As Zimmer Awaits Merger Approval, Profit Dips
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowWarsaw-based Zimmer Holdings Inc. (NYSE: ZMH) is reporting third quarter profit of $176.8 million, compared to $221.1 million a year ago. Chief Executive Officer David Dvorak says he now expects the pending $13 billion “historic” acquisition of Biomet Inc. to be complete next month. April 30, 2015
News Release
WARSAW, Ind. – Zimmer Holdings, Inc. (NYSE and SIX: ZMH) today reported financial results for the quarter ended March 31, 2015. The Company reported first quarter net sales of $1.13 billion, a decrease of 2.3% reported and an increase of 4.5% constant currency compared to the first quarter of 2014. Diluted earnings per share for the quarter were $1.02 reported and $1.58 adjusted, a decrease of 1.3% adjusted from the prior year period.
“In the first quarter, Zimmer achieved steady sales growth in several geographies and product categories, while continuing to meet our financial commitments and deliver expanded operating margin leverage,” said David Dvorak, President and CEO of Zimmer. “Notably, we recently received approval from the European Commission and the Japan Fair Trade Commission for our pending combination with Biomet, which we now expect to close during the month of May, 2015. This historic merger will enhance our leadership in musculoskeletal healthcare by drawing upon the talent and capabilities that have enabled the extraordinary growth and sustained success of our two companies.”
Net earnings for the first quarter were $177.1 million on a reported basis and $272.8 million on an adjusted basis, a decrease of 0.6% adjusted from the prior year period. Operating cash flow for the first quarter was $73.0 million, inclusive of a payment of $97.6 million to settle a pre-issuance hedge contract associated with the Company's recent senior notes offering.
Also in the quarter, the Company paid $37.3 million in dividends and declared a first quarter dividend of $0.22 per share, consistent with the dividend declared for the prior year period.
Guidance
Based upon the continued strengthening of the U.S. dollar, the Company has updated its full-year 2015 standalone adjusted earnings guidance. The Company now expects adjusted diluted earnings per share on a standalone basis to be in a range of $6.30 to $6.40. This compares to prior full-year 2015 guidance of $6.50 to $6.60. Additionally, changes in currency rates are also expected to negatively impact Biomet earnings, which the Company expects to be partially offset by greater synergies from the pending merger than had previously been contemplated in the Company's guidance. Net annual operating earnings synergies connected with the pending merger are now anticipated to reach $350 million by year three following the closing of the transaction. This compares to prior guidance of net annual synergies of $270 million by the third year post-closing. Consequently, the Company now expects accretion from the pending merger with Biomet to contribute between $0.95 and $1.05 to adjusted diluted earnings per share in the first 12 months following the closing of the transaction. This accretion guidance was previously a range of $1.05 to $1.15.
Conference Call
The Company will conduct its first quarter 2015 investor conference call today, April 30, 2015, 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 call.
Individuals in the U.S. and Canada who wish to dial into the conference call may do so by dialing (877) 941-1227 and entering conference ID 4696681. For a complete listing of international toll-free and local numbers, please visit http://investor.zimmer.com. A digital recording will be available 24 hours after the completion of the conference call, from May 1, 2015 to May 30, 2015. To access the recording, U.S. and Canada callers should dial (800) 406-7325 and international callers should dial +1 (303) 590-3030, and enter the Access Code ID 4696670.
Sales Table
The following table provides sales results by geographic segment and product category, as well as the percentage change compared to the prior year quarter on both a reported and constant currency basis.
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. Zimmer's 2014 sales were approximately $4.7 billion. Zimmer is supported by the efforts of more than 9,000 employees worldwide.
Source: Zimmer Holdings Inc.