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8-K - FORM 8-K - ZIMMER BIOMET HOLDINGS, INC. | c64338e8vk.htm |
Exhibit 99.1
Contacts: |
||
Media
|
Investors | |
Garry R. Clark
|
Robert J. Marshall Jr. | |
574-372-4493
|
574-371-8042 | |
garry.clark@zimmer.com
|
robert.marshall@zimmer.com |
Zimmer Holdings, Inc. Reports First Quarter 2011 Financial Results
| Net Sales of $1,116 million represent an increase of 5.0% reported (3.3% constant currency) | ||
| Diluted EPS for the first quarter were $1.08 reported, an increase of 6.9% over the prior year period, and $1.19 adjusted, an increase of 16.7% over the prior year period | ||
| Company reaffirms full-year sales and EPS guidance |
(WARSAW, IN) April 28, 2011Zimmer Holdings, Inc. (NYSE and SIX: ZMH) today reported financial
results for the quarter ended March 31, 2011. The Company reported first quarter net sales of
$1,116 million, an increase of 5.0% reported and 3.3% constant currency over the first quarter of
2010. Diluted earnings per share for the quarter were $1.08 reported and $1.19 adjusted, an
increase of 16.7% adjusted over the prior year period.
Driven by the success of recently launched products, Zimmer delivered solid sales results across
all geographic segments in the first quarter, resulting in improved margins and leveraged
earnings, said David Dvorak, Zimmer President and CEO. Our first quarter performance
demonstrated continued progress toward our goal of consistently achieving growth at or above market
rates in all of our geographies and businesses. We will continue to deliver value to our
stakeholders through product innovation, operational excellence initiatives and disciplined capital
deployment.
Net earnings for the first quarter were $208.9 million on a reported basis and $230.9 million on an
adjusted basis, an increase of 11.4% adjusted over the prior year period. Operating cash flow for
the first quarter was $182.2 million.
During the quarter, the Company utilized $236 million of cash to acquire 4.2 million shares. At
the end of the first quarter, $969.7 million of share repurchase authorization remained available
under the current program, which expires on December 31, 2013.
Guidance
The Company reaffirmed its full-year revenue and adjusted EPS guidance for 2011. Full-year
revenues for 2011 are expected to increase between 2% and 4% on a constant currency basis from
2010. The Company estimates that foreign currency translation will increase revenues by
approximately 3% for the full year 2011, resulting in reported revenue growth between 5% and 7%.
Full-year 2011 diluted earnings per share are projected to be in a
range of $4.25 to $4.45 on a reported basis and $4.60 to $4.80 on an
adjusted basis.
Conference Call
The Company will conduct its first quarter 2011 investor conference call today, April 28, 2011, at
8:00 a.m. Eastern Time. The live audio webcast can be accessed via Zimmers 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) 878-3901. International
callers should dial (706) 634-9520. A digital recording will be available two hours after the
completion of the conference call from April 28, 2011, to May 12, 2011. 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 55920510.
Sales Table
The following table provides 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, 2011
(in millions, unaudited)
(in millions, unaudited)
Constant | ||||||||||||
Net | Reported | Currency | ||||||||||
Sales | % Growth | % Growth | ||||||||||
Geographic Segments |
||||||||||||
Americas |
$ | 630 | 2 | % | 2 | % | ||||||
Europe |
299 | 5 | 4 | |||||||||
Asia Pacific |
187 | 16 | 7 | |||||||||
Total |
1,116 | 5 | 3 | |||||||||
Product Categories |
||||||||||||
Reconstructive |
||||||||||||
Americas |
465 | 1 | | |||||||||
Europe |
238 | 3 | 2 | |||||||||
Asia Pacific |
139 | 16 | 6 | |||||||||
Total |
842 | 3 | 2 | |||||||||
Knees |
||||||||||||
Americas |
278 | (3 | ) | (3 | ) | |||||||
Europe |
117 | 3 | 3 | |||||||||
Asia Pacific |
67 | 11 | 2 | |||||||||
Total |
462 | | (1 | ) | ||||||||
Hips |
||||||||||||
Americas |
155 | 5 | 5 | |||||||||
Europe |
114 | 2 | 2 | |||||||||
Asia Pacific |
68 | 20 | 10 | |||||||||
Total |
337 | 7 | 5 | |||||||||
Extremities |
43 | 12 | 11 | |||||||||
Dental |
63 | 21 | 21 | |||||||||
Trauma |
70 | 16 | 14 | |||||||||
Spine |
57 | (5 | ) | (6 | ) | |||||||
Surgical and other |
84 | 10 | 7 |
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. Zimmers 2010 sales were approximately $4.2 billion. The
Company is supported by the efforts of more than 8,000 employees worldwide.
###
Website Information
We routinely post important information for investors on our website, www.zimmer.com, in the
Investor Relations section. We intend to use this website as a means of disclosing material,
non-public information and for complying with our disclosure obligations under Regulation FD.
Accordingly, investors should monitor the Investor Relations section of our website, in addition to
following our press releases, SEC filings, public conference calls, presentations and webcasts. The
information contained on, or that may be accessed through, our website is not incorporated by
reference into, and is not a part of, this document.
Note on Non-GAAP Financial Measures
As used in this press release, the term adjusted refers to operating performance measures that
exclude inventory step-up and special items. Included in special items are acquisition and
integration costs as well as employee termination benefits, certain contract terminations and asset
impairment charges connected with global restructuring and transformation initiatives. 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. Management uses this non-GAAP
information internally to evaluate the performance of the business and believes that it provides
useful information to investors by offering the ability to make more meaningful period-to-period
comparisons of the Companys on-going operating results, the ability to better identify operating
trends that may otherwise be masked or distorted by these types of items and to perform related
trend analysis, and a higher degree of transparency of certain items.
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, managements beliefs and assumptions
made by management. Forward-looking statements may be identified by the use of forward-looking
terms such as may, will, expects, believes, anticipates, plans, estimates,
projects, assumes, guides, targets, forecasts, and seeks or the negative of such terms
or other variations on such terms or comparable terminology. These statements are not guarantees of
future performance and involve risks, uncertainties and assumptions that could cause actual
outcomes and results to differ materially. These risks and uncertainties include, but are not
limited to, our compliance with the Corporate Integrity Agreement through 2012; the success of our
quality and operational improvement initiatives; the outcome of the investigation by the U.S.
government 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;
changes in tax obligations arising from tax reform measures or examinations by tax authorities;
product liability and intellectual property litigation losses; the impact of health care reform
measures in the U.S. including the impact of the new excise tax on medical devices, reductions in
reimbursement levels from third-party payors and cost-containment efforts of health care purchasing
organizations; our ability to retain the independent agents and distributors who market our
products; and 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. 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, 2011 and 2010
(in millions, except per share amounts, unaudited)
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010
(in millions, except per share amounts, unaudited)
2011 | 2010 | % Inc/(Dec) | ||||||||||
Net Sales |
$ | 1,115.6 | $ | 1,062.8 | 5 | % | ||||||
Cost of products sold |
279.0 | 268.4 | 4 | |||||||||
Gross Profit |
836.6 | 794.4 | 5 | |||||||||
Research and development |
55.6 | 50.5 | 10 | |||||||||
Selling, general and administrative |
458.3 | 447.2 | 2 | |||||||||
Special items |
25.5 | 2.6 | 872 | |||||||||
Operating expenses |
539.4 | 500.3 | 8 | |||||||||
Operating Profit |
297.2 | 294.1 | 1 | |||||||||
Interest expense, net |
11.0 | 14.6 | (25 | ) | ||||||||
Earnings before income taxes |
286.2 | 279.5 | 2 | |||||||||
Provision for income taxes |
77.3 | 74.1 | 4 | |||||||||
Net Earnings of Zimmer Holdings, Inc. |
$ | 208.9 | $ | 205.4 | 2 | |||||||
Earnings Per Common Share |
||||||||||||
Basic |
$ | 1.08 | $ | 1.01 | 7 | |||||||
Diluted |
$ | 1.08 | $ | 1.01 | 7 | |||||||
Weighted Average Common Shares
Outstanding |
||||||||||||
Basic |
192.6 | 203.0 | ||||||||||
Diluted |
193.8 | 204.2 |
Certain amounts in the 2010 consolidated statement of earnings have been reclassified to
conform to the 2011 presentation.
ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, unaudited)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | 575.6 | $ | 668.9 | ||||
Short-term investments |
290.6 | 265.1 | ||||||
Receivables, net |
876.3 | 775.9 | ||||||
Inventories, net |
958.4 | 936.4 | ||||||
Other current assets |
329.8 | 363.4 | ||||||
Total current assets |
3,030.7 | 3,009.7 | ||||||
Property, plant and equipment, net |
1,218.3 | 1,213.8 | ||||||
Goodwill |
2,676.9 | 2,580.8 | ||||||
Intangible assets, net |
830.4 | 827.1 | ||||||
Other assets |
361.4 | 368.5 | ||||||
Total Assets |
$ | 8,117.7 | $ | 7,999.9 | ||||
Liabilities and Shareholders Equity |
||||||||
Current liabilities |
$ | 713.4 | $ | 702.5 | ||||
Other long-term liabilities |
399.8 | 384.0 | ||||||
Long-term debt |
1,140.2 | 1,142.1 | ||||||
Shareholders equity |
5,864.3 | 5,771.3 | ||||||
Total Liabilities and Shareholders Equity |
$ | 8,117.7 | $ | 7,999.9 | ||||
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010
(in millions, unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010
(in millions, unaudited)
2011 | 2010 | |||||||
Cash flows provided by (used in) operating activities |
||||||||
Net earnings of Zimmer Holdings, Inc. |
$ | 208.9 | $ | 205.4 | ||||
Depreciation and amortization |
86.1 | 84.9 | ||||||
Share-based compensation |
14.3 | 12.7 | ||||||
Income tax benefits from employee stock compensation plans |
6.2 | 1.7 | ||||||
Excess income tax benefits from employee stock compensation plans |
(2.4 | ) | (0.7 | ) | ||||
Inventory step-up |
4.4 | 1.3 | ||||||
Changes in operating assets and liabilities, net of acquired
assets and liabilities |
||||||||
Income taxes |
18.1 | 2.3 | ||||||
Receivables |
(70.5 | ) | (32.5 | ) | ||||
Inventories |
(13.8 | ) | 17.2 | |||||
Accounts payable and accrued expenses |
(23.0 | ) | (37.1 | ) | ||||
Other assets and liabilities |
(46.1 | ) | 4.3 | |||||
Net cash provided by operating activities |
182.2 | 259.5 | ||||||
Cash flows provided by (used in) investing activities |
||||||||
Additions to instruments |
(46.3 | ) | (39.3 | ) | ||||
Additions to other property, plant and equipment |
(17.1 | ) | (11.6 | ) | ||||
Purchases of investments |
(65.3 | ) | (4.0 | ) | ||||
Sales of investments |
75.0 | 20.0 | ||||||
Investments in other assets |
(13.2 | ) | (2.9 | ) | ||||
Net cash used in investing activities |
(66.9 | ) | (37.8 | ) | ||||
Cash flows provided by (used in) financing activities |
||||||||
Net proceeds under revolving credit facilities |
0.2 | | ||||||
Proceeds from employee stock compensation plans |
17.0 | 4.9 | ||||||
Excess income tax benefits from employee stock compensation plans |
2.4 | 0.7 | ||||||
Repurchase of common stock |
(236.1 | ) | (93.5 | ) | ||||
Net cash used in financing activities |
(216.5 | ) | (87.9 | ) | ||||
Effect of exchange rates on cash and cash equivalents |
7.9 | (4.3 | ) | |||||
Increase (decrease) in cash and cash equivalents |
(93.3 | ) | 129.5 | |||||
Cash and cash equivalents, beginning of period |
668.9 | 691.7 | ||||||
Cash and cash equivalents, end of period |
$ | 575.6 | $ | 821.2 | ||||
ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC SEGMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010
(in millions, unaudited)
NET SALES BY GEOGRAPHIC SEGMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010
(in millions, unaudited)
Three Months Ended March 31, | ||||||||||||
2011 | 2010 | % Inc | ||||||||||
Americas |
$ | 629.7 | $ | 615.7 | 2 | % | ||||||
Europe |
299.2 | 286.1 | 5 | |||||||||
Asia Pacific |
186.7 | 161.0 | 16 | |||||||||
Total |
$ | 1,115.6 | $ | 1,062.8 | 5 | |||||||
ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010
(in millions, unaudited)
NET SALES BY PRODUCT CATEGORY
FOR THE THREE MONTHS ENDED MARCH 31, 2011 and 2010
(in millions, unaudited)
Three Months Ended March 31, | ||||||||||||
2011 | 2010 | % Inc/(Dec) | ||||||||||
Reconstructive |
||||||||||||
Knees |
$ | 462.2 | $ | 460.4 | | % | ||||||
Hips |
337.3 | 315.7 | 7 | |||||||||
Extremities |
42.9 | 38.4 | 12 | |||||||||
842.4 | 814.5 | 3 | ||||||||||
Dental |
62.4 | 51.7 | 21 | |||||||||
Trauma |
70.1 | 60.4 | 16 | |||||||||
Spine |
56.9 | 60.0 | (5 | ) | ||||||||
Surgical and other |
83.8 | 76.2 | 10 | |||||||||
Total |
$ | 1,115.6 | $ | 1,062.8 | 5 | |||||||
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED % GROWTH TO
CONSTANT CURRENCY % GROWTH
(unaudited)
RECONCILIATION OF REPORTED % GROWTH TO
CONSTANT CURRENCY % GROWTH
(unaudited)
For the Three Months Ended | ||||||||||||
March 31, 2011 | ||||||||||||
Foreign | Constant | |||||||||||
Reported | Exchange | Currency | ||||||||||
% Growth | Impact | % Growth | ||||||||||
Geographic Segments |
||||||||||||
Americas |
2 | % | | % | 2 | % | ||||||
Europe |
5 | 1 | 4 | |||||||||
Asia Pacific |
16 | 9 | 7 | |||||||||
Total |
5 | 2 | 3 | |||||||||
Product Categories |
||||||||||||
Reconstructive |
||||||||||||
Americas |
1 | 1 | | |||||||||
Europe |
3 | 1 | 2 | |||||||||
Asia Pacific |
16 | 10 | 6 | |||||||||
Total |
3 | 1 | 2 | |||||||||
Knees |
||||||||||||
Americas |
(3 | ) | | (3 | ) | |||||||
Europe |
3 | | 3 | |||||||||
Asia Pacific |
11 | 9 | 2 | |||||||||
Total |
| 1 | (1 | ) | ||||||||
Hips |
||||||||||||
Americas |
5 | | 5 | |||||||||
Europe |
2 | | 2 | |||||||||
Asia Pacific |
20 | 10 | 10 | |||||||||
Total |
7 | 2 | 5 | |||||||||
Extremities |
12 | 1 | 11 | |||||||||
Dental |
21 | | 21 | |||||||||
Trauma |
16 | 2 | 14 | |||||||||
Spine |
(5 | ) | 1 | (6 | ) | |||||||
Surgical and other |
10 | 3 | 7 |
ZIMMER HOLDINGS, INC.
Reconciliation of Net Earnings and Adjusted Net Earnings
For the Three Months Ended March 31, 2011 and 2010
(in millions, unaudited)
Reconciliation of Net Earnings and Adjusted Net Earnings
For the Three Months Ended March 31, 2011 and 2010
(in millions, unaudited)
Three Months | ||||||||
Ended March 31, | ||||||||
2011 | 2010 | |||||||
Net Earnings of Zimmer Holdings, Inc. |
$ | 208.9 | $ | 205.4 | ||||
Inventory step-up |
4.4 | 1.3 | ||||||
Special items |
25.5 | 2.6 | ||||||
Taxes on inventory step-up and special items* |
(7.9 | ) | (1.9 | ) | ||||
Adjusted Net Earnings |
$ | 230.9 | $ | 207.4 | ||||
* | The tax effect is calculated based upon the statutory rates for the jurisdictions where the items were incurred. |
ZIMMER HOLDINGS, INC.
Reconciliation of Diluted EPS and Adjusted Diluted EPS
For the Three Months Ended March 31, 2011 and 2010
(unaudited)
Reconciliation of Diluted EPS and Adjusted Diluted EPS
For the Three Months Ended March 31, 2011 and 2010
(unaudited)
Three Months | ||||||||
Ended March 31, | ||||||||
2011 | 2010 | |||||||
Diluted EPS |
$ | 1.08 | $ | 1.01 | ||||
Inventory step-up |
0.02 | 0.01 | ||||||
Special items |
0.13 | 0.01 | ||||||
Taxes on inventory step-up and special items* |
(0.04 | ) | (0.01 | ) | ||||
Adjusted Diluted EPS |
$ | 1.19 | $ | 1.02 | ||||
* | The tax effect is calculated based upon the statutory rates for the jurisdictions where the items were incurred. |
ZIMMER HOLDINGS, INC.
Reconciliation of 2011 Projected Diluted EPS
and Projected Adjusted Diluted EPS
(unaudited)
Reconciliation of 2011 Projected Diluted EPS
and Projected Adjusted Diluted EPS
(unaudited)
Projected Year Ended December 31, 2011: | Low | High | ||||||
Diluted EPS |
4.25 | 4.45 | ||||||
Inventory step-up |
0.05 | 0.05 | ||||||
Special items |
0.44 | 0.44 | ||||||
Taxes on inventory step-up and special items* |
(0.14 | ) | (0.14 | ) | ||||
Adjusted Diluted EPS |
$ | 4.60 | $ | 4.80 | ||||
* | The tax effect is calculated based upon the statutory rates for the jurisdictions where the items are projected to be incurred. |