Zimmer Holdings has recorded a 7.19 percent increase in profit for the quarter ended Sep. 30, 2014. The company earned $165.50 million or $0.96 a share in the third-quarter compared with $154.40 million or $0.90 a share a year ago.
Revenue during the third-quarter went up marginally 2.95 percent to $1,106 million from $1074.30 million in the last year period. Gross margin expanded by 363 basis points over the previous year period to 73.03 percent. Total expenses as a percentage of revenues decreased to 77.29 percent from 80.29 percent in the same period last year. This has led an improvement of 301 basis points in operating margin to 22.71 percent.
The company disclosed operating income of $251.20 million, compared with $211.70 million in the last year period.
"Zimmer’s third quarter was marked by solid revenue growth in key product categories and geographies, building on a strong prior year performance," said David Dvorak, president and CEO of zimmer.
"Our financial results reflect the ongoing execution of our operational excellence initiatives, as demonstrated by continued margin expansion and accelerated earnings growth during the quarter. Looking to future quarters, we believe that our pending combination with Biomet, which we expect to close in the first quarter of 2015, will enhance stockholder value through the creation of a leading innovator in the global musculoskeletal market."
The company updated its full-year revenue and EPS guidance for 2014. Full-year revenues are now expected to increase approximately 2.25% on a constant currency basis from 2013. Previously, the company had estimated full-year revenues would increase 2.0% to 3.0% constant currency.
The company now projects full-year 2014 diluted earnings per share to be approximately $4.65 on a reported basis and approximately $6.05 on an adjusted basis. Prior guidance for full-year 2014 reported and adjusted diluted earnings per share was $4.65 to $4.75 and $6.00 to $6.10, respectively.
Cash Flow
Zimmer Holdings has generated cash of $698.60 million from operating activities during the nine month period, up 5.39 percent or $35.70 million when compared with the last year period. The company has generated 20.25 cents of operating cash flow in every sales dollar for the nine month period, up from 19.60 cents in the same period last year.
The company has spent $498.10 million cash to meet investing activities during the nine month period, as against cash outgo of $272.30 million in the last year period. It has made net capital expenditure of $95.70 million during the nine month period, which was higher by 23.96 percent or $18.50 million, from a year ago.
The company's free cash flow accounted for 86.30 percent of operating cash flow for the nine month period, compared with 88.35 percent in the last year period.
The company has spent $307 million cash to meet financing activities during the nine month period, as against cash outgo of $345.10 million in the last year period. It has borrowed net of $1.40 million through debt during the nine month period. It has spent net of $146 million on repurchase of common stocks.
The company's cash dividend payment increased 9.76 percent or $9.60 million to $108 million.
As on Sep. 30, 2014, the company's cash balance stood at $967.30 million, up 5.44 percent or $49.90 million from Sep. 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 $3239.70 million as at Sep. 30, 2014, up $206.70 million or 6.82 percent from $3,033 million on Sep. 30, 2013. It registered a decrease in current ratio to 3.96 as at Sep. 30, 2014 from 4.77 on Sep. 30, 2013.
The company's cash conversion cycle (CCC) was increased to 437 days for third quarter from 334 days for the last year period. Days' sales outstanding were almost stable at 79 days for third quarter when compared with the last year period. Days' inventory outstanding increased to 358 days for third quarter compared with 299 days for the last year period.
Debt Position
The company has witnessed a decline in long-term debt over the last one year. As on Sep. 30, 2014, long-term debt stood at $1426.40 million, down 15.40 percent or $259.60 million, from Sep. 30, 2013. Total debt was 14.75 percent of total assets as on Sep. 30, 2014, compared with 18.02 percent on Sep. 30, 2013.
