Financial

Zimmer Biomet Announces First Quarter 2019 Financial Results

WARSAW, Ind., April 26, 2019 /PRNewswire/ — Zimmer Biomet Holdings, Inc. (NYSE and SIX: ZBH) today reported financial results for the quarter ended March 31, 2019.  The Company reported first quarter net sales of $1.976 billion.  The effect of foreign currency exchange negatively impacted first quarter net sales by 2.8%, resulting in a reported net sales decrease of 2.1% from the prior year period.  First quarter net sales increased 0.7% on a constant currency basis.  Net earnings for the first quarter were $246 million and $384 million on an adjusted basis.  Diluted earnings per share for the first quarter were $1.20, an increase of 41.2% over the prior year period.  First quarter adjusted diluted earnings per share were $1.87, a decrease of 2.1% from the prior year period.

“We delivered another solid quarter, driven by overall strong performance in the Asia Pacific and Europe, Middle Eastand Africa regions,” said Bryan Hanson, President and CEO of Zimmer Biomet.  “Our accomplishments this quarter affirm our confidence in the progress we are making to turn around the business.  Recently launched products and platform technologies will enable our sales force to leverage our complete ecosystem of differentiated solutions and return to offense in the second half of the year.” 

Geographic and Product Category Sales

The following sales table provides results by geography and product category for the first quarter of 2019, as well as the percentage change compared to the prior year quarter, on both a reported basis and a constant currency basis. 

NET SALES – THREE MONTHS ENDED MARCH 31, 2019
(in millions, unaudited)
Constant
NetCurrency
Sales% Change% Change
Geographic Results
Americas$1,194(1.2)%(0.9)%
EMEA464(6.6)1.5
Asia Pacific3181.45.6
Total$1,976(2.1)%0.7%
Product Categories
Knees
Americas$409(1.9)%(1.7)%
EMEA176(7.0)1.5
Asia Pacific1091.86.8
Total694(2.7)0.5
Hips
Americas247(0.3)0.1
EMEA133(6.4)1.7
Asia Pacific1041.95.7
Total484(1.6)1.7
S.E.T *440(0.6)1.7
Spine & CMF**183(0.1)1.7
Dental105(2.9)(0.2)
Other70(11.7)(9.4)
Total$1,976(2.1)%0.7%
* Surgical, Sports Medicine, Extremities and Trauma
** Craniomaxillofacial

Cash Flow and Balance Sheet

Operating cash flow for the first quarter was $284 million.  Free cash flow in the first quarter was $182 million.  The Company paid down $110 million of debt in the first quarter and expects to continue using a majority of its 2019 free cash flow to further decrease debt.  In addition, the Company paid $49 million in dividends in the quarter and declared a first quarter dividend of $0.24 per share.

Guidance

The Company’s prior guidance for 2019 is unchanged.

Conference Call

The Company will conduct its first quarter 2019 investor conference call today, April 26, 2019, at 8:30 a.m. Eastern Time.  The audio webcast can be accessed via Zimmer Biomet’s Investor Relations website at http://investor.zimmerbiomet.com.  It will be archived for replay following the conference call. 

About the Company

Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer Biomet is a global leader in musculoskeletal healthcare. We design, manufacture and market orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; office based technologies; spine, craniomaxillofacial and thoracic products; dental implants; and related surgical products.

We collaborate with healthcare professionals around the globe to advance the pace of innovation. Our products and solutions help treat patients suffering from disorders of, or injuries to, bones, joints or supporting soft tissues. Together with healthcare professionals, we help millions of people live better lives.

We have operations in more than 25 countries around the world and sell products in more than 100 countries. For more information, visit www.zimmerbiomet.com or follow Zimmer Biomet on Twitter at www.twitter.com/zimmerbiomet

Website Information

We routinely post important information for investors on our website, www.zimmerbiomet.com, in the “Investor Relations” section.  We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD.  Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts.  The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Note on Non-GAAP Financial Measures

This press release includes non-GAAP financial measures that differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”).  These non-GAAP financial measures may not be comparable to similar measures reported by other companies and should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP.

Sales change information for the three-month period ended March 31, 2019 is presented on a GAAP (reported) basis and on a constant currency basis.  Constant currency percentage changes exclude the effects of foreign currency exchange rates.  They are calculated by translating current and prior-period sales at the same predetermined exchange rate.  The translated results are then used to determine year-over-year percentage increases or decreases. 

Net earnings and diluted earnings per share for the three-month period ended March 31, 2019 are presented on a GAAP (reported) basis and on an adjusted basis.  Adjusted earnings and adjusted diluted earnings per share exclude the effects of certain inventory and manufacturing-related charges, including charges to discontinue certain product lines; intangible asset amortization; acquisition, integration and related expenses; quality remediation expenses; certain litigation gains and charges; expenses to comply with the new European Union Medical Device Regulation; other charges; any related effects on our income tax provision associated with these items and other certain tax adjustments. 

Free cash flow is an additional non-GAAP measure that is presented in this press release. Free cash flow is computed by deducting additions to instruments and other property, plant and equipment from net cash provided by operating activities.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in this press release. This press release also contains supplemental reconciliations of additional non-GAAP financial measures that the Company presents in other contexts. These additional non-GAAP financial measures are computed from the most directly comparable GAAP financial measure as indicated in the applicable reconciliation.

Management uses non-GAAP financial measures internally to evaluate the performance of the business.  Additionally, management believes these non-GAAP measures provide meaningful incremental information to investors to consider when evaluating the performance of the Company.  Management believes these measures offer the ability to make period-to-period comparisons that are not impacted by certain items that can cause dramatic changes in reported income but that do not impact the fundamentals of our operations.  The non-GAAP measures enable the evaluation of operating results and trend analysis by allowing a reader to better identify operating trends that may otherwise be masked or distorted by these types of items that are excluded from the non-GAAP measures.  In addition, constant currency sales changes, adjusted operating profit, adjusted diluted earnings per share and free cash flow are used as performance metrics in our incentive compensation programs.

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Drue De Angelis

Drue is Managing Partner for The De Angelis Group, Executive Search firm exclusively for the Ortho & Spine industry.

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