WARSAW, Ind., July 27, 2018 /PRNewswire/ -- Zimmer Biomet
Holdings, Inc. (NYSE and SIX: ZBH) today reported financial results for the quarter ended June 30, 2018. The
Company reported second quarter net sales of $2.008 billion, an increase of 3.0% over the prior
year period, and an increase of 1.0% on a constant currency basis. Diluted earnings per share for the second quarter were
$0.90, flat when compared to the prior year period. Second quarter adjusted diluted earnings
per share were $1.92, a decrease of 7.7% from the prior year period.
Bryan Hanson, President and CEO of Zimmer Biomet, said: "Our achievements during the
second quarter, including the improvement of our global Knee and Hip sales performance and ongoing growth within the Asia Pacific region, validate our confidence in our full-year outlook. To continue building on our
year-to-date progress, we will remain focused on strategies to support long-term, sustainable revenue growth and
value-creation. These priorities include the completion of quality remediation activities, supply recovery efforts, new
product introductions and the continuous enhancement of our culture."
Net earnings for the second quarter were $185.0 million, and $392.0
million on an adjusted basis. Operating cash flow for the second quarter was $393.3
million. Free cash flow in the quarter was $300.6 million.
In the quarter, the Company paid $48.8 million in dividends and declared a second quarter
dividend of $0.24 per share.
Guidance
The Company is updating its full-year 2018 revenue guidance. For the full year, the Company now expects revenue growth
to be in a range of 1.0% to 2.5% compared to the prior year, including the positive contribution of between 100 and 150 basis
points of foreign currency translation. Additionally, the Company now expects its full-year free cash flow to be in a range
of $1.2 billion to $1.35 billion (1). All other
prior guidance for 2018 remains unchanged.
(1)
|
Reconciliation of Projected Free Cash Flow for the Year Ending December 31,
2018
|
(in millions)
|
Low
|
High
|
Net Cash Provided by Operating Activities
|
$1,685
|
$1,805
|
Additions to Instruments and Other Property, Plant and Equipment
|
(485)
|
(455)
|
Free Cash Flow
|
$1,200
|
$1,350
|
Conference Call
The Company will conduct its second quarter 2018 investor conference call today, July 27, 2018,
at 8:30 a.m. Eastern Time. The audio webcast can be accessed via Zimmer Biomet's Investor
Relations website at http://investor.zimmerbiomet.com. It will be archived for replay following the conference call.
Individuals in the U.S. and Canada who wish to dial into the conference call may do so by
dialing (888) 312-9837 and entering conference ID 7278985. For a complete listing of international toll-free and local
numbers, please visit http://investor.zimmerbiomet.com. A
digital recording will be available 24 hours after the completion of the conference call, from July 28,
2018 to August 27, 2018. To access the recording, U.S. callers should dial (888)
203-1112 and international callers should dial +1 (719) 457-0820 and enter the Access Code ID 7278985.
Sales Tables
The following sales tables provide results by geography and product category, as well as the percentage change
compared to the prior year quarter and six months, on both a reported basis and a constant currency basis.
NET SALES - THREE MONTHS ENDED JUNE 30, 2018
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant
|
|
|
|
Net
|
|
|
|
|
|
|
|
Currency
|
|
|
|
Sales
|
|
|
% Change
|
|
|
|
% Change
|
|
|
Geographic Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
1,216
|
|
|
|
1.0
|
|
%
|
|
|
0.9
|
|
%
|
EMEA
|
|
458
|
|
|
|
4.4
|
|
|
|
|
(1.8)
|
|
|
Asia Pacific
|
|
334
|
|
|
|
8.5
|
|
|
|
|
5.4
|
|
|
Total
|
$
|
2,008
|
|
|
|
3.0
|
|
%
|
|
|
1.0
|
|
%
|
Product Categories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Knees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
408
|
|
|
|
0.7
|
|
%
|
|
|
0.5
|
|
%
|
EMEA
|
|
171
|
|
|
|
7.0
|
|
|
|
|
1.1
|
|
|
Asia Pacific
|
|
124
|
|
|
|
8.1
|
|
|
|
|
5.1
|
|
|
Total
|
|
703
|
|
|
|
3.4
|
|
|
|
|
1.4
|
|
|
Hips
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
250
|
|
|
|
2.7
|
|
|
|
|
2.5
|
|
|
EMEA
|
|
134
|
|
|
|
2.2
|
|
|
|
|
(3.8)
|
|
|
Asia Pacific
|
|
103
|
|
|
|
9.9
|
|
|
|
|
6.5
|
|
|
Total
|
|
487
|
|
|
|
4.0
|
|
|
|
|
1.5
|
|
|
S.E.T *
|
|
434
|
|
|
|
3.0
|
|
|
|
|
1.2
|
|
|
Dental
|
|
107
|
|
|
|
(3.2)
|
|
|
|
|
(5.5)
|
|
|
Spine & CMF**
|
|
198
|
|
|
|
2.5
|
|
|
|
|
1.3
|
|
|
Other
|
|
79
|
|
|
|
2.8
|
|
|
|
|
1.2
|
|
|
Total
|
$
|
2,008
|
|
|
|
3.0
|
|
%
|
|
|
1.0
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Surgical, Sports Medicine, Foot and Ankle, Extremities and
Trauma
|
** Craniomaxillofacial
|
NET SALES - SIX MONTHS ENDED JUNE 30, 2018
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant
|
|
|
|
Net
|
|
|
|
|
|
|
Currency
|
|
|
|
Sales
|
|
|
% Change
|
|
|
% Change
|
|
|
Geographic Results
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
2,424
|
|
|
|
(0.4)
|
|
%
|
|
(0.6)
|
|
%
|
EMEA
|
|
954
|
|
|
|
7.0
|
|
|
|
(2.4)
|
|
|
Asia Pacific
|
|
647
|
|
|
|
8.4
|
|
|
|
4.0
|
|
|
Total
|
$
|
4,025
|
|
|
|
2.6
|
|
%
|
|
(0.3)
|
|
%
|
Product Categories
|
|
|
|
|
|
|
|
|
|
|
|
|
Knees
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
825
|
|
|
|
(1.0)
|
|
%
|
|
(1.1)
|
|
%
|
EMEA
|
|
360
|
|
|
|
9.8
|
|
|
|
0.5
|
|
|
Asia Pacific
|
|
231
|
|
|
|
5.3
|
|
|
|
1.2
|
|
|
Total
|
|
1,416
|
|
|
|
2.6
|
|
|
|
(0.4)
|
|
|
Hips
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
$
|
498
|
|
|
|
2.0
|
|
|
|
1.7
|
|
|
EMEA
|
|
276
|
|
|
|
3.4
|
|
|
|
(5.7)
|
|
|
Asia Pacific
|
|
205
|
|
|
|
9.7
|
|
|
|
5.0
|
|
|
Total
|
|
979
|
|
|
|
3.9
|
|
|
|
0.3
|
|
|
S.E.T *
|
|
876
|
|
|
|
3.7
|
|
|
|
1.2
|
|
|
Dental
|
|
215
|
|
|
|
(1.7)
|
|
|
|
(5.1)
|
|
|
Spine & CMF**
|
|
381
|
|
|
|
0.5
|
|
|
|
(1.2)
|
|
|
Other
|
|
158
|
|
|
|
0.8
|
|
|
|
(1.5)
|
|
|
Total
|
$
|
4,025
|
|
|
|
2.6
|
|
%
|
|
(0.3)
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Surgical, Sports Medicine, Foot and Ankle, Extremities and
Trauma
|
** Craniomaxillofacial
|
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 orthopaedic 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.
Reclassifications
Beginning this quarter, in our consolidated statements of earnings we have reclassified expenses that were previously
recognized in a financial statement line item labeled, "Acquisition, quality remediation and other" to the financial statement
line items of "Research and development", "Selling, general and administrative", "Intangible asset impairment", "Acquisition,
integration and related", and "Quality remediation". Prior periods have been reclassified to conform to the current year
presentation.
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, 2018 are 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,
2018 are presented on a GAAP (reported) basis and on an adjusted basis. Adjusted earnings and adjusted diluted
earnings per share exclude the effects of inventory step-up; certain inventory and manufacturing-related charges including
charges to discontinue certain product lines; intangible asset amortization; intangible asset impairment; acquisition,
integration and related expenses; quality remediation expenses; certain litigation gains and charges; other charges; and any
related effects on our income tax provision associated with these items; and other certain tax adjustments.
Free cash flow and projected free cash flow are additional non-GAAP measures that are 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 net earnings
per share and free cash flow are used as performance metrics in our incentive compensation programs.
Cautionary Statement Regarding Forward-Looking Statements
This release contains forward-looking statements within the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, 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," "intends" 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 and expectations of management and are subject to significant risks, uncertainties
and changes in circumstances that could cause actual outcomes and results to differ materially. These risks, uncertainties
and changes in circumstances include, but are not limited to: our chief executive officer transition, including disruptions
and uncertainties related thereto, the potential impact on our business and future strategic direction resulting from our
transition to a new chief executive officer, and our ability to recruit and retain other key members of senior management; 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; 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 (SEC), including our Annual
Report on Form 10-K for the year ended December 31, 2017. 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 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 statement is applicable to all forward-looking statements contained in this
release.
ZIMMER BIOMET HOLDINGS, INC.
|
CONSOLIDATED STATEMENTS OF EARNINGS
|
FOR THE THREE MONTHS ENDED JUNE 30, 2018 and 2017
|
(in millions, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
Net Sales
|
$
|
2,007.6
|
|
|
$
|
1,949.5
|
|
Cost of products sold, excluding intangible asset amortization
|
|
583.7
|
|
|
|
527.7
|
|
Intangible asset amortization
|
|
149.5
|
|
|
|
147.7
|
|
Research and development
|
|
99.1
|
|
|
|
92.6
|
|
Selling, general and administrative
|
|
791.3
|
|
|
|
752.2
|
|
Intangible asset impairment
|
|
-
|
|
|
|
26.8
|
|
Acquisition, integration and related
|
|
50.5
|
|
|
|
72.5
|
|
Quality remediation
|
|
37.5
|
|
|
|
49.9
|
|
Operating expenses
|
|
1,711.6
|
|
|
|
1,669.4
|
|
Operating Profit
|
|
296.0
|
|
|
|
280.1
|
|
Other expense, net
|
|
(2.9)
|
|
|
|
(1.7)
|
|
Interest income
|
|
0.6
|
|
|
|
0.3
|
|
Interest expense
|
|
(75.9)
|
|
|
|
(82.3)
|
|
Earnings before income taxes
|
|
217.8
|
|
|
|
196.4
|
|
Provision for income taxes
|
|
32.9
|
|
|
|
12.3
|
|
Net Earnings
|
|
184.9
|
|
|
|
184.1
|
|
Less: Net Loss attributable to noncontrolling interest
|
|
(0.1)
|
|
|
|
(0.1)
|
|
Net Earnings of Zimmer Biomet Holdings, Inc.
|
$
|
185.0
|
|
|
$
|
184.2
|
|
Earnings Per Common Share
|
|
|
|
|
|
|
|
Basic
|
$
|
0.91
|
|
|
$
|
0.91
|
|
Diluted
|
$
|
0.90
|
|
|
$
|
0.90
|
|
Weighted Average Common Shares Outstanding
|
|
|
|
|
|
|
|
Basic
|
|
203.3
|
|
|
|
201.8
|
|
Diluted
|
|
204.6
|
|
|
|
203.7
|
|
Cash Dividends Declared Per Common Share
|
$
|
0.24
|
|
|
$
|
0.24
|
|
ZIMMER BIOMET HOLDINGS, INC.
|
CONSOLIDATED STATEMENTS OF EARNINGS
|
FOR THE SIX MONTHS ENDED JUNE 30, 2018 and 2017
|
(in millions, except per share amounts, unaudited)
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
Net Sales
|
$
|
4,025.2
|
|
|
$
|
3,921.9
|
|
Cost of products sold, excluding intangible asset amortization
|
|
1,159.5
|
|
|
|
1,040.6
|
|
Intangible asset amortization
|
|
300.3
|
|
|
|
299.7
|
|
Research and development
|
|
194.8
|
|
|
|
183.7
|
|
Selling, general and administrative
|
|
1,593.0
|
|
|
|
1,527.9
|
|
Intangible asset impairment
|
|
-
|
|
|
|
26.8
|
|
Acquisition, integration and related
|
|
96.5
|
|
|
|
130.7
|
|
Quality remediation
|
|
80.1
|
|
|
|
84.3
|
|
Operating expenses
|
|
3,424.2
|
|
|
|
3,293.7
|
|
Operating Profit
|
|
601.0
|
|
|
|
628.2
|
|
Other expense, net
|
|
(6.5)
|
|
|
|
(2.2)
|
|
Interest income
|
|
1.5
|
|
|
|
0.8
|
|
Interest expense
|
|
(154.8)
|
|
|
|
(165.2)
|
|
Earnings before income taxes
|
|
441.2
|
|
|
|
461.6
|
|
Provision (benefit) for income taxes
|
|
80.1
|
|
|
|
(21.8)
|
|
Net Earnings
|
|
361.1
|
|
|
|
483.4
|
|
Less: Net Earnings (Loss) attributable to noncontrolling
interest
|
|
1.4
|
|
|
|
(0.2)
|
|
Net Earnings of Zimmer Biomet Holdings, Inc.
|
$
|
359.7
|
|
|
$
|
483.6
|
|
Earnings Per Common Share
|
|
|
|
|
|
|
|
Basic
|
$
|
1.77
|
|
|
$
|
2.40
|
|
Diluted
|
$
|
1.76
|
|
|
$
|
2.38
|
|
Weighted Average Common Shares Outstanding
|
|
|
|
|
|
|
|
Basic
|
|
203.2
|
|
|
|
201.4
|
|
Diluted
|
|
204.6
|
|
|
|
203.4
|
|
Cash Dividends Declared Per Common Share
|
$
|
0.48
|
|
|
$
|
0.48
|
|
ZIMMER BIOMET HOLDINGS, INC.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
481.2
|
|
|
$
|
524.4
|
|
Receivables, net
|
|
|
1,335.3
|
|
|
|
1,544.1
|
|
Inventories
|
|
|
2,158.5
|
|
|
|
2,068.3
|
|
Other current assets
|
|
|
500.2
|
|
|
|
428.0
|
|
Total current assets
|
|
|
4,475.2
|
|
|
|
4,564.8
|
|
Property, plant and equipment, net
|
|
|
1,986.9
|
|
|
|
2,038.6
|
|
Goodwill
|
|
|
10,595.9
|
|
|
|
10,668.4
|
|
Intangible assets, net
|
|
|
7,996.6
|
|
|
|
8,353.4
|
|
Other assets
|
|
|
436.2
|
|
|
|
388.8
|
|
Total Assets
|
|
$
|
25,490.8
|
|
|
$
|
26,014.0
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
1,753.6
|
|
|
$
|
1,844.7
|
|
Current portion of long-term debt
|
|
|
100.0
|
|
|
|
1,225.0
|
|
Other long-term liabilities
|
|
|
2,179.7
|
|
|
|
2,291.3
|
|
Long-term debt
|
|
|
9,413.3
|
|
|
|
8,917.5
|
|
Stockholders' equity
|
|
|
12,044.2
|
|
|
|
11,735.5
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
25,490.8
|
|
|
$
|
26,014.0
|
|
ZIMMER BIOMET HOLDINGS, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
FOR THE SIX MONTHS ENDED JUNE 30, 2018 and
2017
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
Cash flows provided by (used in) operating activities
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
361.1
|
|
|
$
|
483.4
|
|
Depreciation and amortization
|
|
|
525.1
|
|
|
|
531.7
|
|
Share-based compensation
|
|
|
26.0
|
|
|
|
27.7
|
|
Intangible asset impairment
|
|
|
-
|
|
|
|
26.8
|
|
Inventory step-up
|
|
|
-
|
|
|
|
30.9
|
|
Changes in operating assets and liabilities, net of acquired assets and
liabilities
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
(42.4)
|
|
|
|
(210.4)
|
|
Receivables
|
|
|
177.7
|
|
|
|
226.3
|
|
Inventories
|
|
|
(99.3)
|
|
|
|
(69.7)
|
|
Accounts payable and accrued expenses
|
|
|
(27.1)
|
|
|
|
(201.2)
|
|
Other assets and liabilities
|
|
|
(37.3)
|
|
|
|
(129.6)
|
|
Net cash provided by operating activities
|
|
|
883.8
|
|
|
|
715.9
|
|
Cash flows used in investing activities
|
|
|
|
|
|
|
|
|
Additions to instruments
|
|
|
(126.1)
|
|
|
|
(172.6)
|
|
Additions to other property, plant and equipment
|
|
|
(53.7)
|
|
|
|
(73.8)
|
|
Business combination investments, net of acquired cash
|
|
|
-
|
|
|
|
(4.0)
|
|
Other investing activities
|
|
|
(15.5)
|
|
|
|
(11.7)
|
|
Net cash used in investing activities
|
|
|
(195.3)
|
|
|
|
(262.1)
|
|
Cash flows provided by (used in) financing activities
|
|
|
|
|
|
|
|
|
Proceeds from senior notes
|
|
|
749.5
|
|
|
|
-
|
|
Payments on senior notes
|
|
|
(1,150.0)
|
|
|
|
-
|
|
Proceeds from multicurrency revolving facility
|
|
|
400.0
|
|
|
|
400.0
|
|
Payments on multicurrency revolving facility
|
|
|
(375.0)
|
|
|
|
(400.0)
|
|
Redemption of senior notes
|
|
|
-
|
|
|
|
(500.0)
|
|
Payments on term loan
|
|
|
(225.0)
|
|
|
|
(150.0)
|
|
Net payments on other debt
|
|
|
(0.2)
|
|
|
|
(0.7)
|
|
Dividends paid to stockholders
|
|
|
(97.4)
|
|
|
|
(96.5)
|
|
Proceeds from employee stock compensation plans
|
|
|
56.4
|
|
|
|
105.5
|
|
Net cash flows from unremitted collections from factoring
programs
|
|
|
(62.9)
|
|
|
|
-
|
|
Business combination contingent consideration payments
|
|
|
(16.7)
|
|
|
|
(8.1)
|
|
Restricted stock withholdings
|
|
|
(2.8)
|
|
|
|
(7.1)
|
|
Debt issuance costs
|
|
|
(4.9)
|
|
|
|
-
|
|
Net cash used in financing activities
|
|
|
(729.0)
|
|
|
|
(656.9)
|
|
Effect of exchange rates on cash and cash equivalents
|
|
|
(2.7)
|
|
|
|
19.0
|
|
Decrease in cash and cash equivalents
|
|
|
(43.2)
|
|
|
|
(184.1)
|
|
Cash and cash equivalents, beginning of period
|
|
|
524.4
|
|
|
|
634.1
|
|
Cash and cash equivalents, end of period
|
|
$
|
481.2
|
|
|
$
|
450.0
|
|
ZIMMER BIOMET HOLDINGS, INC.
|
NET SALES BY GEOGRAPHY
|
FOR THE THREE MONTHS ENDED JUNE 30, 2018 and 2017
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Inc
|
|
|
Volume
/ Mix
|
|
|
Price
|
|
|
Foreign
Exchange
|
|
|
Americas
|
|
$
|
1,216.3
|
|
|
$
|
1,203.9
|
|
|
|
1.0
|
|
%
|
|
3.3
|
|
%
|
|
(2.4)
|
|
%
|
|
0.1
|
|
%
|
EMEA
|
|
|
457.7
|
|
|
|
438.2
|
|
|
|
4.4
|
|
|
|
0.5
|
|
|
|
(2.3)
|
|
|
|
6.2
|
|
|
Asia Pacific
|
|
|
333.6
|
|
|
|
307.4
|
|
|
|
8.5
|
|
|
|
8.9
|
|
|
|
(3.5)
|
|
|
|
3.1
|
|
|
Total
|
|
$
|
2,007.6
|
|
|
$
|
1,949.5
|
|
|
|
3.0
|
|
%
|
|
3.5
|
|
%
|
|
(2.5)
|
|
%
|
|
2.0
|
|
%
|
ZIMMER BIOMET HOLDINGS, INC.
|
NET SALES BY PRODUCT CATEGORY
|
FOR THE THREE MONTHS ENDED JUNE 30, 2018 and 2017
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Inc / (Dec)
|
|
|
Volume
/ Mix
|
|
|
Price
|
|
|
Foreign Exchange
|
|
|
Knees
|
|
$
|
703.0
|
|
|
$
|
680.0
|
|
|
|
3.4
|
|
%
|
|
4.2
|
|
%
|
|
(2.8)
|
|
%
|
|
2.0
|
|
%
|
Hips
|
|
|
486.9
|
|
|
|
468.0
|
|
|
|
4.0
|
|
|
|
4.4
|
|
|
|
(2.9)
|
|
|
|
2.5
|
|
|
S.E.T
|
|
|
433.8
|
|
|
|
421.1
|
|
|
|
3.0
|
|
|
|
3.6
|
|
|
|
(2.4)
|
|
|
|
1.8
|
|
|
Dental
|
|
|
106.9
|
|
|
|
110.4
|
|
|
|
(3.2)
|
|
|
|
(4.6)
|
|
|
|
(0.9)
|
|
|
|
2.3
|
|
|
Spine & CMF
|
|
|
198.2
|
|
|
|
193.3
|
|
|
|
2.5
|
|
|
|
3.8
|
|
|
|
(2.5)
|
|
|
|
1.2
|
|
|
Other
|
|
|
78.8
|
|
|
|
76.7
|
|
|
|
2.8
|
|
|
|
3.1
|
|
|
|
(1.9)
|
|
|
|
1.6
|
|
|
Total
|
|
$
|
2,007.6
|
|
|
$
|
1,949.5
|
|
|
|
3.0
|
|
%
|
|
3.5
|
|
%
|
|
(2.5)
|
|
%
|
|
2.0
|
|
%
|
ZIMMER BIOMET HOLDINGS, INC.
|
NET SALES BY GEOGRAPHY
|
FOR THE SIX MONTHS ENDED JUNE 30, 2018 and 2017
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Inc / (Dec)
|
|
|
Volume
/ Mix
|
|
|
Price
|
|
|
Foreign Exchange
|
|
|
Americas
|
|
$
|
2,424.4
|
|
|
$
|
2,433.8
|
|
|
|
(0.4)
|
|
%
|
|
1.8
|
|
%
|
|
(2.4)
|
|
%
|
|
0.2
|
|
%
|
EMEA
|
|
|
954.2
|
|
|
|
891.4
|
|
|
|
7.0
|
|
|
|
-
|
|
|
|
(2.4)
|
|
|
|
9.4
|
|
|
Asia Pacific
|
|
|
646.6
|
|
|
|
596.7
|
|
|
|
8.4
|
|
|
|
7.7
|
|
|
|
(3.7)
|
|
|
|
4.4
|
|
|
Total
|
|
$
|
4,025.2
|
|
|
$
|
3,921.9
|
|
|
|
2.6
|
|
%
|
|
2.3
|
|
%
|
|
(2.6)
|
|
%
|
|
2.9
|
|
%
|
ZIMMER BIOMET HOLDINGS, INC.
|
NET SALES BY PRODUCT CATEGORY
|
FOR THE SIX MONTHS ENDED JUNE 30, 2018 and 2017
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
% Inc / (Dec)
|
|
|
Volume
/ Mix
|
|
|
Price
|
|
|
Foreign Exchange
|
|
|
Knees
|
|
$
|
1,416.3
|
|
|
$
|
1,380.8
|
|
|
|
2.6
|
|
%
|
|
2.6
|
|
%
|
|
(3.0)
|
|
%
|
|
3.0
|
|
%
|
Hips
|
|
|
978.9
|
|
|
|
941.8
|
|
|
|
3.9
|
|
|
|
3.1
|
|
|
|
(2.8)
|
|
|
|
3.6
|
|
|
S.E.T
|
|
|
876.1
|
|
|
|
844.6
|
|
|
|
3.7
|
|
|
|
3.6
|
|
|
|
(2.4)
|
|
|
|
2.5
|
|
|
Dental
|
|
|
214.5
|
|
|
|
218.2
|
|
|
|
(1.7)
|
|
|
|
(3.6)
|
|
|
|
(1.5)
|
|
|
|
3.4
|
|
|
Spine & CMF
|
|
|
381.3
|
|
|
|
379.6
|
|
|
|
0.5
|
|
|
|
0.8
|
|
|
|
(2.0)
|
|
|
|
1.7
|
|
|
Other
|
|
|
158.1
|
|
|
|
156.9
|
|
|
|
0.8
|
|
|
|
(0.1)
|
|
|
|
(1.4)
|
|
|
|
2.3
|
|
|
Total
|
|
$
|
4,025.2
|
|
|
$
|
3,921.9
|
|
|
|
2.6
|
|
%
|
|
2.3
|
|
%
|
|
(2.6)
|
|
%
|
|
2.9
|
|
%
|
RECONCILIATION OF REPORTED NET SALES % CHANGE TO
|
CONSTANT CURRENCY % CHANGE
|
(unaudited)
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
Constant
|
|
|
|
|
|
|
|
|
Exchange
|
|
|
|
Currency
|
|
|
|
% Change
|
|
|
|
Impact
|
|
|
|
% Change
|
|
|
Geographic Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
1.0
|
|
%
|
|
|
0.1
|
|
%
|
|
|
0.9
|
|
%
|
EMEA
|
|
4.4
|
|
|
|
|
6.2
|
|
|
|
|
(1.8)
|
|
|
Asia Pacific
|
|
8.5
|
|
|
|
|
3.1
|
|
|
|
|
5.4
|
|
|
Total
|
|
3.0
|
|
%
|
|
|
2.0
|
|
%
|
|
|
1.0
|
|
%
|
Product Categories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Knees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
0.7
|
|
%
|
|
|
0.2
|
|
%
|
|
|
0.5
|
|
%
|
EMEA
|
|
7.0
|
|
|
|
|
5.9
|
|
|
|
|
1.1
|
|
|
Asia Pacific
|
|
8.1
|
|
|
|
|
3.0
|
|
|
|
|
5.1
|
|
|
Total
|
|
3.4
|
|
|
|
|
2.0
|
|
|
|
|
1.4
|
|
|
Hips
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
2.7
|
|
|
|
|
0.2
|
|
|
|
|
2.5
|
|
|
EMEA
|
|
2.2
|
|
|
|
|
6.0
|
|
|
|
|
(3.8)
|
|
|
Asia Pacific
|
|
9.9
|
|
|
|
|
3.4
|
|
|
|
|
6.5
|
|
|
Total
|
|
4.0
|
|
|
|
|
2.5
|
|
|
|
|
1.5
|
|
|
S.E.T
|
|
3.0
|
|
|
|
|
1.8
|
|
|
|
|
1.2
|
|
|
Dental
|
|
(3.2)
|
|
|
|
|
2.3
|
|
|
|
|
(5.5)
|
|
|
Spine & CMF
|
|
2.5
|
|
|
|
|
1.2
|
|
|
|
|
1.3
|
|
|
Other
|
|
2.8
|
|
|
|
|
1.6
|
|
|
|
|
1.2
|
|
|
Total
|
|
3.0
|
|
%
|
|
|
2.0
|
|
%
|
|
|
1.0
|
|
%
|
RECONCILIATION OF REPORTED NET SALES % CHANGE TO
|
CONSTANT CURRENCY % CHANGE
|
(unaudited)
|
|
|
|
|
|
For the Six Months Ended
|
|
|
|
June 30, 2018
|
|
|
|
|
|
|
|
|
Foreign
|
|
|
|
Constant
|
|
|
|
|
|
|
|
|
Exchange
|
|
|
|
Currency
|
|
|
|
% Change
|
|
|
|
Impact
|
|
|
|
% Change
|
|
|
Geographic Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
(0.4)
|
|
%
|
|
|
0.2
|
|
%
|
|
|
(0.6)
|
|
%
|
EMEA
|
|
7.0
|
|
|
|
|
9.4
|
|
|
|
|
(2.4)
|
|
|
Asia Pacific
|
|
8.4
|
|
|
|
|
4.4
|
|
|
|
|
4.0
|
|
|
Total
|
|
2.6
|
|
%
|
|
|
2.9
|
|
%
|
|
|
(0.3)
|
|
%
|
Product Categories
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Knees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
(1.0)
|
|
%
|
|
|
0.1
|
|
%
|
|
|
(1.1)
|
|
%
|
EMEA
|
|
9.8
|
|
|
|
|
9.3
|
|
|
|
|
0.5
|
|
|
Asia Pacific
|
|
5.3
|
|
|
|
|
4.1
|
|
|
|
|
1.2
|
|
|
Total
|
|
2.6
|
|
|
|
|
3.0
|
|
|
|
|
(0.4)
|
|
|
Hips
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
2.0
|
|
|
|
|
0.3
|
|
|
|
|
1.7
|
|
|
EMEA
|
|
3.4
|
|
|
|
|
9.1
|
|
|
|
|
(5.7)
|
|
|
Asia Pacific
|
|
9.7
|
|
|
|
|
4.7
|
|
|
|
|
5.0
|
|
|
Total
|
|
3.9
|
|
|
|
|
3.6
|
|
|
|
|
0.3
|
|
|
S.E.T
|
|
3.7
|
|
|
|
|
2.5
|
|
|
|
|
1.2
|
|
|
Dental
|
|
(1.7)
|
|
|
|
|
3.4
|
|
|
|
|
(5.1)
|
|
|
Spine & CMF
|
|
0.5
|
|
|
|
|
1.7
|
|
|
|
|
(1.2)
|
|
|
Other
|
|
0.8
|
|
|
|
|
2.3
|
|
|
|
|
(1.5)
|
|
|
Total
|
|
2.6
|
|
%
|
|
|
2.9
|
|
%
|
|
|
(0.3)
|
|
%
|
ZIMMER BIOMET HOLDINGS, INC.
|
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS
|
FOR THE THREE and SIX MONTHS ENDED JUNE 30, 2018
|
(in millions, unaudited)
|
|
|
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
EPS
|
|
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)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12.5
|
|
|
|
0.06
|
|
Intangible asset amortization(2)
|
|
|
-
|
|
|
|
(149.5)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
149.5
|
|
|
|
0.73
|
|
Acquisition, integration and related(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(50.5)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50.5
|
|
|
|
0.25
|
|
Quality remediation(4)
|
|
|
(7.9)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(37.5)
|
|
|
|
-
|
|
|
|
45.4
|
|
|
|
0.22
|
|
Litigation(5)
|
|
|
-
|
|
|
|
-
|
|
|
|
4.2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4.2)
|
|
|
|
(0.02)
|
|
Other charges(6)
|
|
|
-
|
|
|
|
-
|
|
|
|
(11.8)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11.8
|
|
|
|
0.06
|
|
Taxes on specified items(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44.8
|
|
|
|
(44.8)
|
|
|
|
(0.22)
|
|
Other certain tax adjustments(8)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13.7
|
|
|
|
(13.7)
|
|
|
|
(0.06)
|
|
As Adjusted
|
|
$
|
563.3
|
|
|
$
|
-
|
|
|
$
|
783.7
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
91.4
|
|
|
$
|
392.0
|
|
|
$
|
1.92
|
|
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
EPS
|
|
As Reported
|
|
$
|
1,159.5
|
|
|
$
|
300.3
|
|
|
$
|
1,593.0
|
|
|
$
|
96.5
|
|
|
$
|
80.1
|
|
|
$
|
80.1
|
|
|
$
|
359.7
|
|
|
$
|
1.76
|
|
Inventory and manufacturing-related charges(1)
|
|
|
(19.7)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19.7
|
|
|
|
0.10
|
|
Intangible asset amortization(2)
|
|
|
-
|
|
|
|
(300.3)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
300.3
|
|
|
|
1.47
|
|
Acquisition, integration and related(3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(96.5)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
96.5
|
|
|
|
0.47
|
|
Quality remediation(4)
|
|
|
(11.5)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(80.1)
|
|
|
|
-
|
|
|
|
91.6
|
|
|
|
0.45
|
|
Litigation(5)
|
|
|
-
|
|
|
|
-
|
|
|
|
(1.5)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1.5
|
|
|
|
0.01
|
|
Other charges(6)
|
|
|
-
|
|
|
|
-
|
|
|
|
(22.7)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22.7
|
|
|
|
0.11
|
|
Taxes on specified items(7)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
95.4
|
|
|
|
(95.4)
|
|
|
|
(0.47)
|
|
Other certain tax adjustments(8)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13.7
|
|
|
|
(13.7)
|
|
|
|
(0.07)
|
|
As Adjusted
|
|
$
|
1,128.3
|
|
|
$
|
-
|
|
|
$
|
1,568.8
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
189.2
|
|
|
$
|
782.9
|
|
|
$
|
3.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Inventory and
manufacturing-related charges relate to 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) 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. For Biomet, we have detailed integration roadmaps
that cover a three year period from the merger date to accomplish the tasks we feel are necessary to integrate the
businesses. For the various 2016 acquisitions, we also have integration plans that are necessary to integrate the
businesses. 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.
|
(4) We are addressing
inspectional observations on Form 483 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.
|
|
(5) 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
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. 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.
|
|
(6) We have incurred
other various expenses from specific events or projects that we consider highly variable or have a significant impact to
our operating results that we have excluded from our non-GAAP measures. This includes 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 for at least 12 months, which monitorship commenced in July
2017. The excluded costs include the fees paid to the independent compliance monitor and to external legal counsel
assisting in the matter.
|
|
(7) Represents the tax
effects on the previously specified items. The tax effect for the U.S. jurisdiction is calculated based on an
effective rate considering federal and state taxes, as well as permanent items. For jurisdictions outside the U.S.,
the tax effect is calculated based upon the statutory rates where the items were incurred.
|
|
(8) Primarily relates
to internal restructuring transactions that provide us access to offshore funds in a tax efficient manner.
|
ZIMMER BIOMET HOLDINGS, INC.
|
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS
|
FOR THE THREE and SIX MONTHS ENDED JUNE 30, 2017
|
(in millions, unaudited)
|
|
|
FOR THE THREE MONTHS ENDED JUNE 30, 2017
|
|
|
|
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
|
|
|
Other expense, net
|
|
|
Provision for income taxes
|
|
|
Net Earnings of Zimmer Biomet Holdings, Inc.
|
|
|
Diluted EPS
|
|
As Reported
|
|
$
|
527.7
|
|
|
$
|
147.7
|
|
|
$
|
92.6
|
|
|
$
|
752.2
|
|
|
$
|
26.8
|
|
|
$
|
72.5
|
|
|
$
|
49.9
|
|
|
$
|
(1.7)
|
|
|
$
|
12.3
|
|
|
$
|
184.2
|
|
|
$
|
0.90
|
|
Inventory step-up and other inventory and manufacturing-related charges
(1)
|
|
|
(22.5)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22.5
|
|
|
|
0.11
|
|
Intangible asset amortization (2)
|
|
|
-
|
|
|
|
(147.7)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
147.7
|
|
|
|
0.73
|
|
Intangible asset impairment (3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(26.8)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26.8
|
|
|
|
0.13
|
|
Acquisition, integration and related (4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(72.5)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72.5
|
|
|
|
0.36
|
|
Quality remediation (5)
|
|
|
(2.4)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(49.9)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52.3
|
|
|
|
0.26
|
|
Other charges (7)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2.5)
|
|
|
|
(6.9)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(0.6)
|
|
|
|
-
|
|
|
|
8.8
|
|
|
|
0.04
|
|
Taxes on specified items (8)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
102.2
|
|
|
|
(102.2)
|
|
|
|
(0.51)
|
|
Other certain tax adjustments (9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(12.0)
|
|
|
|
12.0
|
|
|
|
0.06
|
|
As Adjusted
|
|
$
|
502.8
|
|
|
$
|
-
|
|
|
$
|
90.1
|
|
|
$
|
745.3
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(2.3)
|
|
|
$
|
102.5
|
|
|
$
|
424.6
|
|
|
$
|
2.08
|
|
FOR THE SIX MONTHS ENDED JUNE 30, 2017
|
|
|
|
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
|
|
|
Other expense, net
|
|
|
(Benefit) for income taxes
|
|
|
Net Earnings of Zimmer Biomet Holdings, Inc.
|
|
|
Diluted EPS
|
|
As Reported
|
|
$
|
1,040.6
|
|
|
$
|
299.7
|
|
|
$
|
183.7
|
|
|
$
|
1,527.9
|
|
|
$
|
26.8
|
|
|
$
|
130.7
|
|
|
$
|
84.3
|
|
|
$
|
(2.2)
|
|
|
$
|
(21.8)
|
|
|
$
|
483.6
|
|
|
$
|
2.38
|
|
Inventory step-up and other inventory and manufacturing-related charges
(1)
|
|
|
(41.2)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
41.2
|
|
|
|
0.20
|
|
Intangible asset amortization (2)
|
|
|
-
|
|
|
|
(299.7)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
299.7
|
|
|
|
1.47
|
|
Intangible asset impairment (3)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(26.8)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26.8
|
|
|
|
0.13
|
|
Acquisition, integration and related (4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(130.7)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
130.7
|
|
|
|
0.64
|
|
Quality remediation (5)
|
|
|
(6.9)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(84.3)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
91.2
|
|
|
|
0.45
|
|
Litigation (6)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7.0)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7.0
|
|
|
|
0.04
|
|
Other charges (7)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2.5)
|
|
|
|
(17.4)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.9
|
|
|
|
-
|
|
|
|
20.8
|
|
|
|
0.10
|
|
Taxes on specified items (8)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
185.2
|
|
|
|
(185.2)
|
|
|
|
(0.91)
|
|
Other certain tax adjustments (9)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
57.8
|
|
|
|
(57.8)
|
|
|
|
(0.28)
|
|
As Adjusted
|
|
$
|
992.5
|
|
|
$
|
-
|
|
|
$
|
181.2
|
|
|
$
|
1,503.5
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(1.3)
|
|
|
$
|
221.2
|
|
|
$
|
858.0
|
|
|
$
|
4.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Inventory step-up
and other inventory and manufacturing-related charges relate to inventory step-up expense, excess and obsolete inventory
charges on certain product lines we intend to discontinue and other inventory and manufacturing-related charges.
Inventory step-up expense represents the incremental expense of inventory sold recognized at its fair value after
business combination accounting is applied versus the expense that would have been recognized if sold at its cost to
manufacture. Since only the inventory that existed at the business combination date was stepped-up to fair value,
we believe excluding the incremental expense provides investors useful information as to what our costs may have been if
we had not been required to increase the inventory's book value to fair value. 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) We recognized
$18.8 million and $8.0 million of intangible asset impairment from Biomet merger-related in-process research and
development and trademark intangible assets, respectively.
|
|
(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. For Biomet, we have detailed integration roadmaps
that cover a three year period from the merger date to accomplish the tasks we feel are necessary to integrate the
businesses. For the various 2016 acquisitions, we also have integration plans that are necessary to integrate the
businesses. 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 issued by the 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
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. 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) We have incurred
other various expenses from specific events or projects that we consider highly variable or have a significant impact to
our operating results that we have excluded from our non-GAAP measures. This includes our costs of complying with
our 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 for at least 12 months, which monitorship commenced in July 2017. The excluded costs include the
fees paid to the independent compliance monitor and to external legal counsel assisting in the matter.
|
|
(8) Represents the tax
effects on the previously specified items. The tax effect for the U.S. jurisdiction is calculated based on an
effective rate considering federal and state taxes, as well as permanent items. For jurisdictions outside the U.S.,
the tax effect is calculated based upon the statutory rates where the items were incurred.
|
|
(9) In the three month
period, other certain tax adjustments relate to charges from internal restructuring transactions that provided the
Company access to cash in a tax efficient manner, partially offset by net favorable resolutions of various tax
matters. The six month period also includes a tax restructuring that lowered the tax rate on deferred tax
liabilities recorded on intangible assets recognized in acquisition-related accounting.
|
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, 2018 and 2017
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Net cash provided by operating
activities
|
$
|
393.3
|
|
|
$
|
440.5
|
|
|
$
|
883.8
|
|
|
$
|
715.9
|
|
Additions to instruments
|
|
(65.7)
|
|
|
|
(86.2)
|
|
|
|
(126.1)
|
|
|
|
(172.6)
|
|
Additions to other property, plant
and equipment
|
|
(27.0)
|
|
|
|
(30.7)
|
|
|
|
(53.7)
|
|
|
|
(73.8)
|
|
Free cash flow
|
$
|
300.6
|
|
|
$
|
323.6
|
|
|
$
|
704.0
|
|
|
$
|
469.5
|
|
ZIMMER BIOMET HOLDINGS, INC.
|
RECONCILIATION OF GROSS PROFIT & MARGIN TO ADJUSTED GROSS
|
PROFIT & MARGIN
|
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2018 and 2017
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
Net Sales
|
$
|
2,007.6
|
|
|
$
|
1,949.5
|
|
|
|
$
|
4,025.2
|
|
|
$
|
3,921.9
|
|
|
Cost of products sold, excluding intangible asset
amortization
|
|
583.7
|
|
|
|
527.7
|
|
|
|
|
1,159.5
|
|
|
|
1,040.6
|
|
|
Intangible asset amortization
|
|
149.5
|
|
|
|
147.7
|
|
|
|
|
300.3
|
|
|
|
299.7
|
|
|
Gross Profit
|
$
|
1,274.4
|
|
|
$
|
1,274.1
|
|
|
|
$
|
2,565.4
|
|
|
$
|
2,581.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory step-up and other
inventory and manufacturing-
related charges
|
|
12.5
|
|
|
|
22.5
|
|
|
|
|
19.7
|
|
|
|
41.2
|
|
|
Quality remediation
|
|
7.9
|
|
|
|
2.4
|
|
|
|
|
11.5
|
|
|
|
6.9
|
|
|
Intangible asset amortization
|
|
149.5
|
|
|
|
147.7
|
|
|
|
|
300.3
|
|
|
|
299.7
|
|
|
Adjusted gross profit
|
$
|
1,444.3
|
|
|
$
|
1,446.7
|
|
|
|
$
|
2,896.9
|
|
|
$
|
2,929.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
63.5
|
|
%
|
|
65.4
|
|
%
|
|
|
63.7
|
|
%
|
|
65.8
|
|
%
|
Inventory step-up and other
inventory and manufacturing-
related charges
|
|
0.6
|
|
|
|
1.1
|
|
|
|
|
0.5
|
|
|
|
1.1
|
|
|
Quality remediation
|
|
0.4
|
|
|
|
0.1
|
|
|
|
|
0.3
|
|
|
|
0.1
|
|
|
Intangible asset amortization
|
|
7.4
|
|
|
|
7.6
|
|
|
|
|
7.5
|
|
|
|
7.7
|
|
|
Adjusted gross margin
|
|
71.9
|
|
%
|
|
74.2
|
|
%
|
|
|
72.0
|
|
%
|
|
74.7
|
|
%
|
ZIMMER BIOMET HOLDINGS, INC.
|
RECONCILIATION OF OPERATING PROFIT & MARGIN TO ADJUSTED OPERATING
PROFIT & MARGIN
|
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2018 and 2017
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
Operating profit
|
$
|
296.0
|
|
|
$
|
280.1
|
|
|
|
$
|
601.0
|
|
|
$
|
628.2
|
|
|
Inventory step-up and other
inventory and manufacturing-
related charges
|
|
12.5
|
|
|
|
22.5
|
|
|
|
|
19.7
|
|
|
|
41.2
|
|
|
Intangible asset amortization
|
|
149.5
|
|
|
|
147.7
|
|
|
|
|
300.3
|
|
|
|
299.7
|
|
|
Intangible asset impairment
|
|
-
|
|
|
|
26.8
|
|
|
|
|
-
|
|
|
|
26.8
|
|
|
Acquisition, integration and related
|
|
50.5
|
|
|
|
72.5
|
|
|
|
|
96.5
|
|
|
|
130.7
|
|
|
Quality remediation
|
|
45.4
|
|
|
|
52.3
|
|
|
|
|
91.6
|
|
|
|
91.2
|
|
|
Litigation
|
|
(4.2)
|
|
|
|
-
|
|
|
|
|
1.5
|
|
|
|
7.0
|
|
|
Other charges
|
|
11.8
|
|
|
|
9.4
|
|
|
|
|
22.7
|
|
|
|
19.9
|
|
|
Adjusted operating profit
|
$
|
561.5
|
|
|
$
|
611.3
|
|
|
|
$
|
1,133.3
|
|
|
$
|
1,244.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit margin
|
|
14.7
|
|
%
|
|
14.4
|
|
%
|
|
|
14.9
|
|
%
|
|
16.0
|
|
%
|
Inventory step-up and other
inventory and manufacturing-
related charges
|
|
0.6
|
|
|
|
1.1
|
|
|
|
|
0.5
|
|
|
|
1.1
|
|
|
Intangible asset amortization
|
|
7.4
|
|
|
|
7.6
|
|
|
|
|
7.5
|
|
|
|
7.7
|
|
|
Intangible asset impairment
|
|
-
|
|
|
|
1.4
|
|
|
|
|
-
|
|
|
|
0.7
|
|
|
Acquisition, integration and related
|
|
2.5
|
|
|
|
3.7
|
|
|
|
|
2.4
|
|
|
|
3.3
|
|
|
Quality remediation
|
|
2.3
|
|
|
|
2.7
|
|
|
|
|
2.3
|
|
|
|
2.3
|
|
|
Litigation
|
|
(0.2)
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
0.1
|
|
|
Other charges
|
|
0.7
|
|
|
|
0.5
|
|
|
|
|
0.6
|
|
|
|
0.5
|
|
|
Adjusted operating profit margin
|
|
28.0
|
|
%
|
|
31.4
|
|
%
|
|
|
28.2
|
|
%
|
|
31.7
|
|
%
|
ZIMMER BIOMET HOLDINGS, INC.
|
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED EFFECTIVE TAX
RATE
|
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 and
2017
|
(in millions, unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
|
Effective tax rate
|
|
15.1
|
|
%
|
|
6.3
|
|
%
|
|
|
18.2
|
|
%
|
|
(4.7)
|
|
%
|
Inventory step-up and other
inventory and manufacturing-
related charges, intangible
asset amortization, intangible
asset impairment, acquisition,
integration and related, quality
remediation, litigation, other
charges and other certain tax
adjustments
|
|
3.8
|
|
|
|
13.2
|
|
|
|
|
1.2
|
|
|
|
25.2
|
|
|
Adjusted effective tax rate
|
|
18.9
|
|
%
|
|
19.5
|
|
%
|
|
|
19.4
|
|
%
|
|
20.5
|
|
%
|
View original content with multimedia:http://www.prnewswire.com/news-releases/zimmer-biomet-announces-second-quarter-2018-financial-results-300687619.html
SOURCE Zimmer Biomet Holdings, Inc.