Zimmer Holdings (ZMH), a manufacturer of orthopedic reconstructive devices, spinal and trauma devices, has recorded a 16.04 percent increase in profit for the quarter ended Jun. 30, 2014.

The company earned $176.50 million or $1.03 a share in the second-quarter compared with $152.10 million or $0.89 a share a year ago. Adjusted earnings per share met the analysts' expectation of $1.49.

Revenue during the second-quarter went up marginally 1.15 percent to $1182.90 million from $1169.50 million in the last year period.

Gross margin contracted by 50 basis points over the previous year period to 71.83 percent. Total expenses as a percentage of revenues decreased to 78.08 percent from 82 percent in the same period last year. That has resulted in improvement of 393 basis points in operating margins to 21.92 percent.

The company disclosed operating income of $259.30 million, compared with operating income of $210.40 million in the last year period.

"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."

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 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.

Cash Flow

Zimmer Holdings has generated cash of $442.90 million from operating activities during the first half, up from $370.20 million when compared with the last year period.

The company has spent $268.70 million cash to meet investing activities during the first half, as against cash outgo of $121.60 million in the last year period. It has made net capital expenditure of $175.40 million during the first half, which was higher by 12 percent or $18.80 million, from a year ago.

The company has spent $291.10 million cash to meet financing activities during the first half, as against cash outgo of $405.40 million in the last year period. It has borrowed net of $0.50 million through debt during the first half. It has spent net of $181.60 million on repurchase of common stocks.

The company's cash dividend payment increased 9.92 percent or $6.40 million to $70.90 million.

As on Jun. 30, 2014, the company's cash balance stood at $968.70 million, up 36.46 percent or $258.80 million from Jun. 30, 2013.

Working Capital

Zimmer Holdings has witnessed an increase in the working capital over the last one year. The company's working capital stood at $3276.90 million as at Jun. 30, 2014, up $489.50 million or 17.56 percent from $2787.40 million on Jun. 30, 2013. It registered a decrease in current ratio to 4.44 as at Jun. 30, 2014 from 4.47 on Jun. 30, 2013.

Debt Position

The company has witnessed a decline in long-term debt over the last one year. As on Jun. 30, 2014, long-term debt stood at $1687.40 million, down 0.04 percent or $0.70 million, from Jun. 30, 2013. The company's long-term debt was 17.51 percent of total assets as on Jun. 30, 2014, compared with 18.56 percent on Jun. 30, 2013.

Interest coverage ratio, which determines how easily a company can pay interest expenses on outstanding debt, has improved to 16.41 from 11.50 in the same period last year.

Shares of Domtar Corp gained $4.04 or 3.92 percent to trade at $99.12 on Thursday (10:45AM).