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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, 2021

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.     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 October 28, 2021, 208,908,008 shares of the registrant’s $.01 par value common stock were outstanding.

 


 

ZIMMER BIOMET HOLDINGS, INC.

INDEX TO FORM 10-Q

September 30, 2021

 

 

 

 

 

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, 2021 and 2020

 

3

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2021 and 2020

 

4

 

 

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

 

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020

 

6

 

 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020

 

7

 

 

Notes to Interim Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2.

 

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

 

31

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

43

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

43

 

 

 

Part II - Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

44

 

 

 

 

 

Item 1A.

 

Risk Factors

 

44

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

44

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

44

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

44

 

 

 

 

 

Item 5.

 

Other Information

 

44

 

 

 

 

 

Item 6.

 

Exhibits

 

45

 

 

 

Signatures

 

46

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net Sales

 

$

1,924.0

 

 

$

1,929.3

 

 

$

5,798.3

 

 

$

4,939.2

 

Cost of products sold, excluding intangible asset amortization

 

 

581.5

 

 

 

569.4

 

 

 

1,679.5

 

 

 

1,481.0

 

Intangible asset amortization

 

 

153.7

 

 

 

149.7

 

 

 

463.8

 

 

 

445.0

 

Research and development

 

 

108.9

 

 

 

85.9

 

 

 

383.8

 

 

 

272.0

 

Selling, general and administrative

 

 

802.4

 

 

 

790.0

 

 

 

2,389.9

 

 

 

2,283.9

 

Goodwill and intangible asset impairment

 

 

-

 

 

 

-

 

 

 

16.3

 

 

 

645.0

 

Restructuring and other cost reduction initiatives

 

 

23.5

 

 

 

16.2

 

 

 

64.9

 

 

 

89.2

 

Quality remediation

 

 

11.8

 

 

 

9.8

 

 

 

33.0

 

 

 

35.9

 

Acquisition, integration, divestiture and related

 

 

27.3

 

 

 

9.1

 

 

 

66.1

 

 

 

15.7

 

Operating expenses

 

 

1,709.1

 

 

 

1,630.1

 

 

 

5,097.3

 

 

 

5,267.7

 

Operating Profit (Loss)

 

 

214.9

 

 

 

299.2

 

 

 

701.0

 

 

 

(328.5

)

Other income, net

 

 

0.3

 

 

 

10.6

 

 

 

15.7

 

 

 

17.4

 

Interest expense, net

 

 

(52.6

)

 

 

(54.0

)

 

 

(159.6

)

 

 

(158.9

)

Earnings (loss) before income taxes

 

 

162.6

 

 

 

255.8

 

 

 

557.1

 

 

 

(470.0

)

Provision for income taxes

 

 

16.8

 

 

 

9.7

 

 

 

71.1

 

 

 

1.2

 

Net Earnings (Loss)

 

 

145.8

 

 

 

246.1

 

 

 

486.0

 

 

 

(471.2

)

Less: Net earnings attributable to noncontrolling interest

 

 

0.2

 

 

 

3.6

 

 

 

0.4

 

 

 

1.4

 

Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.

 

$

145.6

 

 

$

242.5

 

 

$

485.6

 

 

$

(472.6

)

Earnings (Loss) Per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.70

 

 

$

1.17

 

 

$

2.33

 

 

$

(2.29

)

Diluted

 

$

0.69

 

 

$

1.16

 

 

$

2.31

 

 

$

(2.29

)

Weighted Average Common Shares Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

208.8

 

 

 

207.1

 

 

 

208.5

 

 

 

206.8

 

Diluted

 

 

210.6

 

 

 

208.5

 

 

 

210.5

 

 

 

206.8

 

 

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 (LOSS)

(in millions, unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net Earnings (Loss)

 

$

145.8

 

 

$

246.1

 

 

$

486.0

 

 

$

(471.2

)

Other Comprehensive (Loss) Income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency cumulative translation adjustments, net of tax

 

 

(36.9

)

 

 

8.5

 

 

 

(69.6

)

 

 

(22.7

)

Unrealized cash flow hedge gains (losses), net of tax

 

 

18.5

 

 

 

(23.4

)

 

 

60.6

 

 

 

8.7

 

Reclassification adjustments on hedges, net of tax

 

 

1.6

 

 

 

(7.0

)

 

 

3.4

 

 

 

(33.6

)

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

 

 

5.7

 

 

 

0.7

 

 

 

5.3

 

 

 

2.5

 

Total Other Comprehensive Loss

 

 

(11.1

)

 

 

(21.2

)

 

 

(0.3

)

 

 

(45.1

)

Comprehensive Income (Loss)

 

 

134.7

 

 

 

224.9

 

 

 

485.7

 

 

 

(516.3

)

Comprehensive income attributable to the noncontrolling interest

 

 

0.2

 

 

 

3.5

 

 

 

0.4

 

 

 

1.3

 

Comprehensive Income (Loss) Attributable to

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Zimmer Biomet Holdings, Inc.

 

$

134.5

 

 

$

221.4

 

 

$

485.3

 

 

$

(517.6

)

 

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,

 

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

919.6

 

 

$

802.1

 

Accounts receivable, less allowance for credit losses

 

 

1,392.0

 

 

 

1,452.7

 

Inventories

 

 

2,517.4

 

 

 

2,450.7

 

Prepaid taxes

 

 

314.7

 

 

 

208.8

 

Prepaid expenses and other current assets

 

 

168.7

 

 

 

169.0

 

Total Current Assets

 

 

5,312.4

 

 

 

5,083.3

 

Property, plant and equipment, net

 

 

2,008.2

 

 

 

2,047.7

 

Goodwill

 

 

9,212.0

 

 

 

9,261.8

 

Intangible assets, net

 

 

6,470.3

 

 

 

7,055.5

 

Other assets

 

 

1,005.7

 

 

 

969.4

 

Total Assets

 

$

24,008.6

 

 

$

24,417.7

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

327.6

 

 

$

330.0

 

Income taxes payable

 

 

121.2

 

 

 

59.5

 

Other current liabilities

 

 

1,444.6

 

 

 

1,667.4

 

Current portion of long-term debt

 

 

1,045.7

 

 

 

500.0

 

Total Current Liabilities

 

 

2,939.1

 

 

 

2,556.9

 

Deferred income taxes, net

 

 

693.9

 

 

 

790.4

 

Long-term income tax payable

 

 

596.6

 

 

 

588.1

 

Other long-term liabilities

 

 

606.7

 

 

 

656.4

 

Long-term debt

 

 

6,458.1

 

 

 

7,626.5

 

Total Liabilities

 

 

11,294.4

 

 

 

12,218.3

 

Commitments and Contingencies (Note 17)

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

 

Zimmer Biomet Holdings, Inc. Stockholders' Equity:

 

 

 

 

 

 

 

 

Common stock, $0.01 par value, one billion shares authorized, 312.7 million shares in 2021 (311.4 million in 2020) issued

 

 

3.1

 

 

 

3.1

 

Paid-in capital

 

 

9,295.1

 

 

 

9,121.6

 

Retained earnings

 

 

10,426.3

 

 

 

10,086.9

 

Accumulated other comprehensive loss

 

 

(298.1

)

 

 

(297.8

)

Treasury stock, 103.8 million shares in 2021 (103.8 million shares in 2020)

 

 

(6,717.8

)

 

 

(6,719.6

)

Total Zimmer Biomet Holdings, Inc. stockholders' equity

 

 

12,708.6

 

 

 

12,194.2

 

Noncontrolling interest

 

 

5.6

 

 

 

5.2

 

Total Stockholders' Equity

 

 

12,714.2

 

 

 

12,199.4

 

Total Liabilities and Stockholders' Equity

 

$

24,008.6

 

 

$

24,417.7

 

 

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

 

 

Number

 

 

Amount

 

 

Interest

 

 

Equity

 

Balance July 1, 2021

 

 

312.5

 

 

$

3.1

 

 

$

9,248.6

 

 

$

10,331.0

 

 

$

(287.0

)

 

 

(103.8

)

 

$

(6,717.8

)

 

$

5.4

 

 

$

12,583.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings

 

 

-

 

 

 

-

 

 

 

-

 

 

 

145.6

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

0.2

 

 

 

145.8

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11.1

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(11.1

)

Cash dividends declared

($0.24 per share)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(50.3

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(50.3

)

Stock compensation plans

 

 

0.2

 

 

 

-

 

 

 

46.5

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

46.5

 

Balance September 30, 2021

 

 

312.7

 

 

$

3.1

 

 

$

9,295.1

 

 

$

10,426.3

 

 

$

(298.1

)

 

 

(103.8

)

 

$

(6,717.8

)

 

$

5.6

 

 

$

12,714.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance July 1, 2020

 

 

310.7

 

 

$

3.1

 

 

$

9,014.0

 

 

$

9,610.0

 

 

$

(265.8

)

 

 

(103.8

)

 

$

(6,719.9

)

 

$

2.5

 

 

$

11,643.9