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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 September 30, 2022

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

1.414% Notes due 2022

ZBH 22A

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 October 26, 2022, 209,852,392 shares of the registrant’s $.01 par value common stock were outstanding.

 

 


 

ZIMMER BIOMET HOLDINGS, INC.

INDEX TO FORM 10-Q

September 30, 2022

 

 

 

 

 

Page

 

 

 

Part I - Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

3

 

 

Condensed Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2022 and 2021

 

3

 

 

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021

 

4

 

 

Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021

 

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021

 

6

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021

 

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

 

37

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

37

 

 

 

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

 

39

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

39

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

39

 

 

 

 

 

Item 5.

 

Other Information

 

39

 

 

 

 

 

Item 6.

 

Exhibits

 

40

 

 

 

Signatures

 

41

 

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net Sales

 

$

1,669.8

 

 

$

1,685.4

 

 

$

5,114.8

 

 

$

5,050.1

 

Cost of products sold, excluding intangible asset amortization

 

 

488.2

 

 

 

491.4

 

 

 

1,499.2

 

 

 

1,423.9

 

Intangible asset amortization

 

 

131.5

 

 

 

132.2

 

 

 

395.3

 

 

 

398.7

 

Research and development

 

 

101.7

 

 

 

93.8

 

 

 

298.0

 

 

 

339.8

 

Selling, general and administrative

 

 

654.9

 

 

 

684.4

 

 

 

2,034.6

 

 

 

2,038.2

 

Intangible asset impairment

 

 

-

 

 

 

-

 

 

 

3.0

 

 

 

16.3

 

Restructuring and other cost reduction initiatives

 

 

28.3

 

 

 

22.5

 

 

 

129.2

 

 

 

62.6

 

Quality remediation

 

 

8.1

 

 

 

11.7

 

 

 

22.4

 

 

 

32.8

 

Acquisition, integration, divestiture and related

 

 

11.8

 

 

 

6.4

 

 

 

8.5

 

 

 

11.3

 

Operating expenses, net

 

 

1,424.5

 

 

 

1,442.4

 

 

 

4,390.2

 

 

 

4,323.6

 

Operating Profit

 

 

245.3

 

 

 

243.0

 

 

 

724.6

 

 

 

726.5

 

Other (expense) income, net

 

 

(25.4

)

 

 

0.3

 

 

 

(124.1

)

 

 

16.0

 

Interest expense, net

 

 

(42.3

)

 

 

(52.6

)

 

 

(122.2

)

 

 

(159.6

)

Earnings from continuing operations before income taxes

 

 

177.6

 

 

 

190.7

 

 

 

478.3

 

 

 

582.9

 

(Benefit) provision for income taxes from continuing operations

 

 

(16.6

)

 

 

28.3

 

 

 

56.9

 

 

 

82.7

 

Net Earnings from continuing operations

 

 

194.2

 

 

 

162.4

 

 

 

421.4

 

 

 

500.2

 

Less: Net earnings attributable to noncontrolling interest

 

 

0.2

 

 

 

0.2

 

 

 

0.7

 

 

 

0.4

 

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

 

 

194.0

 

 

 

162.2

 

 

 

420.7

 

 

 

499.8

 

Loss from discontinued operations, net of taxes

 

 

-

 

 

 

(16.6

)

 

 

(58.8

)

 

 

(14.2

)

Net Earnings of Zimmer Biomet Holdings, Inc.

 

$

194.0

 

 

$

145.6

 

 

$

361.9

 

 

$

485.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings Per Common Share - Basic

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

 

$

0.92

 

 

$

0.78

 

 

$

2.01

 

 

$

2.40

 

Loss from discontinued operations

 

 

-

 

 

 

(0.08

)

 

 

(0.28

)

 

 

(0.07

)

Net Earnings Per Common Share - Basic

 

$

0.92

 

 

$

0.70

 

 

$

1.73

 

 

$

2.33

 

Earnings Per Common Share - Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations

 

$

0.92

 

 

$

0.77

 

 

$

2.00

 

 

$

2.37

 

Loss from discontinued operations

 

 

-

 

 

 

(0.08

)

 

 

(0.28

)

 

 

(0.06

)

Net Earnings Per Common Share - Diluted

 

$

0.92

 

 

$

0.69

 

 

$

1.72

 

 

$

2.31

 

Weighted Average Common Shares Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

209.8

 

 

 

208.8

 

 

 

209.5

 

 

 

208.5

 

Diluted

 

 

210.3

 

 

 

210.6

 

 

 

210.2

 

 

 

210.5

 

 

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net Earnings of Zimmer Biomet Holdings, Inc.

 

$

194.0

 

 

$

145.6

 

 

$

361.9

 

 

$

485.6

 

Other Comprehensive (Loss) Income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency cumulative translation adjustments, net of tax

 

 

(95.6

)

 

 

(36.9

)

 

 

(186.4

)

 

 

(69.6

)

Unrealized cash flow hedge gains, net of tax

 

 

53.9

 

 

 

18.5

 

 

 

133.2

 

 

 

60.6

 

Reclassification adjustments on hedges, net of tax

 

 

(14.4

)

 

 

1.6

 

 

 

(28.4

)

 

 

3.4

 

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

 

 

3.7

 

 

 

5.7

 

 

 

7.2

 

 

 

5.3

 

Total Other Comprehensive Loss

 

 

(52.4

)

 

 

(11.1

)

 

 

(74.4

)

 

 

(0.3

)

Comprehensive Income Attributable to

 

 

 

 

 

 

 

 

 

 

 

 

Zimmer Biomet Holdings, Inc.

 

$

141.6

 

 

$

134.5

 

 

$

287.5

 

 

$

485.3

 

 

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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

545.4

 

 

$

378.1

 

Accounts receivable, less allowance for credit losses

 

 

1,278.5

 

 

 

1,259.6

 

Inventories

 

 

2,128.6

 

 

 

2,148.0

 

Prepaid taxes

 

 

234.6

 

 

 

326.7

 

Prepaid expenses and other current assets

 

 

347.3

 

 

 

271.0

 

Current assets of discontinued operations

 

 

-

 

 

 

501.6

 

Total Current Assets

 

 

4,534.4

 

 

 

4,885.0

 

Property, plant and equipment, net

 

 

1,801.6

 

 

 

1,836.6

 

Goodwill

 

 

8,798.8

 

 

 

8,919.4

 

Intangible assets, net

 

 

5,136.5

 

 

 

5,533.6

 

Other assets

 

 

1,062.0

 

 

 

1,005.0

 

Noncurrent assets of discontinued operations

 

 

-

 

 

 

1,276.8

 

Total Assets

 

$

21,333.3

 

 

$

23,456.4

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

333.9

 

 

$

306.5

 

Income taxes payable

 

 

30.4

 

 

 

62.0

 

Customer rebates

 

 

115.9

 

 

 

129.5

 

Other current liabilities

 

 

1,156.4

 

 

 

1,187.6

 

Current portion of long-term debt

 

 

659.1

 

 

 

1,605.1

 

Current liabilities of discontinued operations

 

 

-

 

 

 

177.2

 

Total Current Liabilities

 

 

2,295.7

 

 

 

3,467.9

 

Deferred income taxes, net

 

 

541.3

 

 

 

558.5

 

Long-term income tax payable

 

 

581.3

 

 

 

583.0

 

Other long-term liabilities

 

 

608.7

 

 

 

548.5

 

Long-term debt

 

 

5,055.2

 

 

 

5,463.7

 

Noncurrent liabilities of discontinued operations

 

 

-

 

 

 

168.4

 

Total Liabilities

 

 

9,082.2

 

 

 

10,790.0

 

Commitments and Contingencies (Note 16)

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Zimmer Biomet Holdings, Inc. Stockholders' Equity:

 

 

 

 

 

 

Common stock, $0.01 par value, one billion shares authorized, 313.6 million shares in 2022 (312.8 million in 2021) issued

 

 

3.1

 

 

 

3.1

 

Paid-in capital

 

 

9,463.9

 

 

 

9,314.8

 

Retained earnings

 

 

9,739.9

 

 

 

10,292.2

 

Accumulated other comprehensive loss

 

 

(244.9

)

 

 

(231.6

)

Treasury stock, 103.8 million shares in 2022 and 2021

 

 

(6,717.3

)

 

 

(6,717.8

)

Total Zimmer Biomet Holdings, Inc. stockholders' equity

 

 

12,244.7

 

 

 

12,660.7

 

Noncontrolling interest

 

 

6.4

 

 

 

5.7

 

Total Stockholders' Equity

 

 

12,251.1

 

 

 

12,666.4

 

Total Liabilities and Stockholders' Equity

 

$

21,333.3

 

 

$

23,456.4

 

 

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 July 1, 2022

 

 

313.4

 

 

$

3.1

 

 

$

9,418.8

 

 

$

9,606.5

 

 

$

(192.5

)

 

 

(103.8

)

 

$

(6,717.5

)

 

$

6.2

 

 

$

12,124.6

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

194.0

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0.2

 

 

 

194.2

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-