Zimmer Holdings Inc. (NYSE:ZMH) posted a 21 percent profit decline during the second quarter as it set aside $75 million to cover mounting legal claims over its Durom acetabular hip implant.
The Warsaw, Ind.-based orthopedic device giant reported net earnings of $166 million, or 82 cents per diluted share, on sales of $1.06 billion during the three months ended June 30. That’s a 21.2 percent earnings drop, despite the 3.7 percent top-line uptick. Zimmer posted earnings of $210 million, or 98 cents per diluted share, on sales of $1.02 billion during Q2 2009.
The hit to the bottom line stemmed from a $75 million charge to cover mounting lawsuits over Zimmer’s Durom hip implant, which it pulled from the market in July 2008 (PDF). At least 10 more lawsuits were added to a slew of existing suits this week, according to Health Law 360, as many patients receiving the device complained of persistent pain and other problems requiring additional surgery to correct. Absent the $75 million set-aside, Zimmer’s Q2 earnings were up 14.5 percent.
The company also dropped $85.4 million in cash on a stock buyback, re-acquiring 1.4 million shares under a $1.25 billion repurchasing program. There was another $32.2 million to spend buying back its own stock at the end of the quarter, good until the end of the year; Zimmer’s board added $1.5 billion to that kitty for further share repurchases through December 2013.
Zimmer also said it agreed to acquire Beijing Montagne Medical Device Co. Ltd., a Chinese orthopedic implant maker, for an undisclosed amount. That deal is expected to close late this year or in early 2011.
Full-year sales are expected to rise between 3 percent and 5 percent, the company said, with adjusted diluted earnings per share of between $4.15 and $4.35.
