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 East and 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
Net
Currency
Sales
% Change
% Change
---
Geographic Results
Americas $
1,194 (1.2)% (0.9)%
EMEA 464 (6.6) 1.5
Asia Pacific 318 1.4 5.6
Total $
1,976 (2.1)% 0.7%
Product Categories
Knees
Americas $
409 (1.9)% (1.7)%
EMEA 176 (7.0) 1.5
Asia Pacific 109 1.8 6.8
Total 694 (2.7) 0.5
Hips
Americas 247 (0.3) 0.1
EMEA 133 (6.4) 1.7
Asia Pacific 104 1.9 5.7
Total 484 (1.6) 1.7
S.E.T * 440 (0.6) 1.7
Spine & CMF** 183 (0.1) 1.7
Dental 105 (2.9) (0.2)
Other 70 (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.
Cautionary Note Regarding Forward-Looking Statements
This release contains forward-looking statements within the meaning of federal securities laws, 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," "would," "predicts," "potential," "strategy," "future," "opportunity," "work toward," "intends," "guidance," "confidence," "look forward to" 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, expectations and assumptions of management and are subject to significant risks, uncertainties and changes in circumstances that could cause actual outcomes and results to differ materially from the forward-looking statements. These risks, uncertainties and changes in circumstances include, but are not limited to: the possibility that the anticipated synergies and other benefits from mergers and acquisitions will not be realized, or will not be realized within the expected time periods; the risks and uncertainties related to our ability to successfully integrate the operations, products, employees and distributors of acquired companies; the effect of the potential disruption of management's attention from ongoing business operations due to integration matters related to mergers and acquisitions; the effect of mergers and acquisitions on our relationships with customers, vendors and lenders and on our operating results and businesses generally; compliance with the Deferred Prosecution Agreement entered into in January 2017; the success of our quality and operational excellence initiatives, including ongoing quality remediation efforts at our Warsaw North Campus facility; challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the U.S. Food and Drug Administration (FDA) and foreign government regulators, such as more stringent requirements for regulatory clearance of products; the ability to remediate matters identified in any inspectional observations or warning letters issued by the FDA, while continuing to satisfy the demand for our products; the outcome of government investigations; competition; pricing pressures; changes in customer demand for our products and services caused by demographic changes or other factors; the impact of healthcare reform measures, including the impact of the U.S. excise tax on medical devices if such tax is not further suspended or repealed; 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, including our Annual Report on Form 10-K for the year ended December 31, 2018. 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 expressly 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 note is applicable to all forward-looking statements contained in this release.
ZIMMER BIOMET HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 and 2018
(in millions, except per share amounts, unaudited)
2019 2018
---
Net Sales $
1,975.5 $
2,017.6
Cost of products sold, excluding intangible asset amortization 553.4 575.8
Intangible asset amortization 143.4 150.8
Research and development 101.7 95.7
Selling, general and administrative 796.4 801.7
Acquisition, integration and related 10.7 46.0
Quality remediation 19.7 42.6
Operating expenses 1,625.3 1,712.6
Operating Profit 350.2 305.0
Other expense, net (0.5) (3.6)
Interest expense, net (58.0) (78.0)
Earnings before income taxes 291.7 223.4
Provision for income taxes 45.5 47.2
Net Earnings 246.2 176.2
Less: Net Earnings attributable to noncontrolling interest 0.1 1.5
Net Earnings of Zimmer Biomet Holdings, Inc. $
246.1 $
174.7
===
Earnings Per Common Share
Basic $
1.20 $
0.86
Diluted $
1.20 $
0.85
Weighted Average Common Shares Outstanding
Basic 204.4 203.0
Diluted 205.8 204.6
ZIMMER BIOMET HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, unaudited)
March 31, December 31,
2019 2018
Assets
Cash and cash equivalents $
586.8 $
542.8
Receivables, net 1,225.3 1,275.8
Inventories 2,310.2 2,256.5
Other current assets 376.9 352.3
Total current assets 4,499.2 4,427.4
Property, plant and equipment, net 2,014.0 2,015.4
Goodwill 9,570.0 9,594.4
Intangible assets, net 7,522.5 7,684.6
Other assets 683.3 405.0
Total Assets $
24,289.0 $
24,126.8
Liabilities and Stockholders' Equity
Current liabilities $
1,755.0 $
1,896.3
Current portion of long-term debt 500.0 525.0
Other long-term liabilities 2,184.1 2,015.7
Long-term debt 8,310.6 8,413.7
Stockholders' equity 11,539.3 11,276.1
Total Liabilities and Stockholders' Equity $
24,289.0 $
24,126.8
ZIMMER BIOMET HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE
THREE MONTHS
ENDED MARCH 31, 2019 and 2018
(in millions, unaudited)
2019 2018
Cash flows provided by (used in) operating activities
Net earnings $
246.2 $
176.2
Depreciation and amortization 247.7 263.5
Share-based compensation 20.3 13.9
Changes in operating assets and liabilities, net of acquired assets and
liabilities
Income taxes 24.5 8.6
Receivables 50.7 146.2
Inventories (50.7) (39.6)
Accounts payable and accrued expenses (169.2) (27.7)
Other assets and liabilities (85.9) (50.6)
Net cash provided by operating activities (1) 283.6 490.5
Cash flows provided by (used in) investing activities
Additions to instruments (63.7) (60.4)
Additions to other property, plant and equipment (37.8) (26.7)
Net investment hedge settlements 10.5
Investments in other assets (14.5) (14.6)
Net cash used in investing activities (105.5) (101.7)
Cash flows provided by (used in) financing activities
Proceeds from senior notes 749.5
Proceeds from multicurrency revolving facility 400.0
Proceeds from term loans 200.0
Payments on term loans (310.0) (225.0)
Net payments on other debt (0.2)
Dividends paid to stockholders (49.0) (48.6)
Proceeds from employee stock compensation plans 44.4 47.9
Net cash flows from unremitted collections from factoring programs (16.4) (60.8)
Business combination contingent consideration payments (13.6)
Other financing activities (4.2) (7.4)
Net cash provided by (used in) financing activities (135.2) 841.8
Effect of exchange rates on cash and cash equivalents 1.1 10.4
Increase in cash and cash equivalents 44.0 1,241.0
Cash and cash equivalents, beginning of period 542.8 524.4
Cash and cash equivalents, end of period $
586.8 $
1,765.4
(1) 2019 includes approximately $168 million paid related to a patent litigation matter
ZIMMER BIOMET HOLDINGS, INC.
NET SALES BY GEOGRAPHY
FOR THE THREE MONTHS ENDED MARCH 31, 2019 and 2018
(in millions, unaudited)
Three Months Ended
March 31,
2019 2018 % Inc / Volume Price Foreign
(Dec) / Mix Exchange
Americas $
1,194.1 $
1,208.1 (1.2)% 2.0% (2.9)% (0.3)%
EMEA 463.9 496.5 (6.6) 3.4 (1.9) (8.1)
Asia Pacific 317.5 313.0 1.4 7.8 (2.2) (4.2)
Total $
1,975.5 $
2,017.6 (2.1)% 3.3% (2.6)% (2.8)%
ZIMMER BIOMET HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE MONTHS ENDED MARCH 31, 2019 and 2018
(in millions, unaudited)
Three Months Ended
March 31,
2019 2018 % (Dec) Volume Price Foreign
/ Mix Exchange
Knees $
694.1 $
713.3 (2.7)% 3.6% (3.1)% (3.2)%
Hips 484.2 492.0 (1.6) 4.8 (3.1) (3.3)
S.E.T 439.9 442.3 (0.6) 3.1 (1.4) (2.3)
Spine & CMF 182.8 183.1 (0.1) 4.2 (2.5) (1.8)
Dental 104.5 107.6 (2.9) 1.4 (1.6) (2.7)
Other 70.0 79.3 (11.7) (6.8) (2.6) (2.3)
Total $
1,975.5 $
2,017.6 (2.1)% 3.3% (2.6)% (2.8)%
RECONCILIATION OF REPORTED NET SALES % CHANGE TO
CONSTANT CURRENCY % CHANGE
(unaudited)
For the Three Months Ended
March 31, 2019
Foreign Constant
Exchange Currency
% Change Impact % Change
Geographic Results
Americas (1.2)% (0.3)% (0.9)%
EMEA (6.6) (8.1) 1.5
Asia Pacific 1.4 (4.2) 5.6
Total (2.1)% (2.8)% 0.7%
Product Categories
Knees
Americas (1.9)% (0.2)% (1.7)%
EMEA (7.0) (8.5) 1.5
Asia Pacific 1.8 (5.0) 6.8
Total (2.7) (3.2) 0.5
Hips
Americas (0.3) (0.4) 0.1
EMEA (6.4) (8.1) 1.7
Asia Pacific 1.9 (3.8) 5.7
Total (1.6) (3.3) 1.7
S.E.T (0.6) (2.3) 1.7
Spine & CMF (0.1) (1.8) 1.7
Dental (2.9) (2.7) (0.2)
Other (11.7) (2.3) (9.4)
Total (2.1)% (2.8)% 0.7%
ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF REPORTED TO ADJUSTED RESULTS
FOR THE THREE MONTHS ENDED MARCH 31, 2019 and 2018
(in millions, unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019
---
Cost of Intangible Research Selling, Acquisition, Quality Provision Net Earnings Net Diluted
products asset and general and integration remediation for attributable to Earnings earnings
sold, amortization development administrative and related income noncontrolling of per
excluding taxes interest Zimmer common
intangible Biomet share
asset Holdings,
amortization Inc.
As Reported $
553.4 $
143.4 $
101.7 $
796.4 $
10.7 $
19.7 $
45.5 $
0.1 $
246.1 $
1.20
Inventory and (2.0) 3.6 (1.6) (0.01)
manufacturing-related
charges(1)
Intangible asset (143.4) 23.9 119.5 0.58
amortization(2)
Acquisition, integration and (10.7) 2.4 8.3 0.04
related(3)
Quality remediation(4) (19.7) 4.2 15.5 0.08
Litigation(5) 1.8 (2.7) 0.9
Patent litigation licensing 23.5 (5.2) (18.3) (0.09)
gain(6)
European Union Medical (1.6) 0.2 1.4 0.01
Device Regulation(7)
Other charges(8) (22.7) 4.4 0.6 17.7 0.09
Other certain tax 5.3 (5.3) (0.03)
adjustments(9)
As Adjusted $
551.4
$ $
100.1 $
799.0
$
$ $
81.6 $
0.7 $
384.2 $
1.87
FOR THE THREE MONTHS ENDED MARCH 31, 2018
---
Cost of Intangible Selling, general Acquisition, Quality Provision Net Diluted
products sold, asset and integration remediation for income Earnings earnings
excluding amortization administrative and related taxes of Zimmer per
intangible Biomet common
asset Holdings, share
amortization Inc.
As Reported $
575.8 $
150.8 $
801.7 $
46.0 $
42.6 $
47.2 $
174.7 $
0.85
Inventory and manufacturing- (7.2) (5.1) 12.3 0.06
related charges(1)
Intangible asset amortization(2) (150.8) 31.2 119.6 0.58
Acquisition, integration and (46.0) 9.8 36.2 0.18
related(3)
Quality remediation(4) (3.6) (42.6) 10.3 35.9 0.18
Litigation(5) (5.7) 1.4 4.3 0.02
European Union Medical (0.3) 0.3
Device Regulation(7)
Other charges(8) (10.6) 3.1 7.5 0.04
Other certain tax (0.1) 0.1
adjustments(9)
As Adjusted $
565.0
$ $
785.1
$
$ $
97.8 $
390.9 $
1.91
(1) Inventory and manufacturing-related charges relate to
excess and obsolete inventory charges on certain
product lines we intend to discontinue and other
inventory and manufacturing-related charges. The
excess and obsolete inventory charges on certain
product lines are driven by acquisitions where there
are competing product lines and we have plans to
discontinue one of the competing product lines.
(2) We exclude intangible asset amortization from our non-
GAAP financial measures because we internally assess
our performance against our peers without this
amortization. Due to various levels of acquisitions
among our peers, intangible asset amortization can
vary significantly from company to company.
(3) The acquisition, integration and related expenses we
have excluded from our non-GAAP financial measures
resulted from our merger with Biomet in 2015 and
various acquisitions we consummated in 2016. The
acquisition, integration and related expenses include
the following types of expenses:
Consulting and professional fees related to third-
party integration consulting performed in a variety
of areas, such as tax, compliance, logistics and
human resources, and legal fees related to the
consummation of mergers and acquisitions.
Employee termination benefits related to terminating
employees with overlapping responsibilities in
various areas of our business.
Dedicated
project personnel expenses which include the salary,
benefits, travel expenses and other costs directly
associated with employees who are 100 percent
dedicated to our integration of acquired businesses
and employees who have been notified of termination,
but are continuing to work on transferring their
responsibilities.
Contract termination
expenses related to terminated contracts, primarily
with sales agents and distribution agreements.
Other various expenses to relocate facilities,
integrate information technology, losses incurred on
assets resulting from the applicable acquisition, and
other various expenses.
(4) We are addressing inspectional observations on Form
483 and a Warning Letter issued by the U.S. Food and
Drug Administration ("FDA") following its inspections
of our Warsaw North Campus facility, among other
matters. This quality remediation has required us to
devote significant financial resources and is for a
discrete period of time. The majority of the
expenses are related to consultants who are helping
us to update previous documents and redesign certain
processes.
(5) We are involved in routine patent litigation, product
liability litigation, commercial litigation and other
various litigation matters. We review litigation
matters from both a qualitative and quantitative
perspective to determine if excluding the losses or
gains will provide our investors with useful
incremental information. Litigation matters can vary
in their characteristics, frequency and significance
to our operating results. The litigation charges and
gains excluded from our non-GAAP financial measures
in the periods presented relate to product liability
matters where we have received numerous claims on
specific products. In regards to these product
liability matters, due to the complexities involved
and claims filed in multiple districts, the expenses
associated with these matters are significant to our
operating results. Once the litigation matter has
been excluded from our non-GAAP financial measures
in a particular period, any additional expenses or
gains from changes in estimates are also excluded,
even if they are not significant, to ensure
consistency in our non-GAAP financial measures from
period-to-period.
(6) In the first quarter of 2019, we settled a patent
infringement lawsuit out of court, and the other
party agreed to pay us an upfront, lump-sum amount
for a non-exclusive license to the patent.
(7) The new European Union Medical Device Regulation
imposes significant additional premarket and
postmarket requirements. The new regulations provide
a transition period until May 2020 for currently-
approved medical devices to meet the additional
requirements. For certain devices, this transition
period can be extended until May 2024. We are
excluding from our non-GAAP financial measures the
incremental costs incurred to establish initial
compliance with the regulations related to our
currently-approved medical devices. The incremental
costs primarily include third-party consulting
necessary to supplement our internal resources.
(8) We have incurred other various expenses from specific
events or projects that we consider highly variable
or that have a significant impact to our operating
results that we have excluded from our non-GAAP
measures. These include costs related to legal
entity and operational restructuring transactions as
well as our costs of complying with our Deferred
Prosecution Agreement ("DPA") with the U.S.
government related to certain Foreign Corrupt
Practices Act matters involving Biomet and certain of
its subsidiaries. Under the DPA, which has a three-
year term, we are subject to oversight by an
independent compliance monitor, which monitorship
commenced in July 2017. The excluded costs include
the fees paid to the independent compliance monitor
and to external legal counsel assisting in the
matter.
(9) Other certain tax adjustments relate to various
discrete tax period adjustments.
ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF NET CASH PROVIDED BY OPERATING
ACTIVITIES TO FREE CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31, 2019 and 2018
(in millions, unaudited)
Three Months Ended March 31,
2019 2018
---
Net cash provided by operating activities $
283.6 $
490.5
Additions to instruments (63.7) (60.4)
Additions to other property, plant and equipment (37.8) (26.7)
Free cash flow $
182.1 $
403.4
===
ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF GROSS PROFIT & MARGIN TO ADJUSTED GROSS
PROFIT & MARGIN
FOR THE THREE MONTHS ENDED MARCH 31, 2019 and 2018
(in millions, unaudited)
Three Months Ended March 31,
2019 2018
---
Net Sales $
1,975.5 $
2,017.6
Cost of products sold, excluding intangible 553.4 575.8
asset amortization
Intangible asset amortization 143.4 150.8
Gross Profit $
1,278.7 $
1,291.0
Inventory and manufacturing-related charges 2.0 7.2
Quality remediation 3.6
Intangible asset amortization 143.4 150.8
Adjusted gross profit $
1,424.1 $
1,452.6
===
Gross margin 64.7% 64.0%
Inventory and manufacturing-related charges 0.1 0.4
Quality remediation 0.1
Intangible asset amortization 7.3 7.5
Adjusted gross margin 72.1% 72.0%
ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF OPERATING PROFIT & MARGIN TO ADJUSTED OPERATING
PROFIT & MARGIN
FOR THE THREE MONTHS ENDED MARCH 31, 2019 and 2018
(in millions, unaudited)
Three Months Ended March 31,
2019 2018
---
Operating profit $
350.2 $
305.0
Inventory and manufacturing-related charges 2.0 7.2
Intangible asset amortization 143.4 150.8
Acquisition, integration and related 10.7 46.0
Quality remediation 19.7 46.2
Litigation (1.8) 5.7
Patent litigation licensing gain (23.5)
European Union Medical Device Regulation 1.6 0.3
Other charges 22.7 10.6
Adjusted operating profit $
525.0 $
571.8
===
Operating profit margin 17.7% 15.1%
Inventory and manufacturing-related charges 0.1 0.4
Intangible asset amortization 7.3 7.5
Acquisition, integration and related 0.5 2.3
Quality remediation 1.0 2.3
Litigation (0.1) 0.3
Patent litigation licensing gain (1.2)
European Union Medical Device Regulation 0.1
Other charges 1.2 0.4
Adjusted operating profit margin 26.6% 28.3%
ZIMMER BIOMET HOLDINGS, INC.
RECONCILIATION OF EFFECTIVE TAX RATE TO ADJUSTED EFFECTIVE TAX RATE
FOR THE THREE MONTHS ENDED MARCH 31, 2019 and 2018
(unaudited)
Three Months Ended March
31,
2019 2018
---
Effective tax rate 15.6% 21.1%
Inventory and manufacturing-related charges, 1.9 (1.1)
intangible asset amortization, acquisition,
integration and related, quality remediation,
litigation, patent litigation licensing gain,
European Union Medical Device Regulation,
other charges and other certain tax adjustments
---
Adjusted effective tax rate 17.5% 20.0%
===
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SOURCE Zimmer Biomet Holdings, Inc.
