Health Care & Life Sciences and Life Science & Biotech

Zimmer earnings fall on legal reserve costs

July 25, 2013

Zimmer Holdings saw second-quarter earnings slump 29 percent as the orthopedic device maker set aside an additional $47 million to cover the cost of lawsuits related to its Durom hip cups.

The Warsaw-based company stopped marketing the products in 2008 and has put more than $400 million in reserve to cover potential legal costs, including $108 million in the fourth quarter of 2012.

Earnings fell to $152.1 million, or 89 cents per share, from $214.5 million, or $1.22 per share, a year ago. If the legal reserve charge and other one-time items are excluded, Zimmer said its earnings rose to $1.43 per share from $1.34 per share. Revenue increased 4 percent, to $1.17 billion from $1.13 billion.

Analysts were forecasting earnings of $1.44 per share and $1.15 billion in revenue, according to FactSet.

The company said knee implant revenue rose 4 percent, to $481 million, and hip product revenue edged down to $338 million from $340 million. Sales of surgical and other products jumped 24 percent to $112 million.

Zimmer narrowed its net income guidance for the year and now expects to earn between $5.70 and $5.80 per share, and it expects revenue to grow 2 to 3 percent, to a range of $4.56 billion to $4.61 billion. The company had projected adjusted net income of $5.65 to $5.85 per share and said revenue would grow 1 to 3 percent.

Analysts expect $5.76 per share and $4.56 billion in revenue on average.

Shares of Zimmer Holdings Inc. fell $1.14 to close at $82.90 Thursday. The stock is trading near its highest level in almost six years.

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