Zimmer Reports Third Quarter 2004 Financial Results
Third Quarter Highlights
- Net Sales increased 76% reported, and 13% combined* (includes 3% increase due to changes in foreign exchange rates) to $700 million
- Worldwide Reconstructive sales increased 83% reported, and 16% combined* (includes 3% increase due to changes in foreign exchange rates)
- Americas Reconstructive sales increased 58% reported, and 20% combined*, with standalone Zimmer up 26%
- Record margins — 76% gross, 27% operating and 18% net reported; 77% gross, 30% operating and 20% net adjusted*
- Diluted EPS were $0.52 reported, and $0.56 adjusted*, an increase of 30% adjusted* over prior year
- Record operating cash flow of $206 million, total debt reduced to $680 million and cash on hand is $62 million
- Increasing Q4 2004 diluted earnings per share guidance to a range of $0.55 to $0.57 reported and $0.62 to $0.64 adjusted*. 2005 diluted earnings per share in a range of $2.68 to $2.73 reported, and $2.80 to $2.85 adjusted*, implying an increase over prior year in excess of 20%.
(WARSAW, IN) October 25, 2004 -- Zimmer Holdings, Inc. (NYSE and SWX:ZMH) today reported net sales of $700 million and diluted EPS of $0.52 reported and $0.56 adjusted* for the quarter ended September 30, 2004. The Company’s sales and diluted earnings per share results, on a reported and adjusted* basis, exceeded the high end of the Company’s previous sales and adjusted earnings per share guidance and First Call estimates of $692 million and $0.53 adjusted*, respectively.
The Company’s reported results reflect its acquisition of Centerpulse AG on October 2, 2003, 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.
“Our record gross profit margin of 77% adjusted* and earnings per share growth of 30% adjusted* drove operating cash flow to a record $206 million in the quarter,” said Ray Elliott, Zimmer Chairman, President and Chief Executive Officer. “In the bellwether U.S. reconstructive market, we believe Zimmer outpaced the market during the third quarter by at least two percentage points of growth in knees and four percentage points of growth in hips.”
On October 15, 2004, Zimmer announced that it had entered into a satisfactory financial agreement with CeramTec AG of Germany. The Company believes that, pending regulatory approvals, it will be able to enter the U.S. ceramic-on-ceramic hip replacement market in the second half of 2005. With the addition of a proven ceramic-on-ceramic option in the U.S., Zimmer will be able to offer surgeons a complete offering of alternate bearing surface options, including the successful Longevity ® Highly Crosslinked Polyethylene, the Metasul® Metal-on-Metal Tribological Solution and the Trilogy® AB Ceramic-on-Ceramic System. Currently, no company is able to offer all three of these alternate bearing surface options.
Milestones in Zimmer’s Minimally Invasive Solutions™ ( MIS™) Technologies and Procedures program continue to accelerate. Last week, the Company launched its Computer-Assisted Surgery solution for the MIS 2-Incision™ Hip Replacement Procedure, with the initial procedure performed by Dr. Mark Hartzband at the HackensackUniversityMedical Center in New Jersey. On a related MIS note, according to a recent report delivered at Harvard, in excess of $1 billion could be saved by the U.S. health care system if Zimmer’s MIS 2-Incision and “mini” hip procedures were utilized in an estimated 57% of all hip replacement surgeries. At the Zimmer Institutes, during the quarter the Company completed its 100th MIS 2-Incision procedure training course since inception and trained its 1,000th surgeon in MIS techniques this year.
