Zimmer Reports Second Quarter 2004 Financial Results
WARSAW, Ind., Jul 28, 2004
Second Quarter Highlights
- Net Sales increased 79% reported, and 14% combined* (3% increase due to changes in foreign exchange rates) to $737 million
- Worldwide Recon sales increased 86% reported, and 16% combined* (4% increase due to changes in foreign exchange rates)
- Americas Recon sales increased 59% reported, 20% combined* and U.S. hips grew 21% combined*
- Continued margin expansion -- 73% gross, 24% operating and 16% net reported; 75% gross, 30% operating and 20% net adjusted*
- Diluted EPS were $0.47 reported, and $0.58 adjusted*, an increase of 29% over prior year
- Strong operating cash flow of $204 million, total debt reduced to $869 million and cash on hand is $87 million
- Projected 2006 integration net synergies increased to over $100 million pre-tax
- Increasing 2004 Diluted EPS guidance to a range of $1.86 to $1.90 reported and $2.26 to $2.30 adjusted*, an increase of $0.06 over previous guidance
Zimmer Holdings, Inc. (NYSE: ZMH; SWX: ZMH) today reported net sales of $737 million and diluted EPS of $0.47 reported and $0.58 adjusted* for the quarter ended June 30, 2004. The Company's sales and diluted earnings per share results, on a reported and adjusted* basis, exceeded both the high end of the Company's previous sales guidance of $730 million and earnings per share guidance of $0.42 reported and $0.55 adjusted*, and First Call estimates of $733 million and $0.55 adjusted*.
The Company's reported results reflect its acquisition of Centerpulse AG on October 2, 200, 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.
"The marketing and financial benefits of the Centerpulse acquisition continue to exceed our expectations," said Ray Elliott, Zimmer Chairman, President and CEO. "Our earnings growth and the integration execution are a tribute to our team. We began this year with adjusted* EPS guidance of $2.04 to $2.07 and projected 2006 net synergies of $70 to $90 million. With today's communication, we will have increased our 2004 EPS guidance by more than $0.20 from the beginning of this year and raised projected 2006 pre-tax net synergies to more than $100 million."
On April 23, 2004, the Company completed its acquisition of Implex Corp., a privately held New Jersey company. In 2000, Zimmer entered into an exclusive, worldwide strategic alliance for commercialization of Implex's innovative Hedrocel(R) biomaterial, which Zimmer marketed as Trabecular Metal(TM) Technology. Implex, which is now referred to as Zimmer Trabecular Metal Technology, Inc., operates as a wholly owned subsidiary of the Company. Zimmer has more than a dozen development projects involving Trabecular Metal Technology in the reconstructive, trauma and spinal product areas. Trabecular Metal Technology sales for 2005 for all product categories are expected to exceed $100 million.
"During the quarter, we continued to expand our leadership in Minimally Invasive Solutions(TM) (MIS(TM)) Procedures and Technologies with a record 125 surgeons trained in the month of June alone on Zimmer's MIS 2-Incision(TM) Hip Procedure and the MIS QS(TM) Quad-Sparing(TM) Knee Procedure," said Elliott. "We are particularly pleased with our U.S. hip sales growth of 21%. In our case, the message is clear: MIS leadership brings in new business. Zimmer MIS Procedures accounted for nearly 48% of our U.S. hip sales this quarter and the trend is upward. Surgeon demand for MIS surgical skills training is outstripping our capacity, with more than 600 surgeons in the U.S. alone awaiting Zimmer's surgeon-to-surgeon visits and consultations."
