WARSAW, Ind., Oct 25, 2004 /PRNewswire-FirstCall via COMTEX/ --
Third Quarter Highlights
- Net Sales increased 76% reported, and 13% combined* (includes 3%
increase due to changes in foreign exchange rates) to $700 million
- Worldwide Reconstructive sales increased 83% reported, and 16% combined*
(includes 3% increase due to changes in foreign exchange rates)
- Americas Reconstructive sales increased 58% reported, and 20% combined*,
with standalone Zimmer up 26%
- Record margins - 76% gross, 27% operating and 18% net reported; 77%
gross, 30% operating and 20% net adjusted*
- Diluted EPS were $0.52 reported, and $0.56 adjusted*, an increase of 30%
adjusted* over prior year
- Record operating cash flow of $206 million, total debt reduced to $680
million and cash on hand is $62 million
- Increasing Q4 2004 diluted earnings per share guidance to a range of
$0.55 to $0.57 reported and $0.62 to $0.64 adjusted*. 2005 diluted
earnings per share in a range of $2.68 to $2.73 reported, and $2.80 to
$2.85 adjusted*, implying an increase over prior year in excess of 20%.
Zimmer Holdings, Inc. (NYSE: ZMH; SWX: ZMH) today reported net sales of $700 million and diluted EPS of $0.52 reported and $0.56 adjusted* for the quarter ended September 30, 2004. The Company's sales and diluted earnings per share results, on a reported and adjusted* basis, exceeded the high end of the Company's previous sales and adjusted earnings per share guidance and First Call estimates of $692 million and $0.53 adjusted*, respectively.
The Company's reported results reflect its acquisition of Centerpulse AG on October 2, 2003, and Implex Corp., on April 23, 2004. Reported results include acquisition and integration expenses, inventory step-up and the prior year cumulative effect of a change in accounting principle for instrumentation, as applicable.
"Our record gross profit margin of 77% adjusted* and earnings per share growth of 30% adjusted* drove operating cash flow to a record $206 million in the quarter," said Ray Elliott, Zimmer Chairman, President and Chief Executive Officer. "In the bellwether U.S. reconstructive market, we believe Zimmer outpaced the market during the third quarter by at least two percentage points of growth in knees and four percentage points of growth in hips."
On October 15, 2004, Zimmer announced that it had entered into a satisfactory financial agreement with CeramTec AG of Germany. The Company believes that, pending regulatory approvals, it will be able to enter the U.S. ceramic-on-ceramic hip replacement market in the second half of 2005. With the addition of a proven ceramic-on-ceramic option in the U.S., Zimmer will be able to offer surgeons a complete offering of alternate bearing surface options, including the successful Longevity(R) Highly Crosslinked Polyethylene, the Metasul(R) Metal-on-Metal Tribological Solution and the Trilogy(R) AB Ceramic-on-Ceramic System. Currently, no company is able to offer all three of these alternate bearing surface options.
Milestones in Zimmer's Minimally Invasive Solutions(TM) (MIS(TM)) Technologies and Procedures program continue to accelerate. Last week, the Company launched its Computer-Assisted Surgery solution for the MIS 2-Incision(TM) Hip Replacement Procedure, with the initial procedure performed by Dr. Mark Hartzband at the Hackensack University Medical Center in New Jersey. On a related MIS note, according to a recent report delivered at Harvard, in excess of $1 billion could be saved by the U.S. health care system if Zimmer's MIS 2-Incision and "mini" hip procedures were utilized in an estimated 57% of all hip replacement surgeries. At the Zimmer Institutes, during the quarter the Company completed its 100th MIS 2-Incision procedure training course since inception and trained its 1,000th surgeon in MIS techniques this year.
The Company is providing a comparison of sales to prior year on a combined* basis in the tables that follow, which includes sales of Centerpulse for the third quarter and the first nine months of 2003.
Net Sales - Three Months Ended September 30, 2004
($ MM) Reported Combined*
Net % % Growth
Sales Growth Combined* FX Impact***
Geographic Segments
Americas $430 56% 15% 0%
Europe 167 231 9 9
Asia Pacific 103 44 13 6
Total 700 76 13 3
Product Categories
Reconstructive
Americas $342 58% 20% 0%
Europe 151 248 9 8
Asia Pacific 81 52 13 7
Total 574 83 16 3
Hips
Americas $124 43% 17% 1%
Europe 84 426 11 9
Asia Pacific 42 61 14 7
Total 250 94 14 4
Knees
Americas $190 55% 21% 0%
Europe 57 119 6 8
Asia Pacific 34 30 10 6
Total 281 61 16 2
Trauma $40 12% 2% 3%
Spine $32 N/A** -2% 2%
Orthopaedic Surgical Products $54 11% 7% 2%
** Prior year Spine sales were minimal for Zimmer standalone
*** Effect of changes in foreign exchange rates on growth
Net earnings for the quarter were $128 million on a reported basis, and $140 million adjusted*, an increase of 62% adjusted* over the prior year. Diluted earnings per share for the quarter were $0.52 reported, and $0.56 adjusted*, an increase of 30% adjusted* over the prior year.
Net Sales - Nine Months Ended September 30, 2004
($ MM) Reported Combined*
Net % % Growth
Sales Growth Combined* FX Impact***
Geographic Segments
Americas $1,285 57% 16% 0%
Europe 580 250 14 10
Asia Pacific 315 45 15 9
Total 2,180 82 16 5
Product Categories
Reconstructive
Americas $1,014 59% 20% 1%
Europe 528 261 15 11
Asia Pacific 250 53 15 9
Total 1,792 89 18 5
Hips
Americas $372 46% 19% 1%
Europe 289 466 15 10
Asia Pacific 132 60 15 10
Total 793 104 17 6
Knees
Americas $558 54% 20% 0%
Europe 206 127 13 11
Asia Pacific 103 32 13 9
Total 867 63 18 4
Trauma $129 21% 9% 4%
Spine $100 N/A** 3% 2%
Orthopaedic Surgical Products $159 12% 8% 3%
** Prior year Spine sales were minimal for Zimmer standalone
*** Effect of changes in foreign exchange rates on growth
Net earnings for the nine months were $342 million on a reported basis, and $421 million adjusted*, an increase of 64% adjusted* over the prior year. Diluted earnings per share for the nine months were $1.38 reported, and $1.70 adjusted*, an increase of 32% adjusted* over the prior year.
Guidance
The Company is modifying its guidance for the fourth quarter, and is including guidance for 2005. Fourth quarter sales are expected to be within a range of $775 million to $780 million, representing growth of approximately 10% to 11% over the fourth quarter of 2003. This represents a reduction from the top end of the Company's previous guidance which included a range of $775 million to $790 million. Sales expectations are in line with the original post-Centerpulse acquisition sales growth expectations for the first one to two years communicated in October 2003. When developing its fourth quarter sales guidance, at the end of the second quarter, the Company utilized an incorrect fourth quarter assumption when determining the potential effect of foreign currency, resulting in a $9 million overstatement of constant currency sales expectations for the fourth quarter. The conversion of additional dealer relationships in parts of Scandinavia and Southeast Asia to a direct sales model that had originally been forecasted for the third quarter, were still being negotiated at the end of the quarter. Consequently, the $5 million in sales returns associated with these distributor changes contributed favorably to the Company's third quarter sales performance and is expected to shift into the fourth quarter. The Company's two smallest product categories, Spine and Trauma, are expected to continue growing at rates below their respective markets in the short term.
"As a result of improved gross profit and operating profit margins, we are increasing our earnings per share estimates for the fourth quarter to a range of $0.62 to $0.64 adjusted*," said Sam Leno, Zimmer Chief Financial Officer. "This represents an increase over prior year of approximately 25% adjusted* for the fourth quarter and continues to demonstrate our ability to gain positive leverage from every dollar of sales growth."
For the full year 2005, the Company estimates sales in the range of $3.325 billion to $3.345 billion, an increase of approximately 13% over 2004. The Company also estimates 2005 diluted earnings per share in a range of $2.68 to $2.73 reported, and $2.80 to $2.85 adjusted*. The 2005 guidance reaffirms the Company's expectations for the combination of Zimmer and Centerpulse to deliver a minimum of 10% sales growth in 2005, a 20% to 25% diluted earnings per share adjusted* growth in 2005, and the potential to exceed a 25% diluted earnings per share adjusted* growth in 2006. Earnings per share guidance for 2005 and 2006 excludes the impact of any potential changes in U.S. GAAP related to accounting for equity-based compensation.
Conference Call
The Company will conduct its third quarter sales and earnings conference call, which will be broadcast live over the Internet, on Tuesday, October 26, 2004, at 8:00 a.m. Eastern Time. The live audio webcast of Zimmer's conference call will be accessible through the Zimmer website at http://investor.zimmer.com . 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 26, 2004 to October 29, 2004. To access the recording, U.S./Canada callers should dial (800) 642-1687, or for International callers, dial (706) 645-9291, and enter the Conference ID, 1046523. A copy of this press release and any 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 .
About the Company
Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is the worldwide #1 pure-play orthopaedic leader in the design, development, manufacture and marketing of reconstructive and spinal implants, trauma and related orthopaedic surgical products. In October 2003, the Company finalized its acquisition of Centerpulse AG, a Switzerland-based orthopaedics company and the leader in the European reconstructive market. The new Zimmer has operations in more than 24 countries around the world and sells products in more than 80 countries. As a result of the acquisition of Centerpulse, reported 2003 sales were $1.9 billion. Full-year 2003 pro forma worldwide sales of Zimmer and Centerpulse were approximately $2.6 billion. The new Zimmer is supported by the efforts of more than 6,500 employees.
Visit Zimmer on the worldwide web at http://www.zimmer.com
*Note on Non-GAAP Financial Measures
As used in this press release, the term "combined" sales includes Centerpulse for the first, second and third quarters of 2003 in order to provide more meaningful year-to-year comparisons. The term "adjusted" refers to operating performance measures that exclude acquisition and integration expenses, inventory step-up and the cumulative effect of the change in accounting principle for instruments. Reconciliations of 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," "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 ability to swccessfully integrate Centerpulse AG and Implex Corp., the outcome of the pending informal SEC investigation of Centerpulse accounting, price and product competition, rapid technological development, demographic changes, dependence on new product development, the mix of our products and services, supply and prices of raw materials and products, customer demand for our products and services, control of costs and expenses, our ability to form and implement alliances, international growth, governmental laws and regulations affecting our U.S. and international businesses, including tax obligations and risks, product liability and intellectual property litigation losses, 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 disclosure materials filed by Zimmer with the U.S. 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. 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, 2004 and 2003
(in millions, except per share amounts, unaudited)
2004 2003 % Inc
Net Sales $700.2 $398.2 76%
Cost of products sold 169.1 96.8 75
Gross Profit 531.1 301.4 76
Research and development 41.4 24.4 70
Selling, general and administrative 286.2 146.8 95
Acquisition and integration 11.5 1.7 N/A
Operating expenses 339.1 172.9 96
Operating Profit 192.0 128.5 49
Interest expense 7.7 0.7 N/A
Earnings before income taxes and
minority interest 184.3 127.8 44
Provision for income taxes 56.4 42.8 32
Minority interest - - N/A
Net Earnings $127.9 $85.0 50
Earnings Per Common Share
Basic $0.52 $0.43 21
Diluted $0.52 $0.43 21
Weighted Average Common Shares
Outstanding
Basic 245.0 196.8
Diluted 248.2 199.6
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
(in millions, except per share amounts, unaudited)
2004 2003 % Inc/
(Dec)
Net Sales $2,179.8 $1,199.4 82%
Cost of products sold 590.5 292.1 102
Gross Profit 1,589.3 907.3 75
Research and development 119.4 68.5 74
Selling, general and administrative 881.3 450.4 96
Acquisition and integration 67.0 3.2 N/A
Operating expenses 1,067.7 522.1 105
Operating Profit 521.6 385.2 35
Interest expense 25.8 3.0 N/A
Earnings before income taxes,
cumulative effect of
change in accounting principle
and minority interest 495.8 382.2 30
Provision for income taxes 154.2 128.0 20
Minority interest 0.2 -
Earnings before cumulative effect of
change in accounting principle 341.8 254.2 34
Cumulative effect of change in
accounting principle, net of tax - 55.1 N/A
Net Earnings $341.8 $309.3 11
Earnings Per Common Share - Basic
Earnings before cumulative
effect of change in
accounting principle $1.40 $1.30 8
Cumulative effect of change in
accounting principle, net of tax - 0.28 N/A
Earnings Per Common Share - Basic $1.40 $1.58 (11)
Earnings Per Common Share - Diluted
Earnings before cumulative
effect of
change in accounting principle $1.38 $1.28 8
Cumulative effect of change in
accounting
principle, net of tax - 0.27 N/A
Earnings Per Common Share -
Diluted $1.38 $1.55 (11)
Weighted Average Common Shares
Outstanding
Basic 244.1 196.3
Diluted 247.3 199.1
ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
(in millions)
September 30, December 31,
2004 2003
(unaudited)
Assets
Current Assets:
Cash and equivalents $45.3 $77.5
Restricted cash 17.0 14.5
Receivables, net 489.4 486.4
Inventories, net 506.4 527.7
Other current assets 244.9 232.6
Total Current Assets 1,303.0 1,338.7
Property, Plant and Equipment, net 584.1 525.2
Intangible assets 856.3 760.5
Goodwill 2,342.5 2,291.8
Other Assets 184.6 239.8
Total Assets $5,270.5 $5,156.0
Liabilities and Shareholders' Equity
Current Liabilities $520.9 $544.0
Short-term Debt 12.5 101.3
Other Long-term Liabilities 431.7 352.6
Long-term Debt 667.9 1,007.8
Minority Interest 6.8 7.0
Shareholders' Equity 3,630.7 3,143.3
Total Liabilities and
Shareholders' Equity $5,270.5 $5,156.0
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
(in millions, unaudited)
2004 2003
Cash flows provided by (used in) operating activities
Net earnings $341.8 $309.3
Depreciation and amortization 134.6 62.7
Inventory step-up 56.1 -
Cumulative effect of change in accounting principle - (89.1)
Changes in operating assets and liabilities, net of
acquired assets and liabilities
Income taxes 122.1 68.4
Receivables (4.2) (30.2)
Inventories (32.0) (29.0)
Accounts payable and accrued expenses (26.0) 47.6
Other assets and liabilities 11.9 (13.9)
Net cash provided by operating activities 604.3 325.8
Cash flows provided by (used) in investing activities
Additions to instruments (106.7) (85.2)
Additions to other property, plant and equipment (59.6) (21.8)
Centerpulse acquisition costs (18.2) (3.4)
Implex acquisition, net of acquired cash (103.7) -
Proceeds from note receivable 25.0 -
Investments in other assets (1.1) (15.4)
Net cash used in investing activities (264.3) (125.8)
Cash flows provided by (used in) financing activities
Proceeds from exercise of stock options 58.7 46.4
Net payments on lines of credit (425.1) (82.4)
Debt issuance costs (0.6) (2.5)
Equity issuance costs (5.0) (1.2)
Net cash used in financing activities (372.0) (39.7)
Effect of exchange rates on cash and equivalents (0.2) 1.0
Increase (decrease) in cash and equivalents (32.2) 161.3
Cash and equivalents, beginning of period 77.5 15.7
Cash and equivalents, end of period $45.3 $177.0
ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC REGION
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
(in millions, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2003 % Increase 2004 2003 % Increase
Americas $430.1 $276.1 56% $1,285.0 $815.9 57%
Europe 167.3 50.5 231 580.1 165.9 250
Asia Pacific 102.8 71.6 44 314.7 217.6 45
Total $700.2 $398.2 76 $2,179.8 $1,199.4 82
ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
(in millions, unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
% %
2004 2003 Increase 2004 2003 Increase
Reconstructive $573.4 $312.9 83% $1,792.5 $949.4 89%
Trauma 40.5 36.1 12 128.9 106.8 21
Spine 32.3 0.4 N/A 99.6 1.2 N/A
OSP 54.0 48.8 11 158.8 142.0 12
Total $700.2 $398.2 76 $2,179.8 $1,199.4 82
ZIMMER HOLDINGS, INC.
COMBINED* SALES GROWTH
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
(in millions, unaudited)
Combined* Net Sales Three Months Ended
Three Months Ended September 30, 2004
September 30, 2003 Reported Combined*
Zimmer Centerpulse Combined* Net Sales % Growth
Geographic Segments
Americas $276 $97 $373 $430 15%
Europe 50 104 154 167 9
Asia Pacific 72 19 91 103 13
Total $398 $220 $618 $700 13
Product Categories
Reconstructive
Americas $217 $68 $285 $342 20%
Europe 43 95 138 151 9
Asia Pacific 53 19 72 81 13
Total $313 $182 $495 $574 16
Hips
Americas $87 $19 $106 $124 17%
Europe 16 60 76 84 11
Asia Pacific 26 11 37 42 14
Total $129 $90 $219 $250 14
Knees
Americas $123 $33 $156 $190 21%
Europe 26 28 54 57 6
Asia Pacific 26 5 31 34 10
Total $175 $66 $241 $281 16
Trauma $36 $3 $39 $40 2%
Spine $ - $33 $33 $32 -2%
OSP $49 $2 $51 $54 7%
ZIMMER HOLDINGS, INC.
COMBINED* SALES GROWTH
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(in millions, unaudited)
Combined* Net Sales Nine Months Ended
Nine Months Ended September 30, 2004
September 30, 2003 Reported Combined*
Zimmer Centerpulse Combined* Net Sales % Growth
Geographic Segments
Americas $816 $291 $1,107 $1,285 16%
Europe 166 341 507 580 14
Asia Pacific 217 57 274 315 15
Total $1,199 $689 $1,888 $2,180 16
Product Categories
Reconstructive
Americas $639 $209 $848 $1,014 20%
Europe 146 314 460 528 15
Asia Pacific 164 54 218 250 15
Total $949 $577 $1,526 $1,792 18
Hips
Americas $254 $60 $314 $372 19%
Europe 51 200 251 289 15
Asia Pacific 83 32 115 132 15
Total $388 $292 $680 $793 17
Knees
Americas $362 $102 $464 $558 20%
Europe 91 91 182 206 13
Asia Pacific 78 14 92 103 13
Total $531 $207 $738 $867 18
Trauma $107 $11 $118 $129 9%
Spine $1 $96 $97 $100 3%
OSP $142 $5 $147 $159 8%
ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
(in millions, unaudited)
Three Months
Ended September 30,
2004 2003
Net Earnings $127.9 $85.0
Acquisition and Integration 11.5 1.7
Inventory Step-up 6.5 -
Tax Benefit of Acquisition
and Integration and Inventory Step-up (6.1) (0.6)
Adjusted Net Earnings $139.8 $86.1
ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
(in millions, unaudited)
Nine Months
Ended September 30,
2004 2003
Net Earnings $341.8 $309.3
Acquisition and Integration 67.0 3.2
Inventory Step-up 56.1 -
Tax Benefit of Acquisition
and Integration and Inventory Step-up (43.7) (1.1)
Cumulative Effect of Change
in Accounting Principle, net of tax - (55.1)
Adjusted Net Earnings $421.2 $256.3
ZIMMER HOLDINGS, INC.
RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
(unaudited)
Three Months
Ended September 30,
2004 2003
Diluted EPS $0.52 $0.43
Acquisition and Integration 0.04 -
Inventory Step-up 0.03 -
Tax Benefit of Acquisition and
Integration and Inventory Step-up (0.03) -
Adjusted Diluted EPS $0.56 $0.43
ZIMMER HOLDINGS, INC.
RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
(unaudited)
Nine Months
Ended September 30,
2004 2003
Diluted EPS $1.38 $1.55
Acquisition and Integration 0.27 0.02
Inventory Step-up 0.23 -
Tax Benefit of Acquisition and
Integration and Inventory Step-up (0.18) (0.01)
Cumulative Effect of Change in
Accounting Principle, net of tax - (0.27)
Adjusted Diluted EPS $1.70 $1.29
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
(in millions, except per share amounts, unaudited)
Reported Adjusted
2004 Adjustments 2004
Net Sales $700.2 $ - $700.2
Cost of products sold 169.1 (6.5) 162.6
Gross Profit 531.1 6.5 537.6
Research and development 41.4 - 41.4
Selling, general and administrative 286.2 - 286.2
Acquisition and integration 11.5 (11.5) -
Operating expenses 339.1 (11.5) 327.6
Operating Profit 192.0 18.0 210.0
Interest expense 7.7 - 7.7
Earnings before income taxes 184.3 18.0 202.3
Provision for income taxes 56.4 6.1 62.5
Net Earnings $127.9 $11.9 $139.8
Earnings Per Common Share
Basic $0.52 $0.05 $0.57
Diluted $0.52 $0.04 $0.56
Weighted Average Common Shares Outstanding
Basic 245.0 245.0
Diluted 248.2 248.2
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
(in millions, except per share amounts, unaudited)
Reported Adjustments Adjusted
2004 2004
Net Sales $2,179.8 $ - $2,179.8
Cost of products sold 590.5 (56.1) 534.4
Gross Profit 1,589.3 56.1 1,645.4
Research and development 119.4 - 119.4
Selling, general and administrative 881.3 - 881.3
Acquisition and integration 67.0 (67.0) -
Operating expenses 1,067.7 (67.0) 1,000.7
Operating Profit 521.6 123.1 644.7
Interest expense 25.8 - 25.8
Earnings before income taxes and
minority interest 495.8 123.1 618.9
Provision for income taxes 154.2 43.7 197.9
Minority interest 0.2 - 0.2
Net Earnings $341.8 $79.4 $421.2
Earnings Per Common Share
Basic $1.40 $0.33 $1.73
Diluted $1.38 $0.32 $1.70
Weighted Average Common Shares Outstanding
Basic 244.1 244.1
Diluted 247.3 247.3
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003
(in millions, except per share amounts, unaudited)
Reported Adjustments Adjusted
2003 2003
Net Sales $398.2 $ - $398.2
Cost of products sold 96.8 - 96.8
Gross Profit 301.4 - 301.4
Research and development 24.4 - 24.4
Selling, general and administrative 146.8 - 146.8
Acquisition and integration 1.7 (1.7) -
Operating expenses 172.9 (1.7) 171.2
Operating Profit 128.5 1.7 130.2
Interest expense 0.7 - 0.7
Earnings before income taxes 127.8 1.7 129.5
Provision for income taxes 42.8 0.6 43.4
Net Earnings $85.0 $1.1 $86.1
Earnings Per Common Share
Basic $0.43 $0.01 $0.44
Diluted $0.43 $ - $0.43
Weighted Average Common Shares Outstanding
Basic 196.8 196.8
Diluted 199.6 199.6
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(in millions, except per share amounts, unaudited)
Reported Adjustments Adjusted
2003 2003
Net Sales $1,199.4 $ - $1,199.4
Cost of products sold 292.1 - 292.1
Gross Profit 907.3 - 907.3
Research and development 68.5 - 68.5
Selling, general and administrative 450.4 - 450.4
Acquisition and integration 3.2 (3.2) -
Operating expenses 522.1 (3.2) 518.9
Operating Profit 385.2 3.2 388.4
Interest expense 3.0 - 3.0
Earnings before income taxes and
cumulative effect of change in
accounting principle 382.2 3.2 385.4
Provision for income taxes 128.0 1.1 129.1
Earnings before cumulative effect of
change in accounting principle 254.2 2.1 256.3
Cumulative effect of change in
accounting principle, net of tax 55.1 (55.1) -
Net Earnings $309.3 $(53.0) $256.3
Earnings Per Common Share
Basic $1.58 $(0.27) $1.31
Diluted $1.55 $(0.26) $1.29
Weighted Average Common Shares Outstanding
Basic 196.3 196.3
Diluted 199.1 199.1
ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET MARGIN TO ADJUSTED NET MARGIN
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2004
Net Margin 18.3% 15.7%
Acquisition and Integration 1.6 3.1
Inventory Step-up 1.0 2.6
Tax Benefit of Acquisition and
Integration and Inventory Step-up (0.9) (2.1)
Adjusted Net Margin 20.0% 19.3%
ZIMMER HOLDINGS, INC.
RECONCILIATION OF OPERATING MARGIN TO ADJUSTED OPERATING MARGIN
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2004
Operating Margin 27.4% 23.9%
Acquisition and Integration 1.6 3.1
Inventory Step-up 1.0 2.6
Adjusted Operating Margin 30.0% 29.6%
ZIMMER HOLDINGS, INC.
RECONCILIATION OF GROSS MARGIN TO ADJUSTED GROSS MARGIN
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2004 2004
Gross Margin 75.8% 72.9%
Inventory Step-up 1.0 2.6
Adjusted Gross Margin 76.8% 75.5%
ZIMMER HOLDINGS, INC.
RECONCILIATION OF PROJECTED DILUTED EPS
TO PROJECTED ADJUSTED DILUTED EPS
(unaudited)
Projected Three Months
Ended December 31, 2004
Low High
Diluted EPS $0.55 $0.57
Acquisition and Integration, net of tax 0.06 0.06
Inventory Step-up, net of tax 0.01 0.01
Adjusted Diluted EPS $0.62 $0.64
Projected Year Ended
December 31, 2005
Low High
Diluted EPS $2.68 $2.73
Acquisition and Integration, net of tax 0.11 0.11
Inventory Step-up, net of tax 0.01 0.01
Adjusted Diluted EPS $2.80 $2.85
SOURCE Zimmer Holdings, Inc.
Media: Brad Bishop, +1-574-372-4291,
[email protected] , Investors: Marc Ostermann, +1-574-371-8515,
[email protected] , or Sam Leno, +1-574-372-4790,
[email protected] , all of Zimmer Holdings, Inc.
http://www.zimmer.com
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