美国
证券交易委员会
华盛顿特区20549
表格
(标记一个)
根据1934年证券交易法第13或15(d)条款的季度报告。 |
截至2024年6月30日季度结束
或
根据1934年证券交易法第13或15(d)条款的过渡报告 |
从 至过渡期间
委员会档案编号：
（根据其章程所指定的正式名称）
( 其他司法管辖区或 的注册地或组织地点) |
(国税局雇主识别号码) |
(总部办公地址) |
（邮政编码） |
注册人的电话号码，包括区号：(
根据法案第12(b)条规定注册的证券：
每种类别的名称 |
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交易 标的 |
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每个注册交易所的名称 |
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以勾号注明注册人 (1) 是否在过去 12 个月内提交了 1934 年证券交易法第 13 条或第 15 (d) 条所要求提交的所有报告（或在较短的时间内，注册人需要提交该等报告），以及 (2) 过去 90 天内已遵守该等申报要求。
请打勾表明申报人在过去的12个月（或申报人需在该较短期间内提交这些档案）中已根据《对S-t法规（本章节第232.405条）的规定405条》提交了所有必须提交的交互式资料档案。
请勾选指示登记者是否为大型快速提交人、快速提交人、非快速提交人、较小的报告公司或新兴成长型公司。请参阅交易所法规120亿2条，了解「大型快速提交人」、「快速提交人」、「较小的报告公司」和「新兴成长型公司」的定义。
大型加速归档人 |
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☐ |
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☒ |
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非加速归档人 |
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☐ |
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小型报告公司 |
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新兴成长型企业 |
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如果是新兴成长型企业，在符合任何依据证券交易法第13(a)条所提供的任何新的或修改的财务会计准则的遵循的延伸过渡期方面，是否选择不使用核准记号进行指示。☐
请用勾选标记指示，注册人是否属于外壳公司（交易所法规定的第120亿2条）。 是 ☐ 否
截至2024年10月25日，登记公司的普通股股份未发行数为
zimvie inc.
季度报告
关于前瞻性陈述的注意事项
这份季度报告中包含了根据联邦证券法律意义内的前瞻性陈述，包括但不限于任何关于我们期望、计划、意图、策略或展望的陈述。我们通常使用“可能”、“将会”、“预期”、“相信”、“预测”、“计划”、“估计”、“项目”、“假定”、“指引”、“目标”、“预测”、“看到”、“追求”、“应该”、“可能”、“将会”、“预测”、“潜在”、“策略”、“未来”、“机会”、“朝向工作”、“打算”、“指导”、“信心”、“位置”、“设计”、“努力”、“继续”、“跟踪”、“期待”等类似表达来识别前瞻性陈述。除了历史或当前事实的陈述外，所有其他陈述均被认为是前瞻性陈述，或有可能被认为是前瞻性陈述。这些陈述基于现时管理层的信念、期望和假设，并且存在重大风险、不确定性和情况变化，可能导致实际结果和结果与前瞻性陈述有显著差异。这些风险、不确定性和情况变化包括但不限于：依赖新产品开发、技术进步和创新；产品类别或区域销售组合的转变；原材料和产品的供应和价格；竞争对手、客户、牙科诊所和保险提供者的价格压力；由人口结构变化或其他因素导致的客户对我们产品和服务的需求变化所带来的挑战；与影响我们在美国和国际业务的政府法律和法规的变化和遵循有关的挑战，包括美国食品药品管理局和外国政府监管机构的法规，例如对产品监管的更严格要求；竞争；医疗保健改革措施的影响；第三方支付方支付水平的降低；政府机构、立法机构、私营部门和医疗组织购买团体方面的成本控制努力，包括中国的基于量的采购流程；成本和费用的控制；为关键原材料和外包活动依赖有限数量供应商的能力；获得和保持足够的知识产权保护的能力；我们信息技术系统或产品的违规或故障，包括遭受网络攻击、未经授权访问或盗窃；保留营销我们产品的独立代理商和经销商的能力；我们吸引、保留和培养所需支持业务的高技能雇员的能力；企业并购对我们与客户、供应商和贷款人关系以及对我们的营业业务及通常业务的影响；组建和实施联盟的能力；源自税收改革措施的税务义务变化，包括欧盟对国家援助规定或税务机构的审查；产品责任、知识产权和商业诉讼损失；一般行业和市场条件的变化，包括国内国际增长速度的变化；一般国内国际经济情况的变化，包括通胀和利率和货币兑换波动；全球流行病和其他对全球经济、我们的业务和业务运营、我们的供应商和客户的业务运营产生不利影响的公共卫生事件对选择性程序的延期和我们收取应收账款的能力；以及欧元区国家持续的财务和政治不确定性对受影响国家应收账款收取能力的影响。
请参阅我们截至2023年12月31日之年度报告10-k表第I部分，第1A项“风险因素”，以及本季度报告第II部分，第1A项“风险因素”，进一步讨论可能导致实际结果和事件与前瞻性陈述有重大差异的某些风险和不确定性。读者应谨慎不要依赖这些前瞻性陈述，因为无法保证这些前瞻性陈述将被证明正确。前瞻性陈述仅于其制作日期发表，我们明确声明没有任何意图或义务更新或修订任何前瞻性陈述，不论是否基于新资讯、未来事件或其他原因。
有关可能导致实际结果与前瞻性陈述不同的因素的更多信息，请查看我们不时向美国证券交易委员会（“SEC”）提交的10-K、10-Q和8-K表格报告。
i
目录
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页面 |
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第一部分 |
3 |
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项目一。 |
3 |
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3 |
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4 |
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5 |
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6 |
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7 |
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8 |
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项目二。 |
22 |
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第三项目。 |
27 |
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第四项。 |
28 |
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第二部分 |
29 |
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项目一。 |
29 |
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项目 1A。 |
29 |
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第五项。 |
29 |
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第六项 |
30 |
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31 |
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ii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
ZIMVIE INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share data)
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net Sales |
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Third party, net |
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$ |
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$ |
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$ |
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$ |
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Related party, net |
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Total Net Sales |
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Cost of products sold, excluding intangible asset amortization |
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( |
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( |
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( |
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( |
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Related party cost of products sold, excluding intangible asset amortization |
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( |
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Intangible asset amortization |
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( |
) |
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( |
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( |
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( |
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Research and development |
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( |
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( |
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( |
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( |
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Selling, general and administrative |
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( |
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( |
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( |
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( |
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Restructuring and other cost reduction initiatives |
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( |
) |
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( |
) |
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( |
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( |
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Acquisition, integration, divestiture and related |
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( |
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( |
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( |
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( |
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Operating Expenses |
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( |
) |
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( |
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( |
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( |
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Operating Loss |
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( |
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( |
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( |
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( |
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Other income (expense), net |
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( |
) |
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( |
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Interest income |
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Interest expense |
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( |
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( |
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( |
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( |
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Loss from continuing operations before income taxes |
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( |
) |
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( |
) |
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( |
) |
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( |
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Benefit (provision) for income taxes from continuing operations |
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( |
) |
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( |
) |
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( |
) |
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Net Loss from Continuing Operations of ZimVie Inc. |
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( |
) |
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( |
) |
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( |
) |
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( |
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Earnings (loss) from discontinued operations, net of tax |
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( |
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Net Loss of ZimVie Inc. |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Basic (Loss) Earnings Per Common Share: |
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Continuing operations |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Discontinued operations |
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( |
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Net Loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Diluted (Loss) Earnings Per Common Share: |
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Continuing operations |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Discontinued operations |
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( |
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Net Loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
ZIMVIE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
(in thousands)
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For the Three Months Ended September 30, |
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For the Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net Loss of ZimVie Inc. |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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Other Comprehensive Income (Loss) |
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Foreign currency cumulative translation adjustments, net of tax |
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( |
) |
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( |
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Total Other Comprehensive Income (Loss) |
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( |
) |
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( |
) |
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Comprehensive Income (Loss) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ZIMVIE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except per share data)
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As of |
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September 30, 2024 |
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December 31, 2023 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for credit losses of $ |
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Inventories |
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Prepaid expenses and other current assets |
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Current assets of discontinued operations |
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Total Current Assets |
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Property, plant and equipment, net of accumulated depreciation of $ |
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Goodwill |
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Intangible assets, net |
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Note receivable |
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Other assets |
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Noncurrent assets of discontinued operations |
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Total Assets |
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$ |
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$ |
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LIABILITIES AND EQUITY |
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Current Liabilities: |
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Accounts payable |
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$ |
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$ |
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Income taxes payable |
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Other current liabilities |
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Current liabilities of discontinued operations |
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Total Current Liabilities |
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Deferred income taxes |
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Lease liability |
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Other long-term liabilities |
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Non-current portion of debt |
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Noncurrent liabilities of discontinued operations |
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Total Liabilities |
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Stockholders' Equity: |
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Common stock, $ |
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Preferred stock, $ |
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Additional paid in capital |
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Accumulated deficit |
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( |
) |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
) |
Total Stockholders' Equity |
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Total Liabilities and Stockholders' Equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ZIMVIE INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands)
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Accumulated |
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Additional |
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Other |
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Common |
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Paid-In |
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Accumulated |
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Comprehensive |
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Total |
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Stock |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balance June 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Net loss |
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( |
) |
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( |
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Stock plan activity |
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( |
) |
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( |
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Share-based compensation expense |
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Other comprehensive income |
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Balance September 30, 2024 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Balance June 30, 2023 |
|
$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Net loss |
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( |
) |
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( |
) |
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Share-based compensation expense |
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Other comprehensive loss |
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( |
) |
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( |
) |
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Balance September 30, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Accumulated |
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Additional |
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Other |
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Common |
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Paid-In |
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Accumulated |
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Comprehensive |
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Total |
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Stock |
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Capital |
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Deficit |
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Income (Loss) |
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Equity |
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Balance December 31, 2023 |
|
$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Net loss |
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|
( |
) |
|
|
|
|
|
( |
) |
|||
Stock plan activity |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance December 31, 2022 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
Net loss |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|||
Stock plan activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Balance September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
ZIMVIE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash flows (used in) provided by operating activities: |
|
|
|
|
|
|
||
Net loss of ZimVie Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Share-based compensation |
|
|
|
|
|
|
||
Deferred income tax provision |
|
|
( |
) |
|
|
( |
) |
Loss on disposal of fixed assets |
|
|
|
|
|
|
||
Other non-cash items |
|
|
|
|
|
|
||
Gain on sale of spine disposal group (Note 2) |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities |
|
|
|
|
|
|
||
Income taxes |
|
|
|
|
|
( |
) |
|
Accounts receivable |
|
|
( |
) |
|
|
|
|
Related party receivable |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
( |
) |
|
|
|
|
Accounts payable and accrued liabilities |
|
|
( |
) |
|
|
( |
) |
Related party payable |
|
|
|
|
|
( |
) |
|
Other assets and liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash (used in) provided by operating activities |
|
|
( |
) |
|
|
|
|
Cash flows provided by (used in) investing activities: |
|
|
|
|
|
|
||
Additions to instruments |
|
|
( |
) |
|
|
( |
) |
Additions to other property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Proceeds from sale of spine disposal group, net of cash disposed |
|
|
|
|
|
|
||
Other investing activities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
Cash flows used in financing activities: |
|
|
|
|
|
|
||
Proceeds from debt |
|
|
|
|
|
|
||
Payments on debt |
|
|
( |
) |
|
|
( |
) |
Business combination contingent consideration payments |
|
|
( |
) |
|
|
|
|
Payments related to tax withholding for share-based compensation |
|
|
( |
) |
|
|
( |
) |
Proceeds from stock plan activity |
|
|
|
|
|
|
||
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Effect of exchange rates on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Decrease in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of year |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
Presentation includes cash of both continuing and discontinued operations |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Income taxes paid, net |
|
$ |
|
|
$ |
|
||
Interest paid |
|
|
|
|
|
|
||
Promissory note receivable issued in connection with the sale of spine disposal group |
|
|
|
|
|
|
||
Interest received in-kind |
|
|
|
|
|
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
ZIMVIE INC.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Background, Nature of Business and Basis of Presentation
Background
On March 1, 2022, ZimVie Inc. ("ZimVie," "we," "us" and "our") and Zimmer Biomet Holdings, Inc. ("Zimmer Biomet") entered into a Separation and Distribution Agreement (the "Separation Agreement"), pursuant to which Zimmer Biomet agreed to spin off its spine and dental businesses into ZimVie. The distribution resulted in ZimVie becoming a standalone, publicly traded company. Following the distribution, Zimmer Biomet initially retained
On December 15, 2023, we entered into a definitive agreement to sell our spine segment to an affiliate of H.I.G. Capital (the "Buyer") for $
Nature of Business
ZimVie is a leading medical technology company dedicated to enhancing the quality of life for dental patients worldwide. We develop, manufacture and market a comprehensive portfolio of products and solutions designed to support dental tooth replacement and restoration procedures. We are well-positioned in the growing global dental implant, biomaterials and digital dentistry market with a strong presence in the tooth replacement market with market leading positions in certain geographies. Prior to the closing of the sale of our spine segment, our operations were principally managed on a products basis and included
Since the sale of our spine segment, our core services include designing, manufacturing and distributing dental implant systems. Dental reconstructive implants are for individuals who are totally without teeth or are missing one or more teeth, dental prosthetic products are aimed at providing a more natural restoration to resemble the original teeth, and dental regenerative products are for soft tissue and bone rehabilitation. Our key products include the T3® Implant, Tapered Screw-Vent® Implant System, Trabecular Metal®™ Dental Implant, BellaTek® Encode® Impression System and Puros® Allograft Particulate.
Prior to the sale of our spine segment, the core services of our spine segment included designing, manufacturing and distributing medical devices and surgical instruments to deliver comprehensive solutions for individuals with back or neck pain caused by degenerative conditions, deformities or traumatic injury of the spine. We also provided devices that promote bone healing. Other differentiated products in our spine portfolio included Mobi-C® Cervical Disc, a motion-preserving alternative to fusion for patients with cervical disc disease, and The Tether™, a novel non-fusion device for treatment of pediatric scoliosis.
Basis of Presentation
The accompanying condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, the condensed consolidated statements of operations, condensed consolidated statements of comprehensive income (loss), condensed consolidated statements of shareholders' equity for the three and nine months ended September 30, 2024 and 2023, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023, of ZimVie are unaudited. In management’s opinion, all adjustments comprising normal recurring adjustments necessary for the fair statement of such condensed consolidated financial statements have been made. The accompanying condensed consolidated financial statements and notes in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 ("Quarterly Report") are presented as permitted by Regulation S-X and do not contain certain information included in our annual financial statements and notes thereto. Accordingly, the accompanying condensed consolidated financial information should be read in conjunction with the audited consolidated financial statements presented in our Annual Report. During the three months ended March 31, 2024, we recorded out of period adjustments that increased the Loss from continuing operations before income taxes and reduced Earnings from discontinued operations, net of tax, by $
8
consolidated financial statements for the three months ended March 31, 2024 or nine months ended September 30, 2024, nor were they material to previously issued interim and annual consolidated financial statements.
Restricted Cash - As of both September 30, 2024 and December 31, 2023, we had $
Sale of Spine Segment
The historical results of our spine segment have been reflected as discontinued operations in our condensed consolidated financial statements as the sale represented a strategic shift in our business that had a major effect on operations and financial results. The assets and liabilities associated with this segment are classified as assets and liabilities of discontinued operations in the condensed consolidated balance sheets. The disclosures presented in the notes to the condensed consolidated financial statements are presented on a continuing operations basis, unless otherwise noted.
Accounting Pronouncements Recently Issued
In October 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC's Disclosure Update and Simplification Initiative. This ASU amends the interim and annual disclosure requirements related to a variety of subtopics in the Accounting Standards Codification, including those focusing on accounting changes, earnings per share, debt and repurchase agreements. The guidance will be applied prospectively. The effective date for each amendment will be the date when the SEC's removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. We are currently evaluating the effect of this ASU, but we do not expect it will have a material impact on our condensed consolidated financial statements or disclosures.
In November 2023, FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The key amendments require disclosure of significant segment expenses on an annual and interim basis that are regularly provided to the chief operating decision maker ("CODM") and included within each reported measure of segment profit or loss, including other segment items by reportable segment and a description of their composition, and to provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by FASB Topic 280, Segment Reporting, in interim periods as well. This ASU includes certain clarifications for measuring a segment's profit or loss in assessment by the CODM, disclosure of title and position of the CODM and an explanation of how the CODM uses the reported measures in assessing segment performance and deciding how to allocate resources. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We do not expect the adoption of this ASU to affect our financial position or our results of operations, but expect it will result in additional disclosures.
In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments included in the ASU related to rate reconciliation, income taxes paid disclosures and other disclosures requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disaggregated by jurisdiction. The amendments allow investors to better assess, in their capital allocation decisions, how an entity’s worldwide operations and related tax risks and tax planning and operational opportunities affect its income tax rate and prospects for future cash flows. The amendments in this update are effective for annual periods beginning after December 15, 2024. We are currently in the process of evaluating the effect of this ASU.
In March 2024, the SEC adopted final rules requiring public entities to provide certain climate-related information in their registration statements and annual reports. As part of the disclosures, entities will be required to quantify certain effects of severe weather events and other natural conditions in a note to their consolidated financial statements. While the SEC voluntarily stayed the rules due to pending judicial review, the rules in their current form would be effective for accelerated filers for annual periods beginning after December 15, 2025. We are currently in the process of evaluating the effect of these final rules.
Other recently issued ASUs, excluding ASUs discussed above, were assessed and determined to be not applicable, or are not expected to have a material impact on our condensed consolidated financial statements or disclosures.
9
2. Discontinued Operations
As discussed in Note 1, on December 15, 2023, we entered into a definitive agreement to sell our spine segment. The historical financial condition and results of operations of our spine segment have been reflected as discontinued operations in our condensed consolidated financial statements. The assets and liabilities associated with this segment are classified as assets and liabilities of discontinued operations in the condensed consolidated balance sheets.
On April 1, 2024, we completed the sale of our spine segment for a total purchase price of $
In conjunction with the sale of our spine segment, we entered into a Transition Services Agreement ("TSA") to provide certain support services for up to 12 months from the closing date of the sale. These services include, among others, accounting, information technology, human resources, quality assurance, regulatory affairs and customer support. Income recognized related to the TSA is recorded as Other income in our condensed consolidated statements of operations.
10
Details of earnings (loss) from discontinued operations included in our condensed consolidated statements of operations are as follows (in thousands):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third party, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Related party, net |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Net Sales |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of products sold, excluding intangible asset amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Related party cost of products sold, excluding intangible asset amortization |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Intangible asset amortization |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Research and development |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Selling, general and administrative |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Restructuring and other cost reduction initiatives |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Acquisition, integration, divestiture and related |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Other (expense) income, net |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Interest income (expense), net (1) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Earnings (loss) from discontinued operations before income taxes |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Adjustment of spine disposal group to fair value (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gain on sale of spine disposal group |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Benefit for income taxes from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings (loss) from discontinued operations, net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
11
Details of assets and liabilities of discontinued operations are as follows (in thousands):
|
|
As of |
|
|||||
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable, less allowance for credit losses |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total Current Assets of Discontinued Operations |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
|
||
Intangible assets, net |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total Noncurrent Assets of Discontinued Operations |
|
|
|
|
|
|
||
Accounts payable |
|
|
|
|
|
|
||
Income taxes payable |
|
|
|
|
|
|
||
Other current liabilities (1) |
|
|
|
|
|
|
||
Total Current Liabilities of Discontinued Operations |
|
|
|
|
|
|
||
Deferred income taxes |
|
|
|
|
|
|
||
Lease liability |
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
|
|
|
||
Total Noncurrent Liabilities of Discontinued Operations |
|
|
|
|
|
|
||
Adjustment of spine disposal group to fair value (2) |
|
|
|
|
|
( |
) |
|
(1)
(2)
Cash flows attributable to discontinued operations are included on our condensed consolidated statements of cash flows. Significant non-cash operating and investing activities attributable to discontinued operations consisted of the following (in thousands):
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Depreciation and amortization |
|
$ |
|
|
$ |
|
||
Share-based compensation |
|
|
|
|
|
|
||
Gain on sale of spine disposal group |
|
|
( |
) |
|
|
|
|
Additions to instruments |
|
|
|
|
|
|
||
Additions to other property, plant and equipment |
|
|
|
|
|
|
||
12
3. Goodwill and Other Intangible Assets
The following table summarizes the changes in the carrying amount of goodwill (in thousands):
|
|
Total |
|
|
Balance at December 31, 2023 |
|
|
|
|
Goodwill, Gross |
|
$ |
|
|
Accumulated impairment losses |
|
|
( |
) |
Goodwill, Net |
|
|
|
|
Currency translation |
|
|
|
|
Balance at September 30, 2024 |
|
|
|
|
Goodwill, Gross |
|
|
|
|
Accumulated impairment losses |
|
|
( |
) |
Goodwill, Net |
|
$ |
|
|
The components of identifiable intangible assets were as follows (in thousands):
|
|
Technology |
|
|
Trademarks |
|
|
Customer Relationships |
|
|
Other |
|
|
Total(1) |
|
|||||
As of December 31, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total identifiable intangible assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
As of September 30, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total identifiable intangible assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
(1) During the quarter ended September 30, 2024, we wrote off all fully amortized intangible assets that are no longer in use.
Estimated annual amortization expense for the years ending December 31, 2024 through 2028 based on exchange rates in effect at December 31, 2023 is as follows (in millions):
For the Years Ending December 31, |
|
|
|
|
2024 (remaining) |
|
$ |
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
4. Share-Based Compensation
Conversion Awards
At the time of separation, Zimmer Biomet had share-based compensation plans under which it granted stock options, restricted stock units ("RSUs") and performance-based RSUs. In connection with the distribution, ZimVie employees with outstanding Zimmer Biomet share-based awards received replacement share-based awards. The ratio used to convert the Zimmer Biomet share-based awards was designed to preserve the aggregate intrinsic value of the award immediately after the distribution when compared to the aggregate intrinsic value of the award immediately prior to the distribution. Outstanding RSUs and performance-based RSUs were converted into
13
ZimVie Awards
The ZimVie Inc. 2022 Stock Incentive Plan was established effective as of March 1, 2022, and was amended effective May 12, 2023 (as amended, the "2022 Plan"). A total of
Share-based compensation expense was as follows (in thousands):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Share-based compensation expense recognized in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of products sold, excluding intangible asset amortization |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Selling, general and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Tax benefit related to awards |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total expense, net of tax |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Share-based compensation expense related to discontinued operations is included in the table above and is disclosed in Note 2.
Stock option activity was as follows:
|
|
For the Nine Months Ended September 30, 2024 |
|
|||||||||||||
|
|
|
|
|
Weighted |
|
|
Weighted Average |
|
|
|
|
||||
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
||||
|
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
||||
|
|
Stock Options |
|
|
Price |
|
|
Life (Years) |
|
|
Value (in Millions) |
|
||||
Outstanding at December 31, 2023 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at September 30, 2024 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
We used a Black-Scholes option-pricing model to determine the fair value of our stock options. For awards granted shortly after the distribution: expected volatility of
Aggregate intrinsic value was negligible at September 30, 2024. At September 30, 2024, we had unrecognized share-based compensation cost related to unvested stock options of $
14
RSU activity was as follows:
|
|
For the Nine Months Ended September 30, 2024 |
|
|||||
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Average |
|
||
|
|
Number of |
|
|
Grant Date |
|
||
|
|
RSUs |
|
|
Fair Value |
|
||
Outstanding at December 31, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
RSUs with performance-based vesting provisions ("PRSUs") declined to
15
5. Earnings Per Share
The calculation of weighted average shares for basic and diluted net loss per common share is as follows (in thousands, except per share data):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net Loss from Continuing Operations of ZimVie Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Earnings (loss) from discontinued operations, net of tax |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Net Loss of ZimVie Inc. |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding for basic net loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive stock options and other equity awards (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding for diluted net loss per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic (Loss) Earnings Per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Net Loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted (Loss) Earnings Per Common Share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Continuing operations |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Net Loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
6. Balance Sheet Details
Inventories consisted of the following (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Finished goods |
|
$ |
|
|
$ |
|
||
Work-in-progress |
|
|
|
|
|
|
||
Raw materials |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
Amounts related to cost of products sold in the condensed consolidated statements of operations for excess and obsolete inventory were $
16
Other current liabilities consisted of the following (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Other current liabilities: |
|
|
|
|
|
|
||
Salaries, wages and benefits |
|
$ |
|
|
$ |
|
||
Lease liabilities |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total other current liabilities |
|
$ |
|
|
$ |
|
||
7. Fair Value Measurements of Assets and Liabilities
The fair value of foreign currency exchange forward contracts (see Note 9) is determined using Level 2 inputs. The carrying value of our debt (see Note 8) approximates fair value as it bears interest at floating rates. The carrying amounts of other financial instruments (i.e., cash and cash equivalents, restricted cash, bank time deposits, accounts receivable, net, and accounts payable) approximated their fair values at September 30, 2024 and December 31, 2023 due to their short-term nature.
As discussed in Notes 1 and 2, on April 1, 2024, we completed the sale of the spine segment. A portion of the consideration was in the form of a $
The fair values of acquisition-related contingent payments are estimated using Level 3 inputs. Contingent payments related to acquisitions consist of sales-based payments and are valued using discounted cash flow techniques. The fair value of sales-based payments is based upon probability-weighted future revenue estimates and increases as revenue estimates increase.
The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) (in thousands):
|
|
Level 3 - Liabilities |
|
|
Contingent payments related to acquisitions |
|
|
|
|
Balance December 31, 2023 |
|
$ |
|
|
Settlements |
|
|
( |
) |
Balance September 30, 2024 |
|
$ |
|
|
8. Debt
Our debt consisted of the following (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Term loan |
|
$ |
|
|
$ |
|
||
Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Total debt |
|
|
|
|
|
|
||
Less: current portion |
|
|
|
|
|
|
||
Total debt due after one year |
|
$ |
|
|
$ |
|
||
We entered into a Credit Agreement, dated as of December 17, 2021 (the “Credit Agreement”), with JP Morgan Chase Bank, N.A., as administrative agent and syndication agent, and the lenders and issuing banks named therein. The Credit Agreement provides for revolving loans of up to $
As of September 30, 2024, $
17
in Notes 1 and 2), and we wrote off $
Borrowings under the Credit Facility are collateralized by substantially all of our personal property, including intellectual property and certain real property, and we, along with our subsidiaries party to the Credit Facility, pledged our equity interests in our subsidiaries, subject to materiality thresholds and certain limitations with respect to foreign subsidiaries. The Credit Facility contains various covenants that restrict our ability to take certain actions, including incurrence of indebtedness, creation of liens, mergers or consolidations, dispositions of assets, making certain investments, prepayments or redemptions of subordinated debt, or making certain restricted payments. In addition, the Credit Facility contains financial covenants that require us to maintain a maximum consolidated total net leverage ratio of
See Note 9 to our consolidated financial statements included in our Annual Report for additional information on our Credit Agreement.
In April 2023, we financed $
18
9. Derivatives
We enter into foreign currency exchange forward contracts with terms of to
of $
10. Income Taxes
Our effective tax rate (“ETR”) on loss before income taxes was
11. Segment Data
Our Chief Executive Officer is our Chief Operating Decision Maker. He allocates resources to achieve our operating profit goals and historically reviewed business performance through
We conduct business in the following countries that hold 10% or more of our total combined property, plant and equipment, net (in thousands):
|
|
As of |
|
|||||
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
U.S. |
|
$ |
|
|
$ |
|
||
Spain |
|
|
|
|
|
|
||
Other countries |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
$ |
|
|
$ |
|
||
19
U.S. and foreign sales (based on the location of the customer) are as follows (in thousands):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
U.S. |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Spain |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other countries |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Third party sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Sales within any other individual country were less than
12. Commitments and Contingencies
We are subject to contingencies, such as various claims, legal proceedings and investigations regarding product liability, intellectual property, commercial and other matters that arise in the normal course of business. On a quarterly and annual basis, we review relevant information with respect to loss contingencies and update our accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews. We record liabilities for loss contingencies when it is probable that a loss has been incurred and the amount can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. Legal defense costs expected to be incurred in connection with a loss contingency are accrued when probable and reasonably estimable. The recorded accrual balance for loss contingencies was $
Subject to certain exceptions specified in the Separation Agreement, we assumed the liability for, and control of, all pending and threatened legal matters related to our business, including liabilities for any claims or legal proceedings related to products that had been part of our business, but were discontinued prior to the distribution, as well as assumed or retained liabilities, and will indemnify Zimmer Biomet for any liability arising out of or resulting from such assumed legal matters.
13. Restructuring and Other Cost Reduction Initiatives
In January 2024, we initiated restructuring activities to better structure the organization to support our dental segment after the disposal of the spine segment. During the three and nine months ended September 30, 2024, we recorded pre-tax charges of $
In April and July 2023, we initiated restructuring activities to better position our organization for future success based on the then-current business environment. These activities had the objective of reducing our global cost structure and streamlining our organizational infrastructure across all regions, functions and levels. During the three and nine months ended September 30, 2024, the charges recorded under this plan were negligible. During the three and nine months ended September 30, 2023, the pre-tax charges recorded under this plan were $
In June 2022, we initiated a restructuring plan with the objective of reducing costs and optimizing our global footprint. During the three and nine months ended September 30, 2024, the pre-tax charges recorded under this plan were negligible and $
20
The following table summarizes the liabilities directly attributable to us that were recognized under the plans discussed above and excludes non-cash charges (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
Employee |
|
|
Other |
|
|
Total |
|
|||
Balance, December 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Additions |
|
|
|
|
|
|
|
|
|
|||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following information should be read in conjunction with the interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report. Certain percentages presented in this discussion and analysis are calculated from the underlying whole-dollar amounts and therefore may not recalculate from the rounded numbers used for disclosure purposes. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed in this Quarterly Report and in our Annual Report, particularly in “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”
OVERVIEW
Our History
ZimVie was incorporated in 2021 as a wholly owned subsidiary of Zimmer Biomet for the sole purpose of holding directly or indirectly the assets and liabilities associated with the dental and spine businesses of Zimmer Biomet for distribution. The distribution of the dental and spine businesses was completed on March 1, 2022, and resulted in ZimVie becoming a standalone, publicly traded company. Following the distribution, Zimmer Biomet initially retained 19.7% of the outstanding shares of ZimVie common stock, and all transactions between ZimVie and Zimmer Biomet from the distribution to February 1, 2023 were reported as related party transactions. As of February 1, 2023, Zimmer Biomet had sold all of its 19.7% ownership in ZimVie and is no longer considered a related party. As such, transactions with Zimmer Biomet subsequent to February 1, 2023 are reported as third party transactions.
Sale of Spine Segment
On December 15, 2023, we entered into a definitive agreement to sell our spine segment to an affiliate of H.I.G. Capital. On April 1, 2024, we completed the sale of our spine segment for a total purchase price of $377.2 million (inclusive of $2.2 million in preliminary closing adjustments), subject to certain customary adjustments as set forth in the agreement, received proceeds of $311.8 million, excluding the promissory note and transaction costs, but including cash disposed of $26.1 million, and recorded a gain on the sale of $11.3 million. See additional information in Notes 1 and 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.
Our Company
ZimVie is a leading medical technology company dedicated to enhancing the quality of life for dental patients worldwide. Prior to the closing of the sale of our spine segment, our operations were principally managed on a products basis and included two operating segments, 1) the dental products segment, and 2) the spine products segment. Following the sale of our spine segment on April 1, 2024, we operate as a single segment.
Since the sale of our spine segment, our core services include designing, manufacturing and distributing dental implant systems. We develop, manufacture and market a comprehensive portfolio of products and solutions designed to support dental tooth replacement and restoration procedures. Dental reconstructive implants are for individuals who are totally without teeth or are missing one or more teeth, dental prosthetic products are aimed at providing a more natural restoration to resemble the original teeth, and dental regenerative products are for soft tissue and bone rehabilitation.
Prior to the sale of our spine segment, the core services of our spine segment included designing, manufacturing and distributing medical devices and surgical instruments to deliver comprehensive solutions for individuals with back or neck pain caused by degenerative conditions, deformities or traumatic injury of the spine. Our broad portfolio addressed all areas of spine with market leadership in cervical disc replacement and vertebral body tethering to treat pediatric scoliosis. We also provided devices that promote bone healing.
RESTRUCTURING AND OTHER COST REDUCTION INITIATIVES
Below is a summary of our restructuring and other cost reduction initiatives. For further information, refer to our discussion of expenses below under “Results of Operations - Three and Nine Months Ended September 30, 2024 and 2023 - Operating Expenses” and in Note 13 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.
2024 Program
In January 2024, we initiated restructuring activities to better structure the organization to support our dental segment following the disposal of the spine segment, as discussed in the "Overview - Sale of Spine Segment" above.
22
2023 Programs
In April and July 2023, we initiated restructuring activities to better position our organization for future success based on the then-current business environment. These activities had the objective of reducing our global cost structure and streamlining our organizational infrastructure across all regions, functions and levels. These programs were substantially complete as of March 31, 2024.
2022 Program
In June 2022, we initiated a restructuring plan with the objective of reducing costs and optimizing our global footprint. This program was substantially complete as of June 30, 2024.
RESULTS OF OPERATIONS
As discussed above in the "Overview," we entered into a definitive agreement in December 2023 to sell our spine segment, which closed on April 1, 2024. As such, the historical results of our spine segment have been reflected as discontinued operations in our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report, and the following discussion is presented on a continuing operations basis. See Notes 1 and 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report for details of the financial condition, results of operations and selected cash flows of our spine segment.
Three and Nine Months Ended September 30, 2024 and 2023
Net Sales
The following table presents net sales and the components of the percentage changes ($ in thousands):
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
% Inc/(Dec) |
|
|
Volume/Mix |
|
|
Price |
|
|
Exchange |
|
||||||
Third party, net |
|
$ |
103,222 |
|
|
$ |
105,311 |
|
|
|
(2.0 |
)% |
|
|
(1.3 |
)% |
|
|
(0.9 |
)% |
|
|
0.2 |
% |
Related party, net |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|||
Total Net Sales |
|
$ |
103,222 |
|
|
$ |
105,311 |
|
|
|
(2.0 |
)% |
|
|
(1.3 |
)% |
|
|
(0.9 |
)% |
|
|
0.2 |
% |
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
% Inc/(Dec) |
|
|
Volume/Mix |
|
|
Price |
|
|
Exchange |
|
||||||
Third party, net |
|
$ |
338,228 |
|
|
$ |
344,131 |
|
|
|
(1.7 |
)% |
|
|
(0.2 |
)% |
|
|
(1.1 |
)% |
|
|
(0.4 |
)% |
Related party, net |
|
|
— |
|
|
|
236 |
|
|
|
(100.0 |
)% |
|
|
(100.0 |
)% |
|
N/A |
|
|
N/A |
|
||
Total Net Sales |
|
$ |
338,228 |
|
|
$ |
344,367 |
|
|
|
(1.8 |
)% |
|
|
(0.3 |
)% |
|
|
(1.1 |
)% |
|
|
(0.4 |
)% |
Volume/Mix Trends
Volume decreased in the three and nine months ended September 30, 2024 compared to the same prior year periods. Lower dental implant and capital equipment sales were partially offset by growth in digital dentistry and biomaterials sales during the three months ended September 30, 2024, as compared to the same prior year period. Lower capital equipment and dental implant sales were partially offset by growth in digital dentistry and biomaterials sales during the nine months ended September 30, 2024, as compared to the same prior year period.
Pricing Trends
We experienced a price decline in the three and nine months ended September 30, 2024 compared to the same prior year periods, primarily related to pricing pressures on premium dental implant system sales in North America, resulting from a customer mix shift and customer consolidation in the specialty segment, as well as declines in pricing in China resulting from volume-based pricing.
23
Foreign Currency Exchange Rates
In countries where we have a subsidiary, we sell to customers in their local currencies. Accordingly, our net sales as reported in U.S. Dollars are affected by changes in foreign currency exchange rates. We are primarily exposed to foreign currency exchange rate risk with respect to net sales denominated in Euros and Japanese Yen. For the three months ended September 30, 2024, foreign exchange fluctuations had a small positive effect on year-over-year sales, mainly due to the strengthening of the Euro against the U.S. Dollar, partially offset by the weakening of the Japanese Yen against the U.S. Dollar. For the nine months ended September 30, 2024, foreign exchange fluctuations had a negative effect on year-over-year sales, mainly due to the weakening of the Japanese Yen against the U.S. Dollar.
Expenses as a Percent of Net Sales
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 vs 2023 Inc/(Dec) |
|
|||
Cost of products sold including related party, excluding intangible asset amortization |
|
|
34.7 |
% |
|
|
35.0 |
% |
|
|
(0.3 |
)% |
Intangible asset amortization |
|
|
5.8 |
|
|
|
6.4 |
|
|
|
(0.6 |
) |
Research and development |
|
|
6.7 |
|
|
|
5.4 |
|
|
|
1.3 |
|
Selling, general and administrative |
|
|
55.5 |
|
|
|
53.7 |
|
|
|
1.8 |
|
Restructuring and other cost reduction initiatives |
|
|
0.7 |
|
|
|
1.3 |
|
|
|
(0.6 |
) |
Acquisition, integration, divestiture and related |
|
|
1.2 |
|
|
|
1.8 |
|
|
|
(0.6 |
) |
Operating Loss |
|
|
(4.7 |
) |
|
|
(3.7 |
) |
|
|
1.0 |
|
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 vs 2023 Inc/(Dec) |
|
|||
Cost of products sold including related party, excluding intangible asset amortization |
|
|
36.5 |
% |
|
|
36.2 |
% |
|
|
0.3 |
% |
Intangible asset amortization |
|
|
5.3 |
|
|
|
5.9 |
|
|
|
(0.6 |
) |
Research and development |
|
|
6.0 |
|
|
|
5.6 |
|
|
|
0.4 |
|
Selling, general and administrative |
|
|
53.2 |
|
|
|
54.0 |
|
|
|
(0.8 |
) |
Restructuring and other cost reduction initiatives |
|
|
1.1 |
|
|
|
1.1 |
|
|
|
- |
|
Acquisition, integration, divestiture and related |
|
|
2.1 |
|
|
|
1.3 |
|
|
|
0.8 |
|
Operating Loss |
|
|
(4.2 |
) |
|
|
(4.2 |
) |
|
|
- |
|
Cost of Products Sold and Intangible Asset Amortization
Cost of products sold in dollars declined in the three and nine months ended September 30, 2024 as compared to the same prior year periods, primarily due to the decline in sales as discussed above. Cost of products sold as a percentage of net sales in the three months ended September 30, 2024 decreased as compared to the same prior year period, primarily as a result of a mix shift to higher margin products. Cost of products sold as a percentage of net sales in the nine months ended September 30, 2024 increased as compared to the same prior year period primarily due to the negative impact of price declines on sales as discussed above in "Net Sales - Pricing Trends."
Intangible asset amortization decreased in dollars and as a percentage of net sales in the three and nine months ended September 30, 2024 as compared to the same prior year periods, primarily due to certain intangible assets becoming fully amortized in 2023.
Operating Expenses
Research and development ("R&D") expenses increased in dollars and as a percentage of net sales in the three and nine months ended September 30, 2024 as compared to the same prior year periods. The increases in the three-month period were primarily due to professional service fees related to new product development and launches ($0.6 million), compensation expense ($0.4 million) and supplies ($0.3 million). The increases in the nine-month period were primarily due to professional service fees related to new product development and launches ($0.4 million) and compensation expense ($0.2 million).
Selling, general and administrative (“SG&A”) expenses increased in dollars and as a percentage of sales in the three months ended September 30, 2024 as compared to the same prior year period. Increases in compensation expense ($1.1 million), travel and entertainment expense ($0.5 million) and marketing expense ($0.5 million) were partially offset by decreases in professional services fees ($1.1 million).
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SG&A expenses decreased in dollars and as a percentage of net sales in the nine months ended September 30, 2024, as compared to the same prior year period, generally due to savings from our announced restructuring and other cost reduction initiatives. Specifically, the decline in SG&A was primarily attributable to decreases in compensation and recruiting expense ($1.7 million), professional services fees ($1.4 million) and TSA expenses related to our separation from Zimmer Biomet ($0.7 million).
Expenses resulting from restructuring and other cost reduction initiatives relate to various restructuring plans as discussed above. We recognized expense of $0.7 million and $1.4 million in the three months ended September 30, 2024 and 2023, respectively, primarily related to employee termination benefits. We recognized expense of $3.7 million and $3.9 million in the nine months ended September 30, 2024 and 2023, respectively, primarily related to employee termination benefits, as well as professional services fees. For more information regarding these expenses, see Note 13 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report.
Acquisition, integration, divestiture and related expenses include costs incurred to prepare for and complete the separation from Zimmer Biomet (such as professional fees, transition services agreements, costs to stand up our corporate organization and infrastructure), changes in the fair value of contingent consideration for acquisitions closed prior to the separation date and transaction costs related to the disposal of our spine segment. Acquisition, integration, divestiture and related expenses decreased by $0.7 million for the three months ended September 30, 2024, as compared to the same prior year period, due primarily to a fair value adjustment of the promissory note related to the sale of the spine segment ($1.2 million) and decreases in separation-related expenses ($0.5 million), partially offset by transaction costs related to the evaluation of strategic options for our portfolio, including costs incurred related to the disposal of the spine segment (see Notes 1 and 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report) ($1.1 million). Acquisition, integration, divestiture and related expenses increased by $2.3 million for the nine months ended September 30, 2024 as compared to the same prior year period, due primarily to transaction costs related to the evaluation of strategic options for our portfolio, including costs incurred related to the disposal of the spine segment (see Notes 1 and 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report) ($5.3 million), partially offset by decreases in separation-related expenses ($3.2 million).
Other Income (Expense), net, Interest Income, Interest Expense and Income Taxes
Our other income (expense), net, relates to TSA income, as well as the remeasurement of monetary assets and liabilities that are denominated in a currency other than the subsidiary’s functional currency. We recognized $3.2 million and $6.6 million of TSA income in the three and nine months ended September 30, 2024 and 2023, respectively, related to the sale of the spine segment. Income or expense related to the remeasurement of monetary assets and liabilities varies based upon the volatility of foreign currency exchange rates.
Interest income in the three and nine months ended September 30, 2024 increased compared to the same prior year periods, due primarily to interest income from the promissory note received as partial consideration for the sale of the spine segment (see Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report).
Interest expense in the three and nine months ended September 30, 2024 decreased compared to the same prior year periods, due primarily to a reduction in outstanding debt (see Note 8 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report), as well as a reduction in interest rates.
Our ETR on loss before income taxes was 18.4% and (3.3%) for the three months ended September 30, 2024 and 2023, and (34.2%) and (5.0%), respectively, for the nine months ended September 30, 2024 and 2023, respectively. In the three and nine months ended September 30, 2024, the income tax rate was lower than the 21.0% statutory rate due to our mix of earnings and losses across jurisdictions and losses not benefited as a result of valuation allowances.
Our ETR in future periods could also potentially be impacted by: changes in our mix of pre-tax earnings; changes in tax rates, tax laws or their interpretation; the outcome of various federal, state and foreign audits; and the expiration of certain statutes of limitations. Currently, we cannot reasonably estimate the impact of these items on our financial results.
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LIQUIDITY AND CAPITAL RESOURCES
The following discussion represents the combined liquidity and capital resources of continuing and discontinued operations.
As of September 30, 2024 and December 31, 2023, we had $68.1 million and $87.8 million, respectively, in cash and cash equivalents.
Sources of Liquidity
Cash flows (used in) provided by operating activities were $(7.3) million and $15.7 million in the nine months ended September 30, 2024 and 2023, respectively. Working capital for the nine months ended September 30, 2024 used cash of $4.8 million primarily due to cash used by accounts payable and accrued liabilities, accounts receivable and prepaid expenses and other current assets, partially offset by cash provided by inventories and income taxes. Working capital for the nine months ended September 30, 2023 used cash of $21.5 million due to cash used for income taxes, accounts payable and accrued liabilities and related party payables, partially offset by cash provided by inventories, accounts receivable, related party receivables and prepaid expenses and other current assets.
Cash flows provided by (used in) investing activities were $285.2 million and $(12.4) million in the nine months ended September 30, 2024 and 2023, respectively. In the current year period, we received proceeds of $291.1 million, net of cash disposed, from the sale of the spine segment (as discussed in Notes 1 and 2). Reductions in additions to instruments and other property, plant and equipment in the nine months ended September 30, 2024 compared to the same prior year period were primarily due to the sale of the spine segment.
Cash flows used in financing activities were $295.4 million and $16.8 million for the nine months ended September 30, 2024 and 2023, respectively. In the current year period, we prepaid $275.0 million on the Term Loan using proceeds from the sale of our spine segment (as discussed in Notes 1 and 2) and made optional prepayments on the Term Loan of $15.0 million. In the prior year period, we made optional prepayments on the Term Loan of $17.5 million, which represented the aggregate amount of the mandatory scheduled principal payments due in the first nine months of 2024.
Liquidity and Capital Resources
For additional information regarding our current debt arrangements, see Note 9 to our consolidated financial statements included in our Annual Report. In addition, for information regarding our other material estimated future cash requirements under our contractual obligations and certain other commitments, see “Material Cash Requirements” in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report. There have been no material changes to such information except as set forth herein.
We believe that available cash and cash equivalents, cash flows generated through operations and cash available under our revolving credit facility will be sufficient to meet our liquidity needs, including capital expenditures, for at least the next 12 months. On April 1, 2024, we prepaid $275.0 million on the Term Loan using proceeds from the sale of our spine segment (as discussed in Notes 1 and 2), and we wrote off $0.9 million of debt issuance costs. As a result of this prepayment, we have no more scheduled quarterly amortization payments on the Term Loan, and the remaining balance is due at maturity on February 28, 2027.
CRITICAL ACCOUNTING ESTIMATES
Our financial results are affected by the selection and application of accounting policies and methods and require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. There were no changes in the three and nine months ended September 30, 2024 to the application of our critical accounting estimates as described in our Annual Report.
ACCOUNTING DEVELOPMENTS
See Note 1 to our condensed consolidated financial statements included in this Quarterly Report for information on how recent accounting pronouncements have affected or may affect our financial position, results of operations or cash flows.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Market Risk
We are exposed to certain market risks as part of our ongoing business operations, including risks from changes in foreign currency exchange rates, interest rates and commodity prices that could affect our financial condition, results of operations and cash flows.
Foreign Currency Exchange Risk
We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and net assets denominated in Euros, Japanese Yen, Canadian Dollars, British Pounds, and Swiss Francs. We manage our foreign currency exposure centrally, on a combined basis, which allows us to net exposures and to take advantage of any natural offsets. To reduce the uncertainty of foreign currency exchange rate movements on transactions denominated in foreign currencies, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. These forward contracts are designed to reduce the foreign exchange impact monetary assets and liabilities in non-functional currencies have on our financial results. Realized and unrealized gains and losses on these contracts are recognized in other (expense) income, net.
Commodity Price Risk
We purchase raw material commodities such as cobalt chrome, titanium, tantalum, polymer and sterile packaging. We enter into supply contracts generally with terms of 12 to 24 months, where available, on these commodities to alleviate the effect of market fluctuations in prices. As part of our risk management program, we perform sensitivity analyses related to potential commodity price changes. A 10% price change across all these commodities would not have a material effect on our condensed consolidated financial position, results of operations or cash flows.
Interest Rate Risk
Our interest expense and related risks as reported in our condensed consolidated statements of operations are due to borrowings under our credit agreement. As of September 30, 2024, we had $221.9 million of floating rate debt subject to the adjusted term secured overnight financing rate ("SOFR"). A hypothetical increase of 100 basis points in SOFR to our floating rate debt would, among other things, decrease our annual pre-tax results of operations by $2.2 million.
Credit Risk
Financial instruments, which potentially subject us to concentrations of credit risk, are primarily cash and cash equivalents, derivative instruments and accounts receivable.
We place our cash and cash equivalents with highly rated financial institutions and limit the amount of credit exposure to any one entity. We believe we do not have any significant credit risk on our cash and cash equivalents.
Our concentrations of credit risks with respect to trade accounts receivable are limited due to the large number of customers and their dispersion across a number of geographic areas and by frequent monitoring of the creditworthiness of the customers to whom credit is granted in the normal course of business. Substantially all of our trade receivables are concentrated in the public and private hospital and dental practices in the healthcare industry in the U.S. and internationally or with distributors or dealers who operate in international markets and, accordingly, are exposed to their respective business, economic and country-specific variables. Our ability to collect accounts receivable in some countries depends in part upon the financial stability of these hospital and healthcare sectors and the respective countries’ national economic and healthcare systems. Most notably, in Europe healthcare is typically sponsored by the government. Since we sell products to public hospitals in those countries, we are indirectly exposed to government budget constraints. To the extent the respective governments’ ability to fund their public hospital programs deteriorates, we may have to record significant bad debt expenses in the future.
While we are exposed to risks from the broader healthcare industry in Europe and around the world, there is no significant net exposure due to any individual customer. Exposure to credit risk is controlled through credit approvals, credit limits and monitoring procedures, and we believe that reserves for losses are adequate.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures as defined under Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act"). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024 to provide reasonable assurance that information required to be disclosed in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are subject to various claims, legal proceedings and investigations regarding product liability, intellectual property, commercial and other matters that arise in the normal course of business. We currently do not expect the outcome of these matters to have a material adverse impact on our results of operations, cash flows or financial position. However, the outcome of such matters is unpredictable, our assessment of them may change, and resolution of them could have a material adverse effect on our financial position, results of operations or cash flows.
For additional information related to our contingencies, see Note 12 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report, which is incorporated herein by reference.
Item 1A. Risk Factors.
Careful consideration should be given to the factors discussed in Part I, Item 1A, “Risk Factors” of our Annual Report, which could materially affect our business, financial condition and results of operations. Except as set forth below, there have been no material changes in those risk factors. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations.
Due to the completion of the sale of our spine segment on April 1, 2024, the risk factor in our Annual Report entitled “The pending sale of our spine business (the “Pending Transaction”) is subject to various risks, uncertainties and conditions and may not be completed on the terms or timeline currently contemplated, if at all.” no longer applies.
The risk factor in our Annual Report entitled “We may be unable to achieve some or all of the strategic and financial benefits that we expect to achieve from the Pending Transaction.” is replaced in its entirety by the following:
We may be unable to achieve some or all of the strategic and financial benefits that we expect to achieve from the sale of our spine segment (the “Transaction”).
We are using the net proceeds from the Transaction to repay debt and invest in our dental business. The anticipated operational, financial, strategic and other benefits from the Transaction may not be achieved and could have an adverse impact on our business, financial condition and results of operations. The anticipated benefits are based on a number of assumptions, some of which may prove incorrect, and could be affected by a number of factors beyond our control, including, without limitation, general economic conditions, increased operating costs, regulatory developments and the other risks described in these risk factors.
The risk factor in our Annual Report entitled “If the Pending Transaction is completed, we will be a smaller, less diversified company than as we exist today.” is replaced in its entirety by the following:
The Transaction has resulted in us being a smaller, less diversified company.
The Transaction has resulted in us being a smaller, less diversified company that is significantly more reliant on our remaining dental business. As a result, we may be more vulnerable to changing market conditions, which could have a material adverse effect on our business, financial condition, and results of operations. The diversification of revenues, costs and cash flows has diminished as a result of the Transaction, such that our results of operations, cash flows, working capital, and effective tax rate may be subject to increased volatility and our ability to fund capital expenditures, investments and service debt may be diminished. As a result of the Transaction, we are incurring ongoing costs that were previously allocated to the spine segment. Those costs may exceed our estimates and could diminish the benefits we expect to realize from the Transaction.
Item 5. Other Information.
During the three months ended September 30, 2024, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
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Item 6. Exhibits.
Exhibit Index
Exhibit Number |
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Description |
2.1^ |
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2.2^ |
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3.1 |
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3.2 |
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21* |
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31.1* |
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31.2* |
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32.1* |
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32.2* |
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101.INS |
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Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
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Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents |
104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith
^ Schedules and exhibits to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. ZimVie hereby undertakes to furnish copies of any of the omitted schedules and exhibits upon request by the SEC.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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ZimVie Inc. |
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Date: October 30, 2024 |
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By: |
/s/ Richard Heppenstall |
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Richard Heppenstall |
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Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) |
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