WARSAW, Ind., April 24 /PRNewswire-FirstCall/ --
-- Net Sales of $1.06 billion represents an increase of 11% reported (6%
constant currency)
-- Worldwide Reconstructive Sales increased 12% reported (6% constant
currency)
-- Diluted EPS were $1.02 reported, an increase of 4% over the prior year
period, and $1.04 adjusted, an increase of 6% over the prior year
period
-- Updates 2008 full year sales guidance and reaffirms earnings
-- Announces $1.25 billion stock repurchase program
Zimmer Holdings, Inc. (NYSE: ZMH; SWX: ZMH) today reported financial
results for the quarter ended March 31, 2008. The Company reported first
quarter net sales of $1.06 billion, an increase of 11% reported and 6%
constant currency over the first quarter of 2007. Diluted earnings per share
for the quarter were $1.02 reported, an increase of 4%, and $1.04 adjusted, an
increase of 6% over the prior year period.
"We are pleased with our earnings performance and cash flow generation in
the first quarter," said David Dvorak, Zimmer President and CEO. "Sales
results reflect continued growth in our reconstructive business and we expect
to achieve higher levels of penetration with new products as the year
progresses. For instance, we are well positioned to move forward with our new
knee offerings that are coming on line, including the Zimmer(R) NexGen(R)
LPS-Flex Mobile Knee, the Gender Solutions(TM) Natural-Knee(R) Flex and the
Gender Solutions(TM) Patello-femoral Joint System. In addition, our
Kinectiv(TM) Technology for hip replacement, as well as our Fitmore(TM) Hip
stem, which received FDA clearance for marketing in early March, are creative
and innovative additions to our portfolio."
The Company said it has made substantial progress on its strategic
infrastructure and operating initiatives. "We are well on our way with
construction and recruiting efforts at our recently announced Shannon, Ireland
facility, and we are making additional investments across our global
manufacturing network," Mr. Dvorak said. "Further, the April 17, 2008,
announcement of our enhanced compliance model was an important milestone for
our Company. These are all critical steps in preparing our Company to better
serve the healthcare markets of the future."
The Company also announced that its Board of Directors has approved an
additional $1.25 billion stock repurchase program, which expires on December
31, 2009. This is in addition to the remaining capacity of $477 million as of
March 31, 2008, under the repurchase program authorized in December 2006.
Purchases may be made in the open market or in privately negotiated
transactions from time to time in compliance with Securities and Exchange
Commission regulations, depending on market conditions and other factors. The
Company had approximately 231.5 million shares of common stock outstanding as
of March 31, 2008.
"As we continue to evaluate our potential uses of cash and other
resources, the Board has confirmed that repurchasing shares is consistent with
our confidence in the Company's long-term growth prospects and provides an
effective avenue to return value to our stockholders," said Mr. Dvorak.
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 on both a reported and constant currency basis.
NET SALES - THREE MONTHS ENDED MARCH 31, 2008
(in millions, unaudited)
Constant
Net Reported Currency
Sales % Growth % Growth
Geographic Segments
Americas $607 7 % 6 %
Europe 305 18 6
Asia Pacific 147 19 7
Total 1,059 11 6
Product Categories
Reconstructive
Americas 482 7 6
Europe 275 18 6
Asia Pacific 115 19 8
Total 872 12 6
Knees
Americas 280 7 6
Europe 120 18 6
Asia Pacific 54 25 12
Total 454 11 7
Hips
Americas 148 4 3
Europe 129 15 3
Asia Pacific 53 19 6
Total 330 10 3
Extremities 32 31 27
Dental 56 14 9
Trauma 56 11 6
Spine 54 16 14
OSP and other 77 5 1
Net earnings for the first quarter were $239 million on a reported basis
and $244 million on an adjusted basis, an increase of 4% adjusted over the
prior year period. Operating cash flow for the first quarter was $243
million.
Guidance
The Company updated its full year 2008 sales guidance and reaffirmed its
earnings guidance. Reported sales for 2008 are expected to increase by 10 to
11% over the prior year. This sales guidance reflects a reduction in constant
currency growth to 6 to 7%, countered by favorable foreign currency, now
estimated at 4%. Full year 2008 adjusted diluted earnings per share are
expected to be in the same range as previously issued guidance of $4.20 to
$4.25. These estimates include the impact of previously announced actions at
the Company's Ohio-based Orthopaedic Surgical Products operation. These
actions are expected to adversely impact 2008 adjusted diluted earnings per
share by $0.18 to $0.20, including $0.07 related to inventory charges, idle
plant costs and other nonrecurring expenses. The Company expects this impact
to be offset by reductions in planned operating expenses, share repurchases
and other actions.
Conference Call
The Company will conduct its first quarter 2008 investor conference call
today, April 24, 2008, 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)
815-6162. International callers should dial (706) 634-9502. A digital
recording will be available two hours after the completion of the conference
call from April 24, 2008 to May 4, 2008. 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, 41904442. 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 .
About the Company
Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is a
worldwide leader in designing, developing, manufacturing and marketing
orthopaedic reconstructive, spinal and trauma devices, dental implants, and
related orthopaedic surgical products. Zimmer has operations in more than 25
countries around the world and sells products in more than 100 countries.
Zimmer's 2007 sales were approximately $3.9 billion. The Company is supported
by the efforts of more than 7,500 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 acquisition, integration and other expenses.
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, 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 obtain
and maintain adequate intellectual property protection, our ability to
successfully integrate acquired businesses, our ability to form and implement
alliances, international growth, our 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, product liability and intellectual
property litigation losses, reimbursement levels from third-party payors,
cost-containment efforts of healthcare purchasing organizations, our ability
to retain the independent agents and distributors who market our products,
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 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 MARCH 31, 2008 and 2007
(in millions, except per share amounts, unaudited)
2008 2007 % Inc/(Dec)
Net Sales $1,059.2 $950.2 11 %
Cost of products sold 254.7 206.4 23
Gross Profit 804.5 743.8 8
Research and development 50.0 52.3 (4)
Selling, general and administrative 415.6 361.6 15
Acquisition, integration and other
expense (income) 7.3 2.7 175
Operating expenses 472.9 416.6 14
Operating Profit 331.6 327.2 1
Interest income (expense) 1.0 (0.2) 521
Earnings before income taxes and
minority interest 332.6 327.0 2
Provision for income taxes 93.1 93.3 -
Minority interest (0.2) (0.3) (16)
Net Earnings $239.3 $233.4 3
Earnings Per Common Share
Basic $1.03 $0.99 4
Diluted $1.02 $0.98 4
Weighted Average Common Shares
Outstanding
Basic 232.5 236.9
Diluted 233.9 239.2
ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
March 31, December 31,
2008 2007
(unaudited)
Assets
Current Assets:
Cash and equivalents $476.0 $463.9
Restricted cash 2.8 2.5
Receivables, net 759.3 674.3
Inventories, net 756.6 727.8
Other current assets 227.9 214.2
Total current assets 2,222.6 2,082.7
Property, plant and equipment, net 1,039.0 971.9
Goodwill 2,712.7 2,621.4
Intangible assets, net 734.8 743.8
Other assets 210.1 213.9
Total Assets $6,919.2 $6,633.7
Liabilities and Shareholders' Equity
Current liabilities $789.2 $748.6
Other long-term liabilities 303.6 328.4
Long-term debt 116.9 104.3
Minority interest 3.0 2.8
Shareholders' equity 5,706.5 5,449.6
Total Liabilities and Shareholders'
Equity $6,919.2 $6,633.7
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 and 2007
(in millions, unaudited)
2008 2007
Cash flows provided by (used in)
operating activities
Net earnings $239.3 $233.4
Depreciation and amortization 61.8 53.4
Share-based compensation 14.9 20.9
Income tax benefits from stock
option exercises 2.6 27.9
Excess income tax benefits from
stock option exercises (1.6) (20.0)
Changes in operating assets and
liabilities
Income taxes 5.4 18.6
Receivables (53.1) (63.4)
Inventories (14.0) (19.6)
Accounts payable and accrued
expenses 12.7 (17.8)
Other assets and liabilities (25.3) (40.4)
Net cash provided by operating
activities 242.7 193.0
Cash flows provided by (used in)
investing activities
Additions to instruments (57.5) (34.5)
Additions to other property, plant
and equipment (53.4) (18.7)
Other - (5.9)
Net cash used in investing
activities (110.9) (59.1)
Cash flows provided by (used in)
financing activities
Proceeds from issuance of common
stock 16.8 79.0
Excess income tax benefits from
stock option exercises 1.6 20.0
Repurchase of common stock (144.3) (173.4)
Net cash used in financing
activities (125.9) (74.4)
Effect of exchange rates on cash and
equivalents 6.2 0.8
Increase in cash and equivalents 12.1 60.3
Cash and equivalents, beginning of
period 463.9 265.7
Cash and equivalents, end of period $476.0 $326.0
ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC SEGMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2008 and 2007
(in millions)
Three Months Ended March 31,
2008 2007 % Increase
(unaudited) (unaudited)
Americas $607.1 $567.8 7 %
Europe 305.5 258.8 18
Asia Pacific 146.6 123.6 19
Total $1,059.2 $950.2 11
ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE MONTHS ENDED MARCH 31, 2008 and 2007
(in millions)
Three Months Ended March 31,
2008 2007 % Increase
(unaudited) (unaudited)
Reconstructive $872.2 $780.1 12 %
Trauma 55.5 50.1 11
Spine 54.2 46.7 16
OSP and other 77.3 73.3 5
Total $1,059.2 $950.2 11
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED % GROWTH TO
CONSTANT CURRENCY % GROWTH
(unaudited)
For the Three Months Ended
March 31, 2008
Foreign Constant
Reported Exchange Currency
% Growth Impact % Growth
Geographic Segments
Americas 7 % 1 % 6 %
Europe 18 12 6
Asia Pacific 19 12 7
Total 11 5 6
Product Categories
Reconstructive
Americas 7 1 6
Europe 18 12 6
Asia Pacific 19 11 8
Total 12 6 6
Knees
Americas 7 1 6
Europe 18 12 6
Asia Pacific 25 13 12
Total 11 4 7
Hips
Americas 4 1 3
Europe 15 12 3
Asia Pacific 19 13 6
Total 10 7 3
Extremities 31 4 27
Dental 14 5 9
Trauma 11 5 6
Spine 16 2 14
OSP and other 5 4 1
ZIMMER HOLDINGS, INC.
Reconciliation of Net Earnings and Adjusted Net Earnings
For the Three Months Ended March 31, 2008 and 2007
(in millions, unaudited)
Three Months
Ended March 31,
2008 2007
Net Earnings $239.3 $233.4
Inventory step-up 0.3 -
Acquisition, integration and other 7.3 2.7
Taxes on acquisition, integration
and other (2.6) (0.7)
Adjusted Net Earnings $244.3 $235.4
ZIMMER HOLDINGS, INC.
Reconciliation of Diluted EPS and Adjusted Diluted EPS
For the Three Months Ended March 31, 2008 and 2007
(unaudited)
Three Months
Ended March 31,
2008 2007
Diluted EPS $1.02 $0.98
Acquisition, integration and other 0.03 0.01
Taxes on acquisition, integration
and other (0.01) (0.01)
Adjusted Diluted EPS $1.04 $0.98
ZIMMER HOLDINGS, INC.
Reconciliation of 2008 Projected Diluted EPS
and Projected Adjusted Diluted EPS
(unaudited)
Projected Twelve Months Ended
December 31, 2008: Low High
Diluted EPS $4.12 $4.17
Acquisition, integration and other,
net of tax 0.08 0.08
Adjusted Diluted EPS $4.20 $4.25
SOURCE Zimmer Holdings, Inc.
Media, Brad Bishop, +1-574-372-4291, bradley.bishop@zimmer.com, or Investors,
Paul Blair, +1-574-371-8042, paul.blair@zimmer.com, James T. Crines,
+1-574-372-4264, james.crines@zimmer.com, all of Zimmer Holdings, Inc.
