-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LCek5JtAoEkal4p5HYEu58N9YhixYdVIoWCAvjiZ+qg/E/Zu2qfL9nGU12Mm67wg +T96UsMcVVNSNMcJtGLj/Q== 0000950137-05-009172.txt : 20050727 0000950137-05-009172.hdr.sgml : 20050727 20050727172333 ACCESSION NUMBER: 0000950137-05-009172 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20050727 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050727 DATE AS OF CHANGE: 20050727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ZIMMER HOLDINGS INC CENTRAL INDEX KEY: 0001136869 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 134151777 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-16407 FILM NUMBER: 05978195 BUSINESS ADDRESS: STREET 1: 345 EAST MAIN STREET CITY: WARSAW STATE: IN ZIP: 46580 BUSINESS PHONE: 5742676131 MAIL ADDRESS: STREET 1: 345 EAST MAIN STREET CITY: WARSAW STATE: IN ZIP: 46580 8-K 1 c97019e8vk.htm CURRENT REPORT e8vk
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 27, 2005
Zimmer Holdings, Inc.
 
(Exact name of registrant as specified in its charter)
         
Delaware   001-16407   13-4151777
 
(State or other jurisdiction   (Commission   (IRS Employer
of incorporation)   File Number)   Identification No.)
345 East Main Street
Warsaw, Indiana 46580
 
(Address of principal executive offices) (Zip Code)
Registrant’s 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:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

TABLE OF CONTENTS

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
SIGNATURES
Press Release

Table of Contents

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
     On July 27, 2005, Zimmer Holdings, Inc. (the “Registrant”) reported its results of operations for the quarter ended June 30, 2005. The Registrant’s 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.
     As previously announced, the Registrant acquired Centerpulse AG on October 2, 2003 and Implex Corp. on April 23, 2004. The earnings release attached as Exhibit 99.1 includes the operating performance measures of adjusted net earnings, adjusted diluted EPS and projected diluted EPS which exclude acquisition and integration expenses and inventory step-up. It also includes other non-GAAP financial measures including net margin, operating margin, gross margin and net debt.
     Management believes that the presentation of these non-GAAP financial measures allows investors to better understand the operating results of the Registrant. However, these measures should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP.
     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 Exhibits, 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 Exhibits.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press Release, dated July 27, 2005, issued by the Registrant.

 

Table of Contents

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 27, 2005
 
            
    ZIMMER HOLDINGS, INC.
 
            
 
  By:     /s/ David C. Dvorak    
 
           
 
        David C. Dvorak, Executive Vice President,    
 
        Corporate Services and Chief Counsel    

 

EX-99.1 2 c97019exv99w1.htm PRESS RELEASE exv99w1
 

EXHIBIT 99.1
         
Contacts:
        
   Media
  Investors    
Brad Bishop
  Marc Ostermann   Sam Leno
574-372-4291
  574-371-8515   574-372-4790
bradley.bishop@zimmer.com
  marc.ostermann@zimmer.com   sam.leno@zimmer.com
Zimmer Reports Second Quarter 2005 Financial Results
Quarter Highlights
  •   Net Sales of $847 million represents an increase of 15% (includes 2% increase due to changes in foreign exchange rates)
 
  •   15% Sales increases in all three geographic segments—Americas, Europe and Asia Pacific
 
  •   Worldwide Reconstructive Sales increased 16% (includes 2% increase due to changes in foreign exchange rates) with Americas Reconstructive Sales increasing 17%
 
  •   Spine and Dental both increased sales in excess of 20%
 
  •   Record profit margins—78% gross, 33% operating and 23% net reported; 78% gross, 34% operating and 24% net adjusted*
 
  •   Diluted EPS were $0.76 reported, and $0.80 adjusted*, an increase of 38% adjusted* over prior year
 
  •   Operating cash flow of $244 million, total debt reduced to $268 million and cash on hand of $95 million, resulting in net debt* of $173 million
 
  •   Increasing the Company’s 2005 EPS guidance by $0.07 to $2.93 reported and $3.07 adjusted*
(WARSAW, IN) July 27, 2005 — Zimmer Holdings, Inc. (NYSE and SWX: ZMH) today reported financial results for the quarter ended June 30, 2005. For the quarter, the Company announced net sales of $847 million and diluted earnings per share of $0.76 reported and $0.80 adjusted*, exceeding First Call estimates of $842 million and $0.75 adjusted*, respectively. Reported results include acquisition and integration expenses and inventory step-up, as applicable.

 

 

“We had a strong and balanced quarter with 15 percent sales growth in each of our geographic segments and above market performance, with greater than 20 percent growth, in both Spine and Dental,” said Ray Elliott, Zimmer Chairman, President and CEO. “Almost a quarter of a billion dollars of operating cash flow this period creates the potential to become net debt free again early in the fourth quarter—only two years from the date of our Centerpulse acquisition.”
Zimmer said it continues to be pleased by the product, market and expense synergy opportunities realized as a result of the Centerpulse acquisition. With 2,594 integration milestones complete, the Company is three-quarters of the way through its comprehensive plan and is confident it will exceed $100 million in annual synergy expense savings.
The Company said it has completed more new product projects in the first half of 2005 than in the full year 2004, and continued to emphasize its leadership in Minimally Invasive Solutions™ (MIS™) Procedures and Technologies. “We have trained twice as many surgeons at our 23 Zimmer Institute locations in the first half of this year than during the same period last year,” Elliott said. “We have greatly increased training on our newest procedures with more than 400 surgeons trained this quarter alone in our MIS Quad-Sparing™ Total Knee Replacement Procedure and nearly 400 this quarter in the MIS Anterolateral Hip Replacement Procedure.”
The Company noted that it released the Zimmer® NexGen® MIS™ Tibial Component, the first knee replacement implant that can be assembled inside the patient, facilitating minimally invasive procedures, and that it has released 5,000 MIS knee instrument sets since inception, including more than 1,250 for the MIS Quad-Sparing Procedure. In computer navigation, Zimmer said that 180 surgeries have been performed with the Zimmer® Computer Assisted Solutions Electromagnetic Computer Navigation System, developed in cooperation with exclusive partner Medtronic, and that the iNav™ Portable Navigation System, a low-cost, convenient version of its electromagnetic surgical navigation system will be in limited release for knees this fall.

2

 

The following tables provide sales results by geographic segment and product category, as well as the percent change compared to the prior year quarter and six months and the impact of changes in foreign exchange rates.

3

 

NET SALES — THREE MONTHS ENDED JUNE 30, 2005
(in millions, unaudited)
                         
    Net   %   FX
    Sales   Growth   Impact**
Geographic Segments
                        
Americas
   $ 495       15 %     1 %
Europe
     228       15       4  
Asia Pacific
     124       15       4  
 
                        
Total
     847       15       2  
 
                        
Product Categories
                        
Reconstructive
                        
Americas
     398       17       1  
Europe
     206       15       5  
Asia Pacific
     101       17       5  
 
                        
Total
     705       16       2  
 
                        
Knees
                        
Americas
     226       21       0  
Europe
     85       18       5  
Asia Pacific
     43       20       5  
 
                        
Total
     354       20       2  
 
                        
Hips
                        
Americas
     138       9       1  
Europe
     106       11       5  
Asia Pacific
     50       12       4  
 
                        
Total
     294       10       3  
 
                        
Extremities
     17       17       2  
 
                        
Dental
     40       28       2  
 
                        
Trauma
     44       2       2  
 
                        
Spine
     41       22       1  
 
                        
Orthopaedic Surgical Products
     57       8       2  
 
**   Effect of changes in foreign exchange rates on growth

4

 

Net earnings for the quarter were $191 million on a reported basis, and were $199 million adjusted*, an increase of 39% adjusted* over the prior year period. Diluted earnings per share for the quarter were $0.76 reported and were $0.80 adjusted*, an increase of 38% adjusted* over the prior year period. Included in the quarter is approximately $6.5 million of pre-tax income reflected in cost of goods related primarily to the favorable resolution of certain legal and other matters. These items contributed 0.8% to gross profit margin and a little less than $0.02 to diluted earnings per share.

5

 

NET SALES — SIX MONTHS ENDED JUNE 30, 2005
(in millions, unaudited)
                         
    Net   %   FX
    Sales   Growth   Impact**
Geographic Segments
                        
Americas
   $ 975       14 %     0 %
Europe
     463       12       5  
Asia Pacific
     237       12       4  
 
                        
Total
     1,675       13       2  
 
                        
Product Categories
                        
Reconstructive
                        
Americas
     783       17       1  
Europe
     420       11       4  
Asia Pacific
     191       13       4  
 
                        
Total
     1,394       14       2  
 
                        
Knees
                        
Americas
     448       21       0  
Europe
     173       17       6  
Asia Pacific
     80       15       4  
 
                        
Total
     701       19       2  
 
                        
Hips
                        
Americas
     270       9       1  
Europe
     218       6       4  
Asia Pacific
     98       9       4  
 
                        
Total
     586       8       3  
 
                        
Extremities
     34       14       2  
 
                        
Dental
     73       24       2  
 
                        
Trauma
     90       1       1  
 
                        
Spine
     79       18       1  
 
                        
Orthopaedic Surgical Products
     112       7       2  
 
**   Effect of changes in foreign exchange rates on growth

6

 

Net earnings for the six months were $364 million on a reported basis, and were $386 million adjusted*, an increase of 37% adjusted* over the prior year period. Diluted earnings per share for the six months were $1.46 reported and were $1.55 adjusted*, an increase of 36% adjusted* over the prior year period.
Guidance
The Company is updating its guidance for the balance of 2005 to incorporate the results of the second quarter and the significant change in expected contribution from foreign currency detailed in the Company’s June 15, 2005 press release.
Full year 2005 sales guidance provided at the end of the first quarter was a range of $3,325 to $3,345 million. Since then, the expected contribution to sales growth from foreign currency rate changes, using current rates, has decreased by $53 million as a result of the strengthening U.S. dollar against most foreign currencies. Incorporating the lower expected contribution from foreign currency differences during the last six months of 2005, and maintaining constant currency growth rates during the last six months of 2005 at the same 11% that the Company reported in the first six months, our revised full year 2005 sales estimate is approximately $3,325 million. In short, the Company is absorbing the $53 million in changes from foreign currency, while maintaining sales guidance within the range established at the end of the first quarter. Expectations for third quarter sales are approximately $777 million, consisting of constant currency growth of about 11% and zero contribution from foreign currency. Expectations for fourth quarter sales are approximately $875 million, consisting of constant currency growth of about 11% and a negative contribution from foreign currency of approximately $16 million or negative 2%. The fourth quarter and second half have one less billing day than prior year.
The Company’s diluted earnings per share guidance for the full year is being increased by $0.07 to approximately $2.93 reported and $3.07 adjusted*, representing a 27% increase over prior year. Diluted earnings per share guidance for the third quarter is approximately $0.63 reported and $0.66 adjusted*, representing an 18% adjusted* increase over prior year. Diluted earnings per share guidance for the fourth quarter is approximately $0.83 reported and $0.86 adjusted*, representing a 21% adjusted* increase over prior year. Third and fourth quarter earnings per

7

 

share guidance assumes continued increases in R&D spending primarily related, but not limited, to biologics, as well as increases in direct to consumer advertising spending related to MIS procedures and technologies, and incremental legal and IT costs. As noted in the Company’s June 15, 2005 press release, the Company utilizes forward contracts to hedge the short term effects of foreign currency movement on inter-company sales transactions. As a result, the short term effect of rapid foreign currency exchange rate movements on operating profit dollars is expected to be minimal.
Conference Call
The Company will conduct its second quarter 2005 investor conference call on Thursday, July 28, 2005, 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 July 28, 2005 to August 2, 2005. 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, 7234528. 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 reconstructive and spinal implants, trauma and related orthopaedic surgical products. Zimmer has operations in more than 24 countries around the world and sells products in more than 100 countries. Zimmer’s 2004 sales were approximately $3 billion. The Company is supported by the efforts of more than 6,500 employees worldwide.
###
Visit Zimmer on the worldwide web at www.zimmer.com

8

 

*Note on Non-GAAP Financial Measures
As used in this press release, the term “adjusted” refers to operating performance measures that exclude acquisition and integration expenses and inventory step-up. The term “net debt” refers to short-term and long-term debt obligations minus the Company’s cash and equivalents and restricted cash. Reconciliations of 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. The forward-looking statements include sales and diluted earnings per share guidance and other statements identified by the use of forward-looking terms such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “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 Centerpulse AG and Implex Corp., the outcome of the Department of Justice investigation announced in March 2005 and the pending informal SEC investigation of Centerpulse accounting, 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 the disclosure materials filed by Zimmer with the U.S. Securities and Exchange Commission. 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. 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.

9

 

ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 2005 and 2004
(in millions, except per share amounts, unaudited)
                         
    2005   2004   % Inc/(Dec)
Net Sales
   $ 846.8     $ 737.4       15 %
Cost of products sold
     188.8       201.9       (7 )
 
                        
Gross Profit
     658.0       535.5       23  
 
                        
 
Research and development
     43.6       38.2       14  
Selling, general and administrative
     328.5       297.3       11  
Acquisition and integration
     10.1       24.2       (58 )
 
                        
Operating expenses
     382.2       359.7       6  
 
                        
 
                        
Operating Profit
     275.8       175.8       57  
Interest expense
     4.2       8.3       (49 )
 
                        
Earnings before income taxes and minority interest
     271.6       167.5       62  
Provision for income taxes
     80.7       51.4       57  
Minority interest
     (0.2 )     0.2       N/A  
 
                        
Net Earnings
   $ 190.7     $ 116.3       64  
 
                        
 
                        
Earnings Per Common Share
                        
Basic
   $ 0.77     $ 0.48       60  
Diluted
   $ 0.76     $ 0.47       62  
 
                        
Weighted Average Common Shares Outstanding
                        
Basic
     247.0       244.3          
Diluted
     249.9       247.9          

10

 

ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
(in millions, except per share amounts, unaudited)
                         
    2005   2004   % Inc/(Dec)
Net Sales
   $ 1,675.3     $ 1,479.6       13 %
Cost of products sold
     379.1       421.4       (10 )
 
                        
Gross Profit
     1,296.2       1,058.2       22  
 
                        
 
                        
Research and development
     85.7       78.0       10  
Selling, general and administrative
     650.1       595.1       9  
Acquisition and integration
     27.0       55.5       (51 )
 
                        
Operating expenses
     762.8       728.6       5  
 
                        
Operating Profit
     533.4       329.6       62  
Interest expense
     11.4       18.1       (37 )
 
                        
Earnings before income taxes and minority interest
     522.0       311.5       68  
Provision for income taxes
     157.3       97.8       61  
Minority interest
     (0.4 )     0.2       N/A  
 
                        
Net Earnings
   $ 364.3     $ 213.9       70  
 
                        
 
                        
Earnings Per Common Share
                        
Basic
   $ 1.48     $ 0.88       68  
Diluted
   $ 1.46     $ 0.87       68  
 
                        
Weighted Average Common Shares Outstanding
                        
Basic
     246.5       243.6          
Diluted
     249.5       247.2          

11

 

ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2005 AND DECEMBER 31, 2004
(in millions)
                 
    June 30,   December 31,
    2005   2004
    (unaudited)        
Assets
                
Current Assets:
                
Cash and equivalents
   $ 78.8     $ 154.6  
Restricted cash
     16.6       18.9  
Receivables, net
     573.4       524.8  
Inventories, net
     568.0       536.0  
Other current assets
     255.4       326.6  
 
                
Total current assets
     1,492.2       1,560.9  
 
                
Property, plant and equipment, net
     676.6       628.5  
Goodwill
     2,434.2       2,528.9  
Intangible assets, net
     779.1       794.8  
Other assets
     169.4       182.4  
 
                
Total Assets
   $ 5,551.5     $ 5,695.5  
 
                
 
                
Liabilities and Shareholders’ Equity
                
 
                
Current liabilities
   $ 613.9     $ 673.5  
Short-term debt
     —       27.5  
Other long-term liabilities
     363.1       420.9  
Long-term debt
     268.1       624.0  
Minority interest
     1.8       7.1  
Shareholders’ equity
     4,304.6       3,942.5  
 
                
Total Liabilities and Shareholders’ Equity
   $ 5,551.5     $ 5,695.5  
 
                

12

 

ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
(in millions, unaudited)
                 
    2005   2004
Cash flows provided by (used in) operating activities
                
Net earnings
   $ 364.3     $ 213.9  
Depreciation and amortization
     90.4       87.3  
Inventory step-up
     4.1       49.6  
Changes in operating assets and liabilities, net of acquired assets and liabilities
                
Income taxes
     79.9       93.6  
Receivables
     (66.6 )     (44.2 )
Inventories
     (58.6 )     (14.3 )
Accounts payable and accrued expenses
     (1.1 )     (27.0 )
Other assets and liabilities
     (16.3 )     39.4  
 
                
Net cash provided by operating activities
     396.1       398.3  
 
                
Cash flows provided by (used in) investing activities
                
Additions to instruments
     (90.6 )     (74.9 )
Additions to other property, plant and equipment
     (42.2 )     (30.6 )
Centerpulse and InCentive acquisitions, net of acquired cash
     —       (18.2 )
Implex acquisition, net of acquired cash
     —       (103.7 )
Proceeds from note receivable
     —       25.0  
Investments in other assets
     (9.7 )     (1.1 )
 
                
Net cash used in investing activities
     (142.5 )     (203.5 )
 
                
Cash flows provided by (used in) financing activities
                
Proceeds from exercise of stock options
     52.1       49.7  
Net proceeds/(payments) on lines of credit
     174.7       (239.4 )
Payments on term loan
     (550.0 )     —  
Debt issuance costs
     (1.9 )     —  
Equity issuance costs
     —       (5.0 )
 
                
Net cash used in financing activities
     (325.1 )     (194.7 )
 
                
Effect of exchange rates on cash and equivalents
     (4.3 )     (0.7 )
 
                
Increase in cash and equivalents
     (75.8 )     (0.6 )
Cash and equivalents, beginning of period
     154.6       77.5  
 
                
Cash and equivalents, end of period
   $ 78.8     $ 76.9  
 
                

13

 

ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC SEGMENT
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 and 2004
(in millions, unaudited)
                                                 
    Three Months Ended June 30,   Six Months Ended June 30,
    2005   2004   % Increase   2005   2004   % Increase
Americas
   $ 494.7     $ 432.2       15 %   $ 975.1     $ 854.9       14 %
Europe
     228.1       197.7       15       462.7       412.8       12  
Asia Pacific
     124.0       107.5       15       237.5       211.9       12  
 
                                                
 
                                                
Total
   $ 846.8     $ 737.4       15     $ 1,675.3     $ 1,479.6       13  
 
                                                
ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005 and 2004
(in millions, unaudited)
                                                 
    Three Months Ended June 30,   Six Months Ended June 30,
    2005   2004   % Increase   2005   2004 % Increase
Reconstructive
   $ 704.9     $ 607.8       16 %   $ 1,394.3     $ 1,219.1       14 %
Trauma
     44.4       43.4       2       89.8       88.4       1  
Spine
     41.1       33.8       22       79.4       67.3       18  
OSP
     56.4       52.4       8       111.8       104.8       7  
 
                                                
 
                                                
Total
   $ 846.8     $ 737.4       15     $ 1,675.3     $ 1,479.6       13  
 
                                                

14

 

ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET EARNINGS
AND ADJUSTED* NET EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 2005 and 2004
(in millions, unaudited)
                 
    Three Months
    Ended June 30,
    2005   2004
Net Earnings
   $ 190.7     $ 116.3  
Acquisition and integration
     10.1       24.2  
Inventory step-up
     2.1       18.6  
Tax benefit of acquisition and integration and inventory step-up
     (3.7 )     (15.3 )
 
                
Adjusted Net Earnings
   $ 199.2     $ 143.8  
 
                
ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET EARNINGS
AND ADJUSTED* NET EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
(in millions, unaudited)
                 
    Six Months
    Ended June 30,
    2005   2004
Net Earnings
   $ 364.3     $ 213.9  
Acquisition and integration
     27.0       55.5  
Inventory step-up
     4.1       49.6  
Tax benefit of acquisition and integration and inventory step-up
     (9.3 )     (37.6 )
 
                
Adjusted Net Earnings
   $ 386.1     $ 281.4  
 
                

15

 

ZIMMER HOLDINGS, INC.
RECONCILIATION OF DILUTED EPS
AND ADJUSTED* DILUTED EPS
FOR THE THREE MONTHS ENDED JUNE 30, 2005 and 2004
(unaudited)
                 
    Three Months
    Ended June 30,
    2005   2004
Diluted EPS
   $ 0.76     $ 0.47  
Acquisition and integration
     0.04       0.10  
Inventory step-up
     0.01       0.07  
Tax benefit of acquisition and integration and inventory step-up
     (0.01 )     (0.06 )
 
                
Adjusted* Diluted EPS
   $ 0.80     $ 0.58  
 
                
ZIMMER HOLDINGS, INC.
RECONCILIATION OF DILUTED EPS
AND ADJUSTED* DILUTED EPS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 and 2004
(unaudited)
                 
    Six Months
    Ended June 30,
    2005   2004
Diluted EPS
   $ 1.46     $ 0.87  
Acquisition and integration
     0.11       0.22  
Inventory step-up
     0.02       0.20  
Tax benefit of acquisition and integration and inventory step-up
     (0.04 )     (0.15 )
 
                
Adjusted* Diluted EPS
   $ 1.55     $ 1.14  
 
                

16

 

ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED
AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 2005
(in millions, except per share amounts, unaudited)
                         
    Reported           Adjusted*
    2005   Adjustments   2005
Net Sales
   $ 846.8     $ —     $ 846.8  
Cost of products sold
     188.8       (2.1 )     186.7  
 
                        
Gross Profit
     658.0       2.1       660.1  
 
                        
 
                        
Research and development
     43.6       —       43.6  
Selling, general and administrative
     328.5       —       328.5  
Acquisition and integration
     10.1       (10.1 )     —  
 
                        
Operating expenses
     382.2       (10.1 )     372.1  
 
                        
 
                        
Operating Profit
     275.8       12.2       288.0  
Interest expense
     4.2       —       4.2  
 
                        
Earnings before income taxes and minority interest
     271.6       12.2       283.8  
Provision for income taxes
     80.7       3.7       84.4  
Minority interest
     (0.2 )     —       (0.2 )
 
                        
 
                        
Net Earnings
   $ 190.7     $ 8.5     $ 199.2  
 
                        
 
                        
Earnings Per Common Share
                        
Basic
   $ 0.77     $ 0.04     $ 0.81  
Diluted
   $ 0.76     $ 0.04     $ 0.80  
 
                        
Weighted Average Common Shares Outstanding
                        
Basic
     247.0               247.0  
Diluted
     249.9               249.9  

17

 

ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED
AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 2005
(in millions, except per share amounts, unaudited)
                         
    Reported           Adjusted*
    2005   Adjustments   2005
Net Sales
   $ 1,675.3     $ —     $ 1,675.3  
Cost of products sold
     379.1       (4.1 )     375.0  
 
                        
Gross Profit
     1,296.2       4.1       1,300.3  
 
                        
 
                        
Research and development
     85.7       —       85.7  
Selling, general and administrative
     650.1       —       650.1  
Acquisition and integration
     27.0       (27.0 )     —  
 
                        
Operating expenses
     762.8       (27.0 )     735.8  
 
                        
 
                        
Operating Profit
     533.4       31.1       564.5  
Interest expense
     11.4       —       11.4  
 
                        
Earnings before income taxes and minority interest
     522.0       31.1       553.1  
Provision for income taxes
     157.3       9.3       166.6  
Minority interest
     (0.4 )     —       (0.4 )
 
                        
 
                        
Net Earnings
   $ 364.3     $ 21.8     $ 386.1  
 
                        
 
                        
Earnings Per Common Share
                        
Basic
   $ 1.48     $ 0.09     $ 1.57  
Diluted
   $ 1.46     $ 0.09     $ 1.55  
 
                        
Weighted Average Common Shares Outstanding
                        
Basic
     246.5               246.5  
Diluted
     249.5               249.5  

18

 

ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED
AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 2004
(in millions, except per share amounts, unaudited)
                         
    Reported,           Adjusted*
    2004   Adjustments   2004
Net Sales
   $ 737.4     $ —     $ 737.4  
Cost of products sold
     201.9       (18.6 )     183.3  
 
                        
Gross Profit
     535.5       18.6       554.1  
 
                        
 
                        
Research and development
     38.2       —       38.2  
Selling, general and administrative
     297.3       —       297.3  
Acquisition and integration
     24.2       (24.2 )     —  
 
                        
Operating expenses
     359.7       (24.2 )     335.5  
 
                        
 
                        
Operating Profit
     175.8       42.8       218.6  
Interest expense
     8.3       —       8.3  
 
                        
Earnings before income taxes
     167.5       42.8       210.3  
Provision for income taxes
     51.4       15.3       66.7  
Minority Interest
     0.2       —       0.2  
 
                        
Net Earnings
   $ 116.3     $ 27.5     $ 143.8  
 
                        
 
                        
Earnings Per Common Share
                        
Basic
   $ 0.48     $ 0.11     $ 0.59  
Diluted
   $ 0.47     $ 0.11     $ 0.58  
 
                        
Weighted Average Common Shares Outstanding
                        
Basic
     244.3               244.3  
Diluted
     247.9               247.9  

19

 

ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED
AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 2004
(in millions, except per share amounts, unaudited)
                         
    Reported           Adjusted*
    2004   Adjustments     2004
Net Sales
   $ 1,479.6     $ —     $ 1,479.6  
Cost of products sold
     421.4       (49.6 )     371.8  
 
                        
Gross Profit
     1,058.2       49.6       1,107.8  
 
                        
 
                        
Research and development
     78.0       —       78.0  
Selling, general and administrative
     595.1       —       595.1  
Acquisition and integration
     55.5       (55.5 )     —  
 
                        
Operating expenses
     728.6       (55.5 )     673.1  
 
                        
 
                        
Operating Profit
     329.6       105.1       434.7  
Interest expense
     18.1       —       18.1  
 
                        
Earnings before income taxes
     311.5       105.1       416.6  
Provision for income taxes
     97.8       37.6       135.4  
Minority Interest
     0.2       —       0.2  
 
                        
 
                        
Net Earnings
   $ 213.9     $ 67.5     $ 281.4  
 
                        
 
                        
Earnings Per Common Share
                        
Basic
   $ 0.88     $ 0.28     $ 1.16  
Diluted
   $ 0.87     $ 0.27     $ 1.14  
 
                        
Weighted Average Common Shares Outstanding
                        
                       
Basic
     243.6               243.6  
Diluted
     247.2               247.2  

20

 

ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET MARGIN
AND ADJUSTED* NET MARGIN
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005
(unaudited)
                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2005   2005
Net Margin
     22.5 %     21.7 %
Acquisition and integration
     1.1       1.7  
Inventory step-up
     0.3       0.2  
Tax benefit of acquisition and integration and inventory step-up
     (0.4 )     (0.6 )
 
                
Adjusted* Net Margin
     23.5 %     23.0 %
 
                
ZIMMER HOLDINGS, INC.
RECONCILIATION OF OPERATING MARGIN
AND ADJUSTED* OPERATING MARGIN
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005
(unaudited)
                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2005   2005
Operating Margin
     32.6 %     31.8 %
Acquisition and integration
     1.1       1.7  
Inventory step-up
     0.3       0.2  
 
                
 
Adjusted* Operating Margin
     34.0 %     33.7 %
 
                

21

 

ZIMMER HOLDINGS, INC.
RECONCILIATION OF GROSS MARGIN
AND ADJUSTED* GROSS MARGIN
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2005
(unaudited)
                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2005   2005
Gross Margin
     77.7 %     77.4 %
Inventory step-up
     0.3       0.2  
 
                
Adjusted* Gross Margin
     78.0 %     77.6 %
 
                
ZIMMER HOLDINGS, INC.
RECONCILIATION OF DEBT AND NET DEBT*
AS OF JUNE 30, 2005 and DECEMBER 31, 2004
(in millions, unaudited)
                 
    June 30,   December 31,
    2005   2004
Short-term debt
   $ —     $ 27.5  
Long-term debt
     268.1       624.0  
 
                
Total debt
     268.1       651.5  
 
                
 
                
Cash and equivalents
     78.8       154.6  
Restricted cash
     16.6       18.9  
 
                
Total cash
     95.4       173.5  
 
                
 
                
Net debt*
   $ 172.7     $ 478.0  
 
                

22

 

ZIMMER HOLDINGS, INC.
RECONCILIATION OF PROJECTED DILUTED EPS
AND PROJECTED ADJUSTED* DILUTED EPS
(unaudited)
         
Projected three months ended September 30, 2005:
        
Diluted EPS
   $ 0.63  
Acquisition and Integration, net of tax
     0.03  
 
        
Adjusted* Diluted EPS
   $ 0.66  
 
        
 
        
Projected three months ended December 31, 2005:
        
Diluted EPS
   $ 0.83  
Acquisition and Integration, net of tax
     0.03  
 
        
Adjusted* Diluted EPS
   $ 0.86  
 
        
 
        
Projected twelve months ended December 31, 2005:
        
Diluted EPS
   $ 2.93  
Acquisition and Integration, net of tax
     0.12  
Inventory Step-up, net of tax
     0.02  
 
        
Adjusted* Diluted EPS
   $ 3.07  
 
        

23

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