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Zimmer Biomet Holdings, Inc. Reports First Quarter 2016 Financial Results

WARSAW, Ind., April 28, 2016 /PRNewswire/ --

Zimmer Biomet Holdings, Inc. (NYSE and SIX: ZBH) today reported financial results for the quarter ended March 31, 2016.  The Company reported first quarter net sales of $1.90 billion, an increase of 67.8% on a reported basis and an increase of 1.2% on an adjusted pro forma, constant currency basis, compared to the first quarter of 2015.  Diluted earnings per share for the quarter were $0.52 reported and $2.00 adjusted, an increase of 29.9% adjusted over the prior year period.

ZIMMER BIOMET INC. LOGO

"Zimmer Biomet's first quarter revenue was at the high end of our expectations coming into the year, laying the groundwork for sequential sales improvement as 2016 progresses.  We also continued to make good progress against our net synergy commitments, which supported our ability to again deliver operating margin leverage and strong adjusted earnings per share results," said David Dvorak, President and CEO of Zimmer Biomet.  "We remain on pace to exit the year at or above market growth rates, driven by our focused commercial channel and the cross-selling opportunities across our market-leading musculoskeletal portfolio."

Net earnings for the first quarter were $105.9 million on a reported basis and $404.3 million on an adjusted basis, an increase of 51.5% adjusted over the prior year period.  Operating cash flow for the first quarter was $265.2 million.

In the quarter, the Company paid $44.6 million in dividends and declared a first quarter dividend of $0.24 per share, reflecting an increase of 9.1 percent over the dividend declared for the first quarter of 2015.  Additionally, the Company utilized $415.5 million of cash to repurchase 4.2 million shares.  The Company also repaid $400.0 million on its outstanding term loan during the quarter.

Guidance 
The Company increased its full-year 2016 constant currency revenue and adjusted earnings per share guidance.  The Company now expects constant currency revenue for the full year 2016, as compared to adjusted pro forma 2015 revenue, to increase between 2.0% and 3.0%.  Previously, the Company had expected full-year constant currency revenue to increase between 1.5% and 2.5%.

Additionally, the Company now expects foreign currency translation to decrease full-year 2016 revenues by approximately 1.0%, resulting in reported revenue growth between 1.0% and 2.0% when compared to adjusted pro forma 2015 revenue.  Previously, the Company estimated foreign currency translation would decrease revenues by 2.0%.

The Company now expects full-year 2016 adjusted diluted earnings per share to be in a range of $7.85 to $8.00.  Previously, the Company had estimated a range of $7.80 to $7.95.

Conference Call 
The Company will conduct its first quarter 2016 investor conference call today, April 28, 2016, 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 (877) 941-1227 and entering conference ID 4721887.  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 29, 2016 to May 27, 2016.  To access the recording, U.S. and Canada callers should dial (800) 406-7325 and international callers should dial +1 (303) 590-3030, and enter the Access Code ID 4696670.

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, a pro forma reported basis, and an adjusted pro forma constant currency basis.

 

NET SALES - THREE MONTHS ENDED MARCH 31, 2016


(in millions, unaudited)




































Adjusted











Pro Forma









Pro Forma


Constant




Net


Reported


Reported


Currency




Sales


% Change


% Change


% Change

Geographic Results












Americas

$     1,177


82.5

%


(0.5)

%


1.8

%


EMEA

456


52.7



(6.8)



(1.5)



Asia Pacific

271


42.1



0.6



3.6




Total 

$     1,904


67.8



(1.9)



1.2




























Product Categories












Knees












   Americas

$       429


57.9



0.5



3.3



   EMEA

174


44.1



(5.8)



1.9



   Asia Pacific

100


40.0



1.6



7.2




       Total

703


51.6



(1.0)



3.5
















Hips












   Americas

246


69.4



0.6



1.3



   EMEA

137


32.9



(6.3)



(2.2)



   Asia Pacific

85


34.5



1.5



2.9




       Total

468


50.2



(1.3)



0.5
















S.E.T (1)

401


83.6



(1.7)



0.2
















Dental

109


94.7



(7.4)



(6.0)
















Spine & CMF

141


185.1



(1.7)



(1.0)
















Other

82


132.6



(7.3)



5.6

















Total

$     1,904


67.8



(1.9)



1.2




























(1) Surgical, Sports Medicine, Biologics, 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; spine, bone healing, 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  
Adjusted earnings per share and adjusted net earnings exclude the effect of inventory step-up and other inventory and manufacturing related charges, certain claims, special items, intangible asset amortization, financing and other expenses related to the Biomet merger and 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.  "Pro forma" revenue refers to revenue for prior year periods adjusted to reflect the inclusion of Biomet revenue on a GAAP (reported) basis.  "Adjusted pro forma" revenue refers to pro forma revenue adjusted to reflect the impact of the previously announced divestiture remedies.  "Constant currency" refers to any financial measure that excludes the effect of changes in foreign currency exchange rates.  Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure 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.  Such forward-looking statements include, but are not limited to, statements about the benefits of the merger between Zimmer and LVB Acquisition, Inc., the parent company of Biomet, including future financial and operating results, the combined company's plans, objectives, expectations and intentions and other statements that are not historical facts.  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 the merger 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 the legacy companies; the effect of the potential disruption of management's attention from ongoing business operations due to integration matters related to the merger; the effect of the merger on our relationships with customers, vendors and lenders and on our operating results and businesses generally; Biomet's compliance with its Deferred Prosecution Agreement; the outcome of government investigations; price and product competition; the success of our quality and operational excellence initiatives; 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; 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; 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 periodic 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, 2016 and 2015 

 (in millions, except per share amounts, unaudited) 






2016


2015

 Net Sales 

$     1,904.0


$     1,134.4





 Cost of products sold, excluding intangible asset amortization 

635.2


284.9

 Intangible asset amortization 

126.6


20.4

 Research and development 

85.7


48.3

 Selling, general and administrative 

716.9


424.1

 Special items 

94.1


86.8

      Operating expenses 

1,658.5


864.5





 Operating Profit 

245.5


269.9





 Other expense, net 

(3.8)


(22.6)

 Interest income  

1.3


2.6

 Interest expense 

(88.2)


(23.1)





 Earnings before income taxes 

154.8


226.8





 Provision for income taxes 

49.0


55.7





 Net Earnings 

105.8


171.1





 Less: Net Loss attributable to noncontrolling interest 

(0.1)


(0.3)





 Net Earnings of Zimmer Biomet Holdings, Inc. 

$        105.9


$        171.4





 Earnings Per Common Share 




     Basic 

$          0.53


$          1.01

     Diluted 

$          0.52


$          0.99





 Weighted Average Common Shares Outstanding 




     Basic 

200.1


170.0

     Diluted 

202.0


172.9





 Cash Dividends Declared Per Common Share 

$          0.24


$          0.22

 

 

 ZIMMER BIOMET HOLDINGS, INC. 

 CONDENSED CONSOLIDATED BALANCE SHEETS 

 (in millions, unaudited) 






March 31,

December 31,





2016

2015

 Assets 






 Current Assets: 






   Cash and cash equivalents 




$               996.8

$            1,459.3

   Short-term investments 




13.4

164.6

   Receivables, net 




1,568.2

1,446.5

   Inventories 




2,082.9

2,254.1

   Other current assets 




420.7

529.2

       Total current assets 




5,082.0

5,853.7







 Property, plant and equipment, net 



2,039.0

$            2,062.6

 Goodwill 




10,142.9

9,934.2

 Intangible assets, net 




8,474.2

8,746.3

 Other assets 




559.2

563.8

 Total Assets 




$          26,297.3

$          27,160.6







 Liabilities and Stockholders' Equity 











 Current liabilities 




$            1,514.6

$            1,617.9

 Other long-term liabilities 




4,004.3

4,155.9

 Long-term debt 




11,117.4

11,497.4

 Stockholders' equity 




9,661.0

9,889.4

 Total Liabilities and Stockholders' Equity 


$          26,297.3

$          27,160.6

 

 

 ZIMMER BIOMET HOLDINGS, INC. 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 FOR THE THREE MONTHS ENDED MARCH 31, 2016 and 2015 

 (in millions, unaudited) 













2016

2015








 Cash flows provided by (used in) operating activities 





 Net earnings 




$        105.8

$        171.1


 Depreciation and amortization 




246.9

89.0


 Share-based compensation 




12.7

12.9


 Income tax benefits from employee stock compensation plans 


10.0

16.4


 Excess income tax benefits from employee stock compensation plans 


(3.2)

(7.8)


 Inventory step-up 




153.7

0.4


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




     Income taxes 




(40.8)

(12.6)


     Receivables 




(83.4)

6.6


     Inventories 




38.3

(57.9)


     Accounts payable and accrued expenses 



(120.7)

(151.4)


     Other assets and liabilities 




(54.1)

24.8


 Net cash provided by operating activities 



265.2

91.5








 Cash flows provided by (used in) investing activities 





 Additions to instruments 




(85.1)

(62.4)


 Additions to other property, plant and equipment 


(27.6)

(34.4)


 Purchases of investments 




(0.3)

(152.6)


 Sales of investments 




223.5

320.3


 Investments in other assets 




(14.7)

(3.0)


 Net cash provided by investing activities 



95.8

67.9








 Cash flows provided by (used in) financing activities 





 Proceeds from senior notes 




-

7,628.2


 Payments on term loan 




(400.0)

-


 Net proceeds under revolving credit facilities 



0.3

0.8


 Dividends paid to stockholders 



(44.6)

(37.3)


 Proceeds from employee stock compensation plans 


31.3

27.5


 Excess income tax benefits from employee stock compensation plans 


3.2

7.8


 Debt issuance costs 




-

(58.4)


 Repurchase of common stock 




(415.5)

-


 Net cash (used in) provided by financing activities 


(825.3)

7,568.6








 Effect of exchange rates on cash and cash equivalents 


1.8

(17.8)







-


 (Decrease) increase in cash and cash equivalents 


(462.5)

7,710.2

 Cash and cash equivalents, beginning of period 



1,459.3

1,083.3

 Cash and cash equivalents, end of period 



$        996.8

$     8,793.5

 

 

 ZIMMER BIOMET HOLDINGS, INC. 

 NET SALES BY GEOGRAPHY 

 FOR THE THREE MONTHS ENDED MARCH 31, 2016 and 2015 

 (in millions, unaudited) 



Three Months Ended March 31







2016

2015

% Inc








 Americas 


$     1,177.2

$        645.2

82.5

%

 EMEA 


456.3

298.9

52.7


 Asia Pacific 


270.5

190.3

42.1


 Total 


$     1,904.0

$     1,134.4

67.8




















 ZIMMER BIOMET HOLDINGS, INC. 

 NET SALES BY PRODUCT CATEGORY 

 FOR THE THREE MONTHS ENDED MARCH 31, 2016 and 2015 

 (in millions, unaudited) 



Three Months Ended March 31







2016

2015

% Inc








 Knees 


$        703.3

$        463.9

51.6

%

 Hips 


467.9

311.4

50.2


 S.E.T 


401.1

218.4

83.6


 Dental 


108.6

55.8

94.7


 Spine & CMF 


141.2

49.5

185.1


 Other 


81.9

35.4

132.6


 Total 


$     1,904.0

$     1,134.4

67.8


 

 

ZIMMER BIOMET HOLDINGS, INC.

RECONCILIATION OF PRO FORMA REPORTED % GROWTH TO

ADJUSTED PRO FORMA CONSTANT CURRENCY % GROWTH

(unaudited)























For the Three Months Ended




March 31, 2016








































Adjusted












Pro Forma




Pro Forma





Foreign


Constant




Reported


Divestiture


Exchange


Currency




% Change


Impact


Impact


% Change

Geographic Results













Americas

(0.5)

%


(1.9)

%


(0.4)

%


1.8

%


EMEA

(6.8)



(1.3)



(4.0)



(1.5)



Asia Pacific

0.6



(0.7)



(2.3)



3.6




Total 

(1.9)



(1.5)



(1.6)



1.2






























Product Categories














Knees














   Americas

0.5



(2.4)



(0.4)



3.3




   EMEA

(5.8)



(3.2)



(4.5)



1.9




   Asia Pacific

1.6



(1.7)



(3.9)



7.2




       Total

(1.0)



(2.5)



(2.0)



3.5


















Hips














   Americas

0.6



(0.2)



(0.5)



1.3




   EMEA

(6.3)



-



(4.1)



(2.2)




   Asia Pacific

1.5



-



(1.4)



2.9




       Total

(1.3)



(0.1)



(1.7)



0.5


















S.E.T

(1.7)



(0.7)



(1.2)



0.2


















Dental

(7.4)



-



(1.4)



(6.0)


















Spine & CMF

(1.7)



-



(0.7)



(1.0)


















Other

(7.3)



(11.8)



(1.1)



5.6


















       Total

(1.9)



(1.5)



(1.6)



1.2
















 

 

 ZIMMER BIOMET HOLDINGS, INC. 

 RECONCILIATION OF NET EARNINGS AND ADJUSTED NET EARNINGS 

 FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015 

 (in millions, unaudited) 








 Three Months 



 Ended March 31



2016


2015

Net Earnings of Zimmer Biomet Holdings, Inc.

$       105.9


$       171.4

Inventory step-up and other inventory 




   and manufacturing related charges

172.9


3.9

Intangible asset amortization

126.6


20.4

Special items





   Biomet merger-related


84.5


25.8

   Other special items


9.6


61.0

Biomet merger-related expenses in other expense, net

-


19.5

Interest expense on Biomet merger financing

-


8.5

Taxes on above items and other certain tax adjustments (1)

(95.2)


(43.6)

Adjusted Net Earnings


$       404.3


$       266.9











(1)  The tax effect is calculated based upon the statutory rates for the jurisdictions where the items
     were incurred.

 

 

 ZIMMER BIOMET HOLDINGS, INC. 

 RECONCILIATION OF DILUTED EPS AND ADJUSTED DILUTED EPS 

 FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015 

 (unaudited) 






 Three Months 


 Ended March 31


2016


2015

Diluted EPS

$          0.52


$          0.99

Inventory step-up and other inventory 




   and manufacturing related charges

0.86


0.02

Intangible asset amortization

0.63


0.12

Special items




   Biomet-merger related

0.42


0.15

   Other special items

0.05


0.35

Biomet merger-related expenses in other expense, net

-


0.11

Interest expense on Biomet merger financing

-


0.05

Taxes on above items and other certain tax adjustments (1)

(0.48)


(0.25)

Adjusted Diluted EPS

$          2.00


$          1.54









(1)  The tax effect is calculated based upon the statutory rates for the jurisdictions where the items
     were incurred.

 

 

 ZIMMER BIOMET HOLDINGS, INC. 

 RECONCILIATION OF 2016 PROJECTED DILUTED EPS 

 AND PROJECTED ADJUSTED DILUTED EPS 

 (unaudited) 













 Projected Year Ended December 31, 2016

High


Low





 Diluted EPS 

$                      2.97


$            2.82

 Inventory step-up and other inventory and manufacturing related 




    charges, intangible asset amortization, special items and other expense  

6.73


6.73

 Taxes on above items* 

(1.70)


(1.70)

 Adjusted Diluted EPS 

$                      8.00


$            7.85









 *  The tax effect is calculated based upon the statutory rates for the jurisdictions where the items 
    were or are projected to be incurred. 

 

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SOURCE Zimmer Biomet Holdings, Inc.

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