WARSAW, Ind., Oct. 24 /PRNewswire-FirstCall/ -- Zimmer Holdings, Inc. today reported financial results for the quarter ended September 30, 2007. For the quarter, the Company announced net sales of $903 million, an increase of 10% reported and 8% constant currency over the prior year period. Diluted earnings per share for the quarter were $0.19 reported, a decrease of 75% reported (including the previously reported $169.5 million charge related to the resolution of a federal investigation), and $0.91 adjusted, an increase of 18% adjusted, in line with First Call consensus estimates.
“This was a quarter of solid sales growth and earnings achievement while we advanced our strategic direction through acquisition,” said David Dvorak, Zimmer Holdings President and CEO. “Our Zimmer(R) Gender Solutions(TM) Knee drove growth in our knee product line during the quarter and we are looking forward to the full release of the Natural-Knee(R) Gender Flex Knee system in 2008, which will add gender-specific design features and high-flexion capability to an established and successful brand.”
During the quarter, the Company announced it had entered into a definitive agreement to acquire ORTHOsoft Inc., a market leader in computer surgical navigation in orthopaedics. “With our SmartTools strategic initiative, we are focused on becoming a leader in improving operating room efficiency and enhancing surgical outcomes through the use of innovative navigation devices and cutting tools,” said Dvorak. “The ORTHOsoft acquisition will enable us to advance these concepts across our various businesses and allow us to vertically integrate our existing Zimmer(R) Computer Assisted Solutions (CAS) efforts.” The Company expects this transaction to be completed in early November.
As previously announced, on September 27 the Company entered into resolution agreements with the federal government regarding an ongoing investigation into relationships between orthopaedic providers and consulting surgeons. As part of the settlement, the Company paid a civil settlement amount of $169.5 million during the quarter, which resulted in a non-recurring impact of $0.72 to reported diluted earnings per share.
In the third quarter, the Company purchased 1.97 million common shares for a total of $155 million under its stock repurchase program, leaving authority to make up to $736.8 million in additional purchases through December 31, 2008. The Company has purchased 5.6 million shares for a total of $460.6 million in the first nine months of 2007.
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 and nine months on both a reported and constant currency basis.
Net earnings for the third quarter were $45 million on a reported basis and $215 million on an adjusted basis, an increase of 15% adjusted over the prior year period. Net earnings for the first nine months of 2007 were $509 million on a reported basis and $686 million on an adjusted basis, an increase of 15% adjusted over the prior year period.
Guidance
The Company said it expects fourth quarter 2007 sales to be in a range of $1.027 to $1.032 billion, or 10% to 11% growth over prior year, and adjusted diluted earnings per share for the fourth quarter to be in a range of $1.03 to $1.05, representing 1% to 3% growth over prior year.
This updated sales guidance reflects a $33 million to $38 million reduction in constant currency growth offset by an increase in contribution from foreign exchange of $15 million, assuming current rates. The Company attributes the fourth quarter sales reductions primarily to lower anticipated sequential growth rates in the Americas.
The Company’s new fourth quarter 2007 guidance for adjusted diluted earnings per share represents a reduction of approximately $0.11 to $0.13 from previous guidance. The reduction reflects the negative impact of: (i) approximately $0.07 to $0.08 from the expected sales reductions; (ii) approximately $0.01 from foregone interest income related to the payment of the $169.5 million civil settlement; (iii) approximately $0.02 to $0.03 relating to estimated payments and expense reimbursements to the Company’s appointed monitor; and (iv) approximately $0.01 from the expected acquisition of ORTHOsoft.
With these updates, the Company expects full-year 2007 revenue to be in a range of $3.851 to $3.856 billion, an increase of 10% over prior year, and adjusted diluted earnings per share to be approximately $3.91 to $3.93, an increase of 14% over prior year.
Conference Call
The Company will conduct its third quarter 2007 investor conference call on October 25, 2007, 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 (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 October 25, 2007 to November 8, 2007. 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, 19069309. 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 the worldwide #1 pure-play orthopaedic leader in designing, developing, manufacturing and marketing joint reconstruction, dental and spinal implants, as well as trauma devices and orthopaedic surgical products. Zimmer has operations in more than 24 countries around the world and sells products in more than 100 countries. Zimmer’s 2006 sales were approximately $3.5 billion. The Company is supported by the efforts of more than 7,000 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 settlement, 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 ability to successfully integrate acquired businesses, the impact of our settlement of the federal investigation into financial relationships with consulting surgeons, including our compliance with the Deferred Prosecution Agreement through March 2009 and the Corporate Integrity Agreement through 2012, the outcome of the Department of Justice Antitrust Division investigation announced in June 2006, the outcome of the informal investigation by the Securities and Exchange Commission into U.S. Foreign Corrupt Practices Act matters, 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 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.
CONTACT: Media, Brad Bishop, +1-574-372-4291, bradley.bishop@zimmer.com,
or Investors, Sean F. O’Hara, +1-574-371-8032, sean.f.ohara@zimmer.com, or
James T. Crines, +1-574-372-4264, james.crines@zimmer.com
Web site: http://www.zimmer.com/
