WASHINGTON (dpa-AFX) - Zimmer Holdings, Inc. (ZMH), a manufacturer of orthopedic reconstructive, spinal and trauma devices, reported Thursday a higher profit in its first quarter with increased sales. Adjusted earnings topped analysts' estimates, while sales missed their view. Further, the company trimmed its forecast for fiscal 2014 earnings, and backed sales growth view.
In a separate release, Zimmer said it agreed to acquire Biomet, Inc., a privately held surgical and non-surgical products maker, in a cash and stock deal valued at about $13.35 billion, including the assumption of net debt. The combined company is expected to be a leader in the $45 billion musculoskeletal industry.
In its first quarter, Zimmer's net earnings advanced to $221.5 million from $218.6 million in the previous year. Earnings per share edged up 0.8 percent to $1.29 from $1.28.
Adjusted earnings totaled $258.1 million or $1.50 per share , while it was $1.41 per share last year. On average, 29 analysts polled by Thomson Reuters expected earnings of $1.47 per share. Analysts estimates typically exclude special items.
Net sales grew 2 percent to $1.16 billion from $1.14 billion in the prior year. Analysts expected revenues of $1.18 billion. Sales increased 3.2 percent at constant currency.
Looking ahead for fiscal 2014, the company now expects earnings per share to be in a range of $4.90 to $5.10 on a reported basis and $6.00 to $6.20 on an adjusted basis. The company previously estimated adjusted earnings per share of $6.10 to $6.30. Analysts look for earnings of $6.21 per share.
The company attributed the revision in forecast to a change in outstanding shares for 2014 as share repurchases would be discontinued ahead of the proposed Biomet deal.
Meanwhile, the company continues to expects full-year revenues to increase between 2.5 percent and 4.5 percent on a reported basis, and to increase 3 percent to 5 percent on a constant currency basis.
Regarding the deal with Biomet, Zimmer said their Boards of Directors have approved a definitive agreement.
In the deal, Zimmer will pay $10.35 billion in cash and will also issue an aggregate number of shares of Zimmer stock valued at $3 billion.
At closing, Zimmer stockholders would own about 84 percent of the combined company, while Biomet shareholders would own approximately 16 percent.
The deal would close in the first quarter of 2015, subject to customary closing conditions and regulatory approvals.
Upon closing, the transaction is expected to be double-digit accretive to Zimmer's adjusted earnings per share in the first year.
The company also expects to achieve net annual synergies of approximately $270 million by the third year following the deal closure, with approximately $135 million anticipated in the first year.
In addition, Zimmer expects the strong cash flow to allow Zimmer to maintain a stable dividend of 15 to 20 percent of net income.
The 2013 combined calendar year revenues of Zimmer and Biomet total approximately $7.8 billion, with combined adjusted EBITDA of $2.8 billion.
Zimmer said the companies expect to leverage complementary sales channels in major markets to achieve cross-selling opportunities, while also strengthening their presence in emerging markets.
Further, Biomet's parent will withdraw the proposed initial public offering registration statement filed with the SEC.
In pre-market activity, Zimmer shares gained $10.50 or 11.48 percent, and traded at $101.95.
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