ZIMMER HLD WARSAW, Ind., April 27, 2017 /PRNewswire/ -- Zimmer Biomet Holdings, Inc. (NYSE and SIX: ZBH) today reported financial results for the quarter ended March 31, 2017. The Company reported first quarter net sales of $1.98 billion, an increase of 3.8% over the prior year period, and an increase of 4.5% on a constant currency basis. Excluding approximately 220 basis points of contribution from the LDR Holding Corporation acquisition, revenue increased by 2.3% over the first quarter of 2016. Diluted earnings per share for the quarter were $1.47 reported, an increase of 172.2% over the prior year period. Adjusted diluted earnings per share for the quarter were $2.13, an increase of 6.0% over the prior year period.
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"Zimmer Biomet delivered first quarter revenue and adjusted earnings growth consistent with our expectations, as we positioned the Company for sales acceleration in the second half of the year," said David Dvorak, President and CEO of Zimmer Biomet. "During the quarter, we made progress towards improving our global supply chain throughput, in concert with ongoing, focused investments to harmonize and optimize our global manufacturing and quality systems. We will continue driving these priorities as we progress through the balance of 2017, while leveraging our specialized sales channels and advancing the commercialization of differentiated clinical offerings."
Net earnings for the first quarter were $299.4 million, an increase of 175.2% over the prior year period, and $433.4 million on an adjusted basis, an increase of 6.4% over the prior year period. Operating cash flow for the first quarter was $275.4 million.
In the quarter, the Company paid $48.1 million in dividends and declared a first quarter dividend of $0.24 per share.
Guidance
The Company updated its full-year 2017 constant currency revenue and adjusted earnings per share guidance. The Company now estimates full-year, constant currency revenue to increase between 3.2% and 4.2% compared to the prior year, inclusive of approximately 120 basis points of contribution from the LDR transaction. Previously, the Company had expected full-year, constant currency revenue to increase between 3.7% and 4.7%, inclusive of the LDR contribution. The Company now expects foreign currency translation to decrease revenue for the full year by approximately 1.2%. Previously, the Company had estimated foreign currency translation to decrease revenue by 1.5%. Therefore, the Company now expects full-year 2017 revenue to increase between 2.0% and 3.0% when compared to full-year 2016, or to be in a range of $7.835 billion to $7.915 billion. Previously, the Company had estimated revenue growth to be in a range of 2.2% to 3.2% when compared to full-year 2016, or to be in a range of $7.855 billion to $7.930 billion. Revenue growth, excluding the contribution from LDR on a constant currency basis, is also expected to be in a range of 2.0% to 3.0% for the full-year 2017. Previously, the Company had estimated full-year revenue growth to be in a range of 2.5% to 3.5% on a similar basis.
Additionally, the Company now expects its full-year 2017 diluted earnings per share to be in a range of $4.68 to $4.88, and in a range of $8.50 to $8.60 on an adjusted basis. Previously, the Company had expected diluted earnings per share to be in a range of $4.37 to $4.67 on a reported basis, and in a range of $8.50 to $8.68 on an adjusted basis.
Conference Call
The Company will conduct its first quarter 2017 investor conference call today, April 27, 2017, at 8:00 a.m. Eastern Time. The live 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 April 28, 2017 to May 28, 2017. 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 Table
The following first quarter sales table provides results by geography and product category, as well as the percentage change compared to the prior year quarter on a reported basis and a constant currency basis.
Constant
Net Currency
Sales % Change % Change
----- -------- --------
Geographic Results
Americas $1,235 4.9% 4.7%
EMEA 453 (0.7) 3.1
Asia
Pacific 289 6.9 5.9
---
Total $1,977 3.8% 4.5%
======
Product Categories
Knees
Americas $429 (0.1)% (0.2)%
EMEA 168 (3.4) 0.9
Asia
Pacific 105 5.0 3.1
---
Total 702 (0.2) 0.6
Hips
Americas 246 0.2 -
EMEA 136 (0.5) 2.7
Asia
Pacific 93 9.5 8.9
---
Total 475 1.7 2.4
S.E.T (1) 425 6.0 6.5
Dental 108 (0.7) 0.1
Spine & CMF 186 32.0 32.1
Other 81 (1.8) (1.2)
---
Total $1,977 3.8% 4.5%
======
(1) Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma
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.
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 growth information for the three-month period ended March 31, 2017 is presented on a GAAP (reported) basis and on a constant currency basis, as well as on a basis that excludes the contribution from the Company's acquisition of LDR Holding Corporation in July 2016. Projected revenue growth information for the year ended December 31, 2017 is presented on a GAAP basis and on a constant currency basis, as well as on a basis that excludes the contribution from the LDR transaction. Constant currency growth rates 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, diluted earnings per share and projected diluted earnings per share are presented on a GAAP (reported) basis and on an adjusted basis. Adjusted earnings and earnings per share measures exclude the effects of inventory step-up; certain inventory and manufacturing-related charges connected to discontinuing certain product lines, quality enhancement and remediation efforts; special items; intangible asset amortization; any related effects on our income tax provision associated with these items; and other certain tax adjustments. Special items include expenses resulting directly from our business combinations and/or global restructuring, quality and operational excellence initiatives, including employee termination benefits, certain contract terminations, consulting and professional fees, dedicated project personnel, asset impairment or loss on disposal charges and other items. Other certain tax adjustments include internal restructuring transactions that lower the tax rate on deferred tax liabilities recorded on intangible assets recognized as part of acquisition-related accounting or provide the Company access to offshore funds in a tax efficient manner.
We use these non-GAAP financial measures internally to evaluate the performance of the business and believe they are useful measures that provide meaningful supplemental information to investors to consider when evaluating the performance of the Company. We believe 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 operating results, to perform trend analysis, to better identify operating trends that may otherwise be masked or distorted by these types of items and to provide additional transparency of certain items. In addition, certain of these non-GAAP financial measures are used as performance metrics in our incentive compensation programs.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release.
Cautionary Statement Regarding Forward-Looking Statements
This communication contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terms such as "may," "will," "expects," "believes," "anticipates," "plans," "estimates," "projects," "assumes," "guides," "targets," "forecasts," "sees" and "seeks" or the negative of such terms or other variations on such terms or comparable terminology. 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 and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties 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; challenges relating to changes in and compliance with governmental laws and regulations, including regulations of the U.S. Food and Drug Administration (the "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; price and product competition; 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 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 and general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; and the impact of the ongoing economic uncertainty affecting 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. Copies of these filings, as well as subsequent filings, are available online at www.sec.gov, www.zimmerbiomet.com or on request from us. 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, except as may be set forth in our periodic reports. Readers of this communication are cautioned not to place undue reliance on these forward-looking statements, since, while management believes the assumptions on which the forward-looking statements are based are reasonable, 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 communication.
ZIMMER BIOMET HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2017 and 2016
(in millions, except per share amounts, unaudited)
2017 2016
---- ----
Net Sales $1,977.3 $1,904.0
Cost of products sold, excluding
intangible asset amortization 512.9 640.6
Intangible asset amortization 152.0 126.6
Research and development 91.1 85.7
Selling, general and administrative 760.8 716.9
Special items 110.1 88.7
----- ----
Operating expenses 1,626.9 1,658.5
------- -------
Operating Profit 350.4 245.5
Other expense, net (2.8) (3.8)
Interest income 0.5 1.3
Interest expense (82.9) (88.2)
----- -----
Earnings before income taxes 265.2 154.8
(Benefit) provision for income taxes (34.1) 46.1
----- ----
Net Earnings 299.3 108.7
Less: Net Loss attributable to
noncontrolling interest (0.1) (0.1)
---- ----
Net Earnings of Zimmer Biomet
Holdings, Inc. $299.4 $108.8
====== ======
Earnings Per Common Share
Basic $1.49 $0.54
Diluted $1.47 $0.54
Weighted Average Common Shares Outstanding
Basic 201.1 200.1
Diluted 203.1 202.2
Cash Dividends Declared Per Common
Share $0.24 $0.24
ZIMMER BIOMET HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, unaudited)
March 31, December 31,
2017 2016
---- ----
Assets
Current Assets:
Cash and cash equivalents $1,039.5 $634.1
Receivables, net 1,600.1 1,604.4
Inventories 1,977.0 1,959.4
Other current assets 463.3 465.7
----- -----
Total current assets 5,079.9 4,663.6
Property, plant and equipment, net 2,053.2 2,037.9
Goodwill 10,685.1 10,643.9
Intangible assets, net 8,650.6 8,785.4
Other assets 519.0 553.6
----- -----
Total Assets $26,987.8 $26,684.4
========= =========
Liabilities and Stockholders'
Equity
Current liabilities $1,681.1 $1,805.9
Current portion of long-term debt 975.0 575.6
Other long-term liabilities 3,859.7 3,967.2
Long-term debt 10,537.8 10,665.8
Stockholders' equity 9,934.2 9,669.9
------- -------
Total Liabilities and Stockholders'
Equity $26,987.8 $26,684.4
========= =========
ZIMMER BIOMET HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2017 and 2016
(in millions, unaudited)
2017 2016
---- ----
Cash flows provided by (used in) operating activities
Net earnings $299.3 $108.7
Depreciation and amortization 267.6 246.9
Share-based compensation 14.0 12.7
Inventory step-up 14.6 153.7
Changes in operating
assets and liabilities,
net of acquired assets
and liabilities
Income taxes (86.9) (33.7)
Receivables 26.8 (83.4)
Inventories (11.5) 38.3
Accounts payable
and accrued
expenses (137.0) (116.3)
Other assets and liabilities (111.5) (54.1)
Net cash provided
by operating
activities 275.4 272.8
Cash flows provided by (used in) investing activities
Additions to instruments (86.4) (85.1)
Additions to other
property, plant and
equipment (43.1) (27.6)
Purchases of investments - (0.3)
Sales of investments - 223.5
Other investing activities (3.6) (14.7)
Net cash (used in)
provided by
investing activities (133.1) 95.8
Cash flows provided by (used in) financing activities
Proceeds from
multicurrency
revolving facility 400.0 -
Payments on term loan (150.0) (400.0)
Net (payments)
proceeds on other
debt (0.7) 0.3
Dividends paid to
stockholders (48.1) (44.6)
Proceeds from
employee stock
compensation plans 66.1 31.3
Business combination
contingent
consideration
payments (6.0) -
Restricted stock witholdings (5.2) (4.4)
Repurchase of common stock - (415.5)
Net cash provided by
(used in) financing
activities 256.1 (832.9)
Effect of exchange rates on cash and cash equivalents 7.0 1.8
--- ---
-
Increase (decrease)
in cash and cash
equivalents 405.4 (462.5)
Cash and cash equivalents, beginning of period 634.1 1,459.3
----- -------
Cash and cash equivalents, end of period $1,039.5 $996.8
======== ======
ZIMMER BIOMET HOLDINGS, INC.
NET SALES BY GEOGRAPHY
FOR THE THREE MONTHS ENDED MARCH 31, 2017 and 2016
(in millions, unaudited)
Three Months Ended March 31,
----------------------------
2017 2016 % Inc /
(Dec)
----
Americas $1,234.8 $1,177.3 4.9%
EMEA 453.2 456.2 (0.7)
Asia Pacific 289.3 270.5 6.9
----- -----
Total $1,977.3 $1,904.0 3.8
======== ========
ZIMMER BIOMET HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE MONTHS ENDED MARCH 31, 2017 and 2016
(in millions, unaudited)
Three Months Ended March 31,
----------------------------
2017 2016 % Inc /
(Dec)
----
Knees $701.8 $703.2 (0.2)%
Hips 475.7 467.9 1.7
S.E.T 425.1 401.0 6.0
Dental 107.8 108.6 (0.7)
Spine & CMF 186.3 141.2 32.0
Other 80.6 82.1 (1.8)
---- ----
Total $1,977.3 $1,904.0 3.8
======== ========
ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF REPORTED NET SALES % CHANGE TO
CONSTANT CURRENCY % CHANGE AND
% CHANGE EXCLUDING LDR HOLDING CORPORATION
(unaudited)
For the Three Months Ended
March 31, 2017
--------------
Foreign Constant
Exchange Currency
% Change Impact % Change
-------- ------ --------
Geographic Results
Americas 4.9% 0.2% 4.7%
EMEA (0.7) (3.8) 3.1
Asia Pacific 6.9 1.0 5.9
Total 3.8% (0.7)% 4.5%
Product Categories
Knees
Americas (0.1)% 0.1% (0.2)%
EMEA (3.4) (4.3) 0.9
Asia Pacific 5.0 1.9 3.1
Total (0.2) (0.8) 0.6
Hips
Americas 0.2 0.2 -
EMEA (0.5) (3.2) 2.7
Asia Pacific 9.5 0.6 8.9
Total 1.7 (0.7) 2.4
S.E.T 6.0 (0.5) 6.5
Dental (0.7) (0.8) 0.1
Spine & CMF 32.0 (0.1) 32.1
-
Other (1.8) (0.6) (1.2)
Total 3.8% (0.7)% 4.5%
Impact of LDR Holding Corporation (2.2) - (2.2)
------------
% Change excluding LDR Holding Corporation 1.6% (0.7)% 2.3%
ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2017 and 2016
(in millions, unaudited)
Three Months
Ended March 31,
---------------
2017 2016
---- ----
Net Earnings of Zimmer Biomet Holdings, Inc. $299.4 $108.8
Inventory step-up and other inventory
and manufacturing-related charges 23.2 178.3
Intangible asset amortization 152.0 126.6
Special items
Biomet merger-related 37.0 79.1
Other special items 73.1 9.6
Merger-related expense in other expense, net 1.5 -
Taxes on above items (1) (83.1) (109.5)
Other certain tax adjustments(2) (69.7) 14.3
----- ----
Adjusted Net Earnings $433.4 $407.2
====== ======
(1) 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.
(2) In 2017, other certain tax adjustments relate to a tax restructuring that lowered the tax rate on deferred tax liabilities recorded on intangible assets recognized in acquisition-related accounting. The 2016 adjustment relates to
internal restructuring transactions that provide the Company access to cash in a tax efficient manner.
ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS
FOR THE THREE MONTHS ENDED MARCH 31, 2017 and 2016
(unaudited)
Three Months
Ended March 31,
---------------
2017 2016
---- ----
Diluted EPS $1.47 $0.54
Inventory step-up and other inventory
and manufacturing-
related charges 0.11 0.87
Intangible asset
amortization 0.75 0.63
Special items
Biomet merger-
related 0.18 0.39
Other special items 0.36 0.05
Merger-related
expense in other
expense, net 0.01 -
Taxes on above items
(1) (0.41) (0.54)
Other certain tax
adjustments(2) (0.34) 0.07
----- ----
Adjusted Diluted EPS $2.13 $2.01
===== =====
(1) 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.
(2) In 2017, other certain tax adjustments relate to a tax
restructuring that lowered the tax rate on deferred tax liabilities
recorded on intangible assets recognized in acquisition-related
accounting. The 2016 adjustment relates to internal restructuring
transactions that provide the Company access to cash in a tax
efficient manner.
ZIMMER BIOMET HOLDINGS, INC.
SUMMARY OF EXPENSES INCLUDED IN SPECIAL ITEMS
FOR THE THREE MONTHS ENDED MARCH 31, 2017 and 2016
(in millions, unaudited)
Three Months
Ended March 31,
---------------
2017 2016
---- ----
Biomet merger-related
Consulting and
professional
fees $18.7 $36.1
Employee
termination
benefits (3.0) 4.1
Dedicated
project
personnel 8.7 21.7
Relocated
facilities 2.8 1.7
Contract
terminations - 10.1
Information
technology
integration 2.3 1.4
Other 7.5 4.0
Total Biomet merger-
related 37.0 79.1
Other
Consulting and
professional
fees 50.4 6.9
Employee
termination
benefits 1.2 -
Dedicated
project
personnel 12.8 1.8
Relocated
facilities 2.4 0.2
Certain
litigation
matters 7.0 -
Information
technology
integration 0.5 0.1
Contingent
consideration
adjustments (3.6) -
Other 2.4 0.6
Total Other 73.1 9.6
---- ---
Special items $110.1 $88.7
====== =====
ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF 2017 PROJECTED REVENUE % GROWTH TO
2017 PROJECTED CONSTANT CURRENCY % GROWTH
(unaudited)
Projected Year
Ended December
31, 2017: High Low
---- ---
Revenue % growth 3.0% 2.0%
Foreign exchange
impact 1.2 1.2
--- ---
Constant
currency %
growth 4.2% 3.2%
Impact of LDR
Holding
Corporation (1.2) (1.2)
---- ----
Constant
currency %
growth
excluding LDR
Holding
Corporation 3.0% 2.0%
=== ===
ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF 2017 PROJECTED DILUTED EPS
AND PROJECTED ADJUSTED DILUTED EPS
(unaudited)
Projected Year Ended
December 31, 2017: High Low
---- ---
Diluted EPS $4.88 $4.68
Inventory step-up and other inventory and manufacturing related
charges, intangible
asset amortization,
special items and
other expense 5.80 5.94
Taxes on above
items(1) and other
certain tax
adjustments (2.08) (2.12)
----- -----
Adjusted Diluted EPS $8.60 $8.50
===== =====
(1) The tax effect for the U.S. jurisdiction is estimated 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 estimated based upon the
statutory rates where the items are projected to be incurred.
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SOURCE Zimmer Biomet Holdings, Inc.
