Zimmer Holdings (ZMH) Q3 2010 Earnings Call October 28, 2010 8:00 am ET Executives James Crines - Chief Financial Officer and Executive Vice President of Finance Paul Blair - Vice President of Investor Relations David Dvorak - Chief Executive Officer, President and Director Analysts Charles Chon - Stifel, Nicolaus & Co., Inc. Matthew Miksic - Piper Jaffray Companies David Roman - Goldman Sachs Group Inc. Robert Hopkins Michael Weinstein - JP Morgan Chase & Co Kristen Stewart - Credit Suisse Derrick Sung - Bernstein Research Frederick Wise - Leerink Swann LLC Adam Feinstein - Barclays Capital Bruce Nudell - UBS Investment Bank Joanne Wuensch - BMO Capital Markets U.S. Presentation Operator Mr. Blair, you may begin your conference. Paul Blair
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Zimmer disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, further events or otherwise.This presentation also contains certain non-GAAP financial measures. A reconciliation of such information to the most directly comparable GAAP financial measures, along with other financial and statistical information for the periods to be presented on this conference call was included in the press release announcing our earnings, which may be accessed from the Zimmer website at www.zimmer.com under the section entitled Investor Relations. In addition, we routinely post important information for investors on our website in the Investor Relations section. We intend to use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. A rebroadcast of this call will be available from approximately two hours following the conclusion of today's call through the end of the day on November 11, 2010, and can also be accessed from the Investor Relations section of the Zimmer website. At this time, I'd like to introduce David Dvorak, President and Chief Executive Officer of Zimmer. David Dvorak Thank you, Paul, and good morning, everyone. We're glad you could join us for today's call. This morning, I'll review our third quarter 2010 results and provide some commentary on general market conditions. Jim will then discuss additional financial details. We delivered solid earnings and cash flow performance in the third quarter, notwithstanding challenging global economic conditions that negatively impacted procedure rates. Our performance reflects a focus on disciplined spending in executing our strategic plan. A core element of this plan involves a new product introductions across our businesses. These introductions will position us for an improved performance in the fourth quarter and accelerate growth beyond 2010 as the economy strengthens.
Net sales for the quarter were $965 million, a decrease of 0.5% on a constant-currency basis, and our earnings per share were $0.96 on an adjusted basis, an increase of 9.1% over the prior year period. For the quarter, our Americas and Europe, Middle East and Africa segments experienced constant currency sales declines of 0.4% and 3.8%, respectively, while the Asia Pacific region grew 4.2% constant currency.Knee sales for the quarter decreased year-over-year 2.7% constant currency, reflecting negative volume and mix of 0.4% and negative price of 2.3%. Important advances for Zimmer Knees included a broader rollout of our Patient Specific Instruments and a limited rollout of our posterior referencing instruments. Moving into the fourth quarter and to a greater extent throughout 2011, we expect to see accelerating growth with these knee instruments being deployed broadly. A number of additional MRI centers have been certified to process our Patient Specific Instruments, and we have had continued commercial success based on the unique and differentiating features and benefits of our system. Meanwhile, early clinical feedback on our posterior referencing instruments have been very positive. Recent National Joint Replacement Registry data continues to demonstrate outstanding long-term clinical success of our NexGen and Natural-Knee product families, and we're confident that our enhanced instrumentation options will drive increased adoption globally. Our Hip business performed above market in the Americas in the quarter with sales improving year-over-year, 2.7% on a constant-currency basis. Overall, our Hip sales increased 0.5% constant currency, reflecting positive volume and mix of 2.7% and negative price of 2.2%. Read the rest of this transcript for free on seekingalpha.com