WARSAW, Ind., Jan 31, 2005 /PRNewswire-FirstCall via COMTEX/ --
Fourth Quarter Highlights
- Net Sales increased 14% (includes 3% increase due to changes in foreign exchange rates) to $801 million
- Worldwide Reconstructive Sales increased 16% (includes 3% increase due to changes in foreign exchange rates) with Americas Reconstructive Sales increasing 21%
- Continued margin strength - 76% gross, 30% operating and 25% net reported; 77% gross, 32% operating and a record 22% net adjusted*
- Diluted EPS were $0.81 reported, and $0.71 adjusted*, an increase of 39% adjusted* over prior year
- Record operating cash flow of $258 million, total debt reduced to $652 million and cash on hand $174 million, resulting in net debt* of $478 million
Full Year Highlights
- Net Sales increased 57% reported, and 15% combined* (includes 4% increase due to changes in foreign exchange rates) to $2.98 billion
- Worldwide Reconstructive Sales increased 62% reported, and 17% combined* (includes 4% increase due to changes in foreign exchange rates)
- Diluted EPS were $2.19 reported, and $2.41 adjusted*, an increase of 34% adjusted* over prior year and the third consecutive year of 30% or more adjusted* EPS growth
- Operating cash flow of $862 million and more than $1 billion since acquisition of Centerpulse
- Increasing 2005 diluted EPS guidance by approximately $0.06 to a range of $2.76 to $2.78 reported and $2.89 to $2.91 adjusted*, or 21% over prior year adjusted*
Zimmer Holdings, Inc. (NYSE: ZMH; SWX: ZMH) today reported net sales and earnings for the fourth quarter and year ended December 31, 2004. For the fourth quarter, the Company reported net sales of $801 million and diluted earnings per share of $0.81 and $0.71 adjusted*. Full year net sales were $2.98 billion and diluted earnings per share were $2.19 reported and $2.41 adjusted*. The Company's fourth quarter sales and diluted earnings per share results adjusted* exceeded the high end of the Company's guidance and First Call estimates of $783 million and $0.64, respectively.
The Company's reported results reflect its acquisitions of Centerpulse AG on October 2, 2003, and Implex Corp. on April 23, 2004. Reported results include in-process R&D write-offs, acquisition and integration expenses, inventory step-up, a tax benefit from decreased deferred taxes of acquired Centerpulse operations that resulted from a reduction in the ongoing Swiss tax rate, and the prior year cumulative effect of a change in accounting principle for instrumentation, as applicable.
"Zimmer's winning performance continues as evidenced by our strong sales, margins and cash flow," said Ray Elliott, Zimmer Chairman, President and CEO. "During 2004, we invested heavily in the expansion of landscape-changing innovations such as Minimally Invasive Solutions(TM) (MIS(TM)) Procedures and Technologies and Trabecular Metal(TM) Technology. We delivered more than 40 major development projects to the market. We generated more than $540 million in new product sales. The future should be equally rich with a 146 project pipeline, two-thirds of which is devoted to innovative technology and advanced platforms."
Zimmer has continued to focus on Minimally Invasive Solutions Procedures and Technologies. During the year, the Company trained more than 1,400 surgeons; added two new Zimmer Institutes; documented potentially improved hospital profitability with almost 1,000 patients; launched a 13 city, low- cost DTC campaign capitalizing on more than 100,000 visits to the Company's MIS "Find-a-Doc" web-based surgeon locator; and supported 17 different MIS papers. In addition, Zimmer placed more than 2,000 MIS Quad-Sparing(TM) Knee Replacement and Mini-Knee Replacement instrument sets in the field -- by management estimates, more than the Company's top three competitors combined.
"As we enter 2005, a key focus continues to be the integration of Centerpulse and Implex, including the realization of both targeted synergies and identified opportunities," said Elliott. "The year 2004 was a great beginning -- we are ahead of schedule having already accomplished more than 2,000 of the total 3,364 integration milestones and raised the estimated, sustainable cost synergies to slightly over $100 million annually from our original estimates of $70 to $90 million."
The following tables provide a comparison of sales results for the fourth quarter and full year. Because the Centerpulse acquisition closed on October 2, 2003, Centerpulse sales were included in Zimmer's fourth quarter 2003 results and there is no distinction made between reported and combined* in the table for the fourth quarter. The full-year comparison is on a combined* basis because Centerpulse was an independent company during the first three quarters of 2003.
Net Sales - Three Months Ended December 31, 2004
($ MM) Net % FX
Sales Growth Impact**
Geographic Segments
Americas $456 16% 0%
Europe 228 14 9
Asia Pacific 117 7 4
Total 801 14 3
Product Categories
Reconstructive
Americas $364 21% 1%
Europe 209 14 9
Asia Pacific 91 6 4
Total 664 16 3
Hips
Americas $128 15% 1%
Europe 109 9 9
Asia Pacific 49 7 4
Total 286 11 4
Knees
Americas $204 26% 0%
Europe 86 20 9
Asia Pacific 37 3 4
Total 327 21 3
Dental $36 21% 3%
Trauma $44 2% 3%
Spine $35 2% 1%
Orthopaedic Surgical Products $58 11% 2%
** Effect of changes in foreign exchange rates on growth
Net earnings for the quarter were $200 million on a reported basis, and were $176 million adjusted*, an increase of 42% adjusted* over the prior year. Diluted earnings per share for the quarter were $0.81 reported and were $0.71 adjusted*, an increase of 39% adjusted* over the prior year.
Net Sales - Year Ended December 31, 2004
($ MM) Reported Combined*
% Growth
Net % FX
Sales Growth Combined* Impact**
Geographic Segments
Americas $1,741 44% 16% 0%
Europe 809 121 14 9
Asia Pacific 431 32 13 8
Total 2,981 57 15 4
Product Categories
Reconstructive
Americas $1,378 46% 20% 0%
Europe 737 124 14 9
Asia Pacific 341 37 12 7
Total 2,456 62 17 4
Hips
Americas $500 37% 18% 1%
Europe 398 163 13 10
Asia Pacific 181 41 12 8
Total 1,079 67 15 5
Knees
Americas $762 46% 22% 0%
Europe 292 79 15 10
Asia Pacific 141 23 10 8
Total 1,195 49 19 4
Dental $125 N/A*** 25% 3%
Trauma $173 15% 7% 3%
Spine $134 N/A*** 3% 2%
Orthopaedic Surgical Products $218 12% 9% 3%
** Effect of changes in foreign exchange rates on growth
*** Prior year sales were minimal for Zimmer standalone
Net earnings for the year were $542 million on a reported basis, and were $598 million adjusted*, an increase of 57% adjusted* over the prior year. Diluted earnings per share for the year were $2.19 reported and were $2.41 adjusted*, an increase of 34% adjusted* over the prior year.
Guidance
The following guidance falls within the Company's previous 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 changes in U.S. GAAP related to accounting for equity- based compensation. Many factors are incorporated into the Company's guidance. The factors discussed below are not intended to be an exhaustive list of the factors considered.
As a result of potential foreign currency exchange rate fluctuations throughout 2005, the negative pricing effects of the changing German reimbursement system, and the second quarter 2004 price decreases in Japan, the Company is maintaining its previous full year 2005 sales guidance to be in a range of $3,325 million and $3,345 million. This represents sales growth of approximately 12.0% over full year 2004. Considering the effects of anticipated new product introductions throughout 2005, sales growth for the last six months of 2005 should be slightly above this annual growth range, and sales for the first six months should be slightly below this range. Additionally, the first quarter of 2005 contains two fewer billing days than the same period in 2004, while the second quarter contains one additional billing day. Consequently, sales growth in the first quarter 2005 should be approximately 9.0% reported (representing 12% growth on a per billing day basis), while sales growth in the second quarter should be approximately 15.0% reported (representing 13% growth on a per billing day basis).
With the Company's improved gross profit and operating profit margins reported in the fourth quarter of 2004, it is increasing its previous full year adjusted* earnings per share estimates for 2005 by $0.06 to a range of $2.89 to $2.91, an increase over prior year of approximately 21% adjusted*. The Company expects reported earnings per share in the first half of 2005 to be in a range of $1.32 to $1.33, and adjusted* earnings per share to be in a range of $1.40 to $1.41, with approximately $0.66 to $0.67 in the first quarter and approximately $0.74 in the second quarter. The Company also expects reported earnings per share in the second half of 2005 to be in a range of $1.44 to $1.45, and adjusted* earnings per share in a range of $1.49 to $1.50.
Conference Call
The Company will conduct its fourth quarter and full-year 2004 investor conference call on Tuesday, February 1, 2005, at 8:00 a.m. Eastern Time. The live audio webcast can be accessed live 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 (800) 406-1106. International callers should dial (706) 634-7075. A digital recording will be available two hours after the completion of the conference call from February 1, 2005 to February 4, 2005. 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, 3063291. 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 .
Zimmer 2005 Analyst Meeting at AAOS
Zimmer had previously announced that it will conduct a meeting for investment analysts on February 24, 2005, during the American Academy of Orthopaedic Surgeons meeting. The meeting will be held at the Renaissance Mayflower Hotel in Washington, D.C., in the State Room, with registration to start at 4:30 p.m. Eastern Time. The investment analyst meeting will be hosted by Ray Elliott and Sam Leno, Executive Vice President, Corporate Finance and Operations and Chief Financial Officer, and will feature a presentation and question and answer period, which will also be available as a live webcast at http://investor.zimmer.com . To avoid any delay in starting the meeting on time, investment analysts are encouraged to pre-register for the meeting by contacting Michele Picillo in advance of the meeting at 574-372-4474 or by e-mail at [email protected] .
About the Company
Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is the worldwide #1 pure-play orthopaedic leader in designing, developing, manufacturing and marketing 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. Zimmer has operations in more than 24 countries around the world and sells products in more than 100 countries. Zimmer's 2004 sales were approximately $3 billion. The Company is supported by the efforts of more than 6,500 employees worldwide.
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 in-process R&D write-offs, acquisition and integration expenses, inventory step-up, a tax benefit from decreased deferred taxes of acquired Centerpulse operations that resulted from a reduction in the ongoing Swiss tax rate, and the cumulative effect of the change in accounting principle for instruments. The term "net debt" refers to short-term and long-term debt obligations minus the Company's cash and equivalents and restricted cash. 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 successfully 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 DECEMBER 31, 2004 and 2003
(in millions, except per share amounts, unaudited)
2004 2003 % Inc/(Dec)
Net Sales $801.1 $701.6 14%
Cost of products sold 189.4 224.1 (16)
Gross Profit 611.7 477.5 28
Research and development 47.3 37.3 27
Selling, general and administrative 308.7 287.1 8
In-process research and development - 11.2 N/A
Acquisition and integration 14.1 76.4 (82)
Operating expenses 370.1 412.0 (10)
Operating Profit 241.6 65.5 269
Interest expense 5.9 10.2 (43)
Earnings before income taxes and
minority interest 235.7 55.3 326
Provision for income taxes 35.4 18.8 89
Minority interest (0.3) 0.5 (172)
Net Earnings $200.0 $37.0 440
Earnings Per Common Share
Basic $0.82 $0.15 447
Diluted $0.81 $0.15 440
Weighted Average Common Shares Outstanding
Basic 245.3 242.0
Diluted 248.4 245.4
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2004 and 2003
(in millions, except per share amounts, unaudited)
2004 2003 % Inc/(Dec)
Net Sales $2,980.9 $1,901.0 57%
Cost of products sold 779.9 516.2 51
Gross Profit 2,201.0 1,384.8 59
Research and development 166.7 105.8 57
Selling, general and administrative 1,190.0 737.5 61
In-process research and development - 11.2 N/A
Acquisition and integration 81.1 79.6 2
Operating expenses 1,437.8 934.1 54
Operating Profit 763.2 450.7 69
Interest expense 31.7 13.2 140
Earnings before income taxes,
minority interest and
cumulative effect of change in
accounting principle 731.5 437.5 67
Provision for income taxes 189.6 146.8 29
Minority interest (0.1) 0.5 (124)
Earnings before cumulative effect of
change in accounting principle 541.8 291.2 86
Cumulative effect of change in
accounting principle, net of tax - 55.1 N/A
Net Earnings $541.8 $346.3 57
Earnings Per Common Share - Basic
Earnings before cumulative effect of
change in accounting principle $2.22 $1.40 59
Cumulative effect of change in
accounting principle, net of tax - 0.27 N/A
Earnings Per Common Share - Basic $2.22 $1.67 33
Earnings Per Common Share - Diluted
Earnings before cumulative effect of
change in accounting principle $2.19 $1.38 59
Cumulative effect of change in
accounting principle, net of tax - 0.26 N/A
Earnings Per Common Share -
Diluted $2.19 $1.64 34
Weighted Average Common Shares Outstanding
Basic 244.4 207.7
Diluted 247.8 211.2
ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2004 and 2003
(in millions)
December 31,
2004 2003
(unaudited)
Assets
Current Assets:
Cash and equivalents $154.6 $77.5
Restricted cash 18.9 14.5
Receivables, net 524.8 486.4
Inventories, net 536.0 527.7
Other current assets 326.6 232.6
Total current assets 1,560.9 1,338.7
Property, plant and equipment, net 628.5 525.2
Intangible assets 794.8 760.5
Goodwill 2,528.9 2,291.8
Other assets 182.4 239.8
Total Assets $5,695.5 $5,156.0
Liabilities and Shareholders' Equity
Current liabilities $673.5 $544.0
Short-term debt 27.5 101.3
Other long-term liabilities 420.9 352.6
Long-term debt 624.0 1,007.8
Minority interest 7.1 7.0
Shareholders' equity 3,942.5 3,143.3
Total Liabilities and Shareholders' Equity $5,695.5 $5,156.0
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004 and 2003
(in millions)
2004 2003
(unaudited)
Cash flows provided by (used in) operating activities
Net earnings $541.8 $346.3
Depreciation and amortization 181.3 103.3
Inventory step-up 59.4 42.7
Write off of in-process research and development - 11.2
Cumulative effect of change in accounting principle - (89.1)
Changes in operating assets and liabilities, net of
acquired assets and liabilities
Income taxes 139.2 117.8
Receivables (10.6) (39.0)
Inventories (44.7) (53.0)
Accounts payable and accrued expenses (3.1) 75.9
Other assets and liabilities (1.1) (21.3)
Net cash provided by operating activities 862.2 494.8
Cash flows provided by (used in) investing activities
Additions to instruments (139.6) (113.6)
Additions to other property, plant and equipment (100.8) (44.9)
Centerpulse and InCentive acquisitions,
net of acquired cash (18.2) (927.7)
Implex acquisition, net of acquired cash (153.1) -
Proceeds from note receivable 25.0 -
Investments in other assets (1.6) (16.5)
Net cash used in investing activities (388.3) (1,102.7)
Cash flows provided by (used in) financing activities
Proceeds from exercise of stock options 65.0 70.5
Net proceeds/(payments) on lines of credit (461.4) 170.6
Proceeds from term loans - 550.0
Payments on term loans - (100.0)
Debt issuance costs (0.6) (19.4)
Equity issuance costs (5.0) (6.9)
Net cash provided by (used in) financing activities (402.0) 664.8
Effect of exchange rates on cash and equivalents 5.2 4.9
Increase in cash and equivalents 77.1 61.8
Cash and equivalents, beginning of period 77.5 15.7
Cash and equivalents, end of period $154.6 $77.5
ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC REGION
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2004 and 2003
(in millions, unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
% %
2004 2003 Increase 2004 2003 Increase
Americas $456.3 $392.4 16% $1,741.3 $1,208.3 44%
Europe 228.2 200.1 14 808.3 366.0 121
Asia Pacific 116.6 109.1 7 431.3 326.7 32
Total $801.1 $701.6 14 $2,980.9 $1,901.0 57
ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2004 and 2003
(in millions, unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
% %
2004 2003 Increase 2004 2003 Increase
Reconstructive $663.8 $571.6 16% $2,456.3 $1,521.0 62%
Trauma 44.0 43.3 2 172.9 150.1 15
Spine 34.6 33.9 2 134.2 35.1 281
OSP 58.7 52.8 11 217.5 194.8 12
Total $801.1 $701.6 14 $2,980.9 $1,901.0 57
ZIMMER HOLDINGS, INC.
COMBINED* SALES GROWTH
FOR THE YEAR ENDED DECEMBER 31, 2004
(in millions, unaudited)
Net Sales
Nine Months Year Ended
Year Ended Ended Dec. 31, 2004
Dec. 31, Sept. 30,
2003 2003
Zimmer Centerpulse Reported Combined*
Reported Reported Combined* Net Sales % Growth
Geographic
Segments
Americas $1,208 $291 $1,499 $1,741 16%
Europe 366 341 707 809 14
Asia Pacific 327 57 384 431 13
Total $1,901 $689 $2,590 $2,981 15
Product
Categories
Reconstructive
Americas $941 $209 $1,150 $1,378 20%
Europe 330 314 644 737 14
Asia Pacific 250 54 304 341 12
Total $1,521 $577 $2,098 $2,456 17
Hips
Americas $366 $60 $426 $500 18%
Europe 152 200 352 398 13
Asia
Pacific 128 32 160 181 12
Total $646 $292 $938 $1,079 15
Knees
Americas $524 $102 $626 $762 22%
Europe 163 91 254 292 15
Asia
Pacific 114 14 128 141 10
Total $801 $207 $1,008 $1,195 19
Dental $30 $70 $100 $125 25%
Trauma $150 $11 $161 $173 7%
Spine $35 $96 $131 $134 3%
OSP $195 $5 $200 $218 9%
ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET EARNINGS TO ADJUSTED* NET EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2004 and 2003
(in millions, unaudited)
Three Months
Ended December 31,
2004 2003
Net Earnings $200.0 $37.0
Acquisition and integration 14.1 76.4
Inventory step-up 3.3 42.7
In-process research and development - 11.2
Tax benefit of acquisition and
integration, inventory step-up and
in-process research & development (6.5) (42.8)
Tax benefit from decreased deferred
taxes of acquired Centerpulse operations;
due to Swiss tax rate reduction (34.5) -
Adjusted* Net Earnings $176.4 $124.5
ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET EARNINGS TO ADJUSTED* NET EARNINGS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2004 and 2003
(in millions, unaudited)
Twelve Months
Ended December 31,
2004 2003
Net Earnings $541.8 $346.3
Acquisition and integration 81.1 79.6
Inventory step-up 59.4 42.7
In-process research and development - 11.2
Tax benefit of acquisition and
integration, inventory step-up and
in-process research & development (50.2) (43.9)
Tax benefit from decreased deferred
taxes of acquired Centerpulse operations;
due to Swiss tax rate reduction (34.5) -
Cumulative effect of change in
accounting principle, net of tax - (55.1)
Adjusted* Net Earnings $597.6 $380.8
ZIMMER HOLDINGS, INC.
RECONCILIATION OF DILUTED EPS TO ADJUSTED* DILUTED EPS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2004 and 2003
(unaudited)
Three Months
Ended December 31,
2004 2003
Diluted EPS $0.81 $0.15
Acquisition and integration 0.06 0.31
Inventory step-up 0.01 0.18
In-process research and development - 0.05
Tax benefit of acquisition and
integration, inventory step-up and
in-process research & development (0.03) (0.18)
Tax benefit from decreased deferred
taxes of acquired Centerpulse
operations; due to Swiss tax
rate reduction (0.14) -
Adjusted* Diluted EPS $0.71 $0.51
ZIMMER HOLDINGS, INC.
RECONCILIATION OF DILUTED EPS TO ADJUSTED* DILUTED EPS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2004 and 2003
(unaudited)
Twelve Months
Ended December 31,
2004 2003
Diluted EPS $2.19 $1.64
Acquisition and integration 0.32 0.38
Inventory step-up 0.24 0.20
In-process research and development - 0.05
Tax benefit of acquisition and
integration, inventory step-up
and in-process research and
development (0.20) (0.21)
Tax benefit from decreased deferred
taxes of acquired Centerpulse
operations; due to Swiss tax
rate reduction (0.14) -
Cumulative effect of change in
accounting principle, net of tax - (0.26)
Adjusted* Diluted EPS $2.41 $1.80
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2004
(in millions, except per share amounts, unaudited)
Reported Adjustments Adjusted*
2004 2004
Net Sales $801.1 $- $801.1
Cost of products sold 189.4 (3.3) 186.1
Gross Profit 611.7 3.3 615.0
Research and development 47.3 - 47.3
Selling, general and administrative 308.7 - 308.7
Acquisition and integration 14.1 (14.1) -
Operating expenses 370.1 (14.1) 356.0
Operating Profit 241.6 17.4 259.0
Interest expense 5.9 - 5.9
Earnings before income taxes and
minority interest 235.7 17.4 253.1
Provision for income taxes 35.4 41.0 76.4
Minority interest (0.3) - (0.3)
Net Earnings $200.0 $(23.6) $176.4
Earnings Per Common Share
Basic $0.82 $(0.10) $0.72
Diluted $0.81 $(0.10) $0.71
Weighted Average Common
Shares Outstanding
Basic 245.3 245.3
Diluted 248.4 248.4
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2004
(in millions, except per share amounts, unaudited)
Reported Adjustments Adjusted*
2004 2004
Net Sales $2,980.9 $- $2,980.9
Cost of products sold 779.9 (59.4) 720.5
Gross Profit 2,201.0 59.4 2,260.4
Research and development 166.7 - 166.7
Selling, general and administrative 1,190.0 - 1,190.0
Acquisition and integration 81.1 (81.1) -
Operating expenses 1,437.8 (81.1) 1,356.7
Operating Profit 763.2 140.5 903.7
Interest expense 31.7 - 31.7
Earnings before income taxes and
minority interest 731.5 140.5 872.0
Provision for income taxes 189.6 84.7 274.3
Minority interest (0.1) - (0.1)
Net Earnings $541.8 $55.8 $597.6
Earnings Per Common Share
Basic $2.22 $0.23 $2.45
Diluted $2.19 $0.22 $2.41
Weighted Average Common
Shares Outstanding
Basic 244.4 244.4
Diluted 247.8 247.8
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2003
(in millions, except per share amounts, unaudited)
Reported Adjustments Adjusted*
2003 2003
Net Sales $701.6 $- $701.6
Cost of products sold 224.1 (42.7) 181.4
Gross Profit 477.5 42.7 520.2
Research and development 37.3 - 37.3
Selling, general and administrative 287.1 - 287.1
In-process research and development 11.2 (11.2) -
Acquisition and integration 76.4 (76.4) -
Operating expenses 412.0 (87.6) 324.4
Operating Profit 65.5 130.3 195.8
Interest expense 10.2 - 10.2
Earnings before income taxes
and minority interest 55.3 130.3 185.6
Provision for income taxes 18.8 42.8 61.6
Minority interest 0.5 - 0.5
Net Earnings $37.0 $87.5 $124.5
Earnings Per Common Share
Basic $0.15 $0.36 $0.51
Diluted $0.15 $0.36 $0.51
Weighted Average Common
Shares Outstanding
Basic 242.0 242.0
Diluted 245.4 245.4
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2003
(in millions, except per share amounts, unaudited)
Reported Adjustments Adjusted*
2003 2003
Net Sales $1,901.0 $- $1,901.0
Cost of products sold 516.2 (42.7) 473.5
Gross Profit 1,384.8 42.7 1,427.5
Research and development 105.8 - 105.8
Selling, general and administrative 737.5 - 737.5
In-process research and development 11.2 (11.2) -
Acquisition and integration 79.6 (79.6) -
Operating expenses 934.1 (90.8) 843.3
Operating Profit 450.7 133.5 584.2
Interest expense 13.2 - 13.2
Earnings before income taxes,
minority interest and cumulative
effect of change in
accounting principle 437.5 133.5 571.0
Provision for income taxes 146.8 43.9 190.7
Minority interest 0.5 - 0.5
Earnings before cumulative effect of
change in accounting principle 291.2 89.6 380.8
Cumulative effect of change in
accounting principle, net of tax 55.1 (55.1) -
Net Earnings $346.3 $34.5 $380.8
Earnings Per Common Share - Basic
Earnings before cumulative
effect of change in
accounting principle $1.40 $0.43 $1.83
Cumulative effect of change in
accounting principle, net of tax 0.27 (0.27) -
Earnings Per Common Share - Basic $1.67 $0.16 $1.83
Earnings Per Common Share - Diluted
Earnings before cumulative
effect of change in accounting
principle $1.38 $0.42 $1.80
Cumulative effect of change in
accounting principle, net of tax 0.26 (0.26) -
Earnings Per Common Share - Diluted $1.64 $0.16 $1.80
Weighted Average Common Shares
Outstanding
Basic 207.7 207.7
Diluted 211.2 211.2
ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET MARGIN TO ADJUSTED* NET MARGIN
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2004
(unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2004 2004
Net Margin 25.0 % 18.2 %
Acquisition and integration 1.7 2.7
Inventory step-up 0.4 2.0
Tax benefit of acquisition and
integration and inventory step-up (0.8) (1.7)
Tax benefit from decreased deferred
taxes of acquired Centerpulse
operations; due to Swiss tax rate
reduction (4.3) (1.2)
Adjusted* Net Margin 22.0 % 20.0 %
ZIMMER HOLDINGS, INC.
RECONCILIATION OF OPERATING MARGIN TO ADJUSTED* OPERATING MARGIN
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2004
(unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2004 2004
Operating Margin 30.2 % 25.6 %
Acquisition and integration 1.7 2.7
Inventory step-up 0.4 2.0
Adjusted* Operating Margin 32.3 % 30.3 %
ZIMMER HOLDINGS, INC.
RECONCILIATION OF GROSS MARGIN TO ADJUSTED* GROSS MARGIN
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2004
(unaudited)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2004 2004
Gross Margin 76.4 % 73.8 %
Inventory step-up 0.4 2.0
Adjusted* Gross Margin 76.8 % 75.8 %
ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET DEBT*
AS OF DECEMBER 31, 2004 and 2003
(unaudited)
December 31,
2004 2003
Short-term debt $27.5 $101.3
Long-term debt 624.0 1,007.8
Total debt 651.5 1,109.1
Cash and equivalents 154.6 77.5
Restricted cash 18.9 14.5
Total cash 173.5 92.0
Net debt* $478.0 $1,017.1
ZIMMER HOLDINGS, INC.
RECONCILIATION OF PROJECTED DILUTED EPS
TO PROJECTED ADJUSTED* DILUTED EPS
(unaudited)
Low High
Projected three months ended March 31, 2005:
Diluted EPS $0.60 $0.61
Acquisition and Integration, net of tax 0.05 0.05
Inventory Step-up, net of tax 0.01 0.01
Adjusted* Diluted EPS $0.66 $0.67
Projected three months ended June 30, 2005:
Diluted EPS $0.72 $0.72
Acquisition and Integration, net of tax 0.02 0.02
Adjusted* Diluted EPS $0.74 $0.74
Projected six months ended June 30, 2005:
Diluted EPS $1.32 $1.33
Acquisition and Integration, net of tax 0.07 0.07
Inventory Step-up, net of tax 0.01 0.01
Adjusted* Diluted EPS $1.40 $1.41
Projected six months ended December 31, 2005:
Diluted EPS $1.44 $1.45
Acquisition and Integration, net of tax 0.05 0.05
Adjusted* Diluted EPS $1.49 $1.50
Projected twelve months ended December 31, 2005:
Diluted EPS $2.76 $2.78
Acquisition and Integration, net of tax 0.12 0.12
Inventory Step-up, net of tax 0.01 0.01
Adjusted* Diluted EPS $2.89 $2.91
SOURCE Zimmer Holdings, Inc.
Media: Brad Bishop, +1-574-372-4291, [email protected] , Marc Ostermann,
+1-574-371-8515, [email protected] , or Investors: Sam Leno, +1-574-372-4790
[email protected] , all of Zimmer Holdings, Inc.
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