WARSAW, Ind., Jan 29, 2009 /PRNewswire-FirstCall via COMTEX News Network/ --
- Net Sales of $1.03 billion for the fourth quarter represents a decrease
of 4% reported (a decrease of 1% constant currency)
- Diluted EPS for the fourth quarter were $0.75 reported, a decrease of
33% from the prior year period, and $1.00 adjusted, a decrease of 15%
from the prior year period
- Net Sales of $4.12 billion for the full year represents an increase of
6% reported (an increase of 3% constant currency)
- Diluted EPS for the full year were $3.72 reported, an increase of 14%
over the prior year period, and $4.05 adjusted, unchanged from the prior
year period
Zimmer Holdings, Inc. (NYSE: ZMH; SWX: ZMH) today reported financial
results for the fourth quarter and year ended December 31, 2008. For the
fourth quarter, the Company announced net sales of $1.03 billion, a decrease
from the prior year period of 4% reported and a decrease of 1% constant
currency. Diluted earnings per share for the quarter were $0.75 reported, a
decrease of 33% and $1.00 adjusted, a decrease of 15% from the prior year
period. Full-year net sales were $4.12 billion, an increase of 6% reported
and 3% constant currency. Diluted earnings per share for the year were $3.72
reported, an increase of 14% and $4.05 adjusted, unchanged from the prior
year.
"Although we are not satisfied with our 2008 financial performance
relative to the market opportunities, we have made good progress in addressing
the issues that negatively impacted our results. In the fourth quarter, we
continued to ramp up our surgeon training and education programs, further
advanced activities on the product development front, and resolved a large
number of our outstanding payments to consulting healthcare professionals and
institutions," said David Dvorak, Zimmer President and CEO. "We are excited
about the prospects for reestablishing positive momentum in our overall
business, with the goal of restoring revenue growth as 2009 progresses."
Net earnings for the fourth quarter were $167.5 million on a reported
basis and $224.6 million on an adjusted basis, a decrease of 18.6% adjusted
from the prior year period. Operating cash flow for the fourth quarter was
$207 million. Net earnings for the full year 2008 were $848.6 million on a
reported basis and $924.3 million on an adjusted basis, a decrease of 3.9%
adjusted from the prior year.
During the fourth quarter of 2008, the Company acquired 1.2 million shares
of its common stock for an aggregate purchase price of $48.1 million. For the
full year 2008, the Company purchased 10.7 million shares for a total of $737
million. At the end of the year, $1.13 billion of authorization remained
under the Company's $1.25 billion repurchase program, which expires on
December 31, 2009.
In the fourth quarter, the Company increased its provision for known and
anticipated claims relating to the previously announced voluntary suspension
of marketing and distribution of the Durom(R) Acetabular Component in the U.S.
from the previously announced $47.5 million to $69 million. The increase is
based on an assessment of the number of claims received since the end of the
third quarter of 2008. Adjusted 2008 figures in this release exclude the
impact of this provision.
Guidance
The Company expects full-year revenues for 2009 to increase between 1% and
3% on a constant currency basis, with revenues anticipated to be flat in the
first half of the year and improving thereafter. Assuming foreign currency
exchange rates remain near year-end 2008 levels, the Company estimates that
foreign currency translation will reduce revenue by approximately 4% for the
full year 2009. Adjusted diluted earnings per share are expected to show
negative growth in the first three quarters with positive growth in the fourth
quarter. 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 fourth quarter and year-end 2008 investor
conference call today, January 29, 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 January 29, 2009 to February 12, 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, 80433715. 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 full year on both a reported and constant currency basis.
NET SALES - THREE MONTHS ENDED DECEMBER 31, 2008
(in millions, unaudited)
Constant
Net Reported Currency
Sales % Growth % Growth
Geographic Segments
Americas $589 (1)% - %
Europe 297 (10) -
Asia Pacific 144 (4) (5)
Total 1,030 (4) (1)
Product Categories
Reconstructive
Americas 457 (2) (1)
Europe 263 (10) (1)
Asia Pacific 112 (6) (6)
Total 832 (5) (1)
Knees
Americas 266 - 1
Europe 113 (9) 1
Asia Pacific 52 (6) (2)
Total 431 (3) 1
Hips
Americas 141 (5) (4)
Europe 121 (11) (2)
Asia Pacific 52 (2) (6)
Total 314 (7) (3)
Extremities 30 3 7
Dental 57 (13) (10)
Trauma 57 2 4
Spine 72 29 33
OSP and other 69 (19) (19)
NET SALES - TWELVE MONTHS ENDED DECEMBER 31, 2008
(in millions, unaudited)
Constant
Net Reported Currency
Sales % Growth % Growth
Geographic Segments
Americas $2,354 3 % 3 %
Europe 1,179 9 4
Asia Pacific 588 9 2
Total 4,121 6 3
Product Categories
Reconstructive
Americas 1,869 4 4
Europe 1,054 10 4
Asia Pacific 468 9 3
Total 3,391 7 4
Knees
Americas 1,090 6 6
Europe 452 11 6
Asia Pacific 221 12 6
Total 1,763 8 6
Hips
Americas 576 1 1
Europe 494 7 2
Asia Pacific 210 8 -
Total 1,280 5 1
Extremities 121 16 15
Dental 227 3 1
Trauma 221 8 5
Spine 231 17 16
OSP and other 278 (11) (14)
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 approximately 8,500 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 the 2007 civil settlement and related tax
benefit, the 2008 provision for certain Durom Cup product claims in the U.S.,
in-process research and development (IPR&D), inventory step-up and
acquisition, integration and other expenses. The provision related to the
Durom Cup 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 Deferred Prosecution Agreement through March 2009 and the Corporate
Integrity Agreement through 2012; the impact of our enhanced healthcare
compliance global initiatives and business practices on our relationships with
customers and consultants, our market share and our overall financial
performance; 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; reductions in
reimbursement levels from third-party payors and cost-containment efforts of
healthcare 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 DECEMBER 31, 2008 and 2007
(in millions, except per share amounts, unaudited)
2008 2007 % Inc/(Dec)
Net Sales $1,030.2 $1,073.5 (4) %
Cost of products sold 243.1 253.9 (4)
Gross Profit 787.1 819.6 (4)
Research and development 47.2 50.8 (7)
Selling, general and administrative 435.6 401.2 9
Certain claims 21.5 - 100
Acquisition, integration and other
expense 43.1 15.7 171
Operating expenses 547.4 467.7 17
Operating Profit 239.7 351.9 (32)
Interest and other, net (4.2) 1.1 (502)
Earnings before income taxes and
minority interest 235.5 353.0 (33)
Provision for income taxes 67.9 89.0 (24)
Minority interest (0.1) (0.2) (66)
Net Earnings $167.5 $263.8 (37)
Earnings Per Common Share
Basic $0.75 $1.13 (34)
Diluted $0.75 $1.12 (33)
Weighted Average Common Shares
Outstanding
Basic 223.7 233.3
Diluted 224.2 234.8
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2008 and 2007
(in millions, except per share amounts)
2008 2007 % Inc/(Dec)
(unaudited)
Net Sales $4,121.1 $3,897.5 6 %
Cost of products sold 997.3 875.9 14
Gross Profit 3,123.8 3,021.6 3
Research and development 194.0 209.6 (7)
Selling, general and administrative 1,702.3 1,489.7 14
Settlement - 169.5 (100)
Certain claims 69.0 - 100
Acquisition, integration and other
expense 68.5 25.2 171
Operating expenses 2,033.8 1,894.0 7
Operating Profit 1,090.0 1,127.6 (3)
Interest and other, net 31.8 4.0 698
Earnings before income taxes and
minority interest 1,121.8 1,131.6 (1)
Provision for income taxes 272.3 357.9 (24)
Minority interest (0.9) (0.5) 59
Net Earnings $848.6 $773.2 10
Earnings Per Common Share
Basic $3.73 $3.28 14
Diluted $3.72 $3.26 14
Weighted Average Common Shares
Outstanding
Basic 227.3 235.5
Diluted 228.3 237.5
ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
December 31, December 31,
2008 2007
(unaudited)
Assets
Current Assets:
Cash and equivalents $212.6 $463.9
Restricted cash 2.7 2.5
Receivables, net 732.8 674.3
Inventories, net 928.3 727.8
Other current assets 302.2 214.2
Total current assets 2,178.6 2,082.7
Property, plant and equipment, net 1,264.1 971.9
Goodwill 2,774.8 2,621.4
Intangible assets, net 872.1 743.8
Other assets 149.4 213.9
Total Assets $7,239.0 $6,633.7
Liabilities and Shareholders' Equity
Current liabilities $771.1 $748.6
Other long-term liabilities 353.9 328.4
Long-term debt 460.1 104.3
Minority interest 3.6 2.8
Shareholders' equity 5,650.3 5,449.6
Total Liabilities and Shareholders'
Equity $7,239.0 $6,633.7
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2008 and 2007
(in millions)
2008 2007
(unaudited)
Cash flows provided by (used in)
operating activities
Net earnings $848.6 $773.2
Depreciation and amortization 275.1 230.0
Gain on sale of other assets (38.8) -
In-process research and development 38.5 6.5
Share-based compensation 69.9 70.1
Inventory step-up 7.0 0.5
Income tax benefits from employee
stock compensation plans 12.5 40.8
Excess income tax benefits from
employee stock compensation plans (6.5) (27.0)
Changes in operating assets and
liabilities
Income taxes (75.3) 70.0
Receivables (44.4) (12.5)
Inventories (148.1) (58.0)
Accounts payable and accrued
expenses 119.3 61.9
Other assets and liabilities (19.7) (71.1)
Net cash provided by operating
activities 1,038.1 1,084.4
Cash flows provided by (used in)
investing activities
Additions to instruments (237.9) (138.5)
Additions to other property, plant
and equipment (250.0) (192.7)
Acquisition of intellectual property
rights (109.4) -
Proceeds from sale of other assets 54.9 -
Abbott Spine acquisition, net of
acquired cash (363.0) -
Other acquisitions, net of acquired
cash (18.8) (160.3)
Net cash used in investing
activities (924.2) (491.5)
Cash flows provided by (used in)
financing activities
Net borrowings under credit
facilities 330.0 -
Proceeds from employee stock
compensation plans 57.0 149.8
Excess income tax benefits from
employee stock compensation plans 6.5 27.0
Repurchase of common stock (737.0) (576.3)
Net cash used in financing
activities (343.5) (399.5)
Effect of exchange rates on cash and
equivalents (21.7) 4.8
Increase (decrease) in cash and
equivalents (251.3) 198.2
Cash and equivalents, beginning of
period 463.9 265.7
Cash and equivalents, end of period $212.6 $463.9
ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC SEGMENT
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2008 and 2007
(in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 % (Dec) 2008 2007 % Inc
(unaudited) (unaudited) (unaudited)
Americas $589.0 $594.1 (1)% $2,353.9 $2,277.0 3%
Europe 296.8 329.0 (10) 1,179.1 1,081.0 9
Asia Pacific 144.4 150.4 (4) 588.1 539.5 9
Total $1,030.2 $1,073.5 (4) $4,121.1 $3,897.5 6
ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2008 and 2007
(in millions)
Three Months Ended Twelve Months Ended
December 31, December 31,
% %
2008 2007 Inc/(Dec) 2008 2007 Inc/(Dec)
(unaudited) (unaudited) (unaudited)
Reconstructive $832.5 $876.9 (5)% $3,391.0 $3,181.0 7%
Trauma 57.0 55.8 2 221.4 205.8 8
Spine 71.8 55.5 29 230.6 197.0 17
OSP and other 68.9 85.3 (19) 278.1 313.7 (11)
Total $1,030.2 $1,073.5 (4) $4,121.1 $3,897.5 6
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED % GROWTH TO
CONSTANT CURRENCY % GROWTH
(unaudited)
For the Three Months Ended
December 31, 2008
Foreign Constant
Reported Exchange Currency
% Growth Impact % Growth
Geographic Segments
Americas (1)% (1)% - %
Europe (10) (10) -
Asia Pacific (4) 1 (5)
Total (4) (3) (1)
Product Categories
Reconstructive
Americas (2) (1) (1)
Europe (10) (9) (1)
Asia Pacific (6) - (6)
Total (5) (4) (1)
Knees
Americas - (1) 1
Europe (9) (10) 1
Asia Pacific (6) (4) (2)
Total (3) (4) 1
Hips
Americas (5) (1) (4)
Europe (11) (9) (2)
Asia Pacific (2) 4 (6)
Total (7) (4) (3)
Extremities 3 (4) 7
Dental (13) (3) (10)
Trauma 2 (2) 4
Spine 29 (4) 33
OSP and other (19) - (19)
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED % GROWTH TO
CONSTANT CURRENCY % GROWTH
(unaudited)
For the Twelve Months Ended
December 31, 2008
Foreign Constant
Reported Exchange Currency
% Growth Impact % Growth
Geographic Segments
Americas 3 % - % 3 %
Europe 9 5 4
Asia Pacific 9 7 2
Total 6 3 3
Product Categories
Reconstructive
Americas 4 - 4
Europe 10 6 4
Asia Pacific 9 6 3
Total 7 3 4
Knees
Americas 6 - 6
Europe 11 5 6
Asia Pacific 12 6 6
Total 8 2 6
Hips
Americas 1 - 1
Europe 7 5 2
Asia Pacific 8 8 -
Total 5 4 1
Extremities 16 1 15
Dental 3 2 1
Trauma 8 3 5
Spine 17 1 16
OSP and other (11) 3 (14)
ZIMMER HOLDINGS, INC.
Reconciliation of Net Earnings and Adjusted Net Earnings
For the Three Months Ended December 31, 2008 and 2007
(in millions, unaudited)
Three Months
Ended December 31,
2008 2007
Net Earnings $167.5 $263.8
Inventory step-up 3.8 0.3
Certain claims 21.5 -
Acquisition, integration and other 43.1 15.7
Taxes on inventory step-up, certain
claims and acquisition, integration and
other (11.3) (3.7)
Adjusted Net Earnings $224.6 $276.1
ZIMMER HOLDINGS, INC.
Reconciliation of Net Earnings and Adjusted Net Earnings
For the Twelve Months Ended December 31, 2008 and 2007
(in millions, unaudited)
Twelve Months
Ended December 31,
2008 2007
Net Earnings $848.6 $773.2
Inventory step-up 7.0 0.5
Settlement - 169.5
Certain claims 69.0 -
Acquisition, integration and other 68.5 25.2
Taxes on inventory step-up, certain
claims and acquisition, integration and
other (38.0) (6.8)
Tax benefit from settlement (30.8) -
Adjusted Net Earnings $924.3 $961.6
ZIMMER HOLDINGS, INC.
Reconciliation of Diluted EPS and Adjusted Diluted EPS
For the Three Months Ended December 31, 2008 and 2007
(unaudited)
Three Months
Ended December 31,
2008 2007
Diluted EPS $0.75 $1.12
Inventory step-up 0.01 -
Certain claims 0.10 -
Acquisition, integration and other 0.19 0.07
Taxes on inventory step-up, certain
claims and acquisition, integration and
other (0.05) (0.01)
Adjusted Diluted EPS $1.00 $1.18
ZIMMER HOLDINGS, INC.
Reconciliation of Diluted EPS and Adjusted Diluted EPS
For the Twelve Months Ended December 31, 2008 and 2007
(unaudited)
Twelve Months
Ended December 31,
2008 2007
Diluted EPS $3.72 $3.26
Inventory step-up 0.03 -
Settlement - 0.71
Certain claims 0.30 -
Acquisition, integration and other 0.30 0.11
Taxes on inventory step-up, certain
claims and acquisition, integration and
other (0.17) (0.03)
Tax benefit from settlement (0.13) -
Adjusted Diluted EPS $4.05 $4.05
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 $3.68 $3.83
Inventory step-up, net of tax 0.04 0.04
Acquisition, integration and other,
net of tax 0.13 0.13
Adjusted Diluted EPS $3.85 $4.00
SOURCE Zimmer Holdings, Inc.
http://www.zimmer.com
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