ZIMMER BIOMET HOLDINGS, INC.
10-Ks and 10-Qs
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Table of Contents
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2010
Commission File Number
001-16407
ZIMMER HOLDINGS, INC.
(Exact name of registrant as
specified in its charter)
|
Delaware
(State or other jurisdiction of incorporation or organization) |
13-4151777
(IRS Employer Identification No.) |
|
345 East Main Street, Warsaw, IN 46580
(Address of principal executive
offices)
Telephone:
(574) 267-6131
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been
subject to such filing requirements for the past
90 days. Yes
þ
No
o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes
þ
No
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule
12b-2
of the
Exchange Act. (Check one):
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes
o
No
þ
As of April 23, 2010, 202,807,605 shares of the
registrant’s $.01 par value common stock were
outstanding.
ZIMMER
HOLDINGS, INC.
INDEX TO
FORM 10-Q
March 31,
2010
2
Table of Contents
| Item 1. | Financial Statements |
ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
(In millions, except per share amounts, unaudited)
| Three Months Ended March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Net Sales
|
$ | 1,062.8 | $ | 992.6 | ||||
|
Cost of products sold
|
268.4 | 230.2 | ||||||
|
Gross Profit
|
794.4 | 762.4 | ||||||
|
Research and development
|
51.0 | 51.9 | ||||||
|
Selling, general and administrative
|
446.7 | 423.7 | ||||||
|
Acquisition, integration, realignment and other (Note 2)
|
2.6 | 7.0 | ||||||
|
Operating expenses
|
500.3 | 482.6 | ||||||
|
Operating Profit
|
294.1 | 279.8 | ||||||
|
Interest and other, net
|
(14.6 | ) | (3.7 | ) | ||||
|
Earnings before income taxes
|
279.5 | 276.1 | ||||||
|
Provision for income taxes
|
74.1 | 73.9 | ||||||
|
Net Earnings of Zimmer Holdings, Inc.
|
$ | 205.4 | $ | 202.2 | ||||
|
Earnings Per Common Share
|
||||||||
|
Basic
|
$ | 1.01 | $ | 0.91 | ||||
|
Diluted
|
$ | 1.01 | $ | 0.91 | ||||
|
Weighted Average Common Shares Outstanding
|
||||||||
|
Basic
|
203.0 | 221.5 | ||||||
|
Diluted
|
204.2 | 222.1 | ||||||
The accompanying notes are an integral part of these
consolidated financial statements.
3
Table of Contents
ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
(In millions, except share amounts)
|
March 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (Unaudited) | ||||||||
|
ASSETS
|
||||||||
|
Current Assets:
|
||||||||
|
Cash and cash equivalents
|
$ | 821.2 | $ | 691.7 | ||||
|
Certificates of deposit
|
50.2 | 66.4 | ||||||
|
Accounts receivable, less allowance for doubtful accounts
|
767.1 | 751.4 | ||||||
|
Inventories, net
|
896.5 | 913.2 | ||||||
|
Prepaid expenses and other current assets
|
118.0 | 105.4 | ||||||
|
Deferred income taxes
|
220.8 | 209.9 | ||||||
|
Total current assets
|
2,873.8 | 2,738.0 | ||||||
|
Property, plant and equipment, net
|
1,190.5 | 1,221.7 | ||||||
|
Goodwill
|
2,712.3 | 2,783.5 | ||||||
|
Intangible assets, net
|
834.0 | 858.0 | ||||||
|
Other assets
|
211.4 | 184.3 | ||||||
|
Total Assets
|
$ | 7,822.0 | $ | 7,785.5 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
|
Current Liabilities:
|
||||||||
|
Accounts payable
|
$ | 136.0 | $ | 134.6 | ||||
|
Income taxes
|
67.9 | 57.5 | ||||||
|
Other current liabilities
|
451.3 | 498.6 | ||||||
|
Total current liabilities
|
655.2 | 690.7 | ||||||
|
Other long-term liabilities
|
325.9 | 328.5 | ||||||
|
Long-term debt
|
1,127.0 | 1,127.6 | ||||||
|
Total Liabilities
|
2,108.1 | 2,146.8 | ||||||
|
Commitments and Contingencies (Note 14)
|
||||||||
|
Stockholders’ Equity:
|
||||||||
|
Common stock, $0.01 par value, one billion shares
authorized, 254.2 million shares issued in 2010
(254.1 million in 2009)
|
2.5 | 2.5 | ||||||
|
Paid-in capital
|
3,231.6 | 3,214.6 | ||||||
|
Retained earnings
|
5,307.9 | 5,102.5 | ||||||
|
Accumulated other comprehensive income
|
304.9 | 358.6 | ||||||
|
Treasury stock, 51.4 million shares in 2010
(49.9 million in 2009)
|
(3,133.0 | ) | (3,039.5 | ) | ||||
|
Total Stockholders’ Equity
|
5,713.9 | 5,638.7 | ||||||
|
Total Liabilities and Stockholders’ Equity
|
$ | 7,822.0 | $ | 7,785.5 | ||||
The accompanying notes are an integral part of these
consolidated financial statements.
4
Table of Contents
ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
(In millions, unaudited)
|
For the Three Months
|
||||||||
| Ended March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Cash flows provided by (used in) operating activities:
|
||||||||
|
Net earnings of Zimmer Holdings, Inc.
|
$ | 205.4 | $ | 202.2 | ||||
|
Adjustments to reconcile net earnings to cash provided by
operating activities:
|
||||||||
|
Depreciation and amortization
|
84.9 | 79.6 | ||||||
|
Share-based compensation
|
12.7 | 17.1 | ||||||
|
Income tax benefit from stock option exercises
|
1.7 | 0.1 | ||||||
|
Excess income tax benefit from stock option exercises
|
(0.7 | ) | — | |||||
|
Inventory
step-up
|
1.3 | 4.2 | ||||||
|
Changes in operating assets and liabilities, net of effect of
acquisitions:
|
||||||||
|
Income taxes
|
2.3 | 44.9 | ||||||
|
Receivables
|
(32.5 | ) | (6.3 | ) | ||||
|
Inventories
|
17.2 | (32.2 | ) | |||||
|
Accounts payable and accrued expenses
|
(37.1 | ) | (111.5 | ) | ||||
|
Other assets and liabilities
|
4.3 | (13.5 | ) | |||||
|
Net cash provided by operating activities
|
259.5 | 184.6 | ||||||
|
Cash flows provided by (used in) investing activities:
|
||||||||
|
Additions to instruments
|
(39.3 | ) | (45.3 | ) | ||||
|
Additions to other property, plant and equipment
|
(11.6 | ) | (30.9 | ) | ||||
|
Purchases of certificates of deposit
|
(4.0 | ) | — | |||||
|
Sales of certificates of deposit
|
20.0 | — | ||||||
|
Acquisition of intellectual property rights
|
— | (7.6 | ) | |||||
|
Investments in other assets
|
(2.9 | ) | (0.6 | ) | ||||
|
Net cash used in investing activities
|
(37.8 | ) | (84.4 | ) | ||||
|
Cash flows provided by (used in) financing activities:
|
||||||||
|
Net borrowing under credit facilities
|
— | 210.0 | ||||||
|
Proceeds from employee stock compensation plans
|
4.9 | 3.3 | ||||||
|
Excess income tax benefit from stock option exercises
|
0.7 | — | ||||||
|
Repurchase of common stock
|
(93.5 | ) | (301.4 | ) | ||||
|
Acquisition of noncontrolling interest
|
— | (7.8 | ) | |||||
|
Net cash used in financing activities
|
(87.9 | ) | (95.9 | ) | ||||
|
Effect of exchange rates on cash and cash equivalents
|
(4.3 | ) | (4.1 | ) | ||||
|
Increase in cash and cash equivalents
|
129.5 | 0.2 | ||||||
|
Cash and cash equivalents, beginning of year
|
691.7 | 212.6 | ||||||
|
Cash and cash equivalents, end of period
|
$ | 821.2 | $ | 212.8 | ||||
The accompanying notes are an integral part of these
consolidated financial statements.
5
Table of Contents
ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Basis of Presentation |
The financial data presented herein is unaudited and should be
read in conjunction with the consolidated financial statements
and accompanying notes included in the 2009 Annual Report on
Form 10-K
filed by Zimmer Holdings, Inc. In our opinion, the accompanying
unaudited consolidated financial statements include all
adjustments necessary for a fair statement of the financial
position, results of operations and cash flows for the interim
periods presented. The December 31, 2009 condensed balance
sheet data was derived from audited financial statements, but
does not include all disclosures required by accounting
principles generally accepted in the United States of
America. Results for interim periods should not be considered
indicative of results for the full year. Certain amounts in the
three month period ended March 31, 2009 have been
reclassified to conform to the current year presentation.
The words “we,” “us,” “our” and
similar words refer to Zimmer Holdings, Inc. and its
subsidiaries. Zimmer Holdings refers to the parent company only.
| 2. | Significant Accounting Policies |
Acquisition, Integration, Realignment and Other
— We recognize expenses resulting directly from
our business combinations and other items as “Acquisition,
integration, realignment and other” expenses. Acquisition,
integration, realignment and other expenses for the three month
periods ended March 31, 2010 and 2009 included (in
millions):
|
Three Months
|
||||||||
| Ended March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Impairment of assets
|
$ | 0.4 | $ | — | ||||
|
Consulting and professional fees
|
1.0 | 3.1 | ||||||
|
Employee severance and retention
|
(0.1 | ) | 0.2 | |||||
|
Information technology integration
|
0.1 | 0.1 | ||||||
|
Facility and employee relocation
|
— | 0.8 | ||||||
|
Distributor acquisitions
|
— | 0.3 | ||||||
|
Certain litigation matters
|
(0.8 | ) | — | |||||
|
Contract terminations
|
2.0 | 1.0 | ||||||
|
Other
|
— | 1.5 | ||||||
|
Acquisition, integration, realignment and other
|
$ | 2.6 | $ | 7.0 | ||||
Recent Accounting Pronouncements —
There are no
recently issued accounting pronouncements that we have yet to
adopt that are expected to have a material effect on our
financial position, results of operations, or cash flows.
6
Table of Contents
ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 3. | Comprehensive Income |
The reconciliation of net earnings to comprehensive income is as
follows:
|
Three Months
|
||||||||
| Ended March 31, | ||||||||
| 2010 | 2009 | |||||||
| (In millions) | ||||||||
|
Net earnings of Zimmer Holdings, Inc.
|
$ | 205.4 | $ | 202.2 | ||||
|
Other Comprehensive Income:
|
||||||||
|
Foreign currency cumulative translation adjustments
|
(82.4 | ) | (41.6 | ) | ||||
|
Unrealized foreign currency hedge gains, net of tax
|
28.7 | 22.3 | ||||||
|
Reclassification adjustments on foreign currency hedges, net of
tax
|
(0.9 | ) | (6.1 | ) | ||||
|
Unrealized losses on securities, net of tax
|
— | (0.5 | ) | |||||
|
Adjustments to prior service cost and unrecognized actuarial
assumptions, net of tax
|
0.9 | 14.6 | ||||||
|
Total Other Comprehensive Loss
|
(53.7 | ) | (11.3 | ) | ||||
|
Comprehensive Income Attributable to Zimmer Holdings, Inc.
|
$ | 151.7 | $ | 190.9 | ||||
| 4. | Inventories |
|
March 31,
|
December 31,
|
|||||||||||||||
| 2010 | 2009 | |||||||||||||||
| (In millions) | ||||||||||||||||
|
Finished goods
|
$ | 708.7 | $ | 718.6 | ||||||||||||
|
Work in progress
|
57.1 | 48.0 | ||||||||||||||
|
Raw materials
|
130.7 | 146.6 | ||||||||||||||
|
Inventories, net
|
$ | 896.5 | $ | 913.2 | ||||||||||||
| 5. | Property, Plant and Equipment |
|
March 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (In millions) | ||||||||
|
Land
|
$ | 21.6 | $ | 21.8 | ||||
|
Buildings and equipment
|
1,144.4 | 1,147.7 | ||||||
|
Capitalized software costs
|
162.2 | 158.8 | ||||||
|
Instruments
|
1,221.5 | 1,210.2 | ||||||
|
Construction in progress
|
61.0 | 62.0 | ||||||
| 2,610.7 | 2,600.5 | |||||||
|
Accumulated depreciation
|
(1,420.2 | ) | (1,378.8 | ) | ||||
|
Property, plant and equipment, net
|
$ | 1,190.5 | $ | 1,221.7 | ||||
7
Table of Contents
ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
| 6. | Other Current Liabilities |
|
March 31,
|
December 31,
|
|||||||
| 2010 | 2009 | |||||||
| (In millions) | ||||||||
|
Other current liabilities:
|
||||||||
|
Salaries, wages and benefits
|
$ | 75.7 | $ | 95.7 | ||||
|
Accrued liabilities
|
375.6 | 402.9 | ||||||
|
Total other current liabilities
|
$ | 451.3 | $ | 498.6 | ||||
| 7. |
|
Long-term debt as of March 31, 2010 consisted of our
unsecured senior notes (Senior Notes) and borrowings under our
$1,350 million senior credit agreement (Senior Credit
Facility). Outstanding long-term debt as of March 31, 2010
was $1,127.0 million, comprised of $998.8 million from
our Senior Notes and $128.2 million from our Senior Credit
Facility. There was no short-term debt outstanding. The
estimated fair value of our Senior Notes as of March 31,
2010, based on quoted prices for the specific securities from
transactions in active markets, was $990.9 million. The
carrying value of the Senior Credit Facility approximates fair
value, as the underlying instruments have variable interest
rates at market value.
| 8. | Fair Value Measurement of Assets and Liabilities |
The following assets and liabilities are recorded at fair value
on a recurring basis as of March 31, 2010 (in millions):
| Fair Value Measurements at Reporting Date Using: | ||||||||||||||||
|
Quoted
|
||||||||||||||||
|
Prices in
|
||||||||||||||||
|
Active
|
Significant
|
|||||||||||||||
|
Markets for
|
Other
|
Significant
|
||||||||||||||
|
Identical
|
Observable
|
Unobservable
|
||||||||||||||
|
Recorded
|
Assets
|
Inputs
|
Inputs
|
|||||||||||||
| Balance | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Assets
|
||||||||||||||||
|
Available-for-sale
securities
|
$ | 0.9 | $ | 0.9 | $ | — | $ | — | ||||||||
|
Derivatives, current and long-term
|
33.9 | — | 33.9 | — | ||||||||||||
| $ | 34.8 | $ | 0.9 | $ | 33.9 | $ | — | |||||||||
|
Liabilities
|
||||||||||||||||
|
Derivatives, current and long-term
|
$ | 22.5 | $ | — | $ | 22.5 | $ | — | ||||||||
| $ | 22.5 | $ | — | $ | 22.5 | $ | — | |||||||||
8
Table of Contents
ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The following assets and liabilities were recorded at fair value
on a recurring basis as of December 31, 2009 (in millions):
| Fair Value Measurements at Reporting Date Using: | ||||||||||||||||
|
Quoted
|
||||||||||||||||
|
Prices in
|
Significant
|
|||||||||||||||
|
Active Markets
|
Other
|
Significant
|
||||||||||||||
|
for Identical
|
Observable
|
Unobservable
|
||||||||||||||
|
Recorded
|
Assets
|
Inputs
|
Inputs
|
|||||||||||||
| Balance | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
|
Assets
|
||||||||||||||||
|
Available-for-sale
securities
|
$ | 0.9 | $ | 0.9 | $ | — | $ | — | ||||||||
|
Derivatives, current and long-term
|
12.4 | — | 12.4 | — | ||||||||||||
| $ | 13.3 | $ | 0.9 | $ | 12.4 | $ | — | |||||||||
|
Liabilities
|
||||||||||||||||
|
Derivatives, current and long-term
|
$ | 32.7 | $ | — | $ | 32.7 | $ | — | ||||||||
| $ | 32.7 | $ | — | $ | 32.7 | $ | — | |||||||||
Available-for-sale
securities are valued using a market approach, based on quoted
prices for the specific security from transactions in active
exchange markets. Derivatives relate to foreign currency
exchange forward contracts and foreign currency options entered
into with various third parties. We value these instruments
using a market approach based on foreign currency exchange rates
obtained from active markets and perform an assessment of
counterparty credit risk.
There were no significant nonrecurring fair value measurements
made in the three month period ended March 31, 2010.
| 9. | Derivative Instruments and Hedging Activities |
We are exposed to certain market risks relating to our ongoing
business operations, including foreign currency risk, commodity
price risk, interest rate risk and credit risk. We manage our
exposure to these and other market risks through regular
operating and financing activities. Currently, the only risk
that we manage through the use of derivative instruments is
foreign currency risk.
We operate on a global basis and are exposed to the risk that
our financial condition, results of operations and cash flows
could be adversely affected by changes in foreign currency
exchange rates. To reduce the potential effects of foreign
currency exchange rate movements on net earnings, we enter into
derivative financial instruments in the form of foreign currency
exchange forward contracts and options with major financial
institutions. We are primarily exposed to foreign currency
exchange rate risk with respect to transactions and net assets
denominated in Euros, Swiss Francs, Japanese Yen, British
Pounds, Canadian Dollars, Australian Dollars, Korean Won,
Swedish Krona, Czech Koruna, Thai Baht, Taiwan Dollars, South
African Rand, Russian Rubles and Indian Rupees. We do not use
derivative financial instruments for trading or speculative
purposes.
We report all derivative instruments as assets or liabilities on
the balance sheet at fair value.
Derivatives
Designated as Hedging Instruments
Our revenues are generated in various currencies throughout the
world. However, a significant amount of our inventory is
produced in U.S. Dollars. Therefore, movements in foreign
currency exchange rates may have different proportional effects
on our revenues compared to our cost of products sold. To
minimize the effects of foreign currency exchange rate movements
on cash flows, we hedge intercompany sales of inventory expected
to occur within the next 30 months with foreign currency
exchange forward contracts and options. We designate these
9
Table of Contents
ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
derivative instruments as cash flow hedges. We have not entered
into any derivative instruments designated as fair value or net
investment in foreign operation hedges.
We perform quarterly assessments of hedge effectiveness by
verifying and documenting the critical terms of the hedge
instrument and that forecasted transactions have not changed
significantly. We also assess on a quarterly basis whether there
have been adverse developments regarding the risk of a
counterparty default. For derivatives which qualify as hedges of
future cash flows, the effective portion of changes in fair
value is temporarily recorded in other comprehensive income and
then recognized in cost of products sold when the hedged item
affects net earnings. The ineffective portion of a
derivative’s change in fair value, if any, is reported in
cost of products sold immediately. The net amount recognized in
earnings during the three month periods ended March 31,
2010 and 2009 due to ineffectiveness and amounts excluded from
the assessment of hedge effectiveness was not significant.
For forward contracts and options outstanding at March 31,
2010, we have obligations to purchase U.S. Dollars and sell
Euros, Japanese Yen, British Pounds, Canadian Dollars,
Australian Dollars, Korean Won, Swedish Krona, Czech Koruna,
Thai Baht, Taiwan Dollars, South African Rand, Russian Rubles,
and Indian Rupees and purchase Swiss Francs and sell
U.S. Dollars at set maturity dates ranging from April 2010
through September 2012. The notional amounts of outstanding
forward contracts and options entered into with third parties to
purchase U.S. Dollars at March 31, 2010 were
$1.1 billion. The notional amounts of outstanding forward
contracts entered into with third parties to purchase Swiss
Francs at March 31, 2010 were $209 million.
As of March 31, 2010 and December 31, 2009, all
derivative instruments designated as cash flow hedges are
recorded at fair value on the balance sheet. On our consolidated
balance sheet, we recognize individual forward contracts and
options with the same counterparty on a net asset/liability
basis if we have a master netting agreement with the
counterparty. The fair value of derivative instruments on a
gross basis as of March 31, 2010 and December 31, 2009
is as follows (in millions):
| 2010 | 2009 | |||||||||
|
Balance
|
Balance
|
|||||||||
|
Sheet
|
Fair
|
Sheet
|
Fair
|
|||||||
| Location | Value | Location | Value | |||||||
|
Asset Derivatives
|
||||||||||
|
Foreign exchange forward contracts
|
Other current assets | $ | 31.9 | Other current assets | $23.3 | |||||
|
Foreign exchange forward contracts
|
Other assets | 13.6 | Other assets | 6.3 | ||||||
|
Total asset derivatives
|
$ | 45.5 | $29.6 | |||||||
|
Liability Derivatives
|
||||||||||
|
Foreign exchange forward contracts
|
Other current liabilities | $ | 26.2 | Other current liabilities | $35.4 | |||||
|
Foreign exchange forward contracts
|
Other long-term liabilities | 7.9 | Other long-term liabilities | 14.5 | ||||||
|
Total liability derivatives
|
$ | 34.1 | $49.9 | |||||||
The fair value of outstanding derivative instruments recorded on
the balance sheet at March 31, 2010, together with settled
derivatives where the hedged item has not yet affected earnings,
was a net unrealized gain of $6.2 million, or
$13.8 million after taxes, which is deferred in other
comprehensive income, of which $7.5 million, or
$11.5 million after taxes, is expected to be reclassified
to earnings over the next twelve months.
10
Table of Contents
ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Derivative instruments had the following effects on other
comprehensive income (OCI) on our consolidated balance sheet and
our consolidated statement of earnings on a gross basis for the
three month periods ended March 31, 2010 and 2009 (in
millions):
|
Amount of
|
||||||||||||||||
|
Amount of
|
Gain/(Loss)
|
|||||||||||||||
|
Gain Recognized
|
Reclassified From OCI
|
|||||||||||||||
| in OCI | to Cost of Products Sold | |||||||||||||||
| Derivative Instrument | 2010 | 2009 | 2010 | 2009 | ||||||||||||
|
Foreign exchange forward contracts
|
$ | 30.6 | $ | 31.1 | $ | (0.4 | ) | $ | 4.3 | |||||||
|
Foreign exchange options
|
— | 0.2 | — | 0.6 | ||||||||||||
|
Total
|
$ | 30.6 | $ | 31.3 | $ | (0.4 | ) | $ | 4.9 | |||||||
Derivatives
Not Designated as Hedging Instruments
We enter into foreign currency forward exchange contracts with
terms of one month to manage currency exposures for monetary
assets and liabilities denominated in a currency other than an
entity’s functional currency. As a result, any foreign
currency remeasurement gains/losses recognized in earnings are
generally offset with gains/losses on the foreign currency
forward exchange contracts in the same reporting period. These
offsetting gains/losses are recorded in cost of products sold as
the underlying assets and liabilities exposed to remeasurement
include inventory-related transactions. These contracts are
settled on the last day of each reporting period. Therefore,
there is no outstanding balance related to these contracts
recorded on the balance sheet as of the end of the reporting
period. The notional amounts of these contracts are typically in
a range of $1.1 billion to $1.4 billion per quarter.
The following gains from these derivative instruments were
recognized in cost of products sold on our consolidated
statement of earnings (in millions):
|
Three Months
|
||||||||
| Ended March 31, | ||||||||
| Derivative Instrument | 2010 | 2009 | ||||||
|
Foreign exchange forward contracts
|
$ | 7.2 | $ | 2.6 | ||||
|
Total
|
$ | 7.2 | $ | 2.6 | ||||
This impact does not include any offsetting gains/losses
recognized in earnings as a result of foreign currency
remeasurement of monetary assets and liabilities denominated in
a currency other than an entity’s functional currency.
| 10. | Income Taxes |
We expect that the net amount of tax liability for unrecognized
tax benefits will change in the next twelve months. We are
currently under audit in numerous federal, state and foreign
jurisdictions. While it is possible that such matters will be
resolved in the next twelve months, we cannot reasonably
estimate the amount or the periods in which changes in the
unrecognized tax benefits will occur.
| 11. | Retirement Benefit Plans |
We have defined benefit pension plans covering certain
U.S. and Puerto Rico employees. The employees who are not
participating in the defined benefit plans receive additional
benefits under our defined contribution plans. Plan benefits are
primarily based on years of credited service and the
participant’s compensation. In addition to the
11
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ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
U.S. and Puerto Rico defined benefit pension plans, we
sponsor various
non-U.S. pension
arrangements, including retirement and termination benefit plans
required by local law or coordinated with government sponsored
plans.
The components of net pension expense for the three month
periods ended March 31, 2010 and 2009, for our
U.S. and
non-U.S. defined
benefit retirement plans are as follows (in millions):
|
Three Months
|
||||||||||||||||
| Ended March 31, | ||||||||||||||||
| 2010 | 2009 | |||||||||||||||
|
Service cost
|
$ | 6.3 | $ | 6.9 | ||||||||||||
|
Interest cost
|
4.6 | 4.9 | ||||||||||||||
|
Expected return on plan assets
|
(6.5 | ) | (6.9 | ) | ||||||||||||
|
Amortization of unrecognized prior service cost and actuarial
loss
|
0.8 | 1.7 | ||||||||||||||
|
Net periodic benefit cost
|
$ | 5.2 | $ | 6.6 | ||||||||||||
We contributed $23.0 million during the three month period
ended March 31, 2010 to our U.S. and Puerto Rico
defined benefit plans and do not expect to contribute additional
funds to these plans during the remainder of 2010. We
contributed $3.4 million to our foreign-based defined
benefit plans in the three month period ended March 31,
2010 and expect to contribute approximately $10 million to
these foreign-based plans during the remainder of 2010.
| 12. | Earnings Per Share |
The following is a reconciliation of weighted average shares for
the basic and diluted shares computations (in millions):
|
Three Months
|
||||||||
|
Ended
|
||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Weighted average shares outstanding for basic net earnings per
share
|
203.0 | 221.5 | ||||||
|
Effect of dilutive stock options and other equity awards
|
1.2 | 0.6 | ||||||
|
Weighted average shares outstanding for diluted net earnings per
share
|
204.2 | 222.1 | ||||||
During the three month period ended March 31, 2010, an
average of 12.8 million options to purchase shares of
common stock were not included in the computation of diluted
earnings per share as the exercise prices of these options were
greater than the average market price of the common stock.
During the three month period ended March 31, 2009, an
average of 16.3 million options were not included.
In the three month period ended March 31, 2010, we
repurchased 1.5 million shares of our common stock at an
average price of $60.62 per share for a total cash outlay of
$93.5 million, including commissions. Our Board of
Directors previously authorized a $1.25 billion share
repurchase program which was set to expire on December 31,
2009. In September 2009, the Board of Directors extended this
program to December 31, 2010. $117.6 million remains
authorized for future repurchases under this program.
| 13. | Segment Information |
We design, develop, manufacture and market orthopaedic
reconstructive implants, dental implants, spinal implants,
trauma products and related surgical products which include
surgical supplies and instruments designed to aid in surgical
procedures and post-operation rehabilitation. We also provide
other healthcare related services. Revenue related to these
other healthcare related services currently represents less than
1 percent of our total net sales. We manage operations
through three major geographic segments — the
Americas, which is comprised
12
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ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
principally of the United States and includes other North,
Central and South American markets; Europe, which is comprised
principally of Europe and includes the Middle East and Africa;
and Asia Pacific, which is comprised primarily of Japan and
includes other Asian and Pacific markets. This structure is the
basis for our reportable segment information discussed below.
Management evaluates operating segment performance based upon
segment operating profit exclusive of operating expenses
pertaining to global operations and corporate expenses,
share-based compensation, certain claims, acquisition,
integration, realignment and other, net curtailment and
settlement, inventory
step-up
and
intangible asset amortization expense. Global operations include
research, development engineering, medical education, brand
management, corporate legal, finance, and human resource
functions, and U.S. and Puerto Rico based manufacturing
operations and logistics. Intercompany transactions have been
eliminated from segment operating profit. Net sales and segment
operating profit are as follows (in millions):
| Net Sales | Operating Profit | |||||||||||||||
|
Three Months
|
Three Months
|
|||||||||||||||
|
Ended
|
Ended
|
|||||||||||||||
| March 31, | March 31, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
|
Americas
|
$ | 615.7 | $ | 594.6 | $ | 306.6 | $ | 289.7 | ||||||||
|
Europe
|
286.1 | 265.1 | 104.8 | 116.6 | ||||||||||||
|
Asia Pacific
|
161.0 | 132.9 | 61.1 | 49.9 | ||||||||||||
|
Total
|
$ | 1,062.8 | $ | 992.6 | ||||||||||||
|
Share-based compensation
|
(12.7 | ) | (17.1 | ) | ||||||||||||
|
Inventory
step-up
|
(1.3 | ) | (4.2 | ) | ||||||||||||
|
Acquisition, integration, realignment and other
|
(2.6 | ) | (7.0 | ) | ||||||||||||
|
Global operations and corporate functions
|
(161.8 | ) | (148.1 | ) | ||||||||||||
|
Operating profit
|
$ | 294.1 | $ | 279.8 | ||||||||||||
Net sales by product category are as follows (in millions):
|
Three Months
|
||||||||
|
Ended
|
||||||||
| March 31, | ||||||||
| 2010 | 2009 | |||||||
|
Reconstructive implants
|
$ | 814.5 | $ | 761.1 | ||||
|
Dental
|
51.7 | 47.4 | ||||||
|
Trauma
|
60.4 | 56.9 | ||||||
|
Spine
|
60.0 | 64.6 | ||||||
|
OSP and other
|
76.2 | 62.6 | ||||||
|
Total
|
$ | 1,062.8 | $ | 992.6 | ||||
| 14. | Commitments and Contingencies |
Intellectual
Property and Product Liability-Related Litigation
In July 2008, we temporarily suspended marketing and
distribution of the
Durom
®
Acetabular Component (
Durom
Cup) in the
U.S. Following our announcement, product liability lawsuits
and other claims have been asserted against us, some of which we
have settled. There are a number of claims still pending, and
additional claims may be submitted.
We recorded a provision of $69.0 million in 2008,
representing management’s estimate of the
Durom
Cup-related claims that would be made in association with
revisions occurring within two years of the original surgery. In
13
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ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
the third quarter of 2009, based on claims information we
received after we made our initial estimate, we increased our
estimate of the number of claims for revisions within two years
of the original surgery and increased the provision by
$35.0 million, for a total of $104.0 million related
to such claims. We have not recorded any adjustments to the
provisions since the third quarter of 2009. These provisions
were recorded as “Certain Claims” in our statement of
earnings. The liability outstanding as of March 31, 2010 is
$64.8 million, which we believe will be adequate to settle
the remaining of these Certain Claims.
Our standard product liability accruals are recognized in
selling, general and administrative expense. We have recorded
provisions as part of our standard product liability accruals
for claims relating to revisions of
Durom
Cup cases in
the U.S. that have occurred, or are estimated to occur,
more than two years after the original surgery. We recorded a
provision of $9.8 million in the three month period ended
March 31, 2010 for such claims, as compared with a
provision of $0.9 million in the same 2009 period. The
total provisions we have recorded for such claims as part of our
standard product liability accruals from 2008 through
March 31, 2010 amount to $42.2 million. The estimated
liability outstanding relating to these claims as of
March 31, 2010 is $29.0 million. It is difficult to
estimate the number of claims we may eventually receive related
to revisions that occur more than two years after the original
surgery, so it is reasonably possible that our estimated
liability may change in the near term. We will continue to
evaluate the adequacy of this liability as more information
becomes available.
We expect to pay the majority of the claims related to the
Durom
Cup within the next three years.
On February 15, 2005, Howmedica Osteonics Corp. filed an
action against us and an unrelated party in the United States
District Court for the District of New Jersey alleging
infringement of U.S. Patent Nos. 6,174,934; 6,372,814;
6,664,308; and 6,818,020. On June 13, 2007, the Court
granted our motion for summary judgment on the invalidity of the
asserted claims of U.S. Patent Nos. 6,174,934; 6,372,814;
and 6,664,308 by ruling that all of the asserted claims are
invalid for indefiniteness. On August 19, 2008, the Court
granted our motion for summary judgment of non-infringement of
certain claims of U.S. Patent No. 6,818,020, reducing
the number of claims at issue in the suit to five. On
April 9, 2009, in response to our earlier petition, the
U.S. Patent and Trademark Office (USPTO) instituted
re-examination proceedings against U.S. Patent
No. 6,818,020. The USPTO rejected all previously issued
claims of U.S. Patent No. 6,818,020 as being
unpatentable in light of one or more prior art references. On
September 30, 2009, the Court issued an order staying
proceedings in the litigation pending the outcome of the
re-examination process. Subsequent to that stay order, Howmedica
filed a motion seeking to certify an appeal of the summary
judgment ruling on the ’934, ’814 and ’308
patents. That motion was granted on January 13, 2010. We
expect that the U.S. Court of Appeals for the Federal
Circuit will hear the appeal of that ruling in 2010. We continue
to believe that our defenses against infringement are valid and
meritorious, and we intend to continue to defend this lawsuit
vigorously.
In addition to claims related to the
Durom
Cup discussed
above, we are also subject to product liability and other claims
and lawsuits arising in the ordinary course of business, for
which we maintain insurance, subject to self-insured retention
limits. We establish accruals for product liability and other
claims in conjunction with outside counsel based on current
information and historical settlement information for open
claims, related legal fees and claims incurred but not reported.
While it is not possible to predict with certainty the outcome
of these cases, it is the opinion of management that, upon
ultimate resolution, liabilities from these cases in excess of
those recorded, if any, will not have a material adverse effect
on our consolidated financial position, results of operations or
cash flows.
Government
Investigations
In September 2007, we and other orthopaedic companies settled a
U.S. government investigation pertaining to consulting
contracts, professional services agreements and other agreements
by which remuneration is provided to orthopaedic surgeons. As
part of the settlement, we entered into a Corporate Integrity
Agreement (CIA) with the Office of Inspector General of the
Department of Health and Human Services (OIG-HHS). Under the
CIA, which has a term expiring in 2012, we agreed, among other
provisions, to continue the operation of our enhanced
14
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ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
Corporate Compliance Program, designed to promote compliance
with federal healthcare program requirements, in accordance with
the terms set forth in the CIA. We also agreed to retain an
independent review organization to perform annual reviews to
assist us in assessing our compliance with the obligations set
forth in the CIA to ensure that arrangements we enter into do
not violate the Anti-Kickback Statute (42 U.S.C.
§ 1320a-7b).
A material breach of the CIA may subject us to exclusion by
OIG-HHS from participation in all federal healthcare programs,
which would have a material adverse effect on our financial
position, results of operations and cash flows.
In November 2007, we received a civil investigative demand from
the Massachusetts Attorney General’s office seeking
additional information regarding our financial relationships
with a number of Massachusetts healthcare providers. We received
a similar inquiry from the Oregon Attorney General’s office
in October 2008. We are cooperating fully with the investigators
with regard to these matters.
In September 2007, the Staff of the U.S. Securities and
Exchange Commission (SEC) informed us that it was conducting an
investigation regarding potential violations of the Foreign
Corrupt Practices Act (FCPA) in the sale of medical devices in a
number of foreign countries by companies in the medical device
industry. In November 2007, we received a letter from the
U.S. Department of Justice (DOJ) requesting that any
information provided to the SEC also be provided to the DOJ on a
voluntary basis. We are continuing to provide information and
cooperate fully with the SEC and the DOJ with regard to this
pending investigation. In addition, as part of our global
compliance program, we have been conducting our own proactive
reviews regarding FCPA compliance in jurisdictions that have not
been involved in the pending investigation. These reviews have
yielded information indicating that certain third-party,
independent distributors of our products in two South American
countries made certain payments that may have potential FCPA
implications. In the course of continuing dialogues with the
agencies, we voluntarily disclosed information relating to these
matters to the SEC and the DOJ, and the reviews are ongoing. We
cannot currently predict the outcome of the investigation or the
impact of our voluntary disclosures to the authorities.
Putative
Class Actions
On August 5, 2008, a complaint was filed in the
U.S. District Court for the Southern District of Indiana,
Plumbers and Pipefitters Local Union 719 Pension Fund v.
Zimmer Holdings, Inc., et al., naming us and two of our
executive officers as defendants. The complaint related to a
putative class action on behalf of persons who purchased our
common stock between January 29, 2008 and July 22,
2008. The complaint alleged that the defendants violated the
federal securities law by allegedly failing to disclose
developments relating to our orthopaedic surgical products
manufacturing operations in Dover, Ohio and the
Durom
Cup. The plaintiff sought unspecified damages and interest,
attorneys’ fees, costs and other relief. On
December 24, 2008, the lead plaintiff filed a consolidated
complaint that alleged the same claims and related to the same
time period. The defendants filed a motion to dismiss the
consolidated complaint on February 23, 2009. On
December 1, 2009, the Court granted defendants’ motion
to dismiss, without prejudice. On January 15, 2010, the
plaintiff filed a motion for leave to amend the consolidated
complaint. That motion is pending. We believe this lawsuit is
without merit, and we and the individual defendants intend to
defend it vigorously.
On November 20, 2008, a complaint was filed in the
U.S. District Court for the Northern District of Indiana,
Dewald v. Zimmer Holdings, Inc., et al., naming us and
certain of our current and former directors and employees as
defendants. The complaint relates to a putative class action on
behalf of all persons who were participants in or beneficiaries
of our U.S. or Puerto Rico Savings and Investment Programs
(plans) between October 5, 2007 and the date of filing and
whose accounts included investments in our common stock. The
complaint alleges, among other things, that the defendants
breached their fiduciary duties in violation of the Employee
Retirement Income Security Act of 1974, as amended, by
continuing to offer Zimmer stock as an investment option in the
plans when the stock purportedly was no longer a prudent
investment and that defendants failed to provide plan
participants with complete and accurate information sufficient
to advise them of the risks of investing their retirement
savings in Zimmer stock. The plaintiff seeks an unspecified
monetary payment to the plans, injunctive and equitable relief,
attorneys’ fees, costs and other relief. On
January 23, 2009, the plaintiff filed an amended complaint
that alleges the
15
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ZIMMER
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO
INTERIM CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
same claims and clarifies that the class period is
October 5, 2007 through September 2, 2008. The
defendants filed a motion to dismiss the amended complaint on
March 23, 2009. The motion to dismiss is pending with the
court. On June 12, 2009, the U.S. Judicial Panel on
Multidistrict Litigation entered an order transferring the
Dewald case to the U.S. District Court for the Southern
District of Indiana for coordinated or consolidated pretrial
proceedings with the Plumbers & Pipefitters Local
Union 719 Pension Fund case referenced above. We believe this
lawsuit is without merit, and we and the individual defendants
intend to defend it vigorously.
16
Table of Contents
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Overview
We are a global leader in the design, development, manufacture
and marketing of orthopaedic reconstructive implants, dental
implants, spinal implants, trauma products and related surgical
products (sometimes referred to in this report as
“OSP”). We also provide other healthcare related
services. We have operations in more than 25 countries and
market products in more than 100 countries. We manage operations
through three reportable geographic segments — the
Americas, Europe and Asia Pacific.
Certain percentages presented in Management’s Discussion
and Analysis are calculated from the underlying whole-dollar
amounts and therefore may not recalculate from the rounded
numbers used for disclosure purposes. In addition, certain
amounts in the 2009 consolidated financial statements have been
reclassified to conform to the 2010 presentation.
We believe the following developments or trends are important in
understanding our financial condition, results of operations and
cash flows for the three month period ended March 31, 2010
and our expected results for the remainder of 2010.
Demand
(Volume and Mix) Trends
Increased volume and changes in the mix of product sales
contributed 4 percentage points of sales growth during the
three month period ended March 31, 2010, compared to a
1 percent decline in the same 2009 period.
We believe long-term market growth rates will be driven by an
aging global population, obesity, proven clinical benefits, new
material technologies, advances in surgical techniques and more
active lifestyles, among other factors. In addition, the ongoing
shift in demand to premium products, such as
Longevity
®
and
Prolong
®
Highly Crosslinked Polyethylenes,
Trabecular
Metal
TM
Technology products, hip stems with
Kinectiv
®
Technology, high-flex knees, knee revision products, porous hip
stems and the introduction of patient specific devices are
expected to continue to positively affect sales growth.
Pricing
Trends
Global selling prices decreased 1 percent during the three
month period ended March 31, 2010, compared to flat pricing
in the same 2009 period. Selling prices in the Americas
decreased 1 percent during the three month period ended
March 31, 2010, compared to flat pricing in the same 2009
period. Europe selling prices were flat during the three month
periods ended March 31, 2010 and 2009. Asia Pacific selling
prices were flat for the three month period ended March 31,
2010, compared to a 3 percent decrease in the same 2009
period. Bi-annual pricing adjustments went into effect in Japan
on April 1, 2010, which will decrease pricing for the
remainder of 2010 in our Asia Pacific region. With the effect of
governmental healthcare cost containment efforts and continuing
pressure from local hospitals and health systems, we expect
selling prices will be down approximately 1 to 2 percent on
a global basis for 2010.
Foreign
Currency Exchange Rates
For the three month period ended March 31, 2010, foreign
currency exchange rates resulted in a 4 percent increase in
sales. We estimate that an overall weaker U.S. Dollar
versus foreign currency exchange rates will have a positive
effect of approximately 0-1 percent on sales for the year
ending December 31, 2010. We address currency risk through
regular operating and financing activities, and, under
appropriate circumstances and subject to proper authorization,
through the use of forward contracts and foreign currency
options solely for managing foreign currency volatility and
risk. Changes to foreign currency exchange rates affect sales
growth, but due to offsetting gains/losses on hedge contracts,
which are recorded in cost of products sold, the effect on net
earnings in the near term is expected to be minimal.
17
Table of Contents
Healthcare
Reform in the U.S.
We are currently assessing the impact that the healthcare reform
legislation recently passed by the U.S. federal government
will have on our business. The new law includes a
2.3 percent excise tax on a majority of our U.S. sales
that is scheduled to be implemented in 2013. While the
healthcare reform legislation is intended to reduce the number
of uninsured and underinsured patients, we do not expect a
significant increase in our procedure volumes as the majority of
the procedures being performed are for patients who are already
covered by Medicare.
Global
Economic Conditions
We see encouraging signs that the markets for our products are
improving. For the second straight quarter, volume/mix for our
core reconstructive business contributed 4 percentage
points of growth, which are the highest levels experienced in
that category since the third quarter of 2008 when volume/mix
trends were consistently in the mid to high single digits.
Dental sales volume/mix was positive for the first time in over
a year, as that category had been more affected by the economic
environment than our other categories, as many dental procedures
are not reimbursed by third-party payors. While we have seen
signs that global economic conditions are beginning to improve,
sales continue to remain under pressure as a result of the
downturn, particularly in our Europe segment.
First
Quarter Results of Operations
Net
Sales by Operating Segment
The following table presents net sales by operating segment and
the components of the percentage changes (dollars in millions):
| Three Months Ended March 31, | ||||||||||||||||||||||||
|
Volume/
|
Foreign
|
|||||||||||||||||||||||
| 2010 | 2009 | % Inc | Mix | Price | Exchange | |||||||||||||||||||
|
Americas
|
$ | 615.7 | $ | 594.6 | 4 | % | 4 | % | (1 | )% | 1 | % | ||||||||||||
|
Europe
|
286.1 | 265.1 | 8 | 1 | — | 7 | ||||||||||||||||||
|
Asia Pacific
|
161.0 | 132.9 | 21 | 11 | — | 10 | ||||||||||||||||||
|
Total
|
$ | 1,062.8 | $ | 992.6 | 7 | 4 | (1 | ) | 4 | |||||||||||||||
“Foreign Exchange” as used in the tables in this
report represents the effect of changes in foreign currency
exchange rates on sales growth.
Net
Sales by Product Category
The following table presents net sales by product category and
the components of the percentage changes (dollars in millions):
| Three Months Ended March 31, |
Volume/
|
Foreign
|
||||||||||||||||||||||
| 2010 | 2009 | % Inc (Dec) | Mix | Price | Exchange | |||||||||||||||||||
|
Reconstructive
|
||||||||||||||||||||||||
|
Knees
|
$ | 460.4 | $ | 428.5 | 7 | % | 5 | % | (1 | )% | 3 | % | ||||||||||||
|
Hips
|
315.7 | 299.6 | 5 | 2 | (1 | ) | 4 | |||||||||||||||||
|
Extremities
|
38.4 | 33.0 | 16 | 14 | — | 2 | ||||||||||||||||||
|
Total
|
814.5 | 761.1 | 7 | 4 | (1 | ) | 4 | |||||||||||||||||
|
Dental
|
51.7 | 47.4 | 9 | 3 | 3 | 3 | ||||||||||||||||||
|
Trauma
|
60.4 | 56.9 | 6 | 1 | 2 | 3 | ||||||||||||||||||
|
Spine
|
60.0 | 64.6 | (7 | ) | (9 | ) | — | 2 | ||||||||||||||||
|
OSP and other
|
76.2 | 62.6 | 22 | 19 | — | 3 | ||||||||||||||||||
|
Total
|
$ | 1,062.8 | $ | 992.6 | 7 | 4 | (1 | ) | 4 | |||||||||||||||
18
Table of Contents
The following table presents net sales by product category by
region (dollars in millions):
| Three Months Ended March 31, | ||||||||||||||||||||||||
| 2010 | 2009 | % Inc (Dec) | ||||||||||||||||||||||
|
Reconstructive
|
||||||||||||||||||||||||
|
Knees
|
||||||||||||||||||||||||
|
Americas
|
$ | 286.2 | $ | 275.8 | 4 | % | ||||||||||||||||||
|
Europe
|
113.6 | 104.8 | 8 | |||||||||||||||||||||
|
Asia Pacific
|
60.6 | 47.9 | 26 | |||||||||||||||||||||
|
Hips
|
||||||||||||||||||||||||
|
Americas
|
146.8 | 141.6 | 4 | |||||||||||||||||||||
|
Europe
|
111.8 | 107.9 | 4 | |||||||||||||||||||||
|
Asia Pacific
|
57.1 | 50.1 | 14 | |||||||||||||||||||||
|
Extremities
|
||||||||||||||||||||||||
|
Americas
|
29.6 | 25.6 | 16 | |||||||||||||||||||||
|
Europe
|
6.5 | 5.7 | 14 | |||||||||||||||||||||
|
Asia Pacific
|
2.3 | 1.7 | 34 | |||||||||||||||||||||
|
Total
|
814.5 | 761.1 | 7 | |||||||||||||||||||||
|
Dental
|
||||||||||||||||||||||||
|
Americas
|
27.2 | 26.1 | 4 | |||||||||||||||||||||
|
Europe
|
18.8 | 16.7 | 12 | |||||||||||||||||||||
|
Asia Pacific
|
5.7 | 4.6 | 25 | |||||||||||||||||||||
|
Trauma
|
||||||||||||||||||||||||
|
Americas
|
32.6 | 32.4 | — | |||||||||||||||||||||
|
Europe
|
11.8 | 10.6 | 11 | |||||||||||||||||||||
|
Asia Pacific
|
16.0 | 13.9 | 16 | |||||||||||||||||||||
|
Spine
|
||||||||||||||||||||||||
|
Americas
|
44.0 | 51.5 | (15 | ) | ||||||||||||||||||||
|
Europe
|
12.9 | 10.5 | 23 | |||||||||||||||||||||
|
Asia Pacific
|
3.1 | 2.6 | 20 | |||||||||||||||||||||
|
OSP and other
|
||||||||||||||||||||||||
|
Americas
|
49.3 | 41.6 | 19 | |||||||||||||||||||||
|
Europe
|
10.7 | 8.9 | 19 | |||||||||||||||||||||
|
Asia Pacific
|
16.2 | 12.1 | 34 | |||||||||||||||||||||
|
Total
|
$ | 1,062.8 | $ | 992.6 | 7 | |||||||||||||||||||
Knees
The
NexGen
®
Complete Knee Solution product line, including
Gender
Solutions
TM
Knee Femoral Implants, the
NexGen
LPS-Flex Knee, the
NexGen
CR-Flex Knee and the
Gender Solutions
Natural-Knee
®
Flex System led knee sales. In addition, sales of partial knee
devices, including the
Zimmer
®
Uni Knee and the recently released
Gender Solutions
Patello Femoral Joint, contributed to Knee growth for the
quarter. In Europe, changes in foreign currency exchange rates
positively affected knee sales in the three month period ended
March 31, 2010 by 6 percent. In Asia Pacific, changes
in foreign currency exchange rates positively affected knee
sales in the three month period ended March 31, 2010 by
14 percent.
Hips
The
Zimmer
M/L Taper Stem, the
Zimmer
M/L Taper
Stem with
Kinectiv
Technology, the
CLS
®
Spotorno
®
Stem from the
CLS
Hip System and the
Alloclassic
®
Zweymüller
®
Hip Stem led hip stem sales. In addition, sales of revision Hip
products such as the
ZMR
®
Hip System and the
Trabecular Metal
Revision Shell and
Augment Cups were strong in the quarter when compared to the
prior year period, as were sales of
BIOLOX
®
1
delta
Heads and
Fitmore
®
Hip Stems. In Europe, changes in foreign currency exchange rates
positively affected hip sales in the three
1
Registered
trademark of CeramTec AG
19
Table of Contents
month period ended March 31, 2010 by 7 percent. In
Asia Pacific, changes in foreign currency exchange rates
positively affected hip sales in the three month period ended
March 31, 2010 by 9 percent.
Extremities
Extremities sales growth was strong across all regions as these
types of procedures have become more widely accepted. The
Bigliani/Flatow
®
Complete Shoulder Solution and the
Zimmer Trabecular Metal
Reverse Shoulder System led extremities sales.
Dental
Dental sales improved following a year of weaker demand caused
by the global economic downturn in 2009. Sales were led by the
Tapered
Screw-Vent
®
Implant System. Regenerative product sales exhibited strong
growth in the three month period ended March 31, 2010.
Trauma
Zimmer
Periarticular Locking Plates and the
ITST
®
Intertrochanteric/Subtrochanteric Fixation System led trauma
sales, while sales of cable products also made a strong
contribution in the quarter. Tibial nail and interlocking screw
sales within the
Zimmer Natural
Nail
TM
system increased as we continued the roll-out of this product
line.
Spine
Our spinal business in the Americas continued to experience
challenges related to the
Dynesys
®
Dynamic Stabilization System. Growth in spine sales in Europe
and Asia Pacific was driven by the stabilization of our
distribution channels, which followed the integration activity
of 2009. Solid sales of the
PathFinder
®
and
Sequoia
®
Pedicle Screw Systems and our
Universal
Clamp
®
System partly offset a decline in sales of the
Dynesys
system in the three month period ended March 31, 2010.
OSP
and other
OSP sales were led by
PALACOS
®
2
Bone Cement and powered instruments. Our wound debridement
products also made a strong contribution as we continue to make
progress recovering market share after a voluntary recall and
temporary suspension of production.
Expenses
as a Percent of Net Sales
| Three Months Ended March 31, | ||||||||||||
| 2010 | 2009 | Inc (Dec) | ||||||||||
|
Cost of products sold
|
25.3 | % | 23.2 | % | 2.1 | |||||||
|
Research and development
|
4.8 | 5.2 | (0.4 | ) | ||||||||
|
Selling, general and administrative
|
42.0 | 42.7 | (0.7 | ) | ||||||||
|
Acquisition, integration, realignment and other
|
0.2 | 0.7 | (0.5 | ) | ||||||||
|
Operating profit
|
27.7 | 28.2 | (0.5 | ) | ||||||||
|
Interest and other, net
|
(1.4 | ) | (0.4 | ) | 1.0 | |||||||
Cost
of Products Sold
The increase in cost of products sold as a percentage of net
sales for the three month period ended March 31, 2010
compared to the same 2009 period was driven by higher
manufacturing costs per unit due to lower production levels in
late 2009 into 2010. Additionally, we recognized foreign
currency hedge losses in the 2010 period compared to hedge gains
recognized in the 2009 period.
2
Registered
trademark of Heraeus Kulzer GmbH
20
Table of Contents
Under our hedging program, for derivatives which qualify as
hedges of future cash flows, the effective portion of changes in
fair value is temporarily recorded in other comprehensive
income, and then recognized in cost of products sold when the
hedged item affects earnings.
Operating
Expenses
Research and development expense, or R&D, decreased to
$51.0 million from $51.9 million for the three month
period ended March 31, 2010 compared to the same 2009
period. R&D spending in the 2009 period was higher due to
development activities related to the
Continuum
TM
Acetabular System and
Zimmer
MMC
TM
Cup products as well as the
Zimmer Natural Nail
system.
While currently below the low end of our target range of 5 to
6 percent of sales, we expect R&D spending in 2010 to
reach that target for the full year as new development programs
accelerate.
Selling, general and administrative expense, or SG&A,
increased to $446.7 million from $423.7 million for
the three month period ended March 31, 2010 compared to the
same 2009 period, which represents an improvement in SG&A
as a percentage of sales by 70 basis points. The
70 basis point improvement represents controlled spending
during a time of increasing sales. Part of the sales improvement
is caused by changes in foreign currency rates, which positively
impacted SG&A as a percentage of sales. A majority of our
SG&A spending is incurred in the U.S., primarily from our
corporate headquarters and similar functions at our various
businesses such as Dental, Trauma, Spine and OSP. Therefore,
SG&A expense does not respond to changes in foreign
currency rates proportionally to our revenue.
The overall dollar increase in spending was driven by higher
product liability claims (see discussion of product liability
claims in Note 14 to the consolidated financial
statements), increased medical education and training
activities, increased instrument costs and incremental costs
associated with certain operational excellence and growth
initiatives. These were partially offset by lower costs,
including elimination of monitor fees, related to the settlement
with the U.S. government that successfully concluded in
March 2009.
Acquisition, integration, realignment and other expenses for the
three month period ended March 31, 2010 were
$2.6 million, compared to $7.0 million in the same
2009 period. The decrease is due to a reduction in consulting
and professional fees and lower legal fees due to the settlement
of certain litigation matters.
Operating
Profit, Interest and Other Expense, Income Taxes and Net
Earnings
Operating profit for the three month period ended March 31,
2010 increased to $294.1 million, from $279.8 in the same
2009 period. The reduction in operating profit to sales ratio is
primarily due to higher production costs.
Interest and other, net for the three month period ended
March 31, 2010, increased to $14.6 million, compared
to $3.7 million in the same 2009 period. The increase in
interest expense is a result of the senior unsecured notes that
we issued in November 2009.
The effective tax rate on earnings before income taxes for the
three month period ended March 31, 2010 decreased to
26.5 percent, from 26.8 percent in the same 2009
period.
Net earnings increased 1.6 percent to $205.4 million
for the three month period ended March 31, 2010, compared
to $202.2 million in the same 2009 period. Basic and
diluted earnings per share both increased 11 percent to
$1.01, from $0.91 in the same 2009 period. The disproportional
change in earnings per share as compared with net earnings is
attributed to the effect of 2010 and 2009 share repurchases.
Liquidity
and Capital Resources
Cash flows provided by operating activities were
$259.5 million for the three month period ended
March 31, 2010, compared to $184.6 million in the same
2009 period. The principal source of cash from operating
activities was net earnings. Non-cash items included in net
earnings accounted for another $98.9 million of operating
cash. All other items of operating cash flows reflect a use of
$44.8 million of cash, compared to a use of
$118.5 million in the same 2009 period. In the 2009 period
we resolved outstanding payments to healthcare professionals and
institutions, resulting in substantial cash outflows. A
reduction in inventory levels during the 2010 period compared
21
Table of Contents
to an increase in inventory levels during the 2009 period also
contributed to the improvement in cash flows from operating
activities, partially offset by higher tax payments in the 2010
period.
At March 31, 2010, we had 60 days of sales outstanding
in trade accounts receivable, which represents an increase of
4 days compared to December 31, 2009 and a decrease of
1 day compared to March 31, 2009. At March 31,
2010, we had 302 days of inventory on hand, which is
consistent with December 31, 2009 and an improvement of
71 days from March 31, 2009.
Cash flows used in investing activities were $37.8 million
for the three month period ended March 31, 2010, compared
to $84.4 million in the same 2009 period. Additions to
instruments decreased by $6.0 million during the three
month period ended March 31, 2010 compared to the same 2009
period. Spending on other property, plant and equipment
decreased to $11.6 million during the three month period
ended March 31, 2010, compared to $30.9 million in the
same 2009 period. We expect spending on property, plant and
equipment and instruments to increase over subsequent quarters
in 2010 as we replace machinery and equipment in the normal
course of business and invest in instruments to support our new
product launches. During the first quarter of 2010, we purchased
and sold approximately $4.0 million and $20.0 million,
respectively, in certificates of deposit that have original
maturities greater than 90 days. Investments in other
assets in both 2010 and 2009 primarily relate to payments to
acquire certain foreign-based distributors.
Cash flows used in financing activities were $87.9 million
for the three month period ended March 31, 2010, compared
to $95.9 million in the same 2009 period. For the three
months ended March 31, 2010, we purchased 1.5 million
common shares for a total of $93.5 million, including
commissions, under our stock repurchase program authorized by
our Board of Directors, compared to $301.4 million in the
same 2009 period. In the 2009 period, we borrowed against our
senior credit facility, in part, to fund these share
repurchases. Proceeds from our stock compensation plans have
increased in the three month period ended March 31, 2010,
compared to the same 2009 period, due to an increase in employee
stock option exercises.
We have two outstanding tranches of unsecured senior notes
(Senior Notes): $500 million aggregate principal amount of
4.625% Senior Notes due November 30, 2019 and
$500 million aggregate principal amount of
5.75% Senior Notes due November 30, 2039. Interest on
the Senior Notes is payable on May 30 and November 30 of each
year beginning on May 30, 2010 until maturity. We may
redeem the Senior Notes at our election in whole or in part at
any time prior to maturity.
We have a five year $1,350 million revolving,
multi-currency, senior unsecured credit facility maturing
November 30, 2012 (Senior Credit Facility). We had
$128.2 million outstanding under the Senior Credit Facility
at March 31, 2010, and an availability of
$1,221.8 million.
We also have available uncommitted credit facilities totaling
$83.9 million.
We may use excess cash or further borrow against our Senior
Credit Facility, subject to limits set by our Board of
Directors, to repurchase additional common stock under the
$1.25 billion program which expires December 31, 2010.
$117.6 million remains authorized for future repurchases
under this program.
Management believes that cash flows from operations and
available borrowings under the Senior Credit Facility are
sufficient to meet our working capital, capital expenditure and
debt service needs. Should investment opportunities arise, we
believe that our earnings, balance sheet and cash flows will
allow us to obtain additional capital, if necessary.
Recent
Accounting Pronouncements
There are no recently issued accounting pronouncements that we
have yet to adopt that are expected to have a material effect on
our financial position, results of operations, or cash flows.
Critical
Accounting Estimates
There were no changes in the three month period ended
March 31, 2010 to the application of critical accounting
policies as described in our Annual Report on
Form 10-K
for the year ended December 31, 2009.
22
Table of Contents
We evaluate the carrying value of goodwill and indefinite life
intangible assets annually, or whenever events or circumstances
indicate the carrying value may not be recoverable. We evaluate
the carrying value of finite life intangible assets whenever
events or circumstances indicate the carrying value may not be
recoverable. Significant assumptions are required to estimate
the fair value of goodwill and intangible assets, most notably
estimated future cash flows generated by these assets. As such,
these fair valuation measurements use significant unobservable
inputs. Changes to these assumptions could require us to record
impairment charges on these assets.
In the fourth quarter of 2009 we incurred a goodwill impairment
charge of $73.0 million related to our U.S. Spine
reporting unit. Although there were signs of improvement in the
three month period ended March 31, 2010, such as growth in
sales of acquired Abbott Spine products, our U.S. Spine
reporting unit continues to experience challenges, so we
performed another impairment test in the first quarter of 2010.
Using methodology similar to that used in the fourth quarter of
2009, we determined the estimated fair value of the reporting
unit using an equal weighting of income and market approaches.
The estimated fair value of the reporting unit was greater
(although not substantially greater) than the carrying value of
the net assets, so we did not record a goodwill impairment
charge.
If the estimated cash flows of the U.S. Spine reporting
unit decrease relative to our current estimates, we may have to
record impairment charges in the future. Factors that could
result in our cash flows being lower than our current estimates
include: 1) decreased revenues caused by changes in the
healthcare market, poor execution of our operating plans, or our
inability to generate new product revenue from our research and
development activities, and 2) our inability to achieve the
estimated operating margins in our forecasts due to unforeseen
factors. Additionally, changes in the broader economic
environment could cause changes to our estimated discount rates
which will impact our estimated fair values, or may cause
changes to the comparable transaction methodology we employed
under the market approach of estimating fair value.
We have five other reporting units subject to goodwill
impairment testing, but no interim impairment testing was
performed on these reporting units as there were no events or
circumstances that would warrant an interim test. For each of
those five reporting units, the estimated fair value
substantially exceeded its carrying value at the last annual
impairment test.
Forward-Looking
Statements
This quarterly report contains certain statements that are
forward-looking statements within the meaning of federal
securities laws. When used in this report, the words
“may,” “will,” “should,”
“anticipate,” “estimate,”
“expect,” “plan,” “believe,”
“predict,” “potential,” “project,”
“target,” “forecast,” “intend,”
“assume,” “guide,” “seek” and
similar expressions are intended to identify forward-looking
statements. Forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ
materially from those projected. These risks and uncertainties
include, but are not limited to:
| • | competition; | |
| • | pricing pressures; | |
| • | dependence on new product development, technological advances and innovation; | |
| • | the impact of the recently enacted federal healthcare reform legislation, including the new excise tax on medical devices; | |
| • | reductions in reimbursement levels by third-party payors and cost containment efforts of healthcare purchasing organizations; | |
| • | the costs of defending or resolving putative class action litigation arising out of trading or ownership of our stock; | |
| • | our compliance through 2012 with the Corporate Integrity Agreement we entered into as part of the September 2007 settlement with the United States government; | |
| • | the success of our quality initiatives; |
23
Table of Contents
| • | the outcome of the investigation by the U.S. government into Foreign Corrupt Practices Act matters announced in October 2007; | |
| • | challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the U.S. Food and Drug Administration and foreign government regulators, such as more stringent requirements for regulatory clearance of our products; | |
| • | tax reform measures, tax authority examinations and associated tax risks and potential obligations; | |
| • | retention of our independent agents and distributors; | |
| • | changes in customer demand for our products and services caused by demographic changes or other factors; | |
| • | changes in general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; | |
| • | our ability to protect proprietary technology and other intellectual property and claims for infringement of the intellectual property rights of third parties; | |
| • | product liability claims; | |
| • | the impact of temporarily suspending U.S. marketing and distribution of the Durom Cup on our sales growth, our customer relationships, our entry into the U.S. hip resurfacing market and product liability claims; | |
| • | the possible disruptive effect of additional strategic acquisitions and our ability to successfully integrate acquired companies; | |
| • | our ability to form and implement strategic alliances; | |
| • | changes in prices of raw materials and products and our ability to control costs and expenses; | |
| • | changes in general industry and market conditions, including domestic and international growth rates; | |
| • | our dependence on a limited number of suppliers for key raw materials and outsourced activities; and | |
| • | shifts in our product category sales mix or our regional sales mix away from products or geographic regions that generate higher operating margins. |
Readers of this report are cautioned not to place undue reliance
on these forward-looking statements. 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 report.
We disclaim 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 our periodic reports and our other filings with the
Securities and Exchange Commission.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
There have been no material changes from the information
provided in our Annual Report on
Form 10-K
for the year ended December 31, 2009.
| Item 4. | Controls and Procedures |
We have established disclosure controls and procedures and
internal controls over financial reporting to provide reasonable
assurance that material information relating to us, including
our consolidated subsidiaries, is made known on a timely basis
to management and the Board of Directors. However, no control
system, no matter how well designed and operated, can provide
absolute assurance that the objectives of the control system are
met, and no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if
any, within a company have been detected.
24
Table of Contents
Our management, with the participation of our Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness
of the design and operation of our disclosure controls and
procedures (as defined in
Rule 13a-15(e)
of the Securities Exchange Act of 1934). Based upon that
evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures as
of the end of the period covered by this report are effective.
There was no change in our internal control over financial
reporting (as defined in
Rule 13a-15(f)
of the Securities Exchange Act of 1934) that occurred
during the quarter ended March 31, 2010 that has materially
affected, or is reasonably likely to materially affect, our
internal control over financial reporting.
| Item 1. | Legal Proceedings |
Information pertaining to legal proceedings can be found in
Note 14 to the interim consolidated financial statements
included in Part I of this report.
| Item 1A. | Risk Factors |
Except as set forth below, there have been no material changes
from the risk factors disclosed in Part I —
Item 1A of our Annual Report on
Form 10-K
for the year ended December 31, 2009.
The risk factor under “RISKS RELATED TO OUR INDUSTRY”
entitled “The impact of healthcare reform in the
U.S. on us is uncertain” is replaced in its entirety
by the following:
The
impact of the recently enacted federal healthcare reform
legislation on our business remains uncertain.
During the first quarter of 2010, the U.S. Congress passed
and the President signed into law the Patient Protection and
Affordable Care Act, as well as the Health Care and Education
Reconciliation Act of 2010, which represent a significant change
to the current U.S. healthcare system. The legislation is
far-reaching and is intended to expand access to health
insurance coverage over time. The new law will likely have a
significant impact upon various aspects of our business
operations. For example, to the extent that the number of
uninsured or underinsured patients is reduced, demand for our
products in the U.S. could marginally increase. However,
the new law provides for new taxes and fees, including a
2.3 percent excise tax on medical devices scheduled to be
implemented in 2013 that will apply to U.S. sales of a
majority of our medical device products.
Many of the details of the new law will be included in new and
revised regulations, which have not yet been promulgated, and
require additional guidance and specificity to be provided by
the Department of Health and Human Services, Department of Labor
and Department of the Treasury. Accordingly, while it is too
early to understand and predict the ultimate impact of the new
legislation on our business, the legislation could have a
material adverse effect on our business, cash flows, financial
condition and results of operations.
25
Table of Contents
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
The following table summarizes repurchases of common stock
settled during the three month period ended March 31, 2010:
|
Total Number of
|
Approximate
|
|||||||||||||||||||
|
Shares Purchased
|
Dollar Value of
|
|||||||||||||||||||
|
as Part of
|
Shares that May
|
|||||||||||||||||||
|
Total Number
|
Publicly
|
Yet Be Purchased
|
||||||||||||||||||
|
of Shares
|
Average Price
|
Announced Plans
|
Under Plans
|
|||||||||||||||||
| Purchased | Paid per Share | or Programs* | or Programs | |||||||||||||||||
|
January 2010
|
1,042,413 | $ | 62.36 | 50,936,061 | $ | 146,113,286 | ||||||||||||||
|
February 2010
|
500,000 | 57.01 | 51,436,061 | 117,602,079 | ||||||||||||||||
|
March 2010
|
— | — | 51,436,061 | 117,602,079 | ||||||||||||||||
|
Total
|
1,542,413 | $ | 60.62 | 51,436,061 | $ | 117,602,079 | ||||||||||||||
| * | Includes repurchases made under expired programs as well as the current program authorizing $1.25 billion of repurchases through December 31, 2010. |
| Item 5. | Other Information |
During the period covered by this report, the Audit Committee of
our Board of Directors approved the engagement of
PricewaterhouseCoopers LLP, our independent registered public
accounting firm, to perform certain non-audit services related
to certain accounting and tax matters. This disclosure is made
pursuant to Section 10A(i)(2) of the Securities Exchange
Act of 1934, as added by Section 202 of the Sarbanes-Oxley
Act of 2002.
| Item 6. | Exhibits |
The following exhibits are filed or furnished as part of this
report:
| 10.1 | * | Form of Change in Control Severance Agreement with Jeffrey B. Paulsen | ||
| 31.1 | Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
| 31.2 | Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||
| 32 | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||
| 99 | Zimmer Holdings, Inc. Employee Stock Purchase Plan (As amended and restated effective January 1, 2010) | |||
| 101 | The following materials from Zimmer Holdings, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, formatted in XBRL (Extensible Business Reporting Language): (1) the Consolidated Statements of Earnings, (2) the Consolidated Balance Sheets, (3) the Consolidated Statements of Cash Flows, and (4) Notes to Consolidated Financial Statements, tagged as blocks of text. |
| * | indicates management contracts or compensatory plans or arrangements |
26
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 thereunto duly authorized.
|
ZIMMER HOLDINGS, INC.
(Registrant) |
||||||
|
Date: May 4, 2010
|
By: |
/s/ James
T.
Crines
|
||||
| James T. Crines | ||||||
| Executive Vice President, Finance and | ||||||
| Chief Financial Officer | ||||||
|
Date: May 4, 2010
|
By: |
/s/ Derek
M.
Davis
|
||||
| Derek M. Davis | ||||||
| Vice President, Finance and Corporate | ||||||
| Controller and Chief Accounting Officer | ||||||
27
TABLE OF CONTENTS
Part I Financial InformationItem 1. Financial StatementsItem 2. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II Other InformationItem 1. Legal ProceedingsItem 1A. Risk FactorsItem 2. Unregistered Sales Of Equity Securities and Use Of ProceedsItem 5. Other InformationItem 6. Exhibits