07.27.09
$4.1 Billion
KEY EXECUTIVES:
David C. Dvorak, President and CEO
Cheryl R. Blanchard, Ph.D., Sr. VP, R&D and Chief Scientific
Officer
James T. Crines, Exec. VP, Finance and CFO
Jeffery A. McCaulley. President, Reconstructive
Mark C. Throdahl, Group President, Global Businesses
NO. OF EMPLOYEES: 8,500
GLOBAL HEADQUARTERS: Warsaw, Ind.
For fiscal 2008, Zimmer hit a milestone few medical device companies reach: It crossed the $4 billion mark in revenue for the first time in its history. Full-year net sales were $4.12 billion, an increase of 6 percent reported and 3 percent constant currency. Diluted earnings per share for the year were $3.72 reported, an increase of 14 percent and $4.05 adjusted, unchanged from the prior year. Net earnings for 2008 were $848.6 million on a reported basis and $924.3 million on an adjusted basis, a decrease of 3.9 percent adjusted from the prior year.
Sales in the Americas grew 3 percent to approximately $2.4 billion, the company reported. Revenue from Europe was $1.2 billion, or 9 percent growth. Asia Pacific also grew by 9 percent to $588 million.
By division, the company’s Reconstructive unit expanded sales 7 percent to roughly a total of $3.4 billion across all product categories (knees, $1.8 billion; hips, $1.3 billion; extremities $121 million; and dental, $227 million), clearly the lion’s share of overall sales.
Zimmer’s Trauma unit reported 8 percent growth of $221 million. Spine added $231 million in sales to the company’s coffers, an impressive increase of 17 percent. The only division to report slower sales was the Orthopedic Surgical Products unit, which fell 11 percent to $278 million. The division had been plagued by costs due to recalls during the fiscal year.
“Our 2008 performance was adversely affected by issues related to the global implementation of our enhanced compliance program and the temporary suspensions of production and sales of certain products, among other matters. Despite these challenges, we made substantial progress defining Zimmer for the future,” David Dvorak, president and CEO, said in a letter to shareholders. “Whether we are talking about turbulence from these recent headwinds or about Zimmer’s future, the common element is our unwavering commitment to act in the best interests of patients and to conduct our business in a manner that inspires confidence and trust. That commitment, in turn, drives our strategies for maintaining Zimmer’s leadership in medical devices and delivering solid returns on our investments.”
During 2008, the company invested heavily in infrastructure projects to accommodate anticipated growth in demand for musculoskeletal procedures. The company expanded manufacturing in Shannon, Ireland; Winterthur, Switzerland, and Warsaw, Ind. Zimmer also is consolidating some of its European distribution facilities into a new, highly automated center in Eschbach, Germany.
Two key management slots were filled during 2008.
In May, Mark C. Throdahl was hired as group president, Global Businesses. He is responsible for Zimmer Spine, Zimmer Dental, Zimmer Trauma, Zimmer Orthopaedic Surgical Products, Zimmer Computer Assisted Solutions and the Human Motion Institute. Prior to joining Zimmer, Throdahl served as CEO for Consort Medical plc, a manufacturer of medical devices for inhaled drug delivery and anesthesia, based in the United Kingdom. Prior to joining Consort in 2001, he held various management roles at Becton Dickinson & Co. in Franklin Lakes, N.J., from 1988 to 2001.
Jeffery A. McCaulley joined the company as president of Zimmer Reconstructive in December. McCaulley most recently served as president and CEO of the Health Division of Amsterdam, Netherlands-based Wolters Kluwer, a provider of scientific information and workflow solutions for healthcare professionals, providers, payers and the pharmaceutical industry. Prior to joining Wolters Kluwer in 2004, he served three years as vice president and general manager of the Diabetes Division of Medtronic, based in Minneapolis, Minn.
As Dvorak mentioned in his annual report note, the company did struggle with a few notable recall issues. One event, announced in April last year, involved problems with the company’s quality systems at its Orthopedic Surgical Products (OSP) facility in Dover, Ohio. According to Zimmer, certain products did not meet its “internal quality standards,” and the manufacture of certain products at the facility was suspended, allowing the company to improve production systems and provide enhanced quality training for employees. The recalls did not affect its core hip and knee implants business. There were no patient safety issues, and the recall primarily was related to issues with the packaging of certain products related to surgical wound cleansing. In 2007, the OSP division initiated a recall of more than 60,000 Pulsavac kits, used to clean wounds, because their sterility was compromised. Specifically, a silicone stain produced during assembly operations was not validated for its effect on the Tyvek sterility barrier, which is supplied by DuPont.
In July, the company recalled a surgical instrument used in minimally invasive knee implant surgeries. The instrument most often is used with the company’s NexGen knee implant system, which was not affected by the recall. The company had received reports that some NexGen tibial broach impactors, which are used to prepare the tibial bone for an implant, had broken during surgery. According to Zimmer, other instruments were available for the procedure. At the time, a Zimmer spokesperson said that when the broach impactor is struck off the intended axis, there is the potential that the instrument could break over time and metal fragments could be left unnoticed in the patient at the time of surgery. Zimmer officials notified the U.S. Food and Drug Administration and affected customers, requesting that all instruments be returned. There were approximately 1,500 instruments in the field when the recall was issued.
Possibly the biggest news of the year for the Warsaw, Ind.-based company, however, was the acquisition of Abbott’s spine business for approximately $360 million in cash. The deal was announced in September. Abbott Spine had 2007 revenues of $109 million. Zimmer Spine’s revenues for the same period were $197 million. Founded in 1996, Abbott Spine has its U.S. headquarters in Austin, Texas, and an international facility in Bordeaux, France. The company currently has approximately 300 employees. Zimmer Spine is based in Minneapolis, Minn. Zimmer officials said they plan to maintain a presence at Abbott’s facilities in Texas and France.
Abbott Spine primarily manufacturers screw systems and stabilizer systems. Zimmer, which is far better known for its array of orthopedic devices, expects the transaction to reduce its fourth-quarter earnings by 3 cents per share and dilute earnings next year by between 8 and 10 cents per share. By 2010, Zimmer officials expect the deal to be neutral to slightly dilutive to earnings.
Industry analysts claimed that the deal better positions Zimmer to tap the faster-growing spinal market, where annual growth is in an estimated range of 13 percent to 14 percent.
KEY EXECUTIVES:
David C. Dvorak, President and CEO
Cheryl R. Blanchard, Ph.D., Sr. VP, R&D and Chief Scientific
Officer
James T. Crines, Exec. VP, Finance and CFO
Jeffery A. McCaulley. President, Reconstructive
Mark C. Throdahl, Group President, Global Businesses
NO. OF EMPLOYEES: 8,500
GLOBAL HEADQUARTERS: Warsaw, Ind.
For fiscal 2008, Zimmer hit a milestone few medical device companies reach: It crossed the $4 billion mark in revenue for the first time in its history. Full-year net sales were $4.12 billion, an increase of 6 percent reported and 3 percent constant currency. Diluted earnings per share for the year were $3.72 reported, an increase of 14 percent and $4.05 adjusted, unchanged from the prior year. Net earnings for 2008 were $848.6 million on a reported basis and $924.3 million on an adjusted basis, a decrease of 3.9 percent adjusted from the prior year.
Sales in the Americas grew 3 percent to approximately $2.4 billion, the company reported. Revenue from Europe was $1.2 billion, or 9 percent growth. Asia Pacific also grew by 9 percent to $588 million.
By division, the company’s Reconstructive unit expanded sales 7 percent to roughly a total of $3.4 billion across all product categories (knees, $1.8 billion; hips, $1.3 billion; extremities $121 million; and dental, $227 million), clearly the lion’s share of overall sales.
Zimmer’s Trauma unit reported 8 percent growth of $221 million. Spine added $231 million in sales to the company’s coffers, an impressive increase of 17 percent. The only division to report slower sales was the Orthopedic Surgical Products unit, which fell 11 percent to $278 million. The division had been plagued by costs due to recalls during the fiscal year.
“Our 2008 performance was adversely affected by issues related to the global implementation of our enhanced compliance program and the temporary suspensions of production and sales of certain products, among other matters. Despite these challenges, we made substantial progress defining Zimmer for the future,” David Dvorak, president and CEO, said in a letter to shareholders. “Whether we are talking about turbulence from these recent headwinds or about Zimmer’s future, the common element is our unwavering commitment to act in the best interests of patients and to conduct our business in a manner that inspires confidence and trust. That commitment, in turn, drives our strategies for maintaining Zimmer’s leadership in medical devices and delivering solid returns on our investments.”
During 2008, the company invested heavily in infrastructure projects to accommodate anticipated growth in demand for musculoskeletal procedures. The company expanded manufacturing in Shannon, Ireland; Winterthur, Switzerland, and Warsaw, Ind. Zimmer also is consolidating some of its European distribution facilities into a new, highly automated center in Eschbach, Germany.
Two key management slots were filled during 2008.
In May, Mark C. Throdahl was hired as group president, Global Businesses. He is responsible for Zimmer Spine, Zimmer Dental, Zimmer Trauma, Zimmer Orthopaedic Surgical Products, Zimmer Computer Assisted Solutions and the Human Motion Institute. Prior to joining Zimmer, Throdahl served as CEO for Consort Medical plc, a manufacturer of medical devices for inhaled drug delivery and anesthesia, based in the United Kingdom. Prior to joining Consort in 2001, he held various management roles at Becton Dickinson & Co. in Franklin Lakes, N.J., from 1988 to 2001.
Jeffery A. McCaulley joined the company as president of Zimmer Reconstructive in December. McCaulley most recently served as president and CEO of the Health Division of Amsterdam, Netherlands-based Wolters Kluwer, a provider of scientific information and workflow solutions for healthcare professionals, providers, payers and the pharmaceutical industry. Prior to joining Wolters Kluwer in 2004, he served three years as vice president and general manager of the Diabetes Division of Medtronic, based in Minneapolis, Minn.
As Dvorak mentioned in his annual report note, the company did struggle with a few notable recall issues. One event, announced in April last year, involved problems with the company’s quality systems at its Orthopedic Surgical Products (OSP) facility in Dover, Ohio. According to Zimmer, certain products did not meet its “internal quality standards,” and the manufacture of certain products at the facility was suspended, allowing the company to improve production systems and provide enhanced quality training for employees. The recalls did not affect its core hip and knee implants business. There were no patient safety issues, and the recall primarily was related to issues with the packaging of certain products related to surgical wound cleansing. In 2007, the OSP division initiated a recall of more than 60,000 Pulsavac kits, used to clean wounds, because their sterility was compromised. Specifically, a silicone stain produced during assembly operations was not validated for its effect on the Tyvek sterility barrier, which is supplied by DuPont.
In July, the company recalled a surgical instrument used in minimally invasive knee implant surgeries. The instrument most often is used with the company’s NexGen knee implant system, which was not affected by the recall. The company had received reports that some NexGen tibial broach impactors, which are used to prepare the tibial bone for an implant, had broken during surgery. According to Zimmer, other instruments were available for the procedure. At the time, a Zimmer spokesperson said that when the broach impactor is struck off the intended axis, there is the potential that the instrument could break over time and metal fragments could be left unnoticed in the patient at the time of surgery. Zimmer officials notified the U.S. Food and Drug Administration and affected customers, requesting that all instruments be returned. There were approximately 1,500 instruments in the field when the recall was issued.
Possibly the biggest news of the year for the Warsaw, Ind.-based company, however, was the acquisition of Abbott’s spine business for approximately $360 million in cash. The deal was announced in September. Abbott Spine had 2007 revenues of $109 million. Zimmer Spine’s revenues for the same period were $197 million. Founded in 1996, Abbott Spine has its U.S. headquarters in Austin, Texas, and an international facility in Bordeaux, France. The company currently has approximately 300 employees. Zimmer Spine is based in Minneapolis, Minn. Zimmer officials said they plan to maintain a presence at Abbott’s facilities in Texas and France.
Abbott Spine primarily manufacturers screw systems and stabilizer systems. Zimmer, which is far better known for its array of orthopedic devices, expects the transaction to reduce its fourth-quarter earnings by 3 cents per share and dilute earnings next year by between 8 and 10 cents per share. By 2010, Zimmer officials expect the deal to be neutral to slightly dilutive to earnings.
Industry analysts claimed that the deal better positions Zimmer to tap the faster-growing spinal market, where annual growth is in an estimated range of 13 percent to 14 percent.