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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED March 31, 2023

Commission File Number 001-16407

 

ZIMMER BIOMET HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

13-4151777

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

345 East Main Street, Warsaw, IN 46580

(Address of principal executive offices)

Telephone: (574) 267-6131

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value

ZBH

New York Stock Exchange

2.425% Notes due 2026

ZBH 26

New York Stock Exchange

1.164% Notes due 2027

ZBH 27

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of April 21, 2023, 208,569,285 shares of the registrant’s $.01 par value common stock were outstanding.

 

 


 

ZIMMER BIOMET HOLDINGS, INC.

INDEX TO FORM 10-Q

March 31, 2023

 

 

 

 

Page

 

 

 

Part I - Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

3

 

 

Condensed Consolidated Statements of Earnings for the Three Months Ended March 31, 2023 and 2022

 

3

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2023 and 2022

 

4

 

 

Condensed Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022

 

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022

 

6

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022

 

7

 

 

Notes to Interim Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

34

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

34

 

 

 

Part II - Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

35

 

 

 

 

 

Item 1A.

 

Risk Factors

 

35

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

35

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

35

 

 

 

 

 

Item 5.

 

Other Information

 

35

 

 

 

 

 

Item 6.

 

Exhibits

 

36

 

 

 

Signatures

 

37

 

2


 

Part I – Financial Information

Item 1. Financial Statements

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share amounts, unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

Net Sales

 

$

1,831.0

 

 

$

1,663.2

 

Cost of products sold, excluding intangible asset amortization

 

 

500.8

 

 

 

500.0

 

Intangible asset amortization

 

 

133.4

 

 

 

130.8

 

Research and development

 

 

110.4

 

 

 

96.9

 

Selling, general and administrative

 

 

715.9

 

 

 

684.5

 

Restructuring and other cost reduction initiatives

 

 

41.8

 

 

 

43.9

 

Quality remediation

 

 

-

 

 

 

6.5

 

Acquisition, integration, divestiture and related

 

 

1.3

 

 

 

2.2

 

Operating expenses

 

 

1,503.7

 

 

 

1,464.8

 

Operating Profit

 

 

327.3

 

 

 

198.4

 

Other income (expense), net

 

 

7.7

 

 

 

(56.1

)

Interest expense, net

 

 

(48.2

)

 

 

(41.1

)

Earnings from continuing operations before income taxes

 

 

286.8

 

 

 

101.2

 

Provision for income taxes from continuing operations

 

 

54.1

 

 

 

28.0

 

Net Earnings from continuing operations

 

 

232.8

 

 

 

73.2

 

Less: Net earnings attributable to noncontrolling interest

 

 

0.2

 

 

 

0.2

 

Net Earnings from Continuing Operations of Zimmer Biomet Holdings, Inc.

 

 

232.5

 

 

 

73.0

 

Loss from discontinued operations, net of taxes

 

 

-

 

 

 

(58.8

)

Net Earnings of Zimmer Biomet Holdings, Inc.

 

$

232.5

 

 

$

14.2

 

 

 

 

 

 

 

Earnings Per Common Share - Basic

 

 

 

 

 

 

Earnings from continuing operations

 

$

1.11

 

 

$

0.35

 

Loss from discontinued operations

 

 

-

 

 

 

(0.28

)

Net Earnings Per Common Share - Basic

 

$

1.11

 

 

$

0.07

 

Earnings Per Common Share - Diluted

 

 

 

 

 

 

Earnings from continuing operations

 

$

1.11

 

 

$

0.35

 

Loss from discontinued operations

 

 

-

 

 

 

(0.28

)

Net Earnings Per Common Share - Diluted

 

$

1.11

 

 

$

0.07

 

Weighted Average Common Shares Outstanding

 

 

 

 

 

 

Basic

 

 

209.4

 

 

 

209.2

 

Diluted

 

 

210.4

 

 

 

210.1

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions, unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2023

 

 

2022

 

Net Earnings of Zimmer Biomet Holdings, Inc.

 

$

232.5

 

 

$

14.2

 

Other Comprehensive Income (Loss):

 

 

 

 

 

 

Foreign currency cumulative translation adjustments, net of tax

 

 

12.4

 

 

 

1.3

 

Unrealized cash flow hedge gains, net of tax

 

 

8.8

 

 

 

13.7

 

Reclassification adjustments on hedges, net of tax

 

 

(19.0

)

 

 

(4.3

)

Adjustments to prior service cost and unrecognized actuarial assumptions, net of tax

 

 

(0.9

)

 

 

0.9

 

Total Other Comprehensive Income

 

 

1.3

 

 

 

11.6

 

Comprehensive Income Attributable to

 

 

 

 

 

 

Zimmer Biomet Holdings, Inc.

 

$

233.8

 

 

$

25.8

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts, unaudited)

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

330.2

 

 

$

375.7

 

Accounts receivable, less allowance for credit losses

 

 

1,380.9

 

 

 

1,381.5

 

Inventories

 

 

2,241.3

 

 

 

2,147.2

 

Prepaid expenses and other current assets

 

 

459.5

 

 

 

522.9

 

Total Current Assets

 

 

4,411.9

 

 

 

4,427.3

 

Property, plant and equipment, net

 

 

1,906.4

 

 

 

1,872.5

 

Goodwill

 

 

8,734.9

 

 

 

8,580.2

 

Intangible assets, net

 

 

5,071.7

 

 

 

5,063.8

 

Other assets

 

 

1,118.6

 

 

 

1,122.2

 

Total Assets

 

$

21,243.5

 

 

$

21,066.0

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

397.1

 

 

$

354.1

 

Income taxes payable

 

 

46.6

 

 

 

38.5

 

Salaries, wages and benefits

 

 

234.2

 

 

 

336.2

 

Other current liabilities

 

 

1,072.9

 

 

 

1,085.1

 

Current portion of long-term debt

 

 

585.0

 

 

 

544.3

 

Total Current Liabilities

 

 

2,335.9

 

 

 

2,358.2

 

Deferred income taxes, net

 

 

484.6

 

 

 

474.8

 

Long-term income tax payable

 

 

423.3

 

 

 

421.2

 

Other long-term liabilities

 

 

637.4

 

 

 

632.6

 

Long-term debt

 

 

5,204.8

 

 

 

5,152.2

 

Total Liabilities

 

 

9,085.9

 

 

 

9,039.0

 

Commitments and Contingencies (Note 16)

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Zimmer Biomet Holdings, Inc. Stockholders' Equity:

 

 

 

 

 

 

Common stock, $0.01 par value, one billion shares authorized, 315.4 million shares as of March 31, 2023 (313.8 million as of December 31, 2022) issued

 

 

3.2

 

 

 

3.1

 

Paid-in capital

 

 

9,692.4

 

 

 

9,504.4

 

Retained earnings

 

 

9,741.7

 

 

 

9,559.3

 

Accumulated other comprehensive loss

 

 

(178.0

)

 

 

(179.3

)

Treasury stock, 106.9 million shares as of March 31, 2023 (104.8 million as of December 31, 2022)

 

 

(7,108.6

)

 

 

(6,867.2

)

Total Zimmer Biomet Holdings, Inc. stockholders' equity

 

 

12,150.7

 

 

 

12,020.3

 

Noncontrolling interest

 

 

6.9

 

 

 

6.7

 

Total Stockholders' Equity

 

 

12,157.6

 

 

 

12,027.0

 

Total Liabilities and Stockholders' Equity

 

$

21,243.5

 

 

$

21,066.0

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except per share amounts, unaudited)

 

 

 

Zimmer Biomet Holdings, Inc. Stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Shares

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Treasury Shares

 

 

Noncontrolling

 

 

Stockholders'

 

 

 

Number

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

(Loss) Income

 

 

Number

 

 

Amount

 

 

Interest

 

 

Equity

 

Balance January 1, 2023

 

 

313.8

 

 

$

3.1

 

 

$

9,504.4

 

 

$

9,559.3

 

 

$

(179.3

)

 

 

(104.8

)

 

$

(6,867.2

)

 

$

6.7

 

 

$

12,027.0

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

232.5

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0.2

 

 

 

232.8

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1.3

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1.3

 

Cash dividends declared
($
0.24 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(50.4

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(50.4

)

Stock compensation plans

 

 

0.5

 

 

 

-

 

 

 

55.4

 

 

 

0.3

 

 

 

-

 

 

 

-

 

 

 

0.3

 

 

 

-

 

 

 

56.0

 

Embody acquisition consideration

 

 

1.1

 

 

 

0.1

 

 

 

134.9

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

135.0

 

Share repurchases

 

 

-

 

 

 

-

 

 

 

(2.3

)

 

 

-

 

 

 

-

 

 

 

(2.1

)

 

 

(241.7

)

 

 

-

 

 

 

(244.0

)

Balance March 31, 2023

 

 

315.4

 

 

$

3.2

 

 

$

9,692.4

 

 

$

9,741.7

 

 

$

(178.0

)

 

 

(106.9

)

 

$

(7,108.6

)

 

$

6.9

 

 

 

12,157.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance January 1, 2022

 

 

312.8

 

 

$

3.1

 

 

$

9,314.8

 

 

$

10,292.2

 

 

$

(231.6

)

 

 

(103.8

)

 

$

(6,717.8

)

 

$

5.7

 

 

$

12,666.4

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14.2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0.2

 

 

 

14.4

 

Other comprehensive income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11.6

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

11.6

 

Cash dividends declared
($
0.24 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(50.3

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(50.3

)

Reclassifications of net investment hedges

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

25.9

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

25.9

 

Spinoff of ZimVie Inc.

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(753.1

)

 

 

35.2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(717.9

)

Stock compensation plans

 

 

0.6

 

 

 

-

 

 

 

70.9

 

 

 

0.1

 

 

 

-

 

 

 

-

 

 

 

0.3

 

 

 

-

 

 

 

71.3

 

Balance March 31, 2022

 

 

313.4

 

 

$

3.1

 

 

$

9,385.7

 

 

$

9,503.1

 

 

$

(158.9

)

 

 

(103.8

)

 

$

(6,717.5

)

 

$

5.9

 

 

$

12,021.4

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


 

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions, unaudited)

 

 

 

 

 

 

For the Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Cash flows provided by (used in) operating activities from continuing operations:

 

 

 

 

 

 

Net earnings from continuing operations

 

$

232.8

 

 

$

73.2

 

Adjustments to reconcile net earnings from continuing operations to
   cash provided by operating activities from continuing operations:

 

 

 

 

 

 

Depreciation and amortization

 

 

231.8

 

 

 

233.8

 

Share-based compensation

 

 

25.0

 

 

 

23.2

 

(Gain) loss on investment in ZimVie

 

 

(2.5

)

 

 

51.0

 

Changes in operating assets and liabilities, net of acquired assets and liabilities

 

 

 

 

 

 

Income taxes

 

 

21.5

 

 

 

(2.5

)

Receivables