Zimmer Biomet Announces Fourth Quarter and Full-Year 2017 Results

 

- Net sales of $2.074 billion for the fourth quarter represent an increase of 3.0% over the prior year period, and an increase of 1.5% on a constant currency basis
- Diluted EPS for the fourth quarter were $6.16, and include a one-time tax benefit of approximately $6.40 resulting from the recently enacted U.S. tax reform legislation(1). Fourth quarter adjusted diluted EPS were $2.10, a decrease of 1.9% from the prior year period
- The Company provides first quarter 2018 sales and earnings guidance

 
[30-January-2018]
 
 

WARSAW, Ind., Jan. 30, 2018 /PRNewswire/ -- Zimmer Biomet (NYSE and SIX: ZBH) today reported financial results for the quarter and full year ended December 31, 2017. The Company reported fourth quarter net sales of $2.074 billion, an increase of 3.0% over the prior year period, and an increase of 1.5% on a constant currency basis. Diluted earnings per share for the fourth quarter were $6.16, and include a one-time tax benefit of approximately $6.40 resulting from the recently enacted U.S. tax reform legislation. Fourth quarter adjusted diluted earnings per share were $2.10, a decrease of 1.9% from the prior year period.

Full-year 2017 net sales were $7.824 billion, an increase of 1.8% over the prior year, on both a reported and constant currency basis. Full-year revenues increased by 0.5% over the prior year on a constant currency basis, excluding approximately 130 basis points of contribution from the LDR Holding Corporation acquisition. Diluted earnings per share for the full year were $9.03. Adjusted diluted earnings per share for the full year were $8.03, an increase of 0.9% over the prior year.

Bryan Hanson, President and CEO of Zimmer Biomet, said: "Since joining the Company last month, I have been performing a thorough review of the business. My immediate priorities are to improve Zimmer Biomet's execution and address a number of near-term challenges that have impacted, and will continue to impact, our performance. With that said, I fully believe in the power of the Zimmer Biomet global brand and portfolio of products, and I am confident that with sound strategy and enhanced execution we can drive sustained shareholder value."

Net earnings for the fourth quarter were $1.257 billion, and $428.5 million on an adjusted basis. Operating cash flow for the fourth quarter was $402.9 million.

Net earnings for full-year 2017 were $1.840 billion, and $1.636 billion on an adjusted basis.

In the quarter, the Company paid $48.6 million in dividends and declared a fourth quarter dividend of $0.24 per share. The Company also repaid $300.0 million of debt during the quarter. For full-year 2017, the Company paid $193.6 million in dividends and repaid approximately $1.250 billion of debt.

(1) U.S. tax reform legislation resulted in a net favorable provisional adjustment due to the reduction of certain deferred tax liabilities which were partially offset by provisional tax charges related to the toll tax provision of U.S. tax reform. The amount recognized is a provisional estimate and subject to change, possibly materially, due to, among other things, refinements of the Company's calculations, changes in interpretations and assumptions the Company has made or additional guidance issued by the U.S. Treasury, Securities and Exchange Commission or Financial Accounting Standards Board.

Guidance
For the first quarter of 2018, the Company expects revenue in the range of $1.955 billion to $1.995 billion, representing a change of negative 1.0% to positive 1.0% compared to the prior year period, and negative 4.0% to negative 2.0% on a constant currency basis compared to the prior year period, inclusive of negative impact related to approximately one less billing day compared to the prior year period.

Additionally, the Company expects its diluted earnings per share for the first quarter of 2018 to be in a range of $0.73 to $0.88, and in a range of $1.84 to $1.91 on an adjusted basis.

Conference Call
The Company will conduct its fourth quarter and full-year 2017 investor conference call today, January 30, 2018, at 8:00 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 January 31, 2018 to March 1, 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 fourth quarter and full-year sales tables provide results by geography and product category, as well as the percentage change compared to the prior year periods on a reported basis and a constant currency basis.

                                                       NET SALES - THREE MONTHS ENDED DECEMBER 31, 2017
                                                                   (in millions, unaudited)


                                                                                                                                  Constant

                                                              Net                                                        Currency

                                                             Sales               % Change                       % Change
                                                             -----               --------                       --------

    Geographic Results

    Americas                                                            $1,280                             0.9%                      0.8%

    EMEA                                                                 473                              6.4                      (0.3)

    Asia Pacific                                                         321                              7.0                        7.2
                                                                         ---

    Total                                                               $2,074                             3.0%                      1.5%
                                                                        ======

    Product Categories

    Knees

    Americas                                                              $443                           (0.3)%                    (0.5)%

    EMEA                                                                 181                             10.0                        3.9

    Asia Pacific                                                         107                            (4.1)                     (4.4)
                                                                         ---

    Total                                                                731                              1.4                      (0.1)

    Hips

    Americas                                                             256                              0.8                        0.5

    EMEA                                                                 137                              1.5                      (5.3)

    Asia Pacific                                                         106                             13.8                       14.6
                                                                         ---

    Total                                                                499                              3.5                        1.6

    S.E.T *                                                              454                              5.9                        4.6

    Dental                                                               108                              2.1                      (0.4)

    Spine & CMF                                                          194                              1.5                        0.5

    Other                                                                 88                              4.3                        2.9
                                                                         ---

    Total                                                               $2,074                             3.0%                      1.5%
                                                                        ======


    * Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma

 

                                                     NET SALES - YEAR ENDED DECEMBER 31, 2017
                                                             (in millions, unaudited)


                                                                                                                 Constant

                                                              Net                                       Currency

                                                             Sales               % Change     % Change
                                                             -----               --------     --------

    Geographic Results

    Americas                                                            $4,866                     1.3%             1.2%

    EMEA                                                               1,745                      0.9               0.2

    Asia Pacific                                                       1,213                      5.4               6.3
                                                                       -----

    Total                                                               $7,824                     1.8%             1.8%
                                                                        ======

    Product Categories

    Knees

    Americas                                                            $1,660                   (1.7)%           (1.7)%

    EMEA                                                                 644                      1.0               0.9

    Asia Pacific                                                         433                      1.5               1.6
                                                                         ---

    Total                                                              2,737                    (0.6)            (0.6)

    Hips

    Americas                                                              $975                    (1.2)            (1.3)

    EMEA                                                                 519                    (0.7)            (1.8)

    Asia Pacific                                                         385                      7.5               9.1
                                                                         ---

    Total                                                              1,879                      0.6               0.6

    S.E.T *                                                            1,709                      3.9               4.0

    Dental                                                               419                    (2.2)            (2.6)

    Spine & CMF                                                          759                     14.7              14.4

    Other                                                                321                    (2.5)            (2.6)
                                                                         ---

    Total                                                               $7,824                     1.8%             1.8%
                                                                        ======


    * 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 change information for the three-month period and the year ended December 31, 2017 is presented on a GAAP (reported) basis and on a constant currency basis. The sales change information for the full year is also presented on a constant currency basis that excludes the contribution from the Company's acquisition of LDR Holding Corporation in July 2016. Projected revenue change information is also presented on a GAAP basis and on a constant currency basis. Constant currency 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 adjusted diluted earnings per share 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; certain claims; goodwill impairment; debt extinguishment charges; any related effects on our income tax provision associated with these items; the effect of U.S. tax reform; 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, certain litigation matters, costs of complying with our deferred prosecution agreement and other items. Other certain tax adjustments include a tax restructuring that lowered the tax rate on deferred tax liabilities recorded on intangible assets recognized in acquisition-related accounting, net favorable resolutions of various tax matters, a favorable tax rate change in a foreign jurisdiction and charges from internal restructuring transactions that provide the Company access to cash in a tax efficient manner.

Management uses these non-GAAP financial measures internally to evaluate the performance of the business and believes they are useful measures that provide meaningful supplemental 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 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 the Company's 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 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 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 enhancement and remediation efforts at the legacy Biomet Warsaw 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, 2016 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2017, June 30, 2017 and September 30, 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 DECEMBER 31, 2017 and 2016
                                                                     (in millions, except per share amounts, unaudited)


                                                                                                                          2017             2016
                                                                                                                          ----             ----

    Net Sales                                                                                                                     $2,074.3       $2,013.1

    Cost of products sold, excluding intangible asset amortization                                                                 591.4          621.8

    Intangible asset amortization                                                                                                  151.5          141.2

    Research and development                                                                                                        95.0           95.7

    Selling, general and administrative                                                                                            770.6          756.3

    Certain claims                                                                                                                  10.3              -

    Goodwill impairment                                                                                                            272.0              -

    Special items                                                                                                                  206.4          214.8
                                                                                                                                   -----          -----

    Operating expenses                                                                                                           2,097.2        1,829.8
                                                                                                                                 -------        -------

    Operating (Loss) Profit                                                                                                       (22.9)         183.3

    Other expense, net                                                                                                             (7.1)        (62.6)

    Interest income                                                                                                                  0.8            0.2

    Interest expense                                                                                                              (80.0)        (90.1)
                                                                                                                                   -----          -----

    (Loss) earnings before income taxes                                                                                          (109.2)          30.8

    Benefit for income taxes                                                                                                   (1,366.2)        (38.9)
                                                                                                                                --------          -----

    Net Earnings                                                                                                                 1,257.0           69.7

    Less: Net (Loss) Income attributable to noncontrolling interest                                                                (0.2)           0.1
                                                                                                                                    ----            ---

    Net Earnings of Zimmer Biomet Holdings, Inc.                                                                                  $1,257.2          $69.6
                                                                                                                                  ========          =====

    Earnings Per Common Share

    Basic                                                                                                                            $6.21          $0.35

    Diluted                                                                                                                          $6.16          $0.34

    Weighted Average Common Shares Outstanding

    Basic                                                                                                                          202.5          200.4

    Diluted                                                                                                                        204.1          202.5

    Cash Dividends Declared Per Common Share                                                                                         $0.24          $0.24

 

                                                                              ZIMMER BIOMET HOLDINGS, INC.
                                                                          CONSOLIDATED STATEMENTS OF EARNINGS
                                                                     FOR THE YEARS ENDED DECEMBER 31, 2017 and 2016
                                                                   (in millions, except per share amounts, unaudited)


                                                                                                                      2017             2016
                                                                                                                      ----             ----

    Net Sales                                                                                                                 $7,824.1        $7,683.9

    Cost of products sold, excluding intangible asset amortization                                                           2,132.9         2,381.8

    Intangible asset amortization                                                                                              603.9           565.9

    Research and development                                                                                                   367.4           365.6

    Selling, general and administrative                                                                                      2,973.9         2,932.9

    Certain claims                                                                                                              10.3               -

    Goodwill impairment                                                                                                        304.7               -

    Special items                                                                                                              607.8           611.8
                                                                                                                               -----           -----

    Operating expenses                                                                                                       7,000.9         6,858.0
                                                                                                                             -------         -------

    Operating Profit                                                                                                           823.2           825.9

    Other expense, net                                                                                                        (18.3)         (71.3)

    Interest income                                                                                                              2.2             2.9

    Interest expense                                                                                                         (327.5)        (357.9)
                                                                                                                              ------          ------

    Earnings before income taxes                                                                                               479.6           399.6

    (Benefit) provision for income taxes                                                                                   (1,359.6)           95.0
                                                                                                                            --------            ----

    Net Earnings                                                                                                             1,839.2           304.6

    Less: Net Loss attributable to noncontrolling interest                                                                     (0.4)          (1.3)
                                                                                                                                ----            ----

    Net Earnings of Zimmer Biomet Holdings, Inc.                                                                              $1,839.6          $305.9
                                                                                                                              ========          ======

    Earnings Per Common Share

    Basic                                                                                                                        $9.11           $1.53

    Diluted                                                                                                                      $9.03           $1.51

    Weighted Average Common Shares Outstanding

    Basic                                                                                                                      201.9           200.0

    Diluted                                                                                                                    203.7           202.4

    Cash Dividends Declared Per Common Share                                                                                     $0.96           $0.96

 

                                                    ZIMMER BIOMET HOLDINGS, INC.
                                               CONDENSED CONSOLIDATED BALANCE SHEETS
                                                      (in millions, unaudited)


                                                                   December 31,                December 31,

                                                                           2017                         2016
                                                                           ----                         ----

    Assets

    Cash and cash equivalents                                                           $524.4                  $634.1

    Receivables, net                                                                   1,494.6                 1,604.4

    Inventories                                                                        2,081.8                 1,959.4

    Other current assets                                                                 481.5                   465.7
                                                                                         -----                   -----

    Total current assets                                                               4,582.3                 4,663.6

    Property, plant and equipment, net                                                 2,038.6                 2,037.9

    Goodwill                                                                          10,668.4                10,643.9

    Intangible assets, net                                                             8,353.4                 8,785.4

    Other assets                                                                         749.9                   553.6
                                                                                         -----                   -----

    Total Assets                                                                     $26,392.6               $26,684.4
                                                                                     =========               =========

    Liabilities and Stockholders' Equity

    Current liabilities                                                               $1,780.8                $1,805.9

    Current portion of long-term debt                                                  1,225.0                   575.6

    Other long-term liabilities                                                        2,711.4                 3,967.2

    Long-term debt                                                                     8,917.5                10,665.8

    Stockholders' equity                                                              11,757.9                 9,669.9
                                                                                      --------                 -------

    Total Liabilities and Stockholders' Equity                                       $26,392.6               $26,684.4
                                                                                     =========               =========

 

                                                                                         ZIMMER BIOMET HOLDINGS, INC.
                                                                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                                FOR THE YEARS ENDED DECEMBER 31, 2017 and 2016
                                                                                           (in millions, unaudited)


                                                                                                                               2017           2016
                                                                                                                               ----           ----

    Cash flows provided by (used in) operating activities

    Net earnings                                                                                                                     $1,839.2          $304.6

    Depreciation and amortization                                                                                                     1,062.7         1,039.3

    Share-based compensation                                                                                                             53.7            57.3

    Goodwill and intangible asset impairment                                                                                            331.5            30.0

    Inventory step-up                                                                                                                    32.8           323.3

    Debt extinguishment                                                                                                                     -           53.3

    Changes in operating assets and liabilities, net of acquired assets and
    liabilities

    Income taxes                                                                                                                    (1,636.7)        (164.1)

    Receivables                                                                                                                         176.5         (137.8)

    Inventories                                                                                                                       (122.8)           76.4

    Accounts payable and accrued expenses                                                                                             (163.1)           28.7

    Other assets and liabilities                                                                                                          8.5            21.2
                                                                                                                                          ---            ----

    Net cash provided by operating activities                                                                                         1,582.3         1,632.2
                                                                                                                                      -------         -------

    Cash flows provided by (used in) investing activities

    Additions to instruments                                                                                                          (337.0)        (345.5)

    Additions to other property, plant and equipment                                                                                  (156.0)        (184.7)

    Purchases of investments                                                                                                                -          (1.5)

    Sales of investments                                                                                                                    -          286.2

    LDR acquisition, net of acquired cash                                                                                                   -      (1,021.1)

    Business combination investments, net of acquired cash                                                                              (4.0)        (421.9)

    Other investing activities                                                                                                         (13.8)          (3.0)
                                                                                                                                        -----            ----

    Net cash used in investing activities                                                                                             (510.8)      (1,691.5)
                                                                                                                                       ------        --------

    Cash flows provided by (used in) financing activities

    Proceeds from senior notes                                                                                                              -        1,073.5

    Proceeds from multicurrency revolving facility                                                                                      400.0               -

    Payments on multicurrency revolving facility                                                                                      (400.0)              -

    Redemption of senior notes                                                                                                        (500.0)      (1,250.0)

    Proceeds from term loan                                                                                                             192.7           750.0

    Payments on term loan                                                                                                             (940.0)        (800.0)

    Net payments on other debt                                                                                                          (0.9)         (33.1)

    Dividends paid to stockholders                                                                                                    (193.6)        (188.4)

    Proceeds from employee stock compensation plans                                                                                     145.5           136.6

    Net cash flows from unremitted servicing collections in revolving factoring                                                         103.5               -
    programs

    Business combination contingent consideration payments                                                                              (9.1)              -

    Restricted stock withholdings                                                                                                       (8.3)          (6.3)

    Debt issuance costs                                                                                                                 (0.3)         (10.0)

    Repurchase of common stock                                                                                                              -        (415.5)
                                                                                                                                          ---         ------

    Net cash used in financing activities                                                                                           (1,210.5)        (743.2)
                                                                                                                                     --------          ------

    Effect of exchange rates on cash and cash equivalents                                                                                29.3          (22.7)
                                                                                                                                         ----           -----

    Decrease in cash and cash equivalents                                                                                             (109.7)        (825.2)

    Cash and cash equivalents, beginning of period                                                                                      634.1         1,459.3
                                                                                                                                        -----         -------

    Cash and cash equivalents, end of period                                                                                           $524.4          $634.1
                                                                                                                                       ======          ======

 

                                                                         ZIMMER BIOMET HOLDINGS, INC.
                                                                            NET SALES BY GEOGRAPHY
                                                        FOR THE THREE MONTHS and YEARS ENDED DECEMBER 31, 2017 and 2016
                                                                           (in millions, unaudited)

                          Three Months Ended                                                    Years Ended
                             December 31,                                                      December 31,
                             ------------                                                      ------------

                 2017                        2016              % Inc                                      2017          2016           % Inc
                 ----                        ----              -----                                      ----          ----           -----

    Americas          $1,280.0                    $1,268.1                                    0.9                             $4,865.6        $4,802.2  1.3%

                                                                                                           %

    EMEA                 472.7                       444.4                                    6.4                              1,745.2         1,730.4   0.9

    Asia Pacific         321.6                       300.6                                    7.0                              1,213.3         1,151.3   5.4
                         -----                       -----                                                                    -------         -------

    Total             $2,074.3                    $2,013.1                                   3.0%                            $7,824.1        $7,683.9  1.8%
                      ========                    ========                                                                   ========        ========

 

                                                                              ZIMMER BIOMET HOLDINGS, INC.
                                                                             NET SALES BY PRODUCT CATEGORY
                                                            FOR THE THREE MONTHS and YEARS ENDED DECEMBER 31, 2017 and 2016
                                                                                (in millions, unaudited)


                           Three Months Ended                                                        Years Ended
                              December 31,                                                          December 31,
                              ------------                                                          ------------

                2017                          2016            % Inc                                           2017          2016              % Inc /

                                                                                                                                           (Dec)
                                                                                                                                            ----

    Knees              $731.2                        $720.9                                      1.4%                            $2,737.1             $2,752.6  (0.6)%

    Hips                499.1                         482.2                                       3.5                              1,879.1              1,867.9     0.6

    S.E.T               454.6                         429.4                                       5.9                              1,709.1              1,644.4     3.9

    Dental              107.5                         105.4                                       2.1                                418.6                427.9   (2.2)

    Spine & CMF         194.3                         191.3                                       1.5                                759.5                662.0    14.7

    Other                87.6                          83.9                                       4.3                                320.7                329.1   (2.5)
                         ----                          ----                                                                         -----                -----

    Total            $2,074.3                      $2,013.1                                      3.0%                            $7,824.1             $7,683.9    1.8%
                     ========                      ========                                                                      ========             ========

 

                                                           ZIMMER BIOMET HOLDINGS, INC.
                                                 RECONCILIATION OF REPORTED NET SALES % CHANGE TO
                                                            CONSTANT CURRENCY % CHANGE
                                                                   (unaudited)


                                For the Three Months Ended

                                     December 31, 2017
                                     -----------------

                                                                              Foreign                   Constant

                                                                             Exchange                   Currency

                       % Change                                               Impact                    % Change
                       --------                                               ------                    --------

    Geographic Results

    Americas                    0.9%                                                              0.1%             0.8%

    EMEA                         6.4                                                                6.7             (0.3)

    Asia Pacific                 7.0                                                              (0.2)              7.2

    Total                       3.0%                                                              1.5%             1.5%

    Product Categories

    Knees

    Americas                  (0.3)%                                                              0.2%           (0.5)%

    EMEA                        10.0                                                                6.1               3.9

    Asia Pacific               (4.1)                                                               0.3             (4.4)

    Total                        1.4                                                                1.5             (0.1)

    Hips

    Americas                     0.8                                                                0.3               0.5

    EMEA                         1.5                                                                6.8             (5.3)

    Asia Pacific                13.8                                                              (0.8)             14.6

    Total                        3.5                                                                1.9               1.6

    S.E.T                        5.9                                                                1.3               4.6

    Dental                       2.1                                                                2.5             (0.4)

    Spine & CMF                  1.5                                                                1.0               0.5

    Other                        4.3                                                                1.4               2.9

    Total                       3.0%                                                              1.5%             1.5%

 

                                                         ZIMMER BIOMET HOLDINGS, INC.
                                               RECONCILIATION OF REPORTED NET SALES % CHANGE TO
                                                        CONSTANT CURRENCY % CHANGE AND
                                                  % CHANGE EXCLUDING LDR HOLDING CORPORATION
                                                                 (unaudited)


                                                                   For the Year Ended

                                                                    December 31, 2017
                                                                  -----------------

                                                                                                 Foreign         Constant

                                                                                                Exchange         Currency

                                                      % Change                                   Impact          % Change
                                                      --------                                   ------          --------

    Geographic Results

    Americas                                                   1.3%                                      0.1%               1.2%

    EMEA                                                        0.9                                        0.7                 0.2

    Asia Pacific                                                5.4                                      (0.9)                6.3

    Total                                                      1.8%                                         -  %            1.8%

    Product Categories

    Knees

    Americas                                                 (1.7)%                                         -  %          (1.7)%

    EMEA                                                        1.0                                        0.1                 0.9

    Asia Pacific                                                1.5                                      (0.1)                1.6

    Total                                                     (0.6)                                         -              (0.6)

    Hips

    Americas                                                  (1.2)                                       0.1               (1.3)

    EMEA                                                      (0.7)                                       1.1               (1.8)

    Asia Pacific                                                7.5                                      (1.6)                9.1

    Total                                                       0.6                                          -                0.6

    S.E.T                                                       3.9                                      (0.1)                4.0

    Dental                                                    (2.2)                                       0.4               (2.6)

    Spine & CMF                                                14.7                                        0.3                14.4

    Other                                                     (2.5)                                       0.1               (2.6)

    Total                                                      1.8%                                         -  %            1.8%

    Impact of LDR Holding Corporation                         (1.3)                                         -              (1.3)
                                                               ----                                        ---               ----

    % Change excluding LDR Holding Corporation                 0.5%                                         -  %            0.5%

 

                                                               ZIMMER BIOMET HOLDINGS, INC.
                                                 RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
                                                  FOR THE THREE MONTHS ENDED DECEMBER 31, 2017 and 2016
                                                                 (in millions, unaudited)


                                                                                                            Three Months

                                                                                                               Ended
                                                                                                            December 31,
                                                                                                          ------------

                                                                                                      2017               2016
                                                                                                      ----               ----

    Net Earnings of Zimmer Biomet Holdings, Inc.                                                               $1,257.2          $69.6

    Inventory step-up and other inventory and                                                                      26.1          111.4
    manufacturing-related charges

    Intangible asset amortization                                                                                 151.5          141.2

    Certain claims                                                                                                 10.3              -

    Goodwill impairment (2)                                                                                       272.0              -

    Special items

    Biomet merger-related                                                                                          74.4          173.8

    Other special items                                                                                           132.0           41.0

    Merger-related and other expense in other                                                                       2.1            4.7
    expense, net

    Debt extinguishment                                                                                               -          53.3

    Taxes on above items (3)                                                                                    (134.9)       (152.0)

    U.S. tax reform (4)                                                                                       (1,305.5)             -

    Other certain tax adjustments (5)                                                                            (56.7)         (8.9)
                                                                                                                  -----           ----

    Adjusted Net Earnings                                                                                        $428.5         $434.1
                                                                                                                 ======         ======

 

                                                               ZIMMER BIOMET HOLDINGS, INC.
                                                 RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
                                                      FOR THE YEARS ENDED DECEMBER 31, 2017 and 2016
                                                                 (in millions, unaudited)


                                                                                                                Years

                                                                                                          Ended December 31,
                                                                                                          ------------------

                                                                                                       2017                  2016
                                                                                                       ----                  ----

    Net Earnings of Zimmer Biomet Holdings, Inc.                                                                $1,839.6            $305.9

    Inventory step-up and other inventory and                                                                       84.6             469.1
    manufacturing-related charges

    Intangible asset amortization                                                                                  603.9             565.9

    Certain claims                                                                                                  10.3                 -

    Goodwill impairment (2)                                                                                        304.7                 -

    Special items

    Biomet merger-related                                                                                          248.0             487.3

    Other special items                                                                                            359.8             124.5

    Merger-related and other expense in other                                                                        2.6               3.6
    expense, net

    Debt extinguishment                                                                                                -             53.3

    Taxes on above items (3)                                                                                     (399.3)          (449.0)

    Biomet merger-related measurement period                                                                           -             52.7
    tax adjustments (6)

    U.S. tax reform (4)                                                                                        (1,305.5)                -

    Other certain tax adjustments (7)                                                                            (112.3)            (2.5)
                                                                                                                  ------              ----

    Adjusted Net Earnings                                                                                       $1,636.4          $1,610.8
                                                                                                                ========          ========

 

                                                          ZIMMER BIOMET HOLDINGS, INC.
                                              RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS
                                              FOR THE THREE MONTHS ENDED DECEMBER 31, 2017 and 2016
                                                                   (unaudited)


                                                                                                   Three Months

                                                                                                       Ended
                                                                                                   December 31,
                                                                                                 ------------

                                                                                               2017             2016
                                                                                               ----             ----

    Diluted EPS                                                                                         $6.16                 $0.34

    Inventory step-up and other inventory and                                                          0.13                  0.55
    manufacturing-related charges

    Intangible asset amortization                                                                      0.74                  0.70

    Certain claims                                                                                     0.05                     -

    Goodwill impairment (2)                                                                            1.33                     -

    Special items

    Biomet merger-related                                                                              0.36                  0.86

    Other special items                                                                                0.65                  0.20

    Merger-related and other expense in other                                                          0.01                  0.02
    expense, net

    Debt extinguishment                                                                           -                  0.26

    Taxes on above items (3)                                                                         (0.66)               (0.75)

    U.S. tax reform (4)                                                                              (6.40)                    -

    Other certain tax adjustments (5)                                                                (0.27)               (0.04)
                                                                                                      -----                 -----

    Adjusted Diluted EPS                                                                                $2.10                 $2.14
                                                                                                        =====                 =====

 

                                                             ZIMMER BIOMET HOLDINGS, INC.
                                                 RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS
                                                    FOR THE YEARS ENDED DECEMBER 31, 2017 and 2016
                                                                      (unaudited)

                                                                                                               Years

                                                                                                               Ended
                                                                                                           December 31,
                                                                                                           ------------

                                                                                                       2017             2016
                                                                                                       ----             ----

    Diluted EPS                                                                                                 $9.03                 $1.51

    Inventory step-up and other inventory and                                                                  0.42                  2.32
    manufacturing-related charges

    Intangible asset amortization                                                                              2.96                  2.80

    Certain claims                                                                                             0.05                     -

    Goodwill impairment (2)                                                                                    1.49                     -

    Special items

    Biomet merger-related                                                                                      1.22                  2.40

    Other special items                                                                                        1.77                  0.62

    Merger-related and other expense in other                                                                  0.01                  0.02
    expense, net

    Debt extinguishment                                                                                   -                  0.26

    Taxes on above items (3)                                                                                 (1.96)               (2.22)

    Biomet merger-related measurement period tax                                                          -                  0.26
    adjustments (6)

    U.S. tax reform (4)                                                                                      (6.41)                    -

    Other certain tax adjustments (7)                                                                        (0.55)               (0.01)
                                                                                                              -----                 -----

    Adjusted Diluted EPS                                                                                        $8.03                 $7.96
                                                                                                                =====                 =====

 

                                                                       ZIMMER BIOMET HOLDINGS, INC.
                                                               SUMMARY OF EXPENSES INCLUDED IN SPECIAL ITEMS
                                                      FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2017 and 2016
                                                                         (in millions, unaudited)


                                        Three Months                                                 Years

                                           Ended                                                     Ended
                                        December 31,                                              December 31,
                                      ------------                                           ------------

                                   2017                                         2016                                    2017     2016
                                   ----                                         ----                                    ----     ----

    Biomet merger-related

    Consulting and professional                       $20.8                                                       $82.0        $81.5   $220.4
    fees

    Employee termination benefits                       0.2                                                        36.5         12.1     50.8

    Dedicated project personnel                        17.4                                                        15.0         50.6     79.8

    Relocated facilities                                1.6                                                         1.6          7.7     19.1

    Certain litigation matters                         10.5                                                         2.5         15.5      2.5

    Contract terminations                               5.2                                                        11.1          5.2     39.9

    Information technology                              1.0                                                         5.0          5.9     14.3
    integration

    Loss/impairment on assets                           9.8                                                        15.0         36.6     43.0

    Other                                               7.9                                                         5.1         32.9     17.5
                                                        ---                                                         ---         ----     ----

    Total Biomet merger-related                        74.4                                                       173.8        248.0    487.3

    Other

    Consulting and professional                        59.8                                                         2.7        218.1     33.0
    fees

    Employee termination benefits                       1.4                                                         3.8          3.5      7.0

    Dedicated project personnel                        10.2                                                         5.8         45.6     17.3

    Impairment/loss on disposal of                        -                                                          -           -     1.1
    assets

    LDR merger consideration                              -                                                          -           -    24.1
    compensation expense

    Relocated facilities                                3.3                                                           -         6.3      0.2

    Certain litigation matters                         53.2                                                        27.1         63.2     30.8

    Contract terminations                               3.9                                                         1.8          3.9      2.9

    Information technology                              1.1                                                         0.2          2.9      1.3
    integration

    Certain R&D agreements                                -                                                          -         2.5        -

    Contingent consideration                          (3.0)                                                          -       (4.5)       -
    adjustments

    Other                                               2.1                                                       (0.4)        18.3      6.8
                                                        ---                                                        ----         ----      ---

    Total Other                                       132.0                                                        41.0        359.8    124.5
                                                      -----                                                        ----        -----    -----

    Special items                                    $206.4                                                      $214.8       $607.8   $611.8
                                                     ======                                                      ======       ======   ======

 

                                  ZIMMER BIOMET HOLDINGS, INC.
               RECONCILIATION OF FIRST QUARTER 2018 PROJECTED REVENUE % CHANGE TO
                              PROJECTED CONSTANT CURRENCY % CHANGE
                                           (unaudited)


     Projected
     Three
     Months
     Ended
     March
     31,
     2018:                          High                                          Low
                                    ----                                          ---

    Revenue
     %
     change                          1.0%                                             (1.0)%

    Foreign
     exchange
     impact                         (3.0)                                              (3.0)
                                     ----                                                ----

     Constant
     currency
     %
     change                        (2.0)%                                             (4.0)%
                                    =====                                               =====

 

                                                                   ZIMMER BIOMET HOLDINGS, INC.
                                                    RECONCILIATION OF FIRST QUARTER 2018 PROJECTED DILUTED EPS
                                                                 TO PROJECTED ADJUSTED DILUTED EPS
                                                                            (unaudited)


    Projected Three Months Ended March 31, 2018:                                                          High          Low
                                                                                                          ----          ---

    Diluted EPS                                                                                                   $0.88         $0.73

    Inventory step-up and other inventory and                                                                    1.27          1.37
    manufacturing related charges, intangible asset
    amortization, special items and other expense

    Taxes on above items(3) and other certain tax                                                              (0.24)       (0.26)
    adjustments


    Adjusted Diluted EPS                                                                                          $1.91         $1.84
                                                                                                                  =====         =====

 

             (2)     The Company recognized a $272.0
                                 million non-cash goodwill
                                 impairment charge in the fourth
                                 quarter of 2018 related to its
                                 Spine less Asia Pacific reporting
                                 unit during its annual goodwill
                                 impairment testing.  The
                                 impairment was driven by
                                 integration issues between the
                                 legacy Zimmer, Biomet and LDR
                                 businesses.  In the third quarter
                                 of 2018, the Company recognized a
                                 $32.7 million non-cash goodwill
                                 impairment charge related to its
                                 Office Based Technologies
                                 reporting unit.  Operating
                                 performance of this reporting
                                 unit has been lower than expected
                                 due to integration issues,
                                 management turnover and poor
                                 execution of its operating plans.


             (3)     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 where the
                                 items were or are projected to be
                                 incurred.  For jurisdictions
                                 outside the U.S., the tax effect
                                 is estimated based upon the
                                 statutory rates where the items
                                 were or are projected to be
                                 incurred.


             (4)     U.S. tax reform resulted in a net
                                 favorable provisional adjustment
                                 due to the reduction of certain
                                 deferred tax liabilities, which
                                 were partially offset by
                                 provisional tax charges related
                                 to the toll tax provision of U.S.
                                 tax reform.


             (5)     In 2017, other certain tax
                                 adjustments relate to a favorable
                                 tax rate change in a foreign
                                 jurisdiction and net favorable
                                 adjustments from internal
                                 restructuring transactions. The
                                 2016 adjustment primarily
                                 includes a favorable resolution
                                 of certain tax matters with
                                 taxing authorities offset by
                                 internal restructuring
                                 transactions that provide the
                                 Company access to offshore funds
                                 in a tax efficient manner.


             (6)     The 2016 period includes negative
                                 effects from finalizing the tax
                                 accounts for the Biomet merger.
                                 Under the applicable U.S. GAAP
                                 rules, these measurement period
                                 adjustments are recognized on a
                                 prospective basis in the period
                                 of change.


             (7)     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,
                                 net favorable resolutions of
                                 various tax matters, a favorable
                                 tax rate change in a foreign
                                 jurisdiction and net favorable
                                 adjustments from internal
                                 restructuring transactions. The
                                 2016 adjustment primarily relates
                                 to a favorable adjustment to
                                 certain deferred tax liabilities
                                 recognized as part of
                                 acquisition-related accounting
                                 and favorable resolution of
                                 certain tax matters with taxing
                                 authorities offset by internal
                                 restructuring transactions that
                                 provide the Company access to
                                 offshore funds in a tax efficient
                                 manner.

 

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SOURCE Zimmer Biomet Holdings, Inc.

 
 
Company Codes: NYSE:ZBH, Swiss:ZBH
 

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