Surgical products maker Zimmer Holdings, Inc. (ZMH), Thursday reported a drop in fourth quarter profit hurt by charges related to goodwill impairment and on higher expenses, notwithstanding increases in quarterly revenues. The company, however, expects full year 2010 earnings in line with current street estimates.
Net earnings of Warsaw, Indiana-based Zimmer dropped to $155.2 million or $0.74 per share from $167.6 million or $0.75 per share in the same quarter a year ago.
Quarterly results included a goodwill impairment charge of $73.0 million or $0.35 per share after tax related to U.S. Spine reporting unit.
On average, 25 analysts' polled by Thomson Reuters currently expects earnings of $1.08 per share for the quarter. Analysts' estimate typically excludes one-time items.
Net sales of Zimmer increased 7% to $1.11 billion from $1.03 billion in the same year-ago quarter, in line with Street estimates for the quarter. On a constant currency basis, the increase was 2.5%.
David Dvorak, President and CEO said, "We once again recorded year-over-year sales growth for the quarter in all three of our geographic reporting segments, driven by a 5.5% constant currency increase in our industry-leading knee replacement business. The continued improvement in our Reconstructive sales performance, combined with recent new product clearances, forms a foundation for sustained sales growth and leveraged earnings in 2010."
Operating expenses were $594.4 million for the quarter, up from $547.4 million in the year ago quarter. Operating profit decreased to $238.5 million from $239.7 million in the corresponding quarter last year.
For full year 2009, net income dropped to $717.4 million or $3.32 per share from $849.5 million or $3.72 per share in the prior year. Net sales decreased to $4.10 billion from $4.12 billion in the year-ago quarter.
Street expected earnings of $3.90 per share on revenues of $4.10 billion for the year.
Looking ahead to full year 2010, the company expects adjusted earnings in a range of $4.15 to $4.35 per share, which is within current Street expectation of $4.28 per share for the year.
Full-year revenues for 2010 are anticipated to increase between 3% and 5% on a constant currency basis.
Assuming foreign currency exchange rates remain near year-end 2009 levels, the company estimates that foreign currency translation will increase revenues by approximately 1% for the full year 2010, resulting in reported revenue growth between 4% and 6%.
ZMH is currently trading at $56.94, down $2.94 or 4.91%, on a volume of 1.84 million shares.
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