WARSAW, Ind., July 26, 2019 /PRNewswire/ -- Zimmer Biomet
Holdings, Inc. (NYSE and SIX: ZBH) today reported financial
results for the quarter ended June 30, 2019. The Company
reported second quarter net sales of $1.989
billion, a decrease of 0.9% from the prior year period, and
an increase of 1.2% on a constant currency basis. Diluted
earnings per share for the second quarter were $0.65, a decrease of 28% from the prior year
period. Second quarter adjusted diluted earnings per share
were $1.93, an increase of 0.5% over
the prior year period. Net earnings for the second quarter
were $134 million and $398 million on an adjusted basis.
"My level of confidence in our turnaround increases with every
quarter," said Bryan Hanson,
President and CEO of Zimmer Biomet. "Our team is focused,
engaged and has positioned the company for offense in the second
half of 2019. I'm truly excited by the momentum we are seeing
and we have updated our guidance to reflect the progress we made in
the first half of the year."
Geographic and Product Category Sales
The following sales tables provide results by geography and
product category for the three and six month periods ended
June 30, 2019, as well as the
percentage change compared to the prior year periods, on both a
reported basis and a constant currency basis.
NET SALES - THREE
MONTHS ENDED JUNE 30, 2019
|
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant
|
|
|
|
Net
|
|
|
|
|
Currency
|
|
|
|
Sales
|
|
% Change
|
|
|
% Change
|
|
|
Geographic
Results
|
|
|
|
|
|
|
|
|
Americas
|
$
1,215
|
|
(0.2)
|
%
|
|
0.1
|
%
|
|
EMEA
|
438
|
|
(4.3)
|
|
|
1.9
|
|
|
Asia
Pacific
|
336
|
|
0.8
|
|
|
4.7
|
|
|
Total
|
$
1,989
|
|
(0.9)
|
%
|
|
1.2
|
%
|
|
Product
Categories
|
|
|
|
|
|
|
|
|
Knees
|
|
|
|
|
|
|
|
|
Americas
|
$
415
|
|
1.6
|
%
|
|
1.8
|
%
|
|
EMEA
|
163
|
|
(4.3)
|
|
|
2.1
|
|
|
Asia
Pacific
|
126
|
|
1.2
|
|
|
5.7
|
|
|
Total
|
704
|
|
0.1
|
|
|
2.5
|
|
|
Hips
|
|
|
|
|
|
|
|
|
Americas
|
253
|
|
1.3
|
|
|
1.6
|
|
|
EMEA
|
126
|
|
(5.9)
|
|
|
0.1
|
|
|
Asia
Pacific
|
100
|
|
(2.8)
|
|
|
0.5
|
|
|
Total
|
479
|
|
(1.5)
|
|
|
0.9
|
|
|
S.E.T
*
|
444
|
|
2.5
|
|
|
4.3
|
|
|
Spine &
CMF**
|
186
|
|
(6.2)
|
|
|
(4.9)
|
|
|
Dental
|
107
|
|
(0.3)
|
|
|
1.7
|
|
|
Other
|
69
|
|
(12.6)
|
|
|
(10.9)
|
|
|
Total
|
$
1,989
|
|
(0.9)
|
%
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Surgical, Sports Medicine, Extremities and Trauma
|
|
|
|
|
|
|
|
|
**
Craniomaxillofacial
|
|
|
|
|
|
|
|
|
NET SALES - SIX
MONTHS ENDED JUNE 30, 2019
|
(in millions,
unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant
|
|
|
Net
|
|
|
|
Currency
|
|
|
Sales
|
|
% Change
|
|
% Change
|
|
Geographic
Results
|
|
|
|
|
|
|
Americas
|
$
2,408
|
|
(0.7)
|
%
|
(0.4)
|
%
|
EMEA
|
902
|
|
(5.5)
|
|
1.7
|
|
Asia
Pacific
|
654
|
|
1.1
|
|
5.1
|
|
Total
|
$
3,964
|
|
(1.5)
|
%
|
1.0
|
%
|
Product
Categories
|
|
|
|
|
|
|
Knees
|
|
|
|
|
|
|
Americas
|
$
824
|
|
(0.2)
|
%
|
-
|
%
|
EMEA
|
339
|
|
(5.7)
|
|
1.8
|
|
Asia
Pacific
|
235
|
|
1.5
|
|
6.2
|
|
Total
|
1,398
|
|
(1.3)
|
|
1.5
|
|
Hips
|
|
|
|
|
|
|
Americas
|
500
|
|
0.5
|
|
0.8
|
|
EMEA
|
259
|
|
(6.1)
|
|
0.9
|
|
Asia
Pacific
|
204
|
|
(0.5)
|
|
3.1
|
|
Total
|
963
|
|
(1.6)
|
|
1.3
|
|
S.E.T
*
|
884
|
|
0.9
|
|
3.0
|
|
Spine &
CMF**
|
369
|
|
(3.3)
|
|
(1.8)
|
|
Dental
|
211
|
|
(1.6)
|
|
0.7
|
|
Other
|
139
|
|
(12.2)
|
|
(10.1)
|
|
Total
|
$
3,964
|
|
(1.5)
|
%
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
Surgical, Sports Medicine, Extremities and Trauma
|
|
|
|
|
|
|
**
Craniomaxillofacial
|
|
|
|
|
|
|
Cash Flow and Balance Sheet
Operating cash flow for the second quarter was $301 million and free cash flow was $161 million. The Company paid down $115 million of debt, paid $49 million in dividends in the quarter and
declared a second quarter dividend of $0.24 per share.
Guidance
The Company had previously stated that it expected to achieve
constant currency revenue in line with its weighted average market
growth rate starting in 2020. Given the progress made in the
turnaround, the Company now believes it will achieve this goal
beginning in the third quarter of 2019, six months earlier than
previously expected. The Company provided updated 2019 financial
guidance for the following metrics. All other previous
guidance items remain unchanged:
Projected Year Ending
December 31, 2019
|
|
Previous
Guidance
|
Current
Guidance
|
2019 Sales Growth vs
Prior Year(1)
|
(0.5%) -
0.5%
|
Flat -
0.5%
|
Adjusted Operating
Profit Margin(2)
|
27.0% -
28.0%
|
27.0% -
27.5%
|
Adjusted Tax
Rate(2)
|
17.0% -
18.0%
|
16.5% -
17.5%
|
Adjusted Diluted
EPS(2)
|
$7.70 -
$7.90
|
$7.75 -
$7.90
|
(1)
|
2019 sales growth vs
prior year is provided on an as reported basis and includes 125 to
175 basis points of negative foreign exchange impact (vs. 100 to
150 basis points previously).
|
(2)
|
These measures are
non-GAAP financial measures for which a reconciliation to the most
directly comparable GAAP financial measure is not available without
unreasonable efforts. See "Forward-Looking Non-GAAP Financial
Measures."
|
Conference Call
The Company will conduct its second quarter 2019 investor
conference call today, July 26, 2019,
at 8:30 a.m. Eastern Time. The
audio webcast can be accessed via Zimmer Biomet's Investor
Relations website at https://investor.zimmerbiomet.com. It
will be archived for replay following the conference
call.
About the Company
Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer Biomet is a global
leader in musculoskeletal healthcare. We design, manufacture and
market orthopedic reconstructive products; sports medicine,
biologics, extremities and trauma products; office based
technologies; spine, craniomaxillofacial and thoracic products;
dental implants; and related surgical products.
We collaborate with healthcare professionals around the globe to
advance the pace of innovation. Our products and solutions help
treat patients suffering from disorders of, or injuries to, bones,
joints or supporting soft tissues. Together with healthcare
professionals, we help millions of people live better lives.
We have operations in more than 25 countries around the world
and sell products in more than 100 countries. For more information,
visit www.zimmerbiomet.com or follow Zimmer Biomet on Twitter at
www.twitter.com/zimmerbiomet.
Website Information
We routinely post important information for investors on our
website, www.zimmerbiomet.com, in the "Investor Relations"
section. We use this website as a means of disclosing
material, non-public information and for complying with our
disclosure obligations under Regulation FD. Accordingly,
investors should monitor the Investor Relations section of our
website, in addition to following our press releases, SEC filings,
public conference calls, presentations and webcasts. The
information contained on, or that may be accessed through, our
website is not incorporated by reference into, and is not a part
of, this document.
Note on Non-GAAP Financial Measures
This press release includes non-GAAP financial measures that
differ from financial measures calculated in accordance with U.S.
generally accepted accounting principles ("GAAP"). These
non-GAAP financial measures may not be comparable to similar
measures reported by other companies and should be considered in
addition to, and not as a substitute for, or superior to, other
measures prepared in accordance with GAAP.
Sales change information for the three and six month periods
ended June 30, 2019 is presented on a
GAAP (reported) basis and on a constant currency basis.
Constant currency percentage changes exclude the effects of foreign
currency exchange rates. They are calculated by translating
current and prior-period sales at the same predetermined exchange
rate. The translated results are then used to determine
year-over-year percentage increases or decreases.
Net earnings and diluted earnings per share for the three and
six month periods ended June 30, 2019
are presented on a GAAP (reported) basis and on an adjusted
basis. Adjusted earnings and adjusted diluted earnings per
share exclude the effects of certain inventory and
manufacturing-related charges, including charges to terminate a raw
material supply agreement and to discontinue certain product lines;
intangible asset amortization; intangible asset impairment;
acquisition, integration and related expenses; quality remediation
expenses; certain litigation gains and charges; expenses to comply
with the new European Union Medical Device Regulation; other
charges; any related effects on our income tax provision associated
with these items and other certain tax adjustments.
Free cash flow is an additional non-GAAP measure that is
presented in this press release. Free cash flow is computed by
deducting additions to instruments and other property, plant and
equipment from net cash provided by operating activities.
Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures are included in this
press release. This press release also contains supplemental
reconciliations of additional non-GAAP financial measures that the
Company presents in other contexts. These additional non-GAAP
financial measures are computed from the most directly comparable
GAAP financial measure as indicated in the applicable
reconciliation.
Management uses non-GAAP financial measures internally to
evaluate the performance of the business. Additionally,
management believes these non-GAAP measures provide meaningful
incremental information to investors to consider when evaluating
the performance of the Company. Management believes these
measures offer the ability to make period-to-period comparisons
that are not impacted by certain items that can cause dramatic
changes in reported income but that do not impact the fundamentals
of our operations. The non-GAAP measures enable the
evaluation of operating results and trend analysis by allowing a
reader to better identify operating trends that may otherwise be
masked or distorted by these types of items that are excluded from
the non-GAAP measures. In addition, constant currency sales
changes, adjusted operating profit, adjusted diluted earnings per
share and free cash flow are used as performance metrics in our
incentive compensation programs.
Forward-Looking Non-GAAP Financial Measures
This press release also includes certain forward-looking
non-GAAP financial measures for the year ending December 31, 2019. We calculate
forward-looking non-GAAP financial measures based on internal
forecasts that omit certain amounts that would be included in GAAP
financial measures. For instance, we exclude the impact
of certain potential charges or gains connected to quality
enhancement and remediation efforts and certain legal and tax
matters. We have not provided quantitative
reconciliations of these forward-looking non-GAAP financial
measures to the most directly comparable forward-looking GAAP
financial measures because the excluded items are not available on
a prospective basis without unreasonable efforts. It is
probable that these forward-looking non-GAAP financial measures may
be materially different from the corresponding GAAP financial
measures.
Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements
within the meaning of federal securities laws, including, among
others, statements regarding sales and earnings guidance and any
statements about our expectations, plans, strategies or
prospects. We generally use the words "may," "will,"
"expects," "believes," "anticipates," "plans," "estimates,"
"projects," "assumes," "guides," "targets," "forecasts," "sees,"
"seeks," "should," "could," "would," "predicts," "potential,"
"strategy," "future," "opportunity," "work toward," "intends,"
"guidance," "confidence," "positioned," "look forward to" and
similar expressions to identify forward-looking
statements. All statements other than statements of
historical or current fact are, or may be deemed to be,
forward-looking statements. Such statements are based
upon the current beliefs, expectations and assumptions of
management and are subject to significant risks, uncertainties and
changes in circumstances that could cause actual outcomes and
results to differ materially from the forward-looking
statements. These risks, uncertainties and changes in
circumstances include, but are not limited to: the
possibility that the anticipated synergies and other benefits from
mergers and acquisitions will not be realized, or will not be
realized within the expected time periods; the risks and
uncertainties related to our ability to successfully integrate the
operations, products, employees and distributors of acquired
companies; the effect of the potential disruption of management's
attention from ongoing business operations due to integration
matters related to mergers and acquisitions; the effect of mergers
and acquisitions on our relationships with customers, vendors and
lenders and on our operating results and businesses generally;
compliance with the Deferred Prosecution Agreement entered into in
January 2017; the success of our
quality and operational excellence initiatives, including ongoing
quality remediation efforts at our Warsaw North Campus facility;
challenges relating to changes in and compliance with governmental
laws and regulations affecting our U.S. and international
businesses, including regulations of the U.S. Food and Drug
Administration (FDA) and foreign government regulators, such as
more stringent requirements for regulatory clearance of products;
the ability to remediate matters identified in any inspectional
observations or warning letters issued by the FDA, while continuing
to satisfy the demand for our products; the outcome of government
investigations; competition; pricing pressures; changes in customer
demand for our products and services caused by demographic changes
or other factors; the impact of healthcare reform measures,
including the impact of the U.S. excise tax on medical devices if
such tax is not further suspended or repealed; reductions in
reimbursement levels by third-party payors and cost containment
efforts of healthcare purchasing organizations; dependence on new
product development, technological advances and innovation; shifts
in the product category or regional sales mix of our products and
services; supply and prices of raw materials and products; control
of costs and expenses; the ability to obtain and maintain adequate
intellectual property protection; the ability to form and implement
alliances; changes in tax obligations arising from tax reform
measures, including European Union rules on state aid, or
examinations by tax authorities; product liability and intellectual
property litigation losses; the ability to retain the independent
agents and distributors who market our products; dependence on a
limited number of suppliers for key raw materials and outsourced
activities; changes in general industry and market conditions,
including domestic and international growth rates; changes in
general domestic and international economic conditions, including
interest rate and currency exchange rate fluctuations; and the
impact of the ongoing financial and political uncertainty on
countries in the Euro zone on the ability to collect accounts
receivable in affected countries. For a further list and
description of such risks and uncertainties, see our reports filed
with the U.S. Securities and Exchange Commission, including our
Annual Report on Form 10-K for the year ended December 31, 2018. Copies of these filings,
as well as subsequent filings, are available online at www.sec.gov,
www.zimmerbiomet.com or on request from us. Forward-looking
statements speak only as of the date they are made, and we
expressly disclaim any intention or obligation to update or revise
any forward-looking statements, whether as a result of new
information, future events or otherwise. Readers of this
release are cautioned not to rely on these forward-looking
statements, since there can be no assurance that these
forward-looking statements will prove to be accurate. This
cautionary note is applicable to all forward-looking
statements contained in this release.
|
ZIMMER
BIOMET HOLDINGS, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS
|
FOR THE
THREE MONTHS ENDED JUNE 30, 2019 and 2018
|
(in
millions, except per share amounts, unaudited)
|
|
|
|
|
|
2019
|
|
2018
|
Net
Sales
|
$ 1,988.6
|
|
$
2,007.6
|
Cost of products
sold, excluding intangible asset amortization
|
581.3
|
|
583.7
|
Intangible asset
amortization
|
146.9
|
|
149.5
|
Research and
development
|
112.1
|
|
99.1
|
Selling, general and
administrative
|
840.3
|
|
791.3
|
Intangible asset
impairment
|
70.1
|
|
-
|
Acquisition,
integration and related
|
10.5
|
|
50.5
|
Quality
remediation
|
22.7
|
|
37.5
|
Operating
expenses
|
1,783.9
|
|
1,711.6
|
Operating
Profit
|
204.7
|
|
296.0
|
Other expense,
net
|
(4.7)
|
|
(2.9)
|
Interest expense,
net
|
(59.7)
|
|
(75.3)
|
Earnings before
income taxes
|
140.3
|
|
217.8
|
Provision for income
taxes
|
8.4
|
|
32.9
|
Net
Earnings
|
131.9
|
|
184.9
|
Less: Net loss
attributable to noncontrolling interest
|
(1.8)
|
|
(0.1)
|
Net Earnings of
Zimmer Biomet Holdings, Inc.
|
$
133.7
|
|
$
185.0
|
Earnings Per
Common Share
|
|
|
|
Basic
|
$
0.65
|
|
$
0.91
|
Diluted
|
$
0.65
|
|
$
0.90
|
Weighted Average
Common Shares Outstanding
|
|
|
|
Basic
|
204.8
|
|
203.3
|
Diluted
|
206.2
|
|
204.6
|
|
ZIMMER
BIOMET HOLDINGS, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS
|
FOR THE SIX
MONTHS ENDED JUNE 30, 2019 and 2018
|
(in
millions, except per share amounts, unaudited)
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Net
Sales
|
$ 3,964.1
|
|
$ 4,025.2
|
|
Cost of products
sold, excluding intangible asset amortization
|
1,134.7
|
|
1,159.5
|
|
Intangible asset
amortization
|
290.3
|
|
300.3
|
|
Research and
development
|
213.8
|
|
194.8
|
|
Selling, general and
administrative
|
1,636.7
|
|
1,593.0
|
|
Intangible asset
impairment
|
70.1
|
|
-
|
|
Acquisition,
integration and related
|
21.2
|
|
96.5
|
|
Quality
remediation
|
42.4
|
|
80.1
|
|
Operating
expenses
|
3,409.2
|
|
3,424.2
|
|
Operating
Profit
|
554.9
|
|
601.0
|
|
Other expense,
net
|
(5.2)
|
|
(6.5)
|
|
Interest expense,
net
|
(117.7)
|
|
(153.3)
|
|
Earnings before
income taxes
|
432.0
|
|
441.2
|
|
Provision for income
taxes
|
53.9
|
|
80.1
|
|
Net
Earnings
|
378.1
|
|
361.1
|
|
Less: Net (loss)
earnings attributable to noncontrolling interest
|
(1.7)
|
|
1.4
|
|
Net Earnings of
Zimmer Biomet Holdings, Inc.
|
$
379.8
|
|
$
359.7
|
|
Earnings Per
Common Share
|
|
|
|
|
Basic
|
$
1.86
|
|
$
1.77
|
|
Diluted
|
$
1.84
|
|
$
1.76
|
|
Weighted Average
Common Shares Outstanding
|
|
|
|
|
Basic
|
204.6
|
|
203.2
|
|
Diluted
|
206.0
|
|
204.6
|
|
ZIMMER
BIOMET HOLDINGS, INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(in
millions, unaudited)
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2019
|
|
2018
|
Assets
|
|
|
|
|
Cash and cash
equivalents
|
|
$
403.1
|
|
$
542.8
|
Receivables,
net
|
|
1,247.1
|
|
1,275.8
|
Inventories
|
|
2,344.5
|
|
2,256.5
|
Other current
assets
|
|
396.5
|
|
352.3
|
Total current
assets
|
|
4,391.2
|
|
4,427.4
|
Property, plant and
equipment, net
|
|
2,035.8
|
|
2,015.4
|
Goodwill
|
|
9,593.7
|
|
9,594.4
|
Intangible assets,
net
|
|
7,524.2
|
|
7,684.6
|
Other
assets
|
|
660.8
|
|
405.0
|
Total
Assets
|
|
$
24,205.7
|
|
$
24,126.8
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
Current
liabilities
|
|
$
1,677.8
|
|
$
1,896.3
|
Current portion of
long-term debt
|
|
2,000.0
|
|
525.0
|
Other long-term
liabilities
|
|
2,146.4
|
|
2,015.7
|
Long-term
debt
|
|
6,719.3
|
|
8,413.7
|
Stockholders'
equity
|
|
11,662.2
|
|
11,276.1
|
Total Liabilities
and Stockholders' Equity
|
|
$
24,205.7
|
|
$
24,126.8
|
ZIMMER
BIOMET HOLDINGS, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
|
FOR THE SIX
MONTHS ENDED JUNE 30, 2019 and 2018
|
(in
millions, unaudited)
|
|
|
|
|
|
|
|
2019
|
|
2018
|
Cash flows
provided by (used in) operating activities
|
|
|
|
|
Net
earnings
|
|
$
378.1
|
|
$
361.1
|
Depreciation and
amortization
|
|
500.7
|
|
525.1
|
Share-based
compensation
|
|
40.0
|
|
26.0
|
Intangible asset
impairment
|
|
70.1
|
|
-
|
Changes in operating
assets and liabilities, net of acquired assets and
liabilities
|
|
|
|
|
Income
taxes
|
|
(44.2)
|
|
(42.4)
|
Receivables
|
|
29.3
|
|
177.7
|
Inventories
|
|
(83.0)
|
|
(99.3)
|
Accounts payable and
accrued expenses
|
|
(269.8)
|
|
(27.1)
|
Other assets and
liabilities
|
|
(36.6)
|
|
(37.3)
|
Net cash provided by
operating activities (1)
|
|
584.6
|
|
883.8
|
Cash flows
provided by (used in) investing activities
|
|
|
|
|
Additions to
instruments
|
|
(144.8)
|
|
(126.1)
|
Additions to other
property, plant and equipment
|
|
(96.7)
|
|
(53.7)
|
Net investment hedge
settlements
|
|
21.3
|
|
-
|
Acquisition of
intellectual property rights
|
|
(197.6)
|
|
-
|
Investments in other
assets
|
|
(9.9)
|
|
(15.5)
|
Net cash used in
investing activities
|
|
(427.7)
|
|
(195.3)
|
Cash flows
provided by (used in) financing activities
|
|
|
|
|
Proceeds from senior
notes
|
|
-
|
|
749.5
|
Proceeds from
multicurrency revolving facility
|
|
-
|
|
400.0
|
Payments on
multicurrency revolving facility
|
|
-
|
|
(375.0)
|
Redemption of senior
notes
|
|
-
|
|
(1,150.0)
|
Proceeds from term
loans
|
|
200.0
|
|
-
|
Payments on term
loans
|
|
(425.0)
|
|
(225.0)
|
Net payments on other
debt
|
|
-
|
|
(0.2)
|
Dividends paid to
stockholders
|
|
(98.1)
|
|
(97.4)
|
Proceeds from
employee stock compensation plans
|
|
54.8
|
|
56.4
|
Net cash flows from
unremitted collections from factoring programs
|
|
(25.6)
|
|
(62.9)
|
Business combination
contingent consideration payments
|
|
-
|
|
(16.7)
|
Other financing
activities
|
|
(4.9)
|
|
(7.7)
|
Net cash used in
financing activities
|
|
(298.8)
|
|
(729.0)
|
Effect of exchange
rates on cash and cash equivalents
|
|
2.2
|
|
(2.7)
|
Decrease in cash and
cash equivalents
|
|
(139.7)
|
|
(43.2)
|
Cash and cash
equivalents, beginning of period
|
|
542.8
|
|
524.4
|
Cash and cash
equivalents, end of period
|
|
$
403.1
|
|
$
481.2
|
(1)
|
2019 reflects
approximately $168 million paid related to a patent litigation
matter
|
ZIMMER
BIOMET HOLDINGS, INC.
|
NET SALES BY
GEOGRAPHY
|
FOR THE
THREE MONTHS ENDED JUNE 30, 2019 and
2018
|
(in
millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
% Inc /
(Dec)
|
|
Volume /
Mix
|
|
Price
|
|
Foreign
Exchange
|
|
Americas
|
|
$
1,214.3
|
|
$
1,216.3
|
|
(0.2)
|
%
|
3.0
|
%
|
(2.9)
|
%
|
(0.3)
|
%
|
EMEA
|
|
438.0
|
|
457.7
|
|
(4.3)
|
|
4.5
|
|
(2.6)
|
|
(6.2)
|
|
Asia
Pacific
|
|
336.3
|
|
333.6
|
|
0.8
|
|
6.8
|
|
(2.1)
|
|
(3.9)
|
|
Total
|
|
$
1,988.6
|
|
$
2,007.6
|
|
(0.9)
|
%
|
3.9
|
%
|
(2.7)
|
%
|
(2.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZIMMER
BIOMET HOLDINGS, INC.
|
NET SALES BY
PRODUCT CATEGORY
|
FOR THE
THREE MONTHS ENDED JUNE 30, 2019 and
2018
|
(in
millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
% Inc /
(Dec)
|
|
Volume /
Mix
|
|
Price
|
|
Foreign
Exchange
|
|
Knees
|
|
$
703.5
|
|
$
703.0
|
|
0.1
|
%
|
5.7
|
%
|
(3.2)
|
%
|
(2.4)
|
%
|
Hips
|
|
479.4
|
|
486.9
|
|
(1.5)
|
|
4.2
|
|
(3.3)
|
|
(2.4)
|
|
S.E.T
|
|
444.4
|
|
433.8
|
|
2.5
|
|
5.6
|
|
(1.3)
|
|
(1.8)
|
|
Spine &
CMF
|
|
185.9
|
|
198.2
|
|
(6.2)
|
|
(2.2)
|
|
(2.7)
|
|
(1.3)
|
|
Dental
|
|
106.5
|
|
106.9
|
|
(0.3)
|
|
2.9
|
|
(1.2)
|
|
(2.0)
|
|
Other
|
|
68.9
|
|
78.8
|
|
(12.6)
|
|
(6.0)
|
|
(4.9)
|
|
(1.7)
|
|
Total
|
|
$
1,988.6
|
|
$
2,007.6
|
|
(0.9)
|
%
|
3.9
|
%
|
(2.7)
|
%
|
(2.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZIMMER
BIOMET HOLDINGS, INC.
|
NET SALES BY
GEOGRAPHY
|
FOR THE SIX
MONTHS ENDED JUNE 30, 2019 and 2018
|
(in
millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
% Inc /
(Dec)
|
|
Volume /
Mix
|
|
Price
|
|
Foreign
Exchange
|
|
Americas
|
|
$
2,408.4
|
|
$
2,424.4
|
|
(0.7)
|
%
|
2.5
|
%
|
(2.9)
|
%
|
(0.3)
|
%
|
EMEA
|
|
901.9
|
|
954.2
|
|
(5.5)
|
|
3.9
|
|
(2.2)
|
|
(7.2)
|
|
Asia
Pacific
|
|
653.8
|
|
646.6
|
|
1.1
|
|
7.3
|
|
(2.2)
|
|
(4.0)
|
|
Total
|
|
$
3,964.1
|
|
$
4,025.2
|
|
(1.5)
|
%
|
3.6
|
%
|
(2.6)
|
%
|
(2.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZIMMER
BIOMET HOLDINGS, INC.
|
NET SALES BY
PRODUCT CATEGORY
|
FOR THE SIX
MONTHS ENDED JUNE 30, 2019 and 2018
|
(in
millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
% Inc /
(Dec)
|
|
Volume /
Mix
|
|
Price
|
|
Foreign
Exchange
|
|
Knees
|
|
$
1,397.6
|
|
$
1,416.3
|
|
(1.3)
|
%
|
4.6
|
%
|
(3.1)
|
%
|
(2.8)
|
%
|
Hips
|
|
963.6
|
|
978.9
|
|
(1.6)
|
|
4.5
|
|
(3.2)
|
|
(2.9)
|
|
S.E.T
|
|
884.3
|
|
876.1
|
|
0.9
|
|
4.3
|
|
(1.3)
|
|
(2.1)
|
|
Spine &
CMF
|
|
368.7
|
|
381.3
|
|
(3.3)
|
|
0.8
|
|
(2.6)
|
|
(1.5)
|
|
Dental
|
|
211.0
|
|
214.5
|
|
(1.6)
|
|
2.1
|
|
(1.4)
|
|
(2.3)
|
|
Other
|
|
138.9
|
|
158.1
|
|
(12.2)
|
|
(6.3)
|
|
(3.8)
|
|
(2.1)
|
|
Total
|
|
$
3,964.1
|
|
$
4,025.2
|
|
(1.5)
|
%
|
3.6
|
%
|
(2.6)
|
%
|
(2.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ZIMMER BIOMET
HOLDINGS, INC.
|
RECONCILIATION OF
REPORTED NET SALES % CHANGE TO
|
CONSTANT CURRENCY
% CHANGE
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
|
|
|
June 30,
2019
|
|
|
|
|
|
Foreign
|
|
|
Constant
|
|
|
|
|
|
Exchange
|
|
|
Currency
|
|
|
% Change
|
|
|
Impact
|
|
|
% Change
|
|
Geographic
Results
|
|
|
|
|
|
|
|
|
Americas
|
(0.2)
|
%
|
|
(0.3)
|
%
|
0.1
|
%
|
EMEA
|
(4.3)
|
|
|
(6.2)
|
|
|
1.9
|
|
Asia
Pacific
|
0.8
|
|
|
(3.9)
|
|
|
4.7
|
|
Total
|
(0.9)
|
%
|
|
(2.1)
|
%
|
1.2
|
%
|
Product
Categories
|
|
|
|
|
|
|
|
|
Knees
|
|
|
|
|
|
|
|
|
Americas
|
1.6
|
%
|
|
(0.2)
|
%
|
1.8
|
%
|
EMEA
|
(4.3)
|
|
|
(6.4)
|
|
|
2.1
|
|
Asia
Pacific
|
1.2
|
|
|
(4.5)
|
|
|
5.7
|
|
Total
|
0.1
|
|
|
(2.4)
|
|
|
2.5
|
|
Hips
|
|
|
|
|
|
|
|
|
Americas
|
1.3
|
|
|
(0.3)
|
|
|
1.6
|
|
EMEA
|
(5.9)
|
|
|
(6.0)
|
|
|
0.1
|
|
Asia
Pacific
|
(2.8)
|
|
|
(3.3)
|
|
|
0.5
|
|
Total
|
(1.5)
|
|
|
(2.4)
|
|
|
0.9
|
|
S.E.T
|
2.5
|
|
|
(1.8)
|
|
|
4.3
|
|
Spine &
CMF
|
(6.2)
|
|
|
(1.3)
|
|
|
(4.9)
|
|
Dental
|
(0.3)
|
|
|
(2.0)
|
|
|
1.7
|
|
Other
|
(12.6)
|
|
|
(1.7)
|
|
|
(10.9)
|
|
Total
|
(0.9)
|
%
|
|
(2.1)
|
%
|
1.2
|
%
|
ZIMMER BIOMET
HOLDINGS, INC.
|
RECONCILIATION OF
REPORTED NET SALES % CHANGE TO
|
CONSTANT CURRENCY
% CHANGE
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
Ended
|
|
|
June 30,
2019
|
|
|
|
|
|
Foreign
|
|
|
Constant
|
|
|
|
|
|
Exchange
|
|
|
Currency
|
|
|
% Change
|
|
|
Impact
|
|
|
% Change
|
|
Geographic
Results
|
|
|
|
|
|
|
|
|
Americas
|
(0.7)
|
%
|
|
(0.3)
|
%
|
(0.4)
|
%
|
EMEA
|
(5.5)
|
|
|
(7.2)
|
|
|
1.7
|
|
Asia
Pacific
|
1.1
|
|
|
(4.0)
|
|
|
5.1
|
|
Total
|
(1.5)
|
%
|
|
(2.5)
|
%
|
1.0
|
%
|
Product
Categories
|
|
|
|
|
|
|
|
|
Knees
|
|
|
|
|
|
|
|
|
Americas
|
(0.2)
|
%
|
|
(0.2)
|
%
|
-
|
%
|
EMEA
|
(5.7)
|
|
|
(7.5)
|
|
|
1.8
|
|
Asia
Pacific
|
1.5
|
|
|
(4.7)
|
|
|
6.2
|
|
Total
|
(1.3)
|
|
|
(2.8)
|
|
|
1.5
|
|
Hips
|
|
|
|
|
|
|
|
|
Americas
|
0.5
|
|
|
(0.3)
|
|
|
0.8
|
|
EMEA
|
(6.1)
|
|
|
(7.0)
|
|
|
0.9
|
|
Asia
Pacific
|
(0.5)
|
|
|
(3.6)
|
|
|
3.1
|
|
Total
|
(1.6)
|
|
|
(2.9)
|
|
|
1.3
|
|
S.E.T
|
0.9
|
|
|
(2.1)
|
|
|
3.0
|
|
Spine &
CMF
|
(3.3)
|
|
|
(1.5)
|
|
|
(1.8)
|
|
Dental
|
(1.6)
|
|
|
(2.3)
|
|
|
0.7
|
|
Other
|
(12.2)
|
|
|
(2.1)
|
|
|
(10.1)
|
|
Total
|
(1.5)
|
%
|
|
(2.5)
|
%
|
1.0
|
%
|
ZIMMER BIOMET
HOLDINGS, INC.
|
RECONCILIATION OF
REPORTED TO ADJUSTED RESULTS
|
FOR THE
THREE MONTHS ENDED JUNE 30, 2019 and 2018
|
(in millions,
unaudited)
|
|
FOR THE THREE
MONTHS ENDED JUNE 30, 2019
|
|
|
Cost of products
sold,
excluding intangible asset
amortization
|
|
Intangible
asset
amortization
|
|
Research and
development
|
|
Selling, general
and
administrative
|
|
Intangible
asset
impairment
|
|
Acquisition,
integration and
related
|
|
Quality
remediation
|
|
Provision for
income taxes
|
|
Net Loss
attributable to
noncontrolling
interest
|
|
Net Earnings
of
Zimmer Biomet
Holdings, Inc.
|
|
Diluted
earnings per
common share
|
As
Reported
|
|
$
581.3
|
|
$
146.9
|
|
$
112.1
|
|
$
840.3
|
|
$
70.1
|
|
$
10.5
|
|
$
22.7
|
|
$
8.4
|
|
$
(1.8)
|
|
$
133.7
|
|
$
0.65
|
Inventory and
manufacturing-related charges(1)
|
|
(34.1)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
9.4
|
|
-
|
|
24.7
|
|
0.12
|
Intangible asset
amortization(2)
|
|
-
|
|
(146.9)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
34.1
|
|
-
|
|
112.8
|
|
0.55
|
Intangible asset
impairment(3)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(70.1)
|
|
-
|
|
-
|
|
5.5
|
|
-
|
|
64.6
|
|
0.31
|
Acquisition,
integration and related(4)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(10.5)
|
|
-
|
|
2.9
|
|
-
|
|
7.6
|
|
0.04
|
Quality
remediation(5)
|
|
(0.7)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(22.7)
|
|
5.9
|
|
-
|
|
17.5
|
|
0.08
|
Litigation(6)
|
|
-
|
|
-
|
|
-
|
|
(7.0)
|
|
-
|
|
-
|
|
-
|
|
1.9
|
|
-
|
|
5.1
|
|
0.02
|
European Union
Medical Device Regulation(8)
|
|
-
|
|
-
|
|
(5.1)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
0.9
|
|
-
|
|
4.2
|
|
0.02
|
Other
charges(9)
|
|
-
|
|
-
|
|
(4.3)
|
|
(39.1)
|
|
-
|
|
-
|
|
-
|
|
9.2
|
|
0.6
|
|
33.6
|
|
0.16
|
Other certain tax
adjustments(10)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
6.1
|
|
-
|
|
(6.1)
|
|
(0.02)
|
As
Adjusted
|
|
$
546.5
|
|
$
-
|
|
$
102.7
|
|
$
794.2
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
84.3
|
|
$
(1.2)
|
|
$
397.7
|
|
$
1.93
|
FOR THE
THREE MONTHS ENDED JUNE 30, 2018
|
|
|
Cost of products
sold,
excluding intangible asset
amortization
|
|
Intangible
asset
amortization
|
|
Selling, general
and
administrative
|
|
Acquisition,
integration
and related
|
|
Quality
remediation
|
|
Provision for
income taxes
|
|
Net Earnings
of
Zimmer Biomet
Holdings, Inc.
|
|
Diluted earnings
per
common share
|
As
Reported
|
|
$
583.7
|
|
$
149.5
|
|
$
791.3
|
|
$
50.5
|
|
$
37.5
|
|
$
32.9
|
|
$
185.0
|
|
$
0.90
|
Inventory and
manufacturing-related charges(1)
|
|
(12.5)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(3.4)
|
|
15.9
|
|
0.08
|
Intangible asset
amortization(2)
|
|
-
|
|
(149.5)
|
|
-
|
|
-
|
|
-
|
|
29.2
|
|
120.3
|
|
0.59
|
Acquisition,
integration and related(4)
|
|
-
|
|
-
|
|
-
|
|
(50.5)
|
|
-
|
|
6.8
|
|
43.7
|
|
0.21
|
Quality
remediation(5)
|
|
(7.9)
|
|
-
|
|
-
|
|
-
|
|
(37.5)
|
|
9.6
|
|
35.8
|
|
0.18
|
Litigation(6)
|
|
-
|
|
-
|
|
4.2
|
|
-
|
|
-
|
|
(0.7)
|
|
(3.5)
|
|
(0.02)
|
European Union
Medical Device Regulation(8)
|
|
|
|
|
|
(0.5)
|
|
|
|
|
|
0.1
|
|
0.4
|
|
-
|
Other
charges(9)
|
|
-
|
|
-
|
|
(11.3)
|
|
-
|
|
-
|
|
3.1
|
|
8.2
|
|
0.04
|
Other certain tax
adjustments(10)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
13.8
|
|
(13.8)
|
|
(0.06)
|
As
Adjusted
|
|
$
563.3
|
|
$
-
|
|
$
783.7
|
|
$
-
|
|
$
-
|
|
$
91.4
|
|
$
392.0
|
|
$
1.92
|
ZIMMER BIOMET
HOLDINGS, INC.
|
RECONCILIATION OF
REPORTED TO ADJUSTED RESULTS
|
FOR THE SIX
MONTHS ENDED JUNE 30, 2019 and 2018
|
(in millions,
unaudited)
|
|
FOR THE SIX
MONTHS ENDED JUNE 30, 2019
|
|
|
Cost of products
sold,
excluding intangible asset
amortization
|
|
Intangible
asset
amortization
|
|
Research and
development
|
|
Selling, general
and
administrative
|
|
Intangible
asset
impairment
|
|
Acquisition,
integration
and related
|
|
Quality
remediation
|
|
Provision for
income taxes
|
|
Net Loss
attributable to
noncontrolling
interest
|
|
Net Earnings
of
Zimmer Biomet
Holdings, Inc.
|
|
Diluted earnings
per
common share
|
As
Reported
|
|
$
1,134.7
|
|
$
290.3
|
|
$
213.8
|
|
$
1,636.7
|
|
$
70.1
|
|
$
21.2
|
|
$
42.4
|
|
$
53.9
|
|
$
(1.7)
|
|
$
379.8
|
|
$
1.84
|
Inventory and
manufacturing-related charges(1)
|
|
(36.1)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
13.0
|
|
-
|
|
23.1
|
|
0.11
|
Intangible asset
amortization(2)
|
|
-
|
|
(290.3)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
58.0
|
|
-
|
|
232.3
|
|
1.13
|
Intangible asset
impairment(3)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(70.1)
|
|
-
|
|
-
|
|
5.5
|
|
-
|
|
64.6
|
|
0.31
|
Acquisition,
integration and related(4)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(21.2)
|
|
-
|
|
5.3
|
|
-
|
|
15.9
|
|
0.08
|
Quality
remediation(5)
|
|
(0.7)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(42.4)
|
|
10.1
|
|
-
|
|
33.0
|
|
0.16
|
Litigation(6)
|
|
-
|
|
-
|
|
-
|
|
(5.2)
|
|
-
|
|
-
|
|
-
|
|
(0.8)
|
|
-
|
|
6.0
|
|
0.03
|
Litigation settlement
gain(7)
|
|
-
|
|
-
|
|
-
|
|
23.5
|
|
-
|
|
-
|
|
-
|
|
(5.2)
|
|
-
|
|
(18.3)
|
|
(0.09)
|
European Union
Medical Device Regulation(8)
|
|
-
|
|
-
|
|
(6.7)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1.1
|
|
-
|
|
5.6
|
|
0.03
|
Other
charges(9)
|
|
-
|
|
-
|
|
(4.3)
|
|
(61.8)
|
|
-
|
|
-
|
|
-
|
|
13.6
|
|
1.2
|
|
51.3
|
|
0.25
|
Other certain tax
adjustments(10)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
11.4
|
|
-
|
|
(11.4)
|
|
(0.05)
|
As
Adjusted
|
|
$
1,097.9
|
|
$
-
|
|
$
202.8
|
|
$
1,593.2
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
165.9
|
|
$
(0.5)
|
|
$
781.9
|
|
$
3.80
|
FOR THE SIX
MONTHS ENDED JUNE 30, 2018
|
|
|
Cost of products
sold,
excluding intangible
asset amortization
|
|
Intangible
asset
amortization
|
|
Selling, general
and
administrative
|
|
Acquisition,
integration
and related
|
|
Quality
remediation
|
|
Provision for
income taxes
|
|
Net Earnings
of
Zimmer Biomet
Holdings, Inc.
|
|
Diluted
earnings
per common share
|
As
Reported
|
|
$
1,159.5
|
|
$
300.3
|
|
$
1,593.0
|
|
$
96.5
|
|
$
80.1
|
|
$
80.1
|
|
$
359.7
|
|
$
1.76
|
Inventory step-up and
other inventory and manufacturing-related
charges(1)
|
|
(19.7)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(8.5)
|
|
28.2
|
|
0.14
|
Intangible asset
amortization(2)
|
|
-
|
|
(300.3)
|
|
-
|
|
-
|
|
-
|
|
60.4
|
|
239.9
|
|
1.18
|
Acquisition,
integration and related(4)
|
|
-
|
|
-
|
|
-
|
|
(96.5)
|
|
-
|
|
16.6
|
|
79.9
|
|
0.39
|
Quality
remediation(5)
|
|
(11.5)
|
|
-
|
|
-
|
|
-
|
|
(80.1)
|
|
19.9
|
|
71.7
|
|
0.35
|
Litigation(6)
|
|
-
|
|
-
|
|
(1.5)
|
|
-
|
|
-
|
|
0.7
|
|
0.8
|
|
-
|
European Union
Medical Device Regulation(8)
|
|
-
|
|
-
|
|
(0.8)
|
|
-
|
|
-
|
|
0.1
|
|
0.7
|
|
-
|
Other
charges(9)
|
|
-
|
|
-
|
|
(21.9)
|
|
-
|
|
-
|
|
6.2
|
|
15.7
|
|
0.08
|
Other certain tax
adjustments(10)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
13.7
|
|
(13.7)
|
|
(0.07)
|
As
Adjusted
|
|
$
1,128.3
|
|
$
-
|
|
$
1,568.8
|
|
$
-
|
|
$
-
|
|
$
189.2
|
|
$
782.9
|
|
$
3.83
|
|
|
(1)
|
In the 2019 periods,
inventory and manufacturing-related charges relate to a $20.8
million charge incurred to terminate a raw material supply
agreement, excess and obsolete inventory charges on certain product
lines we intend to discontinue and other inventory and
manufacturing-related charges. The 2018 charges primarily
relate to the excess and obsolete inventory charges on certain
product lines we intend to discontinue and other inventory and
manufacturing-related charges. The excess and obsolete
inventory charges on certain product lines are driven by
acquisitions where there are competing product lines and we have
plans to discontinue one of the competing product
lines.
|
|
|
(2)
|
We exclude intangible
asset amortization from our non-GAAP financial measures because we
internally assess our performance against our peers without this
amortization. Due to various levels of acquisitions among our
peers, intangible asset amortization can vary significantly from
company to company.
|
|
|
(3)
|
In the second quarter
of 2019, we recognized $70.1 million of in-process research and
development ("IPR&D") intangible asset impairment due to the
termination of certain IPR&D projects.
|
|
|
(4)
|
The acquisition,
integration and related expenses we have excluded from our non-GAAP
financial measures resulted from our merger with Biomet in 2015 and
various acquisitions we consummated in 2016. The acquisition,
integration and related expenses include the following types of
expenses:
|
|
- Consulting and professional fees related to
third-party integration consulting performed in a variety of areas,
such as tax, compliance, logistics and human resources, and legal
fees related to the consummation of mergers and
acquisitions.
- Employee termination benefits related to
terminating employees with overlapping responsibilities in various
areas of our business.
- Dedicated project personnel expenses which
include the salary, benefits, travel expenses and other costs
directly associated with employees who are 100 percent dedicated to
our integration of acquired businesses and employees who have been
notified of termination, but are continuing to work on transferring
their responsibilities.
- Contract termination expenses related to
terminated contracts, primarily with sales agents and distribution
agreements.
- Other various expenses to relocate
facilities, integrate information technology, losses incurred on
assets resulting from the applicable acquisition, and other various
expenses.
|
(5)
|
We are addressing
inspectional observations on Form 483 and a Warning Letter issued
by the U.S. Food and Drug Administration ("FDA") following its
inspections of our Warsaw North Campus facility, among other
matters. This quality remediation has required us to devote
significant financial resources and is for a discrete period of
time. The majority of the expenses are related to consultants
who are helping us to update previous documents and redesign
certain processes.
|
|
|
(6)
|
We are involved in
routine patent litigation, product liability litigation, commercial
litigation and other various litigation matters. We review
litigation matters from both a qualitative and quantitative
perspective to determine if excluding the losses or gains will
provide our investors with useful incremental information.
Litigation matters can vary in their characteristics, frequency and
significance to our operating results. The litigation charges
and gains excluded from our non-GAAP financial measures in the
periods presented relate to product liability matters where we have
received numerous claims on specific products. In regards to
these product liability matters, due to the complexities involved
and claims filed in multiple districts, the expenses associated
with these matters are significant to our operating results.
Once the litigation matter has been excluded from our non-GAAP
financial measures in a particular period, any additional expenses
or gains from changes in estimates are also excluded, even if they
are not significant, to ensure consistency in our non-GAAP
financial measures from period-to-period.
|
|
|
(7)
|
In the first quarter
of 2019, we settled a patent infringement lawsuit out of court, and
the other party agreed to pay us an upfront, lump-sum amount for a
non-exclusive license to the patent.
|
|
|
(8)
|
The European Union
Medical Device Regulation imposes significant additional premarket
and postmarket requirements. The new regulations provide a
transition period until May 2020 for currently-approved medical
devices to meet the additional requirements. For certain
devices, this transition period can be extended until May
2024. We are excluding from our non-GAAP financial measures
the incremental costs incurred to establish initial compliance with
the regulations related to our currently-approved medical
devices. The incremental costs primarily include third-party
consulting necessary to supplement our internal
resources.
|
|
|
(9)
|
We have incurred
other various expenses from specific events or projects that we
consider highly variable or that have a significant impact to our
operating results that we have excluded from our non-GAAP
measures. These include costs related to legal entity,
distribution and manufacturing restructuring as well as our costs
of complying with our Deferred Prosecution Agreement ("DPA") with
the U.S. government related to certain Foreign Corrupt Practices
Act matters involving Biomet and certain of its subsidiaries.
Under the DPA, which has a three-year term, we are subject to
oversight by an independent compliance monitor, which monitorship
commenced in August 2017. The excluded costs include the fees
paid to the independent compliance monitor and to external legal
counsel assisting in the matter.
|
|
|
(10)
|
Other certain
tax adjustments relate to various discrete tax period
adjustments.
|
ZIMMER
BIOMET HOLDINGS, INC.
|
RECONCILIATION OF NET CASH PROVIDED BY
OPERATING
|
ACTIVITIES
TO FREE CASH FLOW
|
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2019 and 2018
|
(in
millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net cash provided by
operating activities
|
$
301.0
|
|
$
393.3
|
|
$
584.6
|
|
$
883.8
|
Additions to
instruments
|
(81.1)
|
|
(65.7)
|
|
(144.8)
|
|
(126.1)
|
Additions to other
property, plant and equipment
|
(58.9)
|
|
(27.0)
|
|
(96.7)
|
|
(53.7)
|
Free cash
flow
|
$
161.0
|
|
$
300.6
|
|
$
343.1
|
|
$
704.0
|
ZIMMER
BIOMET HOLDINGS, INC.
|
RECONCILIATION OF GROSS PROFIT & MARGIN
TO ADJUSTED GROSS
|
PROFIT &
MARGIN
|
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2019 and 2018
|
(in
millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
Net Sales
|
$
1,988.6
|
|
$
2,007.6
|
|
|
$
3,964.1
|
|
$
4,025.2
|
|
Cost of products
sold, excluding intangible asset
amortization
|
581.3
|
|
583.7
|
|
|
1,134.7
|
|
1,159.5
|
|
Intangible asset
amortization
|
146.9
|
|
149.5
|
|
|
290.3
|
|
300.3
|
|
Gross
Profit
|
$
1,260.4
|
|
$
1,274.4
|
|
|
$
2,539.1
|
|
$
2,565.4
|
|
|
|
|
|
|
|
|
|
|
|
Inventory and
manufacturing-related charges
|
34.1
|
|
12.5
|
|
|
36.1
|
|
19.7
|
|
Quality
remediation
|
0.7
|
|
7.9
|
|
|
0.7
|
|
11.5
|
|
Intangible asset
amortization
|
146.9
|
|
149.5
|
|
|
290.3
|
|
300.3
|
|
Adjusted gross
profit
|
$
1,442.1
|
|
$
1,444.3
|
|
|
$
2,866.2
|
|
$
2,896.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
margin
|
63.4
|
%
|
63.5
|
%
|
|
64.1
|
%
|
63.7
|
%
|
Inventory and
manufacturing-related charges
|
1.7
|
|
0.6
|
|
|
0.9
|
|
0.5
|
|
Quality
remediation
|
-
|
|
0.4
|
|
|
-
|
|
0.3
|
|
Intangible asset
amortization
|
7.4
|
|
7.4
|
|
|
7.3
|
|
7.5
|
|
Adjusted gross
margin
|
72.5
|
%
|
71.9
|
%
|
|
72.3
|
%
|
72.0
|
%
|
ZIMMER
BIOMET HOLDINGS, INC.
|
RECONCILIATION OF OPERATING PROFIT &
MARGIN TO ADJUSTED OPERATING PROFIT &
MARGIN
|
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2019 and 2018
|
(in
millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
Operating
profit
|
$
204.7
|
|
$
296.0
|
|
|
$
554.9
|
|
$
601.0
|
|
Inventory and
manufacturing-related charges
|
34.1
|
|
12.5
|
|
|
36.1
|
|
19.7
|
|
Intangible asset
amortization
|
146.9
|
|
149.5
|
|
|
290.3
|
|
300.3
|
|
Intangible asset
impairment
|
70.1
|
|
-
|
|
|
70.1
|
|
-
|
|
Acquisition,
integration and related
|
10.5
|
|
50.5
|
|
|
21.2
|
|
96.5
|
|
Quality
remediation
|
23.4
|
|
45.4
|
|
|
43.1
|
|
91.6
|
|
Litigation
|
7.0
|
|
(4.2)
|
|
|
5.2
|
|
1.5
|
|
Litigation settlement
gain
|
-
|
|
-
|
|
|
(23.5)
|
|
-
|
|
European Union
Medical Device Regulation
|
5.1
|
|
0.5
|
|
|
6.7
|
|
0.8
|
|
Other
charges
|
43.4
|
|
11.3
|
|
|
66.1
|
|
21.9
|
|
Adjusted operating
profit
|
$
545.2
|
|
$
561.5
|
|
|
$
1,070.2
|
|
$
1,133.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit
margin
|
10.3
|
%
|
14.7
|
%
|
|
14.0
|
%
|
14.9
|
%
|
Inventory and
manufacturing-related charges
|
1.7
|
|
0.6
|
|
|
0.9
|
|
0.5
|
|
Intangible asset
amortization
|
7.4
|
|
7.4
|
|
|
7.3
|
|
7.5
|
|
Intangible asset
impairment
|
3.5
|
|
-
|
|
|
1.8
|
|
-
|
|
Acquisition,
integration and related
|
0.5
|
|
2.5
|
|
|
0.5
|
|
2.4
|
|
Quality
remediation
|
1.2
|
|
2.3
|
|
|
1.1
|
|
2.3
|
|
Litigation
|
0.4
|
|
(0.2)
|
|
|
0.1
|
|
-
|
|
Litigation settlement
gain
|
-
|
|
-
|
|
|
(0.6)
|
|
-
|
|
European Union
Medical Device Regulation
|
0.3
|
|
-
|
|
|
0.2
|
|
-
|
|
Other
charges
|
2.1
|
|
0.7
|
|
|
1.7
|
|
0.6
|
|
Adjusted operating
profit margin
|
27.4
|
%
|
28.0
|
%
|
|
27.0
|
%
|
28.2
|
%
|
ZIMMER
BIOMET HOLDINGS, INC.
|
RECONCILIATION OF EFFECTIVE TAX RATE TO
ADJUSTED EFFECTIVE TAX RATE
|
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2019 and 2018
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
Effective tax
rate
|
6.0
|
%
|
15.1
|
%
|
|
12.5
|
%
|
18.2
|
%
|
Inventory and
manufacturing-related charges; intangible asset amortization;
intangible asset impairment; acquisition, integration and related;
quality remediation; litigation; litigation settlement gain;
European Union Medical Device Regulation; other charges and other
certain tax adjustments
|
11.5
|
|
3.8
|
|
|
5.0
|
|
1.2
|
|
Adjusted effective
tax rate
|
17.5
|
%
|
18.9
|
%
|
|
17.5
|
%
|
19.4
|
%
|
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SOURCE Zimmer Biomet Holdings, Inc.