Zimmer (NYSE:ZMH) shares dipped today after the medical device company reported lower profits for the 2nd quarter, partly due to a charge related to the recall of its Durom hip implant and another $75.6 million charge for "special items."
Warsaw, Ind.-based Zimmer posted profits of $152.1 million, or 89¢ per share, on sales of $1.17 billion for the 3 months ended June 30. That’s a 29.1% bottom-line decline on sales growth of 4.0%.
ZMH shares were trading at $83.57 each as of about 10:30 this morning, down 0.6%.
Adjusted to exclude 1-time items, earnings per share were $1.43, a penny under expectations on Wall Street
"In the second quarter, Zimmer delivered strong sales results, driven by our innovative new product offerings and growth in key geographies," president & CEO David Dvorak said in prepared remarks. "We are confident that the company will sustain this accelerated top line performance in the second half of the year. Through disciplined capital deployment and our commitment to operational excellence, we will remain focused on creating value for our stockholders."
Zimmer said it recorded a $47.0 million pre-tax charge to cover legal claims on the Durom acetabular component, which it pulled from the market in 2008.
The medical device company also raised its sales growth estimate for 2013, saying it now expects growth of 4.0%-5.0% on a constant-currency basis, up from 2.5%-4.5% previously. Adjusted EPS are now pegged to reach $5.70-$5.80, up on the lower end by 5¢ but down 5¢ on the top end.
"This updated guidance reflects estimated charges for inventory step-up and other inventory and manufacturing related charges, certain claims and special items of $250 million on a pre-tax basis, or approximately $1.00 per diluted share, on an after-tax basis. Prior guidance reflected an estimate of $135 million, on a pre-tax basis, for these items," according to a press release.