Zimmer Reports First Quarter 2007 Financial Results
July 28, 2016 at 4:25 p.m.
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For the quarter, the company announced net sales of $950 million, an increase of 10 percent reported and 8 percent constant currency, exceeding management guidance of $932 million and First Call estimates of $934 million. Of the $18 million in sales above management guidance, less than $2 million can be attributed to foreign exchange, while $16 million came from underlying constant currency growth. Diluted earnings per share for the quarter were $0.98 reported and adjusted, exceeding First Call earnings estimates of $0.93 adjusted. The $0.98 in earnings per share reflect strong sales and operational results. The earnings per share effect of share repurchases in the quarter was de minimis.
"We're very pleased to start off the year with a quarter that exceeded both our guidance and Wall Street's expectations for sales and earnings performance," said Ray Elliott, Zimmer Chairman, President and CEO. "We recently concluded our most successful American Academy of Orthopaedic Surgeons meeting ever in terms of attendance at our educational sessions and traffic through our booth. Our reconstructive sales continued to build momentum, led by more than 14,000 implantations of our ZimmerÆ Gender Solutions Knee, exceeding our previously increased aspirations of 12,000."
During the quarter, the company initiated its first intensive direct-to- patient marketing campaign in support of the Gender Solutions Knee. Television advertising has been launched in 23 target markets in the United States, including New York, Chicago and San Francisco, and will run through the first half of 2007. Since January, more than 200,000 hits have been received at the company's new internet site, www.GenderKnee.com. At the AAOS meeting in February, the company debuted its first gender-specific hip replacement system, the ZimmerÆ Gender Solutions M/L Taper Stem with Kinectiv Technology, which it expects to launch in the third quarter of this year, followed by the Zimmer Gender Solutions VerSysÆ EpochÆ Hip Prosthesis in early 2008.
The company previously announced that it would acquire Endius Inc., a privately held pioneer in the development of breakthrough minimally invasive spine surgery products, implants and techniques. This acquisition was subsequently completed in April. In a separate transaction, the company acquired the intellectual property rights, inventory and associated assets of the CycloneÆ Anterior Cervical Plate System, a versatile, low-profile ACP system that complements the company's existing Zimmer Spine product offering.
"We continue to execute our strategic plan to Enable, Innovate and Grow, which focuses on key opportunities now and in the future," said Elliott. "We believe that our Gender Solutions knee fosters an important dialogue between women and their physicians, and our investments in spinal technologies should improve our ability to compete for growth in that robust market. The introduction of the BRIGIT Bone Resection Instrument Guide in late 2007 will provide a SmartTool for the operating room that should enhance accuracy for total joint replacement while significantly reducing instrument costs for both the hospital and Zimmer. We are laying the groundwork for our future in biologics with an expected fourth quarter launch of DeNovoÆ NT Natural Tissue Graft. Moreover, we have added clinical trial sites to our study of DeNovoÆ ET Engineered Tissue Graft, which is designed to potentially replace articular cartilage."
In the quarter, the company purchased 2.1 million common shares for a total of $173 million as part of a $1 billion repurchase program, which was announced in 2005 and expires Dec. 31. Purchases under this program are now 14.2 million shares for a total of nearly $1 billion. A second $1 billion repurchase program was authorized by the board of directors in December 2006 with an expiration date of Dec. 31, 2008.
Net earnings for the first quarter were $233 million on a reported basis and were $235 on an adjusted basis, an increase of 15 percent adjusted over the prior year.
With strong operating results for the first quarter, the company is raising its full year 2007 sales guidance by $34 million. Of this increase, $18 million occurred in the first quarter, with less than $2 million coming from improved foreign currency contributions. The remaining $16 million of increased sales guidance assumes improved operating performance in each of the last three quarters. The average foreign currency exchange rates realized in the first quarter were in line with rates assumed when communicating 2007 guidance on Jan. 29. While the U.S. dollar has weakened in the last few weeks, this updated guidance assumes the same average rates experienced throughout the first quarter.
The company is also increasing its full year 2007 adjusted earnings per share guidance by $0.07 while absorbing the dilution effect of its recent acquisition of Endius. Of this increase, $0.05 occurred in the first quarter. An additional operational increase of $0.03 is included for the remainder of the year, offset by $0.01 of dilution from the acquisition of Endius.
For a complete copy of the report, visit www.zimmer.com
Highlights
n Net Sales of $950 million represents an increase of 10 percent reported (8 percent constant currency).
n Worldwide and Americas Reconstructive Sales increased 11 percent reported (9 percent constant currency) and 11 percent reported (11 percent constant currency).
n 14,427 ZimmerÆ) Gender Solutions Knees implanted, a sequential quarterly unit increase of 51 percent.
n Zimmer Dental Sales increased 22 percent reported (21 percent constant currency) and Extremities sales increased 32 percent reported (30 percent constant currency).
n Continued margin strength - 78 percent gross, 34 percent operating and 25 percent net reported and 78 percent gross, 35 percent operating and 25 percent net adjusted (the gross margin of 78.3 percent was an all-time Zimmer record).
n Diluted EPS were $0.98 reported and adjusted, an increase of 20 percent over prior year period.
n Operating cash flow of $213 million represents a 91 percent conversion to cash ratio from net earnings.
n Increasing full year 2007 guidance for sales by approximately $34 million and adjusted diluted EPS by $0.07.[[In-content Ad]]
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For the quarter, the company announced net sales of $950 million, an increase of 10 percent reported and 8 percent constant currency, exceeding management guidance of $932 million and First Call estimates of $934 million. Of the $18 million in sales above management guidance, less than $2 million can be attributed to foreign exchange, while $16 million came from underlying constant currency growth. Diluted earnings per share for the quarter were $0.98 reported and adjusted, exceeding First Call earnings estimates of $0.93 adjusted. The $0.98 in earnings per share reflect strong sales and operational results. The earnings per share effect of share repurchases in the quarter was de minimis.
"We're very pleased to start off the year with a quarter that exceeded both our guidance and Wall Street's expectations for sales and earnings performance," said Ray Elliott, Zimmer Chairman, President and CEO. "We recently concluded our most successful American Academy of Orthopaedic Surgeons meeting ever in terms of attendance at our educational sessions and traffic through our booth. Our reconstructive sales continued to build momentum, led by more than 14,000 implantations of our ZimmerÆ Gender Solutions Knee, exceeding our previously increased aspirations of 12,000."
During the quarter, the company initiated its first intensive direct-to- patient marketing campaign in support of the Gender Solutions Knee. Television advertising has been launched in 23 target markets in the United States, including New York, Chicago and San Francisco, and will run through the first half of 2007. Since January, more than 200,000 hits have been received at the company's new internet site, www.GenderKnee.com. At the AAOS meeting in February, the company debuted its first gender-specific hip replacement system, the ZimmerÆ Gender Solutions M/L Taper Stem with Kinectiv Technology, which it expects to launch in the third quarter of this year, followed by the Zimmer Gender Solutions VerSysÆ EpochÆ Hip Prosthesis in early 2008.
The company previously announced that it would acquire Endius Inc., a privately held pioneer in the development of breakthrough minimally invasive spine surgery products, implants and techniques. This acquisition was subsequently completed in April. In a separate transaction, the company acquired the intellectual property rights, inventory and associated assets of the CycloneÆ Anterior Cervical Plate System, a versatile, low-profile ACP system that complements the company's existing Zimmer Spine product offering.
"We continue to execute our strategic plan to Enable, Innovate and Grow, which focuses on key opportunities now and in the future," said Elliott. "We believe that our Gender Solutions knee fosters an important dialogue between women and their physicians, and our investments in spinal technologies should improve our ability to compete for growth in that robust market. The introduction of the BRIGIT Bone Resection Instrument Guide in late 2007 will provide a SmartTool for the operating room that should enhance accuracy for total joint replacement while significantly reducing instrument costs for both the hospital and Zimmer. We are laying the groundwork for our future in biologics with an expected fourth quarter launch of DeNovoÆ NT Natural Tissue Graft. Moreover, we have added clinical trial sites to our study of DeNovoÆ ET Engineered Tissue Graft, which is designed to potentially replace articular cartilage."
In the quarter, the company purchased 2.1 million common shares for a total of $173 million as part of a $1 billion repurchase program, which was announced in 2005 and expires Dec. 31. Purchases under this program are now 14.2 million shares for a total of nearly $1 billion. A second $1 billion repurchase program was authorized by the board of directors in December 2006 with an expiration date of Dec. 31, 2008.
Net earnings for the first quarter were $233 million on a reported basis and were $235 on an adjusted basis, an increase of 15 percent adjusted over the prior year.
With strong operating results for the first quarter, the company is raising its full year 2007 sales guidance by $34 million. Of this increase, $18 million occurred in the first quarter, with less than $2 million coming from improved foreign currency contributions. The remaining $16 million of increased sales guidance assumes improved operating performance in each of the last three quarters. The average foreign currency exchange rates realized in the first quarter were in line with rates assumed when communicating 2007 guidance on Jan. 29. While the U.S. dollar has weakened in the last few weeks, this updated guidance assumes the same average rates experienced throughout the first quarter.
The company is also increasing its full year 2007 adjusted earnings per share guidance by $0.07 while absorbing the dilution effect of its recent acquisition of Endius. Of this increase, $0.05 occurred in the first quarter. An additional operational increase of $0.03 is included for the remainder of the year, offset by $0.01 of dilution from the acquisition of Endius.
For a complete copy of the report, visit www.zimmer.com
Highlights
n Net Sales of $950 million represents an increase of 10 percent reported (8 percent constant currency).
n Worldwide and Americas Reconstructive Sales increased 11 percent reported (9 percent constant currency) and 11 percent reported (11 percent constant currency).
n 14,427 ZimmerÆ) Gender Solutions Knees implanted, a sequential quarterly unit increase of 51 percent.
n Zimmer Dental Sales increased 22 percent reported (21 percent constant currency) and Extremities sales increased 32 percent reported (30 percent constant currency).
n Continued margin strength - 78 percent gross, 34 percent operating and 25 percent net reported and 78 percent gross, 35 percent operating and 25 percent net adjusted (the gross margin of 78.3 percent was an all-time Zimmer record).
n Diluted EPS were $0.98 reported and adjusted, an increase of 20 percent over prior year period.
n Operating cash flow of $213 million represents a 91 percent conversion to cash ratio from net earnings.
n Increasing full year 2007 guidance for sales by approximately $34 million and adjusted diluted EPS by $0.07.[[In-content Ad]]
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