10-Q

1. Basis of Presentation

The financial data presented herein is unaudited and should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2023.

In our opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. The December 31, 2023 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). Results for interim periods should not be considered indicative of results for the full year.

Amounts reported in millions within this Quarterly Report on Form 10-Q are computed based on the actual amounts. As a result, the sum of the components may not equal the total amount reported in millions due to rounding. In addition, certain columns and rows within tables may not sum to the totals due to the use of rounded numbers. Percentages presented are calculated from the underlying unrounded amounts.

The words “we,” “us,” “our” and similar words, “Zimmer Biomet” and “the Company” refer to Zimmer Biomet Holdings, Inc. and its subsidiaries. “Zimmer Biomet Holdings” refers to the parent company only.

2. Significant Accounting Policies

Use of Estimates - The accompanying unaudited condensed consolidated financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have made our best estimates, as appropriate under GAAP, in the recognition of our assets and liabilities. Actual results could differ materially from these estimates.

Accounting Pronouncements Not Yet Adopted - In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures, which is an amendment to ASC Topic 280 - Segment Reporting. The ASU requires more detailed and disaggregated segment information, including the disclosure of significant segment expense categories and amounts for each reportable segment. The ASU also requires certain annual disclosures to also be made in interim periods. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024. The guidance will be applied retrospectively unless retrospective adoption is impracticable. Early adoption of this ASU is permitted. We are currently evaluating the impact this ASU will have on our financial statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which is an amendment to ASC Topic 740 - Income Taxes. The ASU improves the transparency of income tax disclosures by requiring greater disaggregated information about an entity’s effective tax rate reconciliation and requiring additional disclosures and disaggregation of income taxes, among other amendments to improve the effectiveness of income tax disclosures. The ASU is effective for fiscal years beginning after December 15, 2024. The guidance will be applied prospectively with an option to apply the guidance retrospectively. Early adoption of this ASU is permitted. We are currently evaluating the impact this ASU will have on our financial statements and disclosures.

3. Revenue

Net sales by geography are as follows (in millions):


	Three Months Ended
	March 31,
	2024		2023
United States	$	1,099.2	$	1,060.4
International		790.0		770.6
Total	$	1,889.2	$	1,831.0

Net sales by product category are as follows (in millions):


	Three Months Ended
	March 31,
	2024		2023
Knees	$	788.1	$	762.5
Hips		491.2		492.8
S.E.T.		452.6		433.4
Other		157.3		142.3
Total	$	1,889.2	$	1,831.0

S.E.T. includes sales from our Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic ("CMFT") product categories. Other includes sales from our Technology, Surgical and Bone Cement product categories.

This net sales presentation differs from our reportable operating segments, which are based upon our senior management organizational structure and how we allocate resources toward achieving operating profit goals. Each of our reportable operating segments sells all the product categories noted above. Accordingly, the only difference from the presentation above and our reportable operating segments are the geographic groupings.

4. Restructuring

In December 2023, our management approved a new global restructuring program (the “2023 Restructuring Plan”) intended to optimize our cost structure and drive greater efficiencies throughout the company. The 2023 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $120 million. The pre-tax restructuring charges consist of employee termination benefits; contract terminations for sales agents; and other charges, such as consulting fees. The expenses incurred under our 2023 Restructuring Plan are reported in our “Restructuring and other cost reduction initiatives” financial statement line item. The charges incurred in the three-month period ended March 31, 2024 were primarily the result of finalizing, obtaining approval and, where applicable, communicating certain restructuring plans. The following table summarizes the liabilities recognized related to the 2023 Restructuring Plan (in millions):


	Employee
	Termination			Contract
	Benefits			Terminations		Other			Total
Balance, December 31, 2023	$	9.2		$	-	$	5.0		$	14.2
Expenses incurred in the three months ended March 31, 2024		71.0			1.8		6.8			79.6
Cash payments		(23.5	)		-		(1.3	)		(24.8	)
Foreign currency exchange rate changes		(0.4	)		-		-			(0.4	)
Non-cash activity		-			-		1.2			1.2
Balance, March 31, 2024	$	56.3		$	1.8	$	11.7		$	69.8

Expense incurred since the start of the 2023 Restructuring Plan	$	80.2		$	1.8	$	10.4		$	92.4

Expense estimated to be recognized for the 2023 Restructuring Plan	$	90.0		$	10.0	$	20.0		$	120.0

In December 2021, our management approved a global restructuring program (the “2021 Restructuring Plan”) intended to further reduce costs and to reorganize our global operations in preparation for the spinoff of ZimVie. The 2021 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $180 million. The pre-tax restructuring charges consist of employee termination benefits; contract terminations for sales agents; and other charges, such as consulting fees and project management expenses. The expenses incurred under our 2021 Restructuring Plan are reported in our “Restructuring and other cost reduction initiatives” financial statement line item. The following table summarizes the liabilities recognized related to the 2021 Restructuring Plan (in millions):


	Employee
	Termination			Contract
	Benefits			Terminations			Other			Total
Balance, December 31, 2023	$	4.2		$	17.6		$	2.9		$	24.7
Expenses incurred in the three months ended March 31, 2024		(0.4	)		-			1.3			0.9
Cash payments		(0.8	)		(7.3	)		(1.5	)		(9.6	)
Foreign currency exchange rate changes		(0.1	)		(0.4	)		-			(0.5	)
Balance, March 31, 2024	$	2.9		$	9.9		$	2.7		$	15.5

Expense incurred since the start of the 2021 Restructuring Plan	$	58.7		$	73.8		$	37.5		$	170.0

Expense estimated to be recognized for the 2021 Restructuring Plan	$	60.0		$	80.0		$	40.0		$	180.0

In December 2019, our Board of Directors approved, and we initiated, a global restructuring program (the “2019 Restructuring Plan”) with an objective of reducing structural costs to allow us to further invest in higher priority growth opportunities. The 2019 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $370 million. The pre-tax restructuring charges consist of employee termination benefits; contract terminations for facilities and sales agents; and other charges, such as consulting fees, project management expenses and relocation costs, including costs to close a manufacturing facility.

The following table summarizes the location on our condensed consolidated statement of earnings and type of cost for our 2019 Restructuring Plan (in millions):


	Three Months Ended March 31, 2024
	Employee
	Termination		Contract
	Benefits		Terminations		Other		Total
Cost of products sold, excluding intangible asset amortization	$	-	$	-	$	0.5	$	0.5
Restructuring and other cost reduction initiatives		14.7		-		1.8		16.5
	$	14.7	$	-	$	2.3	$	17.0

The following table summarizes the liabilities recognized related to the 2019 Restructuring Plan (in millions):


	Employee
	Termination			Contract
	Benefits			Terminations			Other			Total
Balance, December 31, 2023	$	43.8		$	5.6		$	2.9		$	52.3
Expenses incurred in the three months ended March 31, 2024		14.7			-			2.3			17.0
Cash payments		-			(0.5	)		(3.5	)		(4.0	)
Foreign currency exchange rate changes		(0.5	)		-			-			(0.5	)
Balance, March 31, 2024	$	58.0		$	5.1		$	1.7		$	64.8

Expense incurred since the start of the 2019 Restructuring Plan	$	140.4		$	35.0		$	161.0		$	336.4


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


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐


		Page

Part I - Financial Information

Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Statements of Earnings for the Three Months Ended March 31, 2024 and 2023	3
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and 2023	4
	Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023	6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023	7
	Notes to Interim Condensed Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33

Item 4.	Controls and Procedures	33

Part II - Other Information

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	36

Signatures		37


	Three Months Ended
	March 31,
	2024			2023
Net Sales	$	1,889.2		$	1,831.0
Cost of products sold, excluding intangible asset amortization		512.3			500.8
Intangible asset amortization		142.1			133.4
Research and development		107.9			110.4
Selling, general and administrative		736.2			715.9
Restructuring and other cost reduction initiatives		124.4			41.8
Acquisition, integration, divestiture and related		0.4			1.3
Operating expenses		1,623.3			1,503.7
Operating Profit		265.9			327.3
Other (expense) income, net		(0.1	)		7.7
Interest expense, net		(50.7	)		(48.2	)
Earnings before income taxes		215.1			286.8
Provision for income taxes		42.3			54.1
Net Earnings		172.8			232.8
Less: Net earnings attributable to noncontrolling interest		0.4			0.2
Net Earnings of Zimmer Biomet Holdings, Inc.	$	172.4		$	232.5

Earnings Per Common Share
Basic	$	0.84		$	1.11
Diluted	$	0.84		$	1.11
Weighted Average Common Shares Outstanding
Basic		205.2			209.4
Diluted		206.2			210.4


	Three Months Ended
	March 31,
	2024			2023
Net Earnings of Zimmer Biomet Holdings, Inc.	$	172.4		$	232.5
Other Comprehensive Income (Loss):
Foreign currency cumulative translation adjustments, net of tax		(35.8	)		12.4
Unrealized cash flow hedge gains, net of tax		34.7			8.8
Reclassification adjustments on hedges, net of tax		(18.0	)		(19.0	)
Adjustments to prior service cost and unrecognized actuarial assumptions, net of tax		(1.1	)		(0.9	)
Total Other Comprehensive (Loss) Income		(20.2	)		1.3
Comprehensive Income Attributable to
Zimmer Biomet Holdings, Inc.	$	152.2		$	233.8


	March 31,			December 31,
	2024			2023
ASSETS
Current Assets:
Cash and cash equivalents	$	393.0		$	415.8
Accounts receivable, less allowance for credit losses		1,446.4			1,442.4
Inventories		2,388.2			2,385.2
Prepaid expenses and other current assets		403.8			366.1
Total Current Assets		4,631.5			4,609.5
Property, plant and equipment, net		2,090.9			2,060.4
Goodwill		8,791.5			8,818.5
Intangible assets, net		4,734.1			4,856.4
Other assets		1,204.4			1,152.1
Total Assets	$	21,452.4		$	21,496.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	370.3		$	410.6
Income taxes payable		70.3			61.2
Other current liabilities		1,386.3			1,485.7
Current portion of long-term debt		970.0			900.0
Total Current Liabilities		2,797.0			2,857.4
Deferred income taxes, net		370.4			357.6
Long-term income tax payable		275.8			273.7
Other long-term liabilities		577.0			652.1
Long-term debt		4,826.2			4,867.9
Total Liabilities		8,846.4			9,008.7
Commitments and Contingencies (Note 15)
Stockholders' Equity:
Zimmer Biomet Holdings, Inc. Stockholders' Equity:
Common stock, $0.01 par value, one billion shares authorized, 317.2 million shares as of March 31, 2024 (316.2 million as of December 31, 2023) issued		3.2			3.2
Paid-in capital		9,945.9			9,846.1
Retained earnings		10,509.0			10,384.5
Accumulated other comprehensive loss		(211.2	)		(191.0	)
Treasury stock, 111.5 million shares as of March 31, 2024 (110.6 million as of December 31, 2023)		(7,648.9	)		(7,562.3	)
Total Zimmer Biomet Holdings, Inc. stockholders' equity		12,598.0			12,480.5
Noncontrolling interest		8.1			7.7
Total Stockholders' Equity		12,606.0			12,488.1
Total Liabilities and Stockholders' Equity	$	21,452.4		$	21,496.9


	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, 2024		316.2	$	3.2	$	9,846.1		$	10,384.5		$	(191.0	)		(110.6	)	$	(7,562.3	)	$	7.7	$	12,488.1
Net earnings		-		-		-			172.4			-			-			-			0.4		172.8
Other comprehensive loss		-		-		-			-			(20.2	)		-			-			-		(20.2	)
Cash dividends declared ($0.24 per share)		-		-		-			(49.3	)		-			-			-			-		(49.3	)
Stock compensation plans		0.8		-		76.4			1.4			-			-			1.4			-		79.2
Embody, Inc. acquisition consideration		0.2		-		23.4			-			-			-			-			-		23.4
Share repurchases		-		-		-			-			-			(0.9	)		(88.0	)		-		(88.0	)
Balance March 31, 2024		317.2	$	3.2	$	9,945.9		$	10,509.0		$	(211.2	)		(111.5	)	$	(7,648.9	)	$	8.1	$	12,606.0

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, Inc. 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



	For the Three Months Ended March 31,
	2024			2023
Cash flows provided by (used in) operating activities:
Net earnings	$	172.8		$	232.8
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization		238.6			231.8
Share-based compensation		29.0			25.0
Changes in operating assets and liabilities, net of acquired assets and liabilities
Income taxes		(8.6	)		21.5
Receivables		(22.7	)		8.6
Inventories		(55.3	)		(94.2	)
Accounts payable and accrued liabilities		(119.4	)		(91.8	)
Other assets and liabilities		(6.4	)		(26.0	)
Net cash provided by operating activities		228.0			307.7
Cash flows provided by (used in) investing activities:
Additions to instruments		(82.0	)		(82.8	)
Additions to other property, plant and equipment		(55.1	)		(46.7	)
Net investment hedge settlements		10.2			13.4
Acquisition of intellectual property rights		(12.5	)		(14.0	)
Business combination investments, net of acquired cash		-			(18.9	)
Other investing activities		(55.6	)		(0.3	)
Net cash used in investing activities		(195.0	)		(149.4	)
Cash flows provided by (used in) financing activities:
Net proceeds from revolving facilities		70.0			210.0
Redemption of senior notes		-			(86.3	)
Payment on term loan		-			(33.9	)
Dividends paid to stockholders		(49.4	)		(50.3	)
Proceeds from employee stock compensation plans		56.4			36.0
Business combination contingent consideration payments		(1.5	)		(9.6	)
Deferred business combination payments		(1.5	)		-
Repurchase of common stock		(113.6	)		(267.6	)
Other financing activities		(10.5	)		(5.1	)
Net cash used in financing activities		(50.1	)		(206.7	)
Effect of exchange rates on cash and cash equivalents		(5.7	)		2.9
Change in cash and cash equivalents		(22.7	)		(45.5	)
Cash and cash equivalents, beginning of year		415.8			375.7
Cash and cash equivalents, end of period	$	393.0		$	330.2