UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 24, 2014
ZIMMER HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
|
|
|
|
|
Delaware |
|
001-16407 |
|
13-4151777 |
(State or other jurisdiction
of incorporation) |
|
(Commission
File Number) |
|
(IRS Employer
Identification No.) |
345 East Main Street
Warsaw, Indiana 46580
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (574) 267-6131
Not applicable
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
|
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
|
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
|
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 |
RESULTS OF OPERATIONS AND FINANCIAL CONDITION |
On July 24, 2014, Zimmer Holdings,
Inc. (the Registrant) reported its results of operations for the quarter ended June 30, 2014. The Registrants earnings release is attached as Exhibit 99.1 and the information set forth therein is incorporated herein by
reference and constitutes a part of this report.
The earnings release attached as Exhibit 99.1 includes two types of non-GAAP
financial measures that differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (GAAP). These non-GAAP financial measures may not be comparable to similar measures reported by other
companies and should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP. The first type of non-GAAP financial measure included in the press release consists of sales information
reported on a constant currency basis which has been calculated by translating actual current and prior-period sales at the same predetermined exchange rate. The translated results are then used to determine year-over-year percentage increases or
decreases that exclude the effect of changes in foreign currency exchange rates.
The second type of non-GAAP financial measure included
in the press release consists of operating performance measures that have been adjusted to exclude certain items. The earnings release presents adjusted net earnings, adjusted diluted EPS and projected adjusted diluted EPS to exclude the effects of
inventory step-up and other inventory and manufacturing related charges, special items, the provision for certain Durom® Acetabular Component product claims, other expenses related to
the pending Biomet merger and certain tax adjustments. Included in special items are acquisition and integration costs and asset impairment charges related to prior acquisitions as well as employee termination benefits, consulting and professional
fees, certain litigation matters, dedicated personnel expenses, certain contract terminations and asset impairment charges connected with global restructuring and operational excellence initiatives.
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 Registrants 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. In addition, adjusted diluted EPS is used as a performance metric in the Registrants incentive compensation programs.
All of the non-GAAP financial measures are reconciled to the most directly comparable GAAP financial measure in the press release.
The Registrant is furnishing the information contained in this report, including the Exhibit, pursuant to Item 2.02 of Form 8-K
promulgated by the Securities and Exchange Commission (the SEC). This information shall not be deemed to be filed with the SEC or incorporated by reference into any other filing with the SEC. By filing this report on Form 8-K
and furnishing this information, the Registrant makes no admission as to the materiality of any information in this report, including the Exhibit.
Item 9.01 |
FINANCIAL STATEMENTS AND EXHIBITS |
|
|
|
Exhibit No. |
|
Description |
|
|
99.1 |
|
Press Release, dated July 24, 2014, issued by the Registrant |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: July 24, 2014
|
|
|
ZIMMER HOLDINGS, INC. |
|
|
By: |
|
/s/ Chad F. Phipps |
Name: |
|
Chad F. Phipps |
Title: |
|
Senior Vice President, General Counsel and Secretary |
EXHIBIT INDEX
|
|
|
Exhibit No. |
|
Description |
|
|
99.1 |
|
Press Release, dated July 24, 2014, issued by the Registrant |
Exhibit 99.1
|
|
|
345 E. Main St. Warsaw, IN 46580
www.zimmer.com |
|
NEWS |
Contacts:
|
|
|
Media |
|
Investors |
Monica Kendrick |
|
Robert J. Marshall Jr. |
574-372-4989 |
|
574-371-8042 |
monica.kendrick@zimmer.com |
|
robert.marshall@zimmer.com |
Zimmer Holdings, Inc. Reports Second Quarter 2014
Financial Results
|
|
|
Net Sales of $1.18 billion represent an increase of 1.2% reported over the prior year period (an increase of 0.9% constant currency) |
|
|
|
Diluted EPS for the second quarter were $1.03 reported, an increase of 15.7% over the prior year period, and $1.49 adjusted, an increase of 4.2% over the prior year period |
|
|
|
Company updates sales and earnings guidance for full-year 2014 |
(WARSAW, IN)
July 24, 2014Zimmer Holdings, Inc. (NYSE and SIX: ZMH) today reported financial results for the quarter ended June 30, 2014. The Company reported second quarter net sales of $1.18 billion, an increase of 1.2% reported and 0.9%
constant currency over the second quarter of 2013. Diluted earnings per share for the quarter were $1.03 reported and $1.49 adjusted, an increase of 4.2% adjusted over the prior year period.
1
The second quarter was marked by solid sales growth in a number of product categories and geographies, as
we continued the ongoing commercialization of innovative new solutions and made further progress on our operational excellence programs, said David Dvorak, President and CEO of Zimmer. Our confidence in the opportunity to create value in
the musculoskeletal market remains strong. In addition, we are excited about the progress we are making in working with the Biomet leadership team to plan our combination, and we continue to anticipate closing the merger in the first quarter of
2015.
Net earnings for the second quarter were $176.5 million on a reported basis and $254.7 million on an adjusted basis, an increase of 4.6%
adjusted over the prior year period. Operating cash flow for the second quarter was $254.1 million.
Also in the quarter, the Company paid $36.9 million
in dividends and declared a second quarter dividend of $0.22 per share, an increase of 10% over the prior year period.
Guidance
The Company updated its full-year revenue and EPS guidance for 2014. Full-year revenues are now expected to increase between 2.0% and 3.0% on a constant
currency basis from 2013. Previously, the Company had estimated full-year revenues would increase between 3.0% and 5.0%, constant currency. The Company continues to expect foreign currency translation to decrease revenues by approximately 0.5% for
the full year, resulting in reported revenue growth between 1.5% and 2.5%.
The Company now projects full-year 2014 diluted earnings per share to be in a
range of $4.65 to $4.75 on a reported basis and $6.00 to $6.10 on an adjusted basis. Prior guidance for full-year 2014 reported and adjusted diluted earnings per share was $4.90 to $5.10 and $6.00 to $6.20, respectively. This updated guidance
reflects estimated charges for inventory and manufacturing related expenses, quality and operational excellence initiatives, certain claims and special items of $250 million on a pre-tax basis, and an additional $70 million for expenses related to
the pending Biomet merger, totaling $320 million or approximately $1.35 per diluted share, on an after-tax basis.
2
Conference Call
The Company will conduct its second quarter 2014 investor conference call today, July 24, 2014, 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 call.
Individuals who wish to dial into the conference call may do so at (888) 878-3901. International callers should dial (706) 634-9520. Conference ID
59090489 may be used to access the call. A digital recording will be available two hours after the completion of the conference call from July 24, 2014, to August 24, 2014. To access the recording, US/Canada callers should dial
(855) 859-2056 or (800) 585-8367. International callers should dial (404) 537-3406 and enter the conference ID 59090489.
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 six months, on both a reported and constant currency basis.
3
NET SALES - THREE MONTHS ENDED JUNE 30, 2014
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
Reported % Change |
|
|
Constant Currency % Change |
|
Geographic Segments |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
640 |
|
|
|
(3 |
)% |
|
|
(3 |
)% |
Europe |
|
|
335 |
|
|
|
9 |
|
|
|
5 |
|
Asia Pacific |
|
|
208 |
|
|
|
3 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,183 |
|
|
|
1 |
|
|
|
1 |
|
Product Categories |
|
|
|
|
|
|
|
|
|
|
|
|
Reconstructive |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
473 |
|
|
|
(1 |
) |
|
|
|
|
Europe |
|
|
260 |
|
|
|
9 |
|
|
|
5 |
|
Asia Pacific |
|
|
157 |
|
|
|
3 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
890 |
|
|
|
3 |
|
|
|
2 |
|
Knees |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
282 |
|
|
|
|
|
|
|
|
|
Europe |
|
|
133 |
|
|
|
13 |
|
|
|
9 |
|
Asia Pacific |
|
|
83 |
|
|
|
1 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
498 |
|
|
|
4 |
|
|
|
3 |
|
Hips |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
153 |
|
|
|
(2 |
) |
|
|
(2 |
) |
Europe |
|
|
117 |
|
|
|
3 |
|
|
|
(1 |
) |
Asia Pacific |
|
|
71 |
|
|
|
4 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
341 |
|
|
|
1 |
|
|
|
|
|
Extremities |
|
|
51 |
|
|
|
6 |
|
|
|
5 |
|
Dental |
|
|
61 |
|
|
|
(1 |
) |
|
|
(1 |
) |
Trauma |
|
|
79 |
|
|
|
7 |
|
|
|
6 |
|
Spine |
|
|
52 |
|
|
|
(4 |
) |
|
|
(4 |
) |
Surgical and other |
|
|
101 |
|
|
|
(10 |
) |
|
|
(10 |
) |
4
NET SALES - SIX MONTHS ENDED JUNE 30, 2014
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales |
|
|
Reported % Change |
|
|
Constant Currency % Change |
|
Geographic Segments |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
$ |
1,278 |
|
|
|
(1 |
)% |
|
|
(1 |
)% |
Europe |
|
|
662 |
|
|
|
8 |
|
|
|
5 |
|
Asia Pacific |
|
|
404 |
|
|
|
2 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,344 |
|
|
|
2 |
|
|
|
2 |
|
Product Categories |
|
|
|
|
|
|
|
|
|
|
|
|
Reconstructive |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
946 |
|
|
|
1 |
|
|
|
1 |
|
Europe |
|
|
517 |
|
|
|
7 |
|
|
|
5 |
|
Asia Pacific |
|
|
299 |
|
|
|
1 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1,762 |
|
|
|
3 |
|
|
|
3 |
|
Knees |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
566 |
|
|
|
1 |
|
|
|
2 |
|
Europe |
|
|
264 |
|
|
|
10 |
|
|
|
7 |
|
Asia Pacific |
|
|
156 |
|
|
|
1 |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
986 |
|
|
|
4 |
|
|
|
4 |
|
Hips |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
303 |
|
|
|
(2 |
) |
|
|
(1 |
) |
Europe |
|
|
233 |
|
|
|
3 |
|
|
|
|
|
Asia Pacific |
|
|
137 |
|
|
|
1 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
673 |
|
|
|
1 |
|
|
|
1 |
|
Extremities |
|
|
103 |
|
|
|
7 |
|
|
|
7 |
|
Dental |
|
|
122 |
|
|
|
1 |
|
|
|
|
|
Trauma |
|
|
159 |
|
|
|
2 |
|
|
|
2 |
|
Spine |
|
|
100 |
|
|
|
(1 |
) |
|
|
(2 |
) |
Surgical and other |
|
|
201 |
|
|
|
(5 |
) |
|
|
(4 |
) |
5
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 2013 sales were approximately $4.6 billion. Zimmer is supported by the
efforts of more than 9,000 employees worldwide.
Website Information
We routinely post important information for investors on our website, www.zimmer.com, in the Investor Relations section. We 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 other inventory and manufacturing related charges, special items, the provision for certain Durom® Acetabular Component product claims, other expenses related to the pending Biomet merger and certain tax adjustments. Included in special items are acquisition and integration costs and asset
impairment charges related to prior acquisitions as well as employee termination benefits, consulting and professional fees, certain litigation matters, dedicated personnel expenses, certain contract terminations and asset impairment charges
connected with global restructuring and operational excellence 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.
6
Cautionary Statement Regarding Forward-Looking Statements
This communication contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. 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. Such forward-looking
statements include, but are not limited to, statements about the benefits of the proposed merger between Zimmer and LVB Acquisition, Inc. (LVB), the parent company of Biomet, including future financial and operating results, the combined
companys plans, objectives, expectations and intentions, the expected timing of completion of the transaction and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of
Zimmers management and are subject to significant risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to: the possibility that the anticipated
synergies and other benefits from the proposed merger of Zimmer and LVB will not be realized, or will not be realized within the expected time periods; the inability to obtain regulatory approvals of the merger (including the approval of antitrust
authorities necessary to complete the transaction) on the terms desired or anticipated; the timing of such approvals and the risk that such approvals may result in the imposition of conditions that could adversely affect the combined company or the
expected benefits of the transaction; the risk that a condition to closing the transaction may not be satisfied on a timely basis or at all; the risk that the proposed transaction fails to close for any other reason; the risks and uncertainties
related to Zimmers ability to successfully integrate the operations, products and employees of Zimmer and Biomet; the effect of the potential disruption of managements attention from
7
ongoing business operations due to the pending merger; the effect of the announcement of the proposed merger on Zimmers and Biomets relationships with their respective customers,
vendors and lenders and on their respective operating results and businesses generally; risks relating to the value of the Zimmer shares to be issued in the transaction; access to available financing (including financing for the acquisition or
refinancing of Zimmers or Biomets debt) on reasonable terms, including the risk that any condition to the closing of the financing committed for the proposed merger and refinancing of Zimmers debt is not satisfied; the outcome of
any legal proceedings related to the proposed merger; the risks and uncertainties normally incidental to the orthopaedic industry, including price and product competition; the success of the companies quality and operational excellence
initiatives; changes in customer demand for Zimmers or Biomets products and services caused by demographic changes or other factors; the impact of healthcare reform measures, including the impact of the U.S. excise tax on medical
devices; reductions in reimbursement levels by third-party payors and cost containment efforts of healthcare purchasing organizations; dependence on new product development, technological advances and innovation; shifts in the product category or
regional sales mix of Zimmers or Biomets products and services; supply and prices of raw materials and products; control of costs and expenses; the ability to obtain and maintain adequate intellectual property protection; the ability to
form and implement alliances; challenges relating to changes in and compliance with governmental laws and regulations, including regulations of the U.S. Food and Drug Administration (the FDA) and foreign government regulators, such as
more stringent requirements for regulatory clearance of products; the ability to remediate matters identified in any inspectional observations or warning letters issued by the FDA; changes in tax obligations arising from tax reform measures or
examinations by tax authorities; product liability and intellectual property litigation losses; the ability to retain the independent agents and distributors who market Zimmers and Biomets products; dependence on a limited number of
suppliers for key raw materials and outsourced activities; changes in general
8
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; and the impact of the ongoing economic uncertainty affecting countries in the Euro zone on the ability to collect accounts receivable in affected countries. For a further list and description of such risks and uncertainties, see
Zimmers periodic reports filed with the U.S. Securities and Exchange Commission (the SEC). Copies of these filings, as well as subsequent filings, are available online at www.sec.gov, www.zimmer.com or on request from Zimmer.
Zimmer disclaims 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 its periodic reports. Readers of this communication
are cautioned not to place undue reliance on these forward-looking statements, since, while management believes 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 communication.
###
9
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 2014 and 2013
(in millions, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
Net Sales |
|
$ |
1,182.9 |
|
|
$ |
1,169.5 |
|
Cost of products sold |
|
|
333.2 |
|
|
|
323.6 |
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
849.7 |
|
|
|
845.9 |
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
48.1 |
|
|
|
54.9 |
|
Selling, general and administrative |
|
|
455.8 |
|
|
|
458.0 |
|
Certain claims |
|
|
21.8 |
|
|
|
47.0 |
|
Special items |
|
|
64.7 |
|
|
|
75.6 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
590.4 |
|
|
|
635.5 |
|
|
|
|
|
|
|
|
|
|
Operating Profit |
|
|
259.3 |
|
|
|
210.4 |
|
Other expense |
|
|
(10.0 |
) |
|
|
|
|
Interest income |
|
|
2.9 |
|
|
|
3.9 |
|
Interest expense |
|
|
(15.8 |
) |
|
|
(18.3 |
) |
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
236.4 |
|
|
|
196.0 |
|
Provision for income taxes |
|
|
60.3 |
|
|
|
44.3 |
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
176.1 |
|
|
|
151.7 |
|
Less: Net loss attributable to noncontrolling interest |
|
|
(0.4 |
) |
|
|
(0.4 |
) |
|
|
|
|
|
|
|
|
|
Net Earnings of Zimmer Holdings, Inc. |
|
$ |
176.5 |
|
|
$ |
152.1 |
|
|
|
|
|
|
|
|
|
|
Earnings Per Common Share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
1.05 |
|
|
$ |
0.90 |
|
Diluted |
|
$ |
1.03 |
|
|
$ |
0.89 |
|
Weighted Average Common Shares Outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
168.4 |
|
|
|
168.8 |
|
Diluted |
|
|
171.0 |
|
|
|
170.7 |
|
Cash dividends declared per common share |
|
$ |
0.22 |
|
|
$ |
0.20 |
|
10
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 and 2013
(in millions, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
Net Sales |
|
$ |
2,344.4 |
|
|
$ |
2,308.4 |
|
Cost of products sold |
|
|
638.6 |
|
|
|
616.5 |
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
1,705.8 |
|
|
|
1,691.9 |
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
95.6 |
|
|
|
108.4 |
|
Selling, general and administrative |
|
|
920.1 |
|
|
|
918.8 |
|
Certain claims |
|
|
21.8 |
|
|
|
47.0 |
|
Special items |
|
|
110.6 |
|
|
|
109.1 |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
1,148.1 |
|
|
|
1,183.3 |
|
|
|
|
|
|
|
|
|
|
Operating Profit |
|
|
557.7 |
|
|
|
508.6 |
|
Other expense |
|
|
(10.0 |
) |
|
|
|
|
Interest income |
|
|
5.4 |
|
|
|
7.6 |
|
Interest expense |
|
|
(30.8 |
) |
|
|
(36.5 |
) |
|
|
|
|
|
|
|
|
|
Earnings before income taxes |
|
|
522.3 |
|
|
|
479.7 |
|
Provision for income taxes |
|
|
125.1 |
|
|
|
110.0 |
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
397.2 |
|
|
|
369.7 |
|
Less: Net loss attributable to noncontrolling interest |
|
|
(0.8 |
) |
|
|
(1.0 |
) |
|
|
|
|
|
|
|
|
|
Net Earnings of Zimmer Holdings, Inc. |
|
$ |
398.0 |
|
|
$ |
370.7 |
|
|
|
|
|
|
|
|
|
|
Earnings Per Common Share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
2.36 |
|
|
$ |
2.20 |
|
Diluted |
|
$ |
2.32 |
|
|
$ |
2.17 |
|
Weighted Average Common Shares Outstanding |
|
|
|
|
|
|
|
|
Basic |
|
|
168.7 |
|
|
|
168.8 |
|
Diluted |
|
|
171.4 |
|
|
|
170.7 |
|
Cash dividends declared per common share |
|
$ |
0.44 |
|
|
$ |
0.40 |
|
11
ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014 |
|
|
December 31, 2013 |
|
Assets |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
968.7 |
|
|
$ |
1,080.6 |
|
Short-term investments |
|
|
729.3 |
|
|
|
727.0 |
|
Receivables, net |
|
|
950.2 |
|
|
|
936.6 |
|
Inventories |
|
|
1,147.2 |
|
|
|
1,074.5 |
|
Other current assets |
|
|
434.4 |
|
|
|
379.0 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
4,229.8 |
|
|
|
4,197.7 |
|
Property, plant and equipment, net |
|
|
1,275.4 |
|
|
|
1,224.7 |
|
Goodwill |
|
|
2,611.1 |
|
|
|
2,611.2 |
|
Intangible assets, net |
|
|
646.5 |
|
|
|
707.7 |
|
Other assets |
|
|
875.5 |
|
|
|
839.3 |
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
9,638.3 |
|
|
$ |
9,580.6 |
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity |
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
952.9 |
|
|
$ |
1,031.6 |
|
Other long-term liabilities |
|
|
545.7 |
|
|
|
576.6 |
|
Long-term debt |
|
|
1,687.4 |
|
|
|
1,672.3 |
|
Stockholders equity |
|
|
6,452.3 |
|
|
|
6,300.1 |
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity |
|
$ |
9,638.3 |
|
|
$ |
9,580.6 |
|
|
|
|
|
|
|
|
|
|
12
ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2014 and 2013
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
2013 |
|
Cash flows provided by (used in) operating activities |
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
397.2 |
|
|
$ |
369.7 |
|
Depreciation and amortization |
|
|
192.3 |
|
|
|
176.5 |
|
Share-based compensation |
|
|
24.2 |
|
|
|
26.2 |
|
Income tax benefits from employee stock compensation plans |
|
|
28.8 |
|
|
|
21.8 |
|
Excess income tax benefits from employee stock compensation plans |
|
|
(8.6 |
) |
|
|
(5.1 |
) |
Inventory step-up |
|
|
4.2 |
|
|
|
2.4 |
|
Changes in operating assets and liabilities, net of acquired assets and liabilities |
|
|
|
|
|
|
|
|
Income taxes |
|
|
(114.4 |
) |
|
|
(47.8 |
) |
Receivables |
|
|
(14.7 |
) |
|
|
(90.0 |
) |
Inventories |
|
|
(85.2 |
) |
|
|
(86.2 |
) |
Accounts payable and accrued expenses |
|
|
(1.7 |
) |
|
|
8.8 |
|
Other assets and liabilities |
|
|
20.8 |
|
|
|
(6.1 |
) |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
442.9 |
|
|
|
370.2 |
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) investing activities |
|
|
|
|
|
|
|
|
Additions to instruments |
|
|
(112.0 |
) |
|
|
(116.3 |
) |
Additions to other property, plant and equipment |
|
|
(63.4 |
) |
|
|
(40.3 |
) |
Purchases of investments |
|
|
(783.3 |
) |
|
|
(366.0 |
) |
Sales of investments |
|
|
691.4 |
|
|
|
475.4 |
|
Investments in other assets |
|
|
(1.4 |
) |
|
|
(74.4 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(268.7 |
) |
|
|
(121.6 |
) |
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in) financing activities |
|
|
|
|
|
|
|
|
Net payments under revolving credit facilities |
|
|
0.5 |
|
|
|
(100.1 |
) |
Dividends paid to stockholders |
|
|
(70.9 |
) |
|
|
(64.5 |
) |
Proceeds from employee stock compensation plans |
|
|
218.9 |
|
|
|
216.7 |
|
Excess income tax benefits from employee stock compensation plans |
|
|
8.6 |
|
|
|
5.1 |
|
Purchase of additional shares from noncontrolling interest |
|
|
|
|
|
|
(1.8 |
) |
Debt issuance costs |
|
|
(47.7 |
) |
|
|
|
|
Repurchase of common stock |
|
|
(400.5 |
) |
|
|
(460.8 |
) |
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(291.1 |
) |
|
|
(405.4 |
) |
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents |
|
|
5.0 |
|
|
|
(17.6 |
) |
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents |
|
|
(111.9 |
) |
|
|
(174.4 |
) |
Cash and cash equivalents, beginning of period |
|
|
1,080.6 |
|
|
|
884.3 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
968.7 |
|
|
$ |
709.9 |
|
|
|
|
|
|
|
|
|
|
13
ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC SEGMENT
FOR THE THREE and SIX MONTHS ENDED JUNE 30, 2014 and 2013
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2014 |
|
|
2013 |
|
|
% Inc/(Dec) |
|
|
2014 |
|
|
2013 |
|
|
% Inc/(Dec) |
|
Americas |
|
$ |
639.7 |
|
|
$ |
660.1 |
|
|
|
(3 |
)% |
|
$ |
1,278.4 |
|
|
$ |
1,294.8 |
|
|
|
(1 |
)% |
Europe |
|
|
334.7 |
|
|
|
307.5 |
|
|
|
9 |
|
|
|
661.6 |
|
|
|
615.0 |
|
|
|
8 |
|
Asia Pacific |
|
|
208.5 |
|
|
|
201.9 |
|
|
|
3 |
|
|
|
404.4 |
|
|
|
398.6 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,182.9 |
|
|
$ |
1,169.5 |
|
|
|
1 |
|
|
$ |
2,344.4 |
|
|
$ |
2,308.4 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE and SIX MONTHS ENDED JUNE 30, 2014 and 2013
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|
|
2014 |
|
|
2013 |
|
|
% Inc/(Dec) |
|
|
2014 |
|
|
2013 |
|
|
% Inc/(Dec) |
|
Reconstructive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Knees |
|
$ |
497.9 |
|
|
$ |
481.0 |
|
|
|
4 |
% |
|
$ |
985.8 |
|
|
$ |
952.0 |
|
|
|
4 |
% |
Hips |
|
|
341.0 |
|
|
|
338.4 |
|
|
|
1 |
|
|
|
672.7 |
|
|
|
669.2 |
|
|
|
1 |
|
Extremities |
|
|
51.5 |
|
|
|
48.6 |
|
|
|
6 |
|
|
|
103.6 |
|
|
|
96.4 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
890.4 |
|
|
|
868.0 |
|
|
|
3 |
|
|
|
1,762.1 |
|
|
|
1,717.6 |
|
|
|
3 |
|
Dental |
|
|
61.1 |
|
|
|
61.4 |
|
|
|
(1 |
) |
|
|
122.1 |
|
|
|
121.1 |
|
|
|
1 |
|
Trauma |
|
|
78.8 |
|
|
|
74.1 |
|
|
|
7 |
|
|
|
158.5 |
|
|
|
156.1 |
|
|
|
2 |
|
Spine |
|
|
52.2 |
|
|
|
54.2 |
|
|
|
(4 |
) |
|
|
100.5 |
|
|
|
101.9 |
|
|
|
(1 |
) |
Surgical and other |
|
|
100.4 |
|
|
|
111.8 |
|
|
|
(10 |
) |
|
|
201.2 |
|
|
|
211.7 |
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,182.9 |
|
|
$ |
1,169.5 |
|
|
|
1 |
|
|
$ |
2,344.4 |
|
|
$ |
2,308.4 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED % GROWTH TO
CONSTANT CURRENCY % GROWTH
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
|
June 30, 2014 |
|
|
|
|
|
|
Foreign |
|
|
Constant |
|
|
|
Reported |
|
|
Exchange |
|
|
Currency |
|
|
|
% Change |
|
|
Impact |
|
|
% Change |
|
Geographic Segments |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
(3 |
)% |
|
|
|
% |
|
|
(3 |
)% |
Europe |
|
|
9 |
|
|
|
4 |
|
|
|
5 |
|
Asia Pacific |
|
|
3 |
|
|
|
(4 |
) |
|
|
7 |
|
Total |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Product Categories |
|
|
|
|
|
|
|
|
|
|
|
|
Reconstructive |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
|
|
Europe |
|
|
9 |
|
|
|
4 |
|
|
|
5 |
|
Asia Pacific |
|
|
3 |
|
|
|
(4 |
) |
|
|
7 |
|
Total |
|
|
3 |
|
|
|
1 |
|
|
|
2 |
|
Knees |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
|
13 |
|
|
|
4 |
|
|
|
9 |
|
Asia Pacific |
|
|
1 |
|
|
|
(4 |
) |
|
|
5 |
|
Total |
|
|
4 |
|
|
|
1 |
|
|
|
3 |
|
Hips |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
(2 |
) |
|
|
|
|
|
|
(2 |
) |
Europe |
|
|
3 |
|
|
|
4 |
|
|
|
(1 |
) |
Asia Pacific |
|
|
4 |
|
|
|
(4 |
) |
|
|
8 |
|
Total |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
Extremities |
|
|
6 |
|
|
|
1 |
|
|
|
5 |
|
Dental |
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
Trauma |
|
|
7 |
|
|
|
1 |
|
|
|
6 |
|
Spine |
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
Surgical and other |
|
|
(10 |
) |
|
|
|
|
|
|
(10 |
) |
15
ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED % GROWTH TO
CONSTANT CURRENCY % GROWTH
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended |
|
|
|
June 30, 2014 |
|
|
|
|
|
|
Foreign |
|
|
Constant |
|
|
|
Reported |
|
|
Exchange |
|
|
Currency |
|
|
|
% Change |
|
|
Impact |
|
|
% Change |
|
Geographic Segments |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
(1 |
)% |
|
|
|
% |
|
|
(1 |
)% |
Europe |
|
|
8 |
|
|
|
3 |
|
|
|
5 |
|
Asia Pacific |
|
|
2 |
|
|
|
(6 |
) |
|
|
8 |
|
Total |
|
|
2 |
|
|
|
|
|
|
|
2 |
|
Product Categories |
|
|
|
|
|
|
|
|
|
|
|
|
Reconstructive |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Europe |
|
|
7 |
|
|
|
2 |
|
|
|
5 |
|
Asia Pacific |
|
|
1 |
|
|
|
(7 |
) |
|
|
8 |
|
Total |
|
|
3 |
|
|
|
|
|
|
|
3 |
|
Knees |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
1 |
|
|
|
(1 |
) |
|
|
2 |
|
Europe |
|
|
10 |
|
|
|
3 |
|
|
|
7 |
|
Asia Pacific |
|
|
1 |
|
|
|
(7 |
) |
|
|
8 |
|
Total |
|
|
4 |
|
|
|
|
|
|
|
4 |
|
Hips |
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
Europe |
|
|
3 |
|
|
|
3 |
|
|
|
|
|
Asia Pacific |
|
|
1 |
|
|
|
(6 |
) |
|
|
7 |
|
Total |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Extremities |
|
|
7 |
|
|
|
|
|
|
|
7 |
|
Dental |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
Trauma |
|
|
2 |
|
|
|
|
|
|
|
2 |
|
Spine |
|
|
(1 |
) |
|
|
1 |
|
|
|
(2 |
) |
Surgical and other |
|
|
(5 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
16
ZIMMER HOLDINGS, INC.
Reconciliation of Net Earnings and Adjusted Net Earnings
For the Three Months Ended June 30, 2014 and 2013
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended June 30, |
|
|
|
2014 |
|
|
2013 |
|
Net Earnings of Zimmer Holdings, Inc. |
|
$ |
176.5 |
|
|
$ |
152.1 |
|
Inventory step-up and other inventory and manufacturing related charges |
|
|
9.6 |
|
|
|
11.7 |
|
Certain claims |
|
|
21.8 |
|
|
|
47.0 |
|
Special items |
|
|
64.7 |
|
|
|
75.6 |
|
Other expense on Biomet merger financing |
|
|
10.0 |
|
|
|
|
|
Taxes on above items* |
|
|
(27.9 |
) |
|
|
(43.0 |
) |
|
|
|
|
|
|
|
|
|
Adjusted Net Earnings |
|
$ |
254.7 |
|
|
$ |
243.4 |
|
|
|
|
|
|
|
|
|
|
* |
The tax effect is calculated based upon the statutory rates for the jurisdictions where the items were incurred. |
ZIMMER HOLDINGS, INC.
Reconciliation of Net Earnings and Adjusted Net Earnings
For the Six Months Ended June 30, 2014 and 2013
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months |
|
|
|
Ended June 30, |
|
|
|
2014 |
|
|
2013 |
|
Net Earnings of Zimmer Holdings, Inc. |
|
$ |
398.0 |
|
|
$ |
370.7 |
|
Inventory step-up and other inventory and manufacturing related charges |
|
|
17.3 |
|
|
|
13.9 |
|
Certain claims |
|
|
21.8 |
|
|
|
47.0 |
|
Special items |
|
|
110.6 |
|
|
|
109.1 |
|
Other expense on Biomet merger financing |
|
|
10.0 |
|
|
|
|
|
Taxes on above items* |
|
|
(44.9 |
) |
|
|
(56.5 |
) |
|
|
|
|
|
|
|
|
|
Adjusted Net Earnings |
|
$ |
512.8 |
|
|
$ |
484.2 |
|
|
|
|
|
|
|
|
|
|
* |
The tax effect is calculated based upon the statutory rates for the jurisdictions where the items were incurred. |
17
ZIMMER HOLDINGS, INC.
Reconciliation of Diluted EPS and Adjusted Diluted EPS
For the Three Months Ended June 30, 2014 and 2013
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
Ended June 30, |
|
|
|
2014 |
|
|
2013 |
|
Diluted EPS |
|
$ |
1.03 |
|
|
$ |
0.89 |
|
Inventory step-up and other inventory and manufacturing related charges |
|
|
0.05 |
|
|
|
0.07 |
|
Certain claims |
|
|
0.13 |
|
|
|
0.28 |
|
Special items |
|
|
0.38 |
|
|
|
0.44 |
|
Other expense on Biomet merger financing |
|
|
0.06 |
|
|
|
|
|
Taxes on above items* |
|
|
(0.16 |
) |
|
|
(0.25 |
) |
|
|
|
|
|
|
|
|
|
Adjusted Diluted EPS |
|
$ |
1.49 |
|
|
$ |
1.43 |
|
|
|
|
|
|
|
|
|
|
* |
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 Six Months Ended June 30, 2014 and 2013
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six Months |
|
|
|
Ended June 30, |
|
|
|
2014 |
|
|
2013 |
|
Diluted EPS |
|
$ |
2.32 |
|
|
$ |
2.17 |
|
Inventory step-up and other inventory and manufacturing related charges |
|
|
0.10 |
|
|
|
0.08 |
|
Certain claims |
|
|
0.13 |
|
|
|
0.28 |
|
Special items |
|
|
0.64 |
|
|
|
0.64 |
|
Other expense on Biomet merger financing |
|
|
0.06 |
|
|
|
|
|
Taxes on above items* |
|
|
(0.26 |
) |
|
|
(0.33 |
) |
|
|
|
|
|
|
|
|
|
Adjusted Diluted EPS |
|
$ |
2.99 |
|
|
$ |
2.84 |
|
|
|
|
|
|
|
|
|
|
* |
The tax effect is calculated based upon the statutory rates for the jurisdictions where the items were incurred. |
18
ZIMMER HOLDINGS, INC.
Reconciliation of 2014 Projected Diluted EPS
and Projected Adjusted Diluted EPS
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Low |
|
|
High |
|
Projected Year Ended December 31, 2014: |
|
|
|
|
|
|
|
|
Diluted EPS |
|
$ |
4.65 |
|
|
$ |
4.75 |
|
Inventory step-up and other inventory and manufacturing related charges, special items and other expense |
|
|
1.73 |
|
|
|
1.73 |
|
Certain claims |
|
|
0.13 |
|
|
|
0.13 |
|
Taxes on above items* |
|
|
(0.51 |
) |
|
|
(0.51 |
) |
|
|
|
|
|
|
|
|
|
Adjusted Diluted EPS |
|
$ |
6.00 |
|
|
$ |
6.10 |
|
|
|
|
|
|
|
|
|
|
* |
The tax effect is calculated based upon the statutory rates for the jurisdictions where the items have been or are projected to be incurred. |
19