10-Q

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 June 30, 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) 373-3333

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. Yes ☒ No ☐

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 July 26, 2023, 208,964,134 shares of the registrant’s $.01 par value common stock were outstanding.

ZIMMER BIOMET HOLDINGS, INC.

INDEX TO FORM 10-Q

June 30, 2023


		Page

Part I - Financial Information

Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Statements of Earnings for the Three and Six Months Ended June 30, 2023 and 2022	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2023 and 2022	4
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

Item 4.	Controls and Procedures	36

Part II - Other Information

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	39

Item 6.	Exhibits	40

Signatures		41

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						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Net Sales	$	1,869.6		$	1,781.8		$	3,700.6		$	3,445.0
Cost of products sold, excluding intangible asset amortization		525.5			511.0			1,026.3			1,011.0
Intangible asset amortization		138.2			133.0			271.6			263.8
Research and development		118.1			99.4			228.5			196.3
Selling, general and administrative		725.8			695.2			1,441.8			1,379.7
Intangible asset impairment		-			3.0			-			3.0
Restructuring and other cost reduction initiatives		24.4			57.0			66.3			100.9
Quality remediation		-			7.8			-			14.3
Acquisition, integration, divestiture and related		7.9			(5.5	)		9.1			(3.3	)
Operating expenses		1,539.9			1,500.9			3,043.6			2,965.7
Operating Profit		329.6			280.9			656.9			479.3
Other (expense) income, net		(1.2	)		(42.6	)		6.5			(98.7	)
Interest expense, net		(51.6	)		(38.8	)		(99.8	)		(79.9	)
Earnings from continuing operations before income taxes		276.8			199.5			563.6			300.7
Provision for income taxes from continuing operations		66.9			45.5			121.0			73.5
Net Earnings from continuing operations		209.9			154.0			442.6			227.2
Less: Net earnings attributable to noncontrolling interest		0.2			0.3			0.5			0.5
Net Earnings from Continuing Operations of Zimmer Biomet Holdings, Inc.		209.6			153.7			442.1			226.7
Loss from discontinued operations, net of taxes		-			-			-			(58.8	)
Net Earnings of Zimmer Biomet Holdings, Inc.	$	209.6		$	153.7		$	442.1		$	167.9

Earnings Per Common Share - Basic
Earnings from continuing operations	$	1.00		$	0.73		$	2.12		$	1.08
Loss from discontinued operations		-			-			-			(0.28	)
Net Earnings Per Common Share - Basic	$	1.00		$	0.73		$	2.12		$	0.80
Earnings Per Common Share - Diluted
Earnings from continuing operations	$	1.00		$	0.73		$	2.10		$	1.08
Loss from discontinued operations		-			-			-			(0.28	)
Net Earnings Per Common Share - Diluted	$	1.00		$	0.73		$	2.10		$	0.80
Weighted Average Common Shares Outstanding
Basic		208.6			209.6			209.0			209.4
Diluted		209.9			210.3			210.1			210.2

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

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions, unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Net Earnings of Zimmer Biomet Holdings, Inc.	$	209.6		$	153.7		$	442.1		$	167.9
Other Comprehensive Income (Loss):
Foreign currency cumulative translation adjustments, net of tax		(26.5	)		(92.1	)		(14.1	)		(90.8	)
Unrealized cash flow hedge gains, net of tax		47.1			65.6			55.9			79.3
Reclassification adjustments on hedges, net of tax		(19.3	)		(9.7	)		(38.3	)		(14.0	)
Adjustments to prior service cost and unrecognized actuarial assumptions, net of tax		(1.1	)		2.6			(2.0	)		3.5
Total Other Comprehensive Income (Loss)		0.2			(33.6	)		1.5			(22.0	)
Comprehensive Income Attributable to
Zimmer Biomet Holdings, Inc.	$	209.8		$	120.1		$	443.6		$	145.9

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

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts, unaudited)


	June 30,			December 31,
	2023			2022
ASSETS
Current Assets:
Cash and cash equivalents	$	319.8		$	375.7
Accounts receivable, less allowance for credit losses		1,367.3			1,381.5
Inventories		2,275.8			2,147.2
Prepaid expenses and other current assets		425.1			522.9
Total Current Assets		4,387.9			4,427.3
Property, plant and equipment, net		1,975.0			1,872.5
Goodwill		8,743.7			8,580.2
Intangible assets, net		5,027.7			5,063.8
Other assets		1,160.0			1,122.2
Total Assets	$	21,294.3		$	21,066.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	354.6		$	354.1
Income taxes payable		81.6			38.5
Other current liabilities		1,277.6			1,421.3
Current portion of long-term debt		520.0			544.3
Total Current Liabilities		2,233.7			2,358.2
Deferred income taxes, net		474.9			474.8
Long-term income tax payable		375.7			421.2
Other long-term liabilities		642.0			632.6
Long-term debt		5,189.4			5,152.2
Total Liabilities		8,915.8			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, 315.8 million shares as of June 30, 2023 (313.8 million as of December 31, 2022) issued		3.2			3.1
Paid-in capital		9,766.0			9,504.4
Retained earnings		9,902.3			9,559.3
Accumulated other comprehensive loss		(177.8	)		(179.3	)
Treasury stock, 107.0 million shares as of June 30, 2023 (104.8 million as of December 31, 2022)		(7,122.2	)		(6,867.2	)
Total Zimmer Biomet Holdings, Inc. stockholders' equity		12,371.5			12,020.3
Noncontrolling interest		7.1			6.7
Total Stockholders' Equity		12,378.6			12,027.0
Total Liabilities and Stockholders' Equity	$	21,294.3		$	21,066.0

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

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 April 1, 2023		315.4	$	3.2	$	9,692.4	$	9,741.7		$	(178.0	)		(106.9	)	$	(7,108.6	)	$	6.9	$	12,157.6
Net earnings		-		-		-		209.6			-			-			-			0.2		209.8
Other comprehensive income		-		-		-		-			0.2			-			-			-		0.2
Cash dividends declared ($0.24 per share)		-		-		-		(50.1	)		-			-			-			-		(50.1	)
Stock compensation plans		0.3		-		58.1		1.1			-			-			0.7			-