UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The number of shares of the Registrant’s Common Stock outstanding as of October 27, 2023 was
ZIMVIE INC.
QUARTERLY REPORT
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of federal securities laws, including, among others, any statements about our expectations, plans, intentions, 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,” “positioned,” “design,” “strive,” “continue,” “track,” “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: 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; pricing pressures from competitors, customers, dental practices and insurance providers; changes in customer demand for our products and services caused by demographic changes or other factors; challenges relating to changes in and compliance with governmental laws and regulations affecting our United States (“U.S.”) and international businesses, including regulations of the U.S. Food and Drug Administration and foreign government regulators, such as more stringent requirements for regulatory clearance of products; competition; the impact of healthcare reform measures; reductions in reimbursement levels by third-party payors; cost containment efforts sponsored by government agencies, legislative bodies, the private sector and healthcare group purchasing organizations, including the volume-based procurement process in China; control of costs and expenses; dependence on a limited number of suppliers for key raw materials and outsourced activities; the ability to obtain and maintain adequate intellectual property protection; breaches or failures of our information technology systems or products, including by cyberattack, unauthorized access or theft; the ability to retain the independent agents and distributors who market our products; our ability to attract, retain and develop the highly skilled employees we need to support our business; the effect of mergers and acquisitions on our relationships with customers, suppliers and lenders and on our operating results and businesses generally; a determination by the Internal Revenue Service that the distribution or certain related transactions should be treated as taxable transactions; financing transactions undertaken in connection with the separation and risks associated with additional indebtedness; the impact of the separation on our businesses and the risk that the separation and the results thereof may be more difficult, time consuming and/or costly than expected, which could impact our relationships with customers, suppliers, employees and other business counterparties; restrictions on activities following the distribution in order to preserve the tax-free treatment of the distribution; 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, intellectual property and commercial litigation losses; changes in general industry and market conditions, including domestic and international growth rates; changes in general domestic and international economic conditions, including inflation and interest rate and currency exchange rate fluctuations; the effects of the COVID-19 global pandemic and other adverse public health developments on the global economy, our business and operations and the business and operations of our suppliers and customers, including the deferral of elective procedures and our ability to collect accounts receivable; 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.
See also Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022 for further discussion of certain risks and uncertainties that could cause actual results and events to differ materially from the forward-looking statements. Readers of this Quarterly Report 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. 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.
For additional information concerning factors that may cause actual results to vary materially from those stated in the forward-looking statements, see our reports on Form 10-K, 10-Q and 8-K filed with the U.S. Securities and Exchange Commission (the “SEC”) from time to time.
i
Table of Contents
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PART I. |
3 |
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Item 1. |
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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Notes to Unaudited Condensed Consolidated Financial Statements |
7 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18 |
Item 3. |
24 |
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Item 4. |
25 |
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PART II. |
26 |
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Item 1. |
26 |
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Item 1A. |
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Item 5. |
26 |
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Item 6. |
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27 |
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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2023 |
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2022 |
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2023 |
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2022 |
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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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Related party cost of products sold, excluding intangible asset amortization |
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( |
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( |
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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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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 (expense) income, net |
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( |
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( |
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Interest expense, net |
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( |
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( |
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( |
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( |
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Loss Before Income Taxes |
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( |
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( |
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( |
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( |
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Income tax benefit |
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Net (Loss) Income |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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Net (Loss) Income Per Common Share - Basic |
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$ |
( |
) |
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$ |
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$ |
( |
) |
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$ |
( |
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Net (Loss) Income Per Common Share - Diluted |
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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.
ZIMVIE INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE 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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2023 |
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2022 |
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2023 |
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2022 |
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Net (Loss) Income |
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$ |
( |
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$ |
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$ |
( |
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$ |
( |
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Other Comprehensive 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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( |
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( |
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Total Other Comprehensive Loss |
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( |
) |
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( |
) |
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( |
) |
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( |
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Comprehensive 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 BALANCE SHEETS (UNAUDITED)
(in thousands, except per share data)
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As of |
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September 30, 2023 |
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December 31, 2022 |
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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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Related party receivable |
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Inventories |
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Prepaid expenses and other current assets |
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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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Other assets |
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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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Related party payable |
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Income taxes payable |
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Other current liabilities |
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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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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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( |
) |
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.
4
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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Net Parent |
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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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Company |
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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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Investment |
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Loss |
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Equity |
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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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$ |
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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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Employee stock purchase plan |
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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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$ |
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Balance June 30, 2022 |
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$ |
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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 income |
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Stock activity under stock plans |
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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, 2022 |
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$ |
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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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Net Parent |
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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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Company |
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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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Investment |
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Loss |
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Equity |
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Balance December 31, 2022 |
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$ |
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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 activity under stock plans |
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( |
) |
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( |
) |
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Share-based compensation expense |
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Employee stock purchase plan |
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Other comprehensive loss |
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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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$ |
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Balance December 31, 2021 |
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$ |
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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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( |
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Net transactions with Zimmer Biomet Holdings, Inc., including separation adjustments |
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( |
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( |
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Net consideration paid to Zimmer Biomet Holdings, Inc. in connection with distribution |
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( |
) |
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( |
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Reclassification of net parent company investment to additional paid-in capital |
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( |
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Stock activity under stock plans |
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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, 2022 |
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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.
5
ZIMVIE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
|
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For the Nine Months Ended September 30, |
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|||||
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2023 |
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2022 |
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||
Cash flows provided by operating activities: |
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Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Share-based compensation |
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Deferred income tax provision |
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( |
) |
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( |
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Loss on disposal of fixed assets |
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Other non-cash items |
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Changes in operating assets and liabilities |
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Income taxes |
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( |
) |
|
|
( |
) |
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 provided by operating activities |
|
|
|
|
|
|
||
Cash flows used in investing activities: |
|
|
|
|
|
|
||
Additions to instruments |
|
|
( |
) |
|
|
( |
) |
Additions to other property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Other investing activities |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows (used in) provided by financing activities: |
|
|
|
|
|
|
||
Net transactions with Zimmer Biomet |
|
|
|
|
|
|
||
Dividend paid to Zimmer Biomet |
|
|
|
|
|
( |
) |
|
Proceeds from debt |
|
|
|
|
|
|
||
Payments on debt |
|
|
( |
) |
|
|
( |
) |
Debt issuance costs |
|
|
|
|
|
( |
) |
|
Payments related to tax withholding for share-based compensation |
|
|
( |
) |
|
|
|
|
Proceeds from stock option activity |
|
|
|
|
|
|
||
Other financing activities |
|
|
|
|
|
|
||
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
Effect of exchange rates on cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
(Decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents, beginning of year |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
Supplemental cash flow information: |
|
|
|
|
|
|
||
Income taxes paid, net |
|
$ |
|
|
$ |
|
||
Interest paid |
|
|
|
|
|
|
||
Derecognition of right-of-use assets |
|
|
|
|
|
( |
) |
|
Derecognition of lease liabilities |
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
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" or "Parent") entered into a Separation and Distribution Agreement (the "Separation Agreement"), pursuant to which Zimmer Biomet agreed to spin off its dental and spine businesses into ZimVie, a new, publicly traded company. Zimmer Biomet effected the separation through a pro rata distribution of
Nature of Business
ZimVie is a leading medical technology company dedicated to enhancing the quality of life for dental and spine patients worldwide. We develop, manufacture and market a comprehensive portfolio of products and solutions designed to support dental tooth replacement and restoration procedures and treat a wide range of spine pathologies. 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. Our broad portfolio also addresses all areas of spine with market leadership in cervical disc replacement and vertebral body tethering to treat pediatric scoliosis. Our operations are principally managed on a products basis and include
In the dental products market, our core services include designing, manufacturing and distributing dental implant solutions. 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.
In the spine products market, our core services include 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 provide devices that promote bone healing. Other differentiated products in our spine portfolio include 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
Prior to March 1, 2022, we existed and functioned as part of the consolidated business of Zimmer Biomet. The accompanying condensed consolidated financial statements are prepared on a standalone basis and, for periods prior to March 1, 2022, were prepared on a carveout basis from Zimmer Biomet’s consolidated financial statements and accounting records, and, accordingly, may not be indicative of the financial position, results of operations or cash flows had we operated as a standalone company during those periods, or comparable to our financial position subsequent to March 1, 2022.
On March 1, 2022, ZimVie became a standalone publicly traded company, and our financial statements are now presented on a consolidated basis. The unaudited financial statements for all periods presented, including our historical results prior to March 1, 2022, are now referred to as "Condensed Consolidated Financial Statements," and have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by U.S. generally accepted accounting principles ("GAAP") for complete consolidated financial statements are not included herein. In our opinion, all adjustments necessary for a fair statement of these interim statements have been included and are of a normal and recurring nature. These interim statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022 ("Annual Report"). The results of operations of any interim period are not necessarily indicative of the results of operations for the full year.
7
Prior to the distribution, our equity balance in these condensed consolidated financial statements represented the excess of total assets over liabilities including the due to/from balances between us and Zimmer Biomet (referred to as "net parent investment" or "NPI") and accumulated other comprehensive loss. NPI was primarily impacted by contributions from Zimmer Biomet that were the result of treasury activities and net funding provided by or distributed to Zimmer Biomet.
Following the distribution, certain functions that Zimmer Biomet provided to us prior to the distribution either continue to be provided to us by Zimmer Biomet under a transition services agreement or are being performed using our own resources or third-party service providers. Additionally, under manufacturing and supply agreements, we manufacture certain products for Zimmer Biomet and Zimmer Biomet manufactures certain products for us. We have incurred, and expect to continue to incur, certain costs to establish ourselves as a standalone public company, as well as ongoing additional costs associated with operating as an independent, publicly traded company.
As of September 30, 2023 and December 31, 2022, we had $
Accounting Pronouncements Recently Issued
There are no recently issued accounting pronouncements that we have not yet adopted that are expected to have a material effect on our financial position, results of operations or cash flows.
2. Goodwill and Other Intangible Assets
The following table summarizes the changes in the carrying amount of goodwill by historical reportable segment (in thousands):
|
|
Dental |
|
|
Spine |
|
|
Total |
|
|||
Balance at December 31, 2022 |
|
|
|
|
|
|
|
|
|
|||
Goodwill, Gross |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Accumulated impairment losses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Goodwill, Net |
|
|
|
|
|
|
|
|
|
|||
Currency translation |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Balance at September 30, 2023 |
|
|
|
|
|
|
|
|
|
|||
Goodwill, Gross |
|
|
|
|
|
|
|
|
|
|||
Accumulated impairment losses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Goodwill, Net |
|
$ |
|
|
$ |
|
|
$ |
|
The components of identifiable intangible assets were as follows (in thousands):
|
|
Technology |
|
|
Trademarks |
|
|
Customer Relationships |
|
|
Other |
|
|
Total |
|
|||||
As of December 31, 2022: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total identifiable intangible assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
As of September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Intangible assets subject to amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Gross carrying amount |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total identifiable intangible assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
8
Estimated annual amortization expense for the years ending December 31, 2023 through 2027 based on exchange rates in effect at December 31, 2022 is as follows (in millions):
For the Years Ending December 31, |
|
|
|
|
2023 (remaining) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total |
|
$ |
|
3. Share-Based Compensation
Conversion Awards
Zimmer Biomet has 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
ZimVie Awards
The ZimVie Inc. 2022 Stock Incentive Plan was originally 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, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
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 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
For periods prior to the distribution, we specifically identified employees who were associated with our historical operations and calculated expense based upon the awards received under the Zimmer Biomet plans, as well as expense related to corporate or shared employees allocated to us on a proportional cost allocation method, primarily based on revenue.
9
Stock option activity was as follows:
|
|
Period Ended September 30, 2023 |
|
|||||||||||||
|
|
|
|
|
Weighted |
|
|
Weighted Average |
|
|
|
|
||||
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
||||
|
|
Number of |
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
||||
|
|
Stock Options |
|
|
Price |
|
|
Life (Years) |
|
|
Value (in Millions) |
|
||||
Outstanding at December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
We used a Black-Scholes option-pricing model to determine the fair value of our stock options. For new awards granted after the distribution: expected volatility of
Aggregate intrinsic value was negligible at September 30, 2023. At September 30, 2023, we had unrecognized share-based compensation cost related to unvested stock options of $
RSU activity was as follows:
|
|
Period Ended September 30, 2023 |
|
|||||
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
Average |
|
||
|
|
Number of |
|
|
Grant Date |
|
||
|
|
RSUs |
|
|
Fair Value |
|
||
Outstanding at December 31, 2022 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Outstanding at September 30, 2023 |
|
|
|
|
$ |
|
RSUs granted in the nine months ended September 30, 2023 included
At September 30, 2023, we had unrecognized share-based compensation cost related to unvested RSUs of $
4. Earnings Per Share
On March 1, 2022,
10
The calculation of weighted average shares for the basic and diluted net (loss) income 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, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Net (loss) income |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding for basic net (loss) income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive stock options and other equity awards (1) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares outstanding for diluted net (loss) income per common share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic net (loss) income per common share |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
Diluted net (loss) income per common share |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
(1) Since we incurred a net loss in each of the three and nine months ended September 30, 2023 and in the nine months ended September 30, 2022, no dilutive stock options or other equity awards were included as diluted shares in those periods.
For the three months ended September 30, 2023 and 2022, a weighted average of
5. Balance Sheet Details
Inventories consisted of the following (in thousands):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
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 ("E&O") inventory, including certain product lines we intend to discontinue, were $
Other current liabilities consisted of the following (in thousands):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Other current liabilities: |
|
|
|
|
|
|
||
Salaries, wages and benefits |
|
$ |
|
|
$ |
|
||
License and service agreements |
|
|
|
|
|
|
||
Lease liabilities |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total other current liabilities |
|
$ |
|
|
$ |
|
6. Fair Value Measurements of Assets and Liabilities
The fair value of foreign currency exchange forward contracts (see Note 8) are determined using Level 2 inputs. The carrying value of our debt (see Note 7) 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, 2023 and December 31, 2022 due to their short-term nature.
11
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. See Note 3 to our consolidated financial statements included in our Annual Report for additional information regarding contingent payments related to acquisitions.
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, 2022 |
|
$ |
|
|
Settlements |
|
|
( |
) |
Balance September 30, 2023 |
|
$ |
|
7. Debt
Our debt consisted of the following (in thousands):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
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 $
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 10 to our consolidated financial statements included in our Annual Report for additional information on our Credit Agreement.
In April 2023, we financed $
12
8. Derivatives
We enter into foreign currency exchange forward contracts with terms of to
of $
9. Income Taxes
Our effective tax rate (“ETR”) on loss before income taxes was
During the nine months ended September 30, 2022, income tax balances were adjusted to reflect the income tax positions after distribution, including those related to tax loss and credit carryforwards, other deferred tax assets and liabilities and valuation allowances. These separation-related adjustments resulted in a $
10. Segment Data
Net sales and operating profit (loss) by segment are as follows (in thousands):
|
|
Net Sales |
|
|
Operating Profit (Loss) |
|
||||||||||
|
|
Three Months Ended September 30, |
|
|
Three Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Dental |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Spine |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Related party transactions |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Expenses related to Parent products |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Intangible asset amortization |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Restructuring and other cost reduction initiatives |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Acquisition, integration, divestiture and related |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Other |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
13
|
|
Net Sales |
|
|
Operating Profit (Loss) |
|
||||||||||
|
|
Nine Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Dental |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Spine |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Segment Total |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Related party transactions |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Expenses related to Parent products |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Intangible asset amortization |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Restructuring and other cost reduction initiatives |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Acquisition, integration, divestiture and related |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Other |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
11. 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.
12. Related Party Transactions
Prior to the distribution, we did not operate as a standalone business and had various relationships with Zimmer Biomet whereby Zimmer Biomet provided services to us. Following the distribution, certain functions that Zimmer Biomet provided to us prior to the distribution either continue to be provided to us by Zimmer Biomet under a transition services agreement or are being performed using our own resources or third-party service providers. The following disclosures summarize activities between us and Zimmer Biomet that are included in our condensed consolidated financial statements.
Prior to Distribution
Corporate Overhead and Other Allocations from Zimmer Biomet
Zimmer Biomet provided certain services, which included, but were not limited to, executive oversight, treasury, finance, legal, human resources, tax planning, internal audit, financial reporting, information technology and other corporate departments. The expenses related to these services have been allocated based on direct usage or benefit where specifically identifiable, with the remainder allocated on a proportional cost allocation method based primarily on net trade sales, as applicable. When specific identification is not practicable, a proportional cost method was used primarily based on sales.
Corporate allocations reflected in the condensed consolidated statements of operations are as follows (in thousands):
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Cost of products sold |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|||
Selling, general & administrative |
|
|
|
|
|
|
|
|
|
|
|
|
14
Management believes that the methods used to allocate expenses to ZimVie are a reasonable reflection of the utilization of services provided to, or the benefit derived by, ZimVie during the periods presented. However, the allocations may not necessarily reflect the condensed consolidated financial position, results of operations and cash flows in the future or what they would have been had ZimVie been a separate, standalone entity during the periods presented.
Share-Based Compensation
As discussed in Note 3, our employees participated in Zimmer Biomet’s share-based compensation plans, the costs of which were allocated and recorded in cost of products sold, R&D, and selling, general and administrative expenses in the condensed consolidated statements of operations. Share-based compensation benefit related to our employees prior to the distribution was $
In connection with the distribution, the awards held by employees were modified and resulted in incremental compensation expense as discussed in Note 3.
Centralized Cash Management
Zimmer Biomet used a centralized approach to cash management and financing of operations. The majority of our subsidiaries were party to Zimmer Biomet’s cash pooling arrangements with several financial institutions to maximize the availability of cash for general operating and investing purposes. Under these cash pooling arrangements, cash balances were swept regularly from our accounts. Cash transfers to and from Zimmer Biomet’s cash concentration accounts and the resulting balances at the end of each reporting period were reflected in NPI and net transactions with Zimmer Biomet in the condensed consolidated balance sheets and statements of cash flows, respectively.
Prior to the distribution, we borrowed $
Manufacturing Services to Zimmer Biomet
We have certain manufacturing facilities that also produce orthopedic products that continue to be sold by Zimmer Biomet after the separation.
|
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Related party net sales |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Related party cost of products sold, excluding intangible asset amortization |
|
|
|
|
|
|
|
|
|
|
|
|
We will continue to sell these products to Zimmer Biomet in future periods pursuant to a transition manufacturing and supply agreement. As of February 1, 2023, Zimmer Biomet had sold all of its
Net Parent Company Investment
As discussed in Note 1, NPI is primarily impacted by contributions from Zimmer Biomet, which are the result of treasury activity and net funding provided by or distributed to Zimmer Biomet. For the nine months ended September 30, 2023 and 2022, net transactions with Zimmer Biomet reflected in the cash flows pre-distribution were
15
For all periods prior to the distribution, transfers between ZimVie and Zimmer Biomet affiliates were recognized in Net transactions with Zimmer Biomet. In connection with the distribution, certain net assets of approximately $
After Distribution
In connection with the distribution, ZimVie entered into various agreements that govern activity between the parties, including, but not limited to, the Separation Agreement, the Transition Services Agreement, interim operating model agreements, the Tax Matters Agreement, the Employee Matters Agreement and transition manufacturing and supply agreements. As of February 1, 2023, Zimmer Biomet had sold all of its
The amounts due from and to Zimmer Biomet under the various agreements that were included in related party receivable or payable, as applicable, in our condensed consolidated balance sheets were as follows (in thousands):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Related party receivable |
|
$ |
|
|
$ |
|
||
Related party payable |
|
|
|
|
|
|
The Separation Agreement sets forth our agreements with Zimmer Biomet regarding the principal actions taken in connection with the separation and the distribution. It also sets forth other agreements that govern aspects of our relationship with Zimmer Biomet following the separation and the distribution. The Separation Agreement provides for, among other things, (i) the assets transferred, the liabilities assumed and the contracts assigned to each of us and Zimmer Biomet as part of the separation, (ii) cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of the ZimVie businesses with us and financial responsibility for the obligations and liabilities of Zimmer Biomet’s remaining businesses with Zimmer Biomet, (iii) procedures with respect to claims subject to indemnification and related matters and governing our and Zimmer Biomet’s obligations and allocations of liabilities with respect to ongoing litigation matters and (iv) the allocation between us and Zimmer Biomet of rights and obligations under existing insurance policies with respect to occurrences prior to completion of the distribution.
The Separation Agreement also provides that, in order to obtain certain requisite governmental approvals, or for other business reasons, following the distribution date, Zimmer Biomet and certain of its affiliates will continue to operate certain activities relating to the ZimVie businesses in certain jurisdictions until the requisite approvals have been received or the occurrence of all other actions permitting the legal transfer of such activities, and we will receive, to the greatest extent possible, all of the economic benefits and burdens of such activities.
The agreements that we entered into with Zimmer Biomet that govern aspects of ZimVie's relationship with Zimmer Biomet following the distribution are described in Note 18 to our consolidated financial statements included in our Annual Report.
13. Restructuring and Other Cost Reduction Initiatives
In April 2023, we initiated restructuring activities to better position our organization for future success based on the current business environment. In July 2023, we continued these activities and took additional actions. These activities have 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, 2023, we recorded pre-tax charges of $
In June 2022, we initiated a restructuring plan with the objective of reducing costs and optimizing our global footprint. In addition, the national volume-based procurement program for spine products in China took place in late September 2022, and we were not successful in our bid. After evaluating our alternatives, in the fourth quarter of 2022 we approved a plan to exit our spine products activities in China. During the three and nine months ended September 30, 2022, actions under the June 2022 plan resulted in pre-tax charges of $
16
In December 2019 and December 2021, Zimmer Biomet initiated restructuring plans (the "ZB Restructuring Plans") with an objective of reducing costs to allow further investment in higher priority growth opportunities. We incurred pre-tax charges related to the ZB Restructuring Plans of less than $
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, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Additions |
|
|
|
|
|
|
|
|
|
|||
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Balance, December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Additions |
|
|
|
|
|
|
|
|
|
|||
Non-cash adjustments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Cash payments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
We do not include charges for restructuring and other cost reduction initiatives in the operating profit of our reportable segments.
17
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
As detailed in Note 1 to our condensed consolidated financial statements included in this Quarterly Report, ZimVie was incorporated on July 30, 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. Prior to March 1, 2022, ZimVie’s financial statements were prepared on a carve-out basis and were derived from Zimmer Biomet’s consolidated financial statements and accounting records.
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.
ZimVie is a leading medical technology company dedicated to enhancing the quality of life for dental and spine patients worldwide. We develop, manufacture and market a comprehensive portfolio of products and solutions designed to support dental tooth replacement and restoration procedures and treat a wide range of spine pathologies. 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. Our broad portfolio also addresses all areas of spine with market leadership in cervical disc replacement and vertebral body tethering to treat pediatric scoliosis. Our operations are principally managed on a products basis and include two operating segments, 1) the dental products segment, and 2) the spine products segment.
In the dental products market, our core services include designing, manufacturing and distributing a comprehensive portfolio of dental implant solutions, biomaterials and digital dentistry solutions. 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 aesthetic and functional restoration to resemble the original teeth, and dental regenerative products are for soft tissue and bone rehabilitation.
In the spine products market, our core services include designing, manufacturing and distributing a full suite of spinal surgery solutions to treat patients with back or neck pain caused by degenerative conditions, deformities, tumors or traumatic injury of the spine. We also provide devices that promote bone healing.
We have a broad geographic revenue base, with meaningful exposure to both established and emerging markets. We have six manufacturing site locations, and a global presence in approximately 25 countries.
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, 2023 and 2022 - Operating Expenses” and in Note 13 to our condensed consolidated financial statements included in this Quarterly Report.
2023 Programs
In April 2023, we initiated restructuring activities to better position our organization for future success based on the current business environment. In July 2023, we continued these activities and took additional actions. These activities have the objective of reducing our global cost structure and streamlining our organizational infrastructure across all regions, functions, and levels. As a result of these initiatives, we expect an approximate 6% reduction in our global workforce, in addition to reductions in discretionary spending.
18
2022 Programs
In June 2022, we initiated a restructuring plan with the objective of reducing costs and optimizing our global footprint. In addition, the national volume-based procurement (“VBP”) program for spine products in China took place in late September 2022, and we were not successful in our bid. After evaluating our alternatives, in the fourth quarter of 2022 we approved a plan to exit our spine products activities in China. Annual 2022 spine product sales in China represented less than 1% of our consolidated annual sales.
The national VBP program for dental products in China took place in January 2023, and we were not successful in our bid. We plan to continue to operate our dental product activities in China by focusing on the private market. Annual 2022 dental product sales in China represented less than 1% of our consolidated annual sales.
RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 2023 and 2022
Net Sales by Product Category
The following tables present net sales by product category and the components of the percentage changes (dollars in thousands):
|
|
Three Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|||||||||
|
|
2023 |
|
|
2022 |
|
|
Change % |
|
|
Volume/Mix |
|
|
Price |
|
|
Exchange |
|
||||||
Dental |
|
$ |
105,311 |
|
|
$ |
105,121 |
|
|
|
0.2 |
% |
|
|
(0.3 |
)% |
|
|
(0.9 |
)% |
|
|
1.4 |
% |
Spine |
|
|
97,561 |
|
|
|
108,153 |
|
|
|
(9.8 |
) |
|
|
(8.4 |
) |
|
|
(0.4 |
) |
|
|
(1.0 |
) |
Third Party Sales |
|
|
202,872 |
|
|
|
213,274 |
|
|
|
(4.9 |
) |
|
|
(4.4 |
) |
|
|
(0.6 |
) |
|
|
0.1 |
|
Related Party |
|
|
— |
|
|
|
1,303 |
|
|
|
(100.0 |
) |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|||
Total |
|
$ |
202,872 |
|
|
$ |
214,577 |
|
|
|
(5.5 |
) |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
|
Nine Months Ended September 30, |
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|||||||||
|
|
2023 |
|
|
2022 |
|
|
Change % |
|
|
Volume/Mix |
|
|
Price |
|
|
Exchange |
|
||||||
Dental |
|
$ |
344,130 |
|
|
$ |
343,839 |
|
|
|
0.1 |
% |
|
|
1.0 |
% |
|
|
(0.5 |
)% |
|
|
(0.4 |
)% |
Spine |
|
|
308,726 |
|
|
|
337,484 |
|
|
|
(8.5 |
) |
|
|
(7.3 |
) |
|
|
(0.6 |
) |
|
|
(0.6 |
) |
Third Party Sales |
|
|
652,856 |
|
|
|
681,323 |
|
|
|
(4.2 |
) |
|
|
(3.2 |
) |
|
|
(0.5 |
) |
|
|
(0.5 |
) |
Related Party |
|
|
339 |
|
|
|
3,419 |
|
|
|
(90.1 |
) |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|||
Total |
|
$ |
653,195 |
|
|
$ |
684,742 |
|
|
|
(4.6 |
) |
|
N/A |
|
|
N/A |
|
|
N/A |
|
Volume/Mix Trends
Volume in the dental products category decreased slightly in the three months ended September 30, 2023 compared to the same prior year period due to one less selling day ($1.6 million). Volume in the spine products category decreased in the three months ended September 30, 2023 compared to the same prior year period due to continued competition resulting in distributor turnover, the exit of our spine products activities in China ($3.7 million), and one less selling day ($1.6 million), partially offset by net spine product sales ($1.9 million) retained by Zimmer Biomet in the same prior year period in certain geographies where our separation and transition activities extended beyond the distribution date (for more information, see "After Distribution - Interim Operating Agreements" in Note 18 to our consolidated financial statements included in our Annual Report).
Volume in the dental products category increased in the nine months ended September 30, 2023 compared to the same prior year period, primarily due to higher demand for tooth replacement procedures combined with a growing digital dentistry market. Volume in the spine products category decreased in the nine months ended September 30, 2023 compared to the same prior year period due to continued competition resulting in distributor turnover and the exit of our spine products activities in China ($9.6 million) partially offset by net spine product sales ($7.5 million) retained by Zimmer Biomet in the same prior year periods in certain geographies where our separation and transition activities extended beyond the distribution date.
Pricing Trends
While the dental products category experienced price declines for the three and nine months ended September 30, 2023, the average implant price increased due to the success of new product launches. The spine products category continued to experience governmental healthcare cost pricing pressure efforts and similar efforts at local hospitals and health systems in the three and nine months ended September 30, 2023.
19
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, 2023, foreign exchange fluctuations had a positive effect on year-over-year sales, while for the nine months ended September 30, 2023, foreign exchange fluctuations had a negative effect on year-over-year sales, mainly due to fluctuations of the U.S. Dollar against the Euro.
Expenses as a Percent of Net Sales
|
|
Three Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
|
2023 vs. |
|
|||
Cost of products sold, excluding intangible asset |
|
|
32.2 |
% |
|
|
27.2 |
% |
|
|
|
5.0 |
% |
Related party cost of products sold, excluding intangible |
|
|
— |
|
|
|
0.6 |
|
|
|
|
(0.6 |
) |
Intangible asset amortization |
|
|
10.2 |
|
|
|
9.0 |
|
|
|
|
1.2 |
|
Research and development |
|
|
5.6 |
|
|
|
6.8 |
|
|
|
|
(1.2 |
) |
Selling, general and administrative |
|
|
57.8 |
|
|
|
60.3 |
|
|
|
|
(2.5 |
) |
Restructuring and other cost reduction initiatives |
|
|
1.2 |
|
|
|
0.3 |
|
|
|
|
0.9 |
|
Acquisition, integration, divestiture and related |
|
|
1.0 |
|
|
|
3.6 |
|
|
|
|
(2.6 |
) |
Operating Loss |
|
|
(8.0 |
) |
|
|
(7.8 |
) |
|
|
|
0.2 |
|
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
|
2023 vs. |
|
|||
Cost of products sold, excluding intangible asset |
|
|
32.2 |
% |
|
|
32.6 |
% |
|
|
|
(0.4 |
)% |
Related party cost of products sold, excluding intangible |
|
|
0.1 |
|
|
|
0.5 |
|
|
|
|
(0.4 |
) |
Intangible asset amortization |
|
|
9.5 |
|
|
|
8.8 |
|
|
|
|
0.7 |
|
Research and development |
|
|
6.1 |
|
|
|
6.9 |
|
|
|
|
(0.8 |
) |
Selling, general and administrative |
|
|
57.2 |
|
|
|
56.9 |
|
|
|
|
0.3 |
|
Restructuring and other cost reduction initiatives |
|
|
2.4 |
|
|
|
0.9 |
|
|
|
|
1.5 |
|
Acquisition, integration, divestiture and related |
|
|
0.8 |
|
|
|
3.7 |
|
|
|
|
(2.9 |
) |
Operating Loss |
|
|
(8.3 |
) |
|
|
(10.3 |
) |
|
|
|
(2.0 |
) |
Cost of Products Sold and Intangible Asset Amortization
The increase in cost of products sold in dollars and as a percentage of net sales in the three months ended September 30, 2023 compared to the same prior year period was primarily due to the release of a spin-related contingent liability with Zimmer Biomet in the spine products category in the prior year period that did not recur, partially offset by an indemnification of legal expenses from Zimmer Biomet in the current year period ($2.8 million). The decrease in cost of products sold in dollars and as a percentage of net sales in the nine months ended September 30, 2023 compared to the same prior year period was primarily due to a reduction in inventory charges ($11.4 million) primarily in the spine product category, the legal indemnification noted above ($2.8 million) and incremental share-based compensation expense related to converted Zimmer Biomet awards ($1.8 million) recorded in the same prior year period that did not recur (for more information, see Note 3 to our condensed consolidated financial statements included in this Quarterly Report), partially offset by the release of a spin-related contingent liability with Zimmer Biomet in the spine products category in the prior year period that did not recur.
Intangible asset amortization increased slightly in dollars and as a percentage of net sales in the three and nine months ended September 30, 2023 as compared to the same prior year periods, due to the relatively fixed nature of amortization expense period over period.
20
Operating Expenses
Research and development ("R&D") expenses in dollars and as a percentage of net sales decreased in the three and nine months ended September 30, 2023 compared to the same prior year periods, primarily due to savings in the dental and spine product categories from the announced restructuring and other cost reduction initiatives. R&D expenses also decreased due to incremental share-based compensation expense related to converted Zimmer Biomet awards ($2.0 million) recorded in the same prior year period that did not recur (for more information, see Note 3 to our condensed consolidated financial statements included in this Quarterly Report).
Selling, general and administrative (“SG&A”) expenses decreased in dollars and as a percentage of net sales in the three months ended September 30, 2023 as compared to the same prior year period, generally due to savings from the announced restructuring and other cost reduction initiatives and reduced selling costs consisting of decreases of employee related expenses ($7.8 million), selling and marketing expenses ($3.7 million) and instrument expense ($1.3 million). SG&A expenses decreased in dollars in the nine months ended September 30, 2023 as compared to the same prior year period generally due to savings from the announced restructuring and other cost reduction initiatives and reduced selling costs, partially offset by an increase in general and administrative costs due to us being a standalone public company for the entire nine-month period ended September 30, 2023 compared to the seven-month period ended September 30, 2022. Specifically, we had decreases of selling related expenses ($5.7 million) and instrument expense ($1.5 million), as well as incremental share-based compensation expense related to converted Zimmer Biomet awards ($9.9 million) recorded in the same prior year period that did not recur (for more information, see Note 3 to our condensed consolidated financial statements included in this Quarterly Report). While SG&A expenses decreased in dollars, they increased as a percentage of net sales in the nine months ended September 30, 2023 as compared to the same prior year period due to the decrease in net sales.
Expenses related to restructuring and other cost reduction initiatives relate to our restructuring plans initiated in April 2023 and June 2022, our exit of our spine products activities in China and Zimmer Biomet's restructuring plans initiated in the fourth quarters of 2019 and 2021. We recognized expenses of $2.4 million and $0.7 million in the three months ended September 30, 2023 and 2022, respectively, and $15.9 million and $6.5 million in the nine months ended September 30, 2023 and 2022, respectively. These expenses primarily related to employee termination benefits, consulting fees and accelerated depreciation. For more information regarding these expenses, see Note 13 to our condensed consolidated financial statements included in this Quarterly Report.
Acquisition, integration, divestiture and related expenses include costs incurred to prepare for and complete the separation from our former parent (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 costs related to the evaluation of strategic options for our portfolio. Acquisition, integration, divestiture and related expenses decreased by $5.8 million for the three months ended September 30, 2023 as compared to the same prior year period due primarily to decreases in separation-related professional fees ($3.6 million), separation-related lease costs ($2.6 million) and separation-related employee costs ($0.8 million), partially offset by increased costs related to the evaluation of strategic options for our portfolio ($1.5 million). Acquisition, integration, divestiture and related expenses decreased by $20.4 million for the nine months ended September 30, 2023 as compared to the same prior year period due primarily to decreases in separation-related professional fees ($8.8 million), separation-related employee costs ($5.0 million), separation-related lease costs ($3.2 million) and contingent consideration ($2.8 million), slightly offset by increased costs related to the evaluation of strategic options for our portfolio ($1.5 million).
Other (Expense) Income, net, Interest Expense, net, and Income Taxes
Our other (expense) income, net, primarily relates to the remeasurement of monetary assets and liabilities that are denominated in a currency other than the subsidiary’s functional currency. Therefore, the income or expense varies based upon the volatility of foreign currency exchange rates.
Interest expense, net, in the three and nine months ended September 30, 2023 increased compared to the same prior year periods, primarily due to increased interest rates.
Our effective tax rate (“ETR”) on loss before income taxes was 80.0% and 103.7% for the three months ended September 30, 2023 and 2022, respectively, and 28.5% and 59.0% for the nine months ended September 30, 2023 and 2022, respectively. In the three and nine months ended September 30, 2023, the income tax benefit was higher than the 21% U.S. federal statutory rate due to profit in inventory recorded prior to the distribution that is non-taxable as the inventory is sold post-separation to third parties, resulting in a significant benefit to the foreign rate differential, partially offset by additional expense for increasing valuation allowances. In the three and nine months ended September 30, 2022, the additional income tax benefit compared to the statutory rate was driven by the impact of losses recorded prior to the distribution that were calculated on a “carve-out” basis, which applied the accounting guidance as if we filed income tax returns on a standalone, separate return basis and are not reflective of the tax results we expect to generate in the future. The benefit was further driven by the profit in inventory recorded prior to the distribution as well as recognition of a Puerto Rico withholding tax receivable available to offset income taxes of $5.7 million.
21
During the nine months ended September 30, 2022, income tax balances were adjusted to reflect the income tax positions after distribution, including those related to tax loss and credit carryforwards, other deferred tax assets and liabilities and valuation allowances. These separation-related adjustments resulted in a $3.9 million increase to the net deferred tax liability, primarily due to inventory and intangible assets transferred in the separation, tax rate changes and changes to the permanent reinvestment assertion in the post-separation environment. The increase in the net deferred tax liability was offset by a corresponding decrease in NPI.
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.
Segment Operating Profit
|
|
Net Sales |
|
|
Operating Profit |
|
|
Operating Profit as a |
|
|||||||||||||||
|
|
Three Months Ended September 30, |
|
|
Three Months Ended September 30, |
|
|
Three Months Ended September 30, |
|
|||||||||||||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||||
Dental |
|
$ |
105,311 |
|
|
$ |
105,121 |
|
|
$ |
22,808 |
|
|
$ |
17,465 |
|
|
|
21.7 |
% |
|
|
16.6 |
% |
Spine |
|
|
97,561 |
|
|
|
108,153 |
|
|
|
6,647 |
|
|
|
17,258 |
|
|
|
6.8 |
|
|
|
16.0 |
|
|
|
Net Sales |
|
|
Operating Profit |
|
|
Operating Profit as a |
|
|||||||||||||||
|
|
Nine Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|||||||||||||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||||
Dental |
|
$ |
344,130 |
|
|
$ |
343,839 |
|
|
$ |
69,074 |
|
|
$ |
68,097 |
|
|
|
20.1 |
% |
|
|
19.8 |
% |
Spine |
|
|
308,726 |
|
|
|
337,484 |
|
|
|
25,418 |
|
|
|
29,619 |
|
|
|
8.2 |
|
|
|
8.8 |
|
Sales in our dental products category in the three months ended September 30, 2023 increased slightly from the same prior year period, primarily due to the positive effect from foreign exchange rates, mostly offset by one less selling day in the current period ($1.6 million) and decreased pricing. Sales in our dental products category in the nine months ended September 30, 2023 increased from the same prior year period, primarily due to an increase in demand for tooth replacement procedures combined with a growing digital dentistry market, partially offset by decreased pricing and the negative effect of changes in foreign exchange rates.
Sales in our spine products category in the three months ended September 30, 2023 decreased from the same prior year period primarily due to continued competition resulting in distributor turnover, the exit of our spine products activities in China ($3.7 million), one less selling day in the current period ($1.6 million), the negative effect of changes in foreign exchange rates and decreased pricing, partially offset by net spine product sales ($1.9 million) retained by Zimmer Biomet in the same prior year period in certain geographies where our separation and transition activities extended beyond the distribution date (for more information, see "After Distribution - Interim Operating Agreements" in Note 18 to our consolidated financial statements included in our Annual Report). Sales in our spine products category in the nine months ended September 30, 2023 decreased from the same prior year period primarily due to continued competition resulting in distributor turnover, the exit of our spine products activities in China ($9.6 million), the negative effect of changes in foreign exchange rates and decreased pricing, partially offset by net spine product sales ($7.5 million) retained by Zimmer Biomet in the same prior year period in certain geographies where our separation and transition activities extended beyond the distribution date.
Operating profit in our dental products category increased for the three and nine months ended September 30, 2023 compared to the same prior year periods, primarily due to savings from announced restructuring and other cost reduction initiatives.
Operating profit in our spine products category decreased for the three months ended September 30, 2023 compared to the same prior year period due to decreased sales and the release of a spin-related contingent liability with Zimmer Biomet in the prior year period that did not recur, partially offset by savings from announced restructuring and other cost reduction initiatives and the indemnification of legal expenses from Zimmer Biomet ($2.8 million). Operating profit in our spine products category decreased for the nine months ended September 30, 2023 compared to the same prior year period due to decreased sales and the release of a spin-related contingent liability with Zimmer Biomet in the prior year period that did not recur, mostly offset by a reduction in inventory charges ($9.8 million) and savings from announced restructuring and other cost reduction initiatives.
Both products categories benefited from reduced incremental share-based compensation due to converted Zimmer Biomet awards recorded in the nine months ended September 30, 2022 that did not recur (for more information, see Note 3 to our condensed consolidated financial statements).
22
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2023 and December 31, 2022, we had $75.4 million and $89.6 million, respectively, in cash and cash equivalents.
Sources of Liquidity
Cash flows provided by operating activities were $15.7 million and $33.5 million in the nine months ended September 30, 2023 and 2022 respectively. Working capital for the nine months ended September 30, 2023 used cash of $21.5 million primarily due to income taxes, accounts payable and accrued liabilities and related party payable, partially offset by cash provided by inventories, accounts receivable, related party receivable and prepaid expenses and other current assets. Working capital for the nine months ended September 30, 2022 used cash of $1.3 million due to prepaid expenses, accounts receivable and related party receivable, mostly offset by cash provided by related party payable, inventories and accounts payable and accrued liabilities.
Cash flows used in investing activities were $12.4 million and $23.1 million in the nine months ended September 30, 2023 and 2022, respectively. The reduction in cash used in investing activities was primarily related to the reduction in expenditures for instruments and other property, plant and equipment due to efforts to optimize our product portfolio and manufacturing and logistics network.
Cash flows used in financing activities were $16.8 million in the nine months ended September 30, 2023 and cash flows provided by financing activities were $15.2 million in the nine months ended September 30, 2022. In the current 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 (as discussed in Note 7 to our condensed consolidated financial statements included in this Quarterly Report). In the 2022 period, new borrowings under our Term Loan (as discussed in Note 7 to our condensed consolidated financial statements included in this Quarterly Report) were used primarily for a dividend paid to Zimmer Biomet at the time of the distribution.
Liquidity and Capital Resources
For additional information regarding our current debt arrangements, including the term loan amortization schedule, see Note 10 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.
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 nine months ended September 30, 2023 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.
23
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, Chinese Renminbi, Swedish Krona, New Taiwan Dollars, Israeli Shekels, Australian Dollars and Japanese Yen. 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 growing due to the Credit Agreement. As of September 30, 2023, we had $518.9 million of floating rate debt potentially 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, increase our annual interest expense by $5.2 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.
24
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, 2023 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, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
25
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 11 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.
You should carefully consider 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. 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. In addition, the COVID-19 pandemic could exacerbate or trigger other risks discussed in our Annual Report, any of which could materially affect our business, financial condition and results of operations.
Item 5. Other Information.
During the three months ended September 30, 2023, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act)
Item 6. Exhibits.
Exhibit Index
Exhibit Number |
|
Description |
3.1 |
|
|
3.2 |
|
|
21 |
|
|
31.1 |
|
|
31.2 |
|
|
32.1 |
|
|
32.2 |
|
|
101.INS |
|
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 |
|
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
26
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.
|
|
ZimVie Inc. |
|
|
|
|
|
Date: November 1, 2023 |
|
By: |
/s/ Richard Heppenstall |
|
|
|
Richard Heppenstall |
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) |
|
|
|
|
27