Business Context and Reporting Period
Company: Zimmer Holdings, Inc.
Filing Type: Form 8-K
Date of Report: January 30, 2006
Reporting Period: Quarter and year ended December 31, 2005
This filing reports the results of operations for the specified period. The company previously acquired Centerpulse AG (October 2003) and Implex Corp. (April 2004).
Key Financial Metrics
The filing text does not provide specific numerical values for revenue, profit, cash flow, margins, debt, or liquidity. These figures are contained in the attached Press Release (Exhibit 99.1), which is incorporated by reference but not reproduced in this text.
The company utilizes the following non-GAAP financial measures to evaluate performance:
- Adjusted net earnings
- Adjusted diluted EPS (and projected adjusted diluted EPS)
- Adjusted net margin, adjusted operating margin, and adjusted gross margin
- Constant currency sales
Material Changes and Non-GAAP Adjustments
Management presents non-GAAP measures to exclude specific items that impact period-to-period comparability:
- Excluded Expenses: Acquisition, integration, and other expenses.
- Inventory Step-up: Adjustments related to inventory valuation changes from acquisitions.
- Accounting Standards: Projected adjusted diluted EPS excludes the estimated impact of Statement of Financial Accounting Standards No. 123(R) regarding Share Based Payment.
- Currency Impact: Constant currency sales are calculated using predetermined exchange rates to exclude the impact of foreign currency fluctuations.
Guidance, Outlook, and Risks
Management Commentary: Management uses these non-GAAP measures to allow investors to compare operating performance on a period-to-period basis absent specific acquisition-related items. The company states these measures should be considered in addition to, not as a substitute for, GAAP measures.
Reconciliation: All non-GAAP financial measures are reconciled to the most directly comparable GAAP financial measure in the attached press release.
Legal Disclaimer: The information furnished in this report is not deemed "filed" with the SEC and is not incorporated by reference into other filings. The registrant makes no admission as to the materiality of the information.
Investor Verification Checklist
- Review Exhibit 99.1 (Press Release) for specific GAAP and non-GAAP numerical results for the quarter and year ended December 31, 2005.
- Verify the reconciliation tables in the press release to understand the magnitude of excluded acquisition and integration costs.
- Assess the impact of foreign currency exchange rates on reported sales versus constant currency sales.
- Confirm the estimated financial impact of FAS 123(R) on projected diluted EPS.