10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

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: 001-41242

 

ZIMVIE INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

87-2007795

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

10225 Westmoor Drive

Westminster, CO

80021

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (303) 443-7500

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

ZIMV

 

The Nasdaq Stock Market LLC

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

Emerging growth company

 

 

 

 

 

 

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 November 4, 2022 was 26,088,272.

 

 


 

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,” “look forward to” and similar expressions to identify forward-looking statements. All statements other than statements of historical or current fact are, or may be deemed to be, forward-looking statements. Such statements are based upon the current beliefs, expectations and assumptions of management and are subject to significant risks, uncertainties and changes in circumstances that could cause actual outcomes and results to differ materially from the forward-looking statements. These risks, uncertainties and changes in circumstances include, but are not limited to: the 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; 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 maybe 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 (“EU”) 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; 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, 2021 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 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.

You are also advised to consult any further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. This cautionary note is applicable to all forward-looking statements contained in this report.

i


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Statements of Operations

3

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

3

 

Condensed Consolidated Balance Sheets

4

 

Condensed Consolidated Statements of Stockholders' Equity

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

25

 

 

 

PART II.

OTHER INFORMATION

25

 

 

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 6.

Exhibits

26

Signatures

27

 

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

ZIMVIE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

Third party, net

 

$

213,274

 

 

$

238,681

 

 

$

681,323

 

 

$

748,234

 

Related party, net

 

 

1,303

 

 

 

938

 

 

 

3,419

 

 

 

4,842

 

Total Net Sales

 

 

214,577

 

 

 

239,619

 

 

 

684,742

 

 

 

753,076

 

Cost of products sold, excluding intangible asset amortization

 

 

(58,311

)

 

 

(90,549

)

 

 

(223,332

)

 

 

(256,397

)

Related party cost of products sold, excluding intangible asset amortization

 

 

(1,319

)

 

 

(789

)

 

 

(3,177

)

 

 

(3,506

)

Intangible asset amortization

 

 

(19,357

)

 

 

(21,527

)

 

 

(60,178

)

 

 

(65,041

)

Research and development

 

 

(14,502

)

 

 

(15,064

)

 

 

(47,437

)

 

 

(43,929

)

Selling, general and administrative

 

 

(129,345

)

 

 

(135,990

)

 

 

(389,509

)

 

 

(405,065

)

Restructuring

 

 

(689

)

 

 

(914

)

 

 

(6,486

)

 

 

(2,291

)

Acquisition, integration, divestiture and related

 

 

(7,727

)

 

 

(5,053

)

 

 

(25,455

)

 

 

(12,011

)

Operating Expenses

 

 

(231,250

)

 

 

(269,886

)

 

 

(755,574

)

 

 

(788,240

)

Operating Loss

 

 

(16,673

)

 

 

(30,267

)

 

 

(70,832

)

 

 

(35,164

)

Other income (expense), net

 

 

615

 

 

 

(119

)

 

 

977

 

 

 

(392

)

Interest expense, net

 

 

(6,242

)

 

 

(114

)

 

 

(11,847

)

 

 

(308

)

Loss Before Income Taxes

 

 

(22,300

)

 

 

(30,500

)

 

 

(81,702

)

 

 

(35,864

)

Income tax benefit

 

 

23,131

 

 

 

251

 

 

 

48,165

 

 

 

1,301

 

Net Income (Loss)

 

$

831

 

 

$

(30,249

)

 

$

(33,537

)

 

$

(34,563

)

Income (Loss) Per Common Share - Basic

 

$

0.03

 

 

$

(1.16

)

 

$

(1.29

)

 

$

(1.33

)

Income (Loss) Per Common Share - Diluted

 

 

0.03

 

 

 

(1.16

)

 

 

(1.29

)

 

 

(1.33

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

ZIMVIE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net Income (Loss)

 

$

831

 

 

$

(30,249

)

 

$

(33,537

)

 

$

(34,563

)

Other Comprehensive Loss:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency cumulative translation adjustments, net of tax

 

 

(36,863

)

 

 

(12,874

)

 

 

(97,203

)

 

 

(33,942

)

Total Other Comprehensive Loss

 

 

(36,863

)

 

 

(12,874

)

 

 

(97,203

)

 

 

(33,942

)

Comprehensive Loss

 

$

(36,032

)

 

$

(43,123

)

 

$

(130,740

)

 

$

(68,505

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

ZIMVIE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

 

 

 

September 30, 2022

 

 

December 31, 2021

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

116,008

 

 

$

100,399

 

Accounts receivable, net of allowance for credit losses of $14,749 and $16,545, respectively

 

 

156,858

 

 

 

164,241

 

Related party receivable

 

 

15,870

 

 

 

 

Inventories

 

 

224,232

 

 

 

246,832

 

Prepaid expenses and other current assets

 

 

33,255

 

 

 

25,380

 

Total Current Assets

 

 

546,223

 

 

 

536,852

 

Property, plant and equipment, net of accumulated depreciation of $382,411 and $418,191, respectively

 

 

150,293

 

 

 

180,243

 

Goodwill

 

 

254,403

 

 

 

267,810

 

Intangible assets, net

 

 

639,544

 

 

 

766,175

 

Other assets

 

 

38,898

 

 

 

75,656

 

Total Assets

 

$

1,629,361

 

 

$

1,826,736

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

41,075

 

 

$

45,026

 

Related party payable

 

 

19,893

 

 

 

 

Income taxes payable

 

 

6,365

 

 

 

6,278

 

Other current liabilities

 

 

136,136

 

 

 

133,280

 

Current portion of long-term debt

 

 

14,025

 

 

 

 

Total Current Liabilities

 

 

217,494

 

 

 

184,584

 

Deferred income taxes, net

 

 

104,883

 

 

 

129,475

 

Lease liability

 

 

23,739

 

 

 

45,317

 

Other long-term liabilities

 

 

14,014

 

 

 

15,983

 

Non-current portion of debt

 

 

535,455

 

 

 

 

Total Liabilities

 

 

895,585

 

 

 

375,359

 

Commitments and Contingencies (Note 14)

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Common stock, $0.01 par value, 150,000 shares authorized
  Shares, issued and outstanding, of
26,088 and 0, respectively

 

 

261

 

 

 

 

Preferred stock, $0.01 par value, 15,000 shares authorized, 0 shares issued and outstanding

 

 

 

 

 

 

Additional paid in capital

 

 

890,686

 

 

 

 

Accumulated deficit

 

 

(17,188

)

 

 

 

Net parent company investment

 

 

 

 

 

1,494,157

 

Accumulated other comprehensive loss

 

 

(139,983

)

 

 

(42,780

)

Total Stockholders' Equity

 

 

733,776

 

 

 

1,451,377

 

Total Stockholders' Equity

 

 

733,776

 

 

 

1,451,377

 

Total Liabilities and Stockholders' Equity

 

$

1,629,361

 

 

$

1,826,736

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

ZIMVIE INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Net Parent

 

 

Other

 

 

 

 

 

 

Common

 

 

Paid-In

 

 

Accumulated

 

 

Company

 

 

Comprehensive

 

 

Total

 

 

 

Stock

 

 

Capital

 

 

Deficit

 

 

Investment

 

 

Loss

 

 

Equity

 

Balance June 30, 2022

 

$

261

 

 

$

885,435

 

 

$

(18,019

)

 

$

 

 

$

(103,120

)

 

$

764,557

 

Net Income

 

 

 

 

 

 

 

 

831

 

 

 

 

 

 

 

 

 

831

 

Stock activity under stock plans

 

 

 

 

 

54

 

 

 

 

 

 

 

 

 

 

 

 

54

 

Share-based compensation expense

 

 

 

 

 

5,197

 

 

 

 

 

 

 

 

 

 

 

 

5,197

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,863

)

 

 

(36,863

)

Balance September 30, 2022

 

$

261

 

 

$

890,686

 

 

$

(17,188

)

 

$

 

 

$

(139,983

)

 

$

733,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance June 30, 2021

 

$

 

 

$

 

 

$

 

 

$

1,464,106

 

 

$

(16,491

)

 

$

1,447,615

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(30,249

)

 

 

 

 

 

(30,249

)

Net transactions with Zimmer Biomet Holdings, Inc.

 

 

 

 

 

 

 

 

 

 

 

(2,183

)

 

 

 

 

 

(2,183

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,874

)

 

 

(12,874

)

Balance September 30, 2021

 

$

 

 

$

 

 

$

 

 

$

1,431,674

 

 

$

(29,365

)

 

$

1,402,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Net Parent

 

 

Other

 

 

 

 

 

 

Common

 

 

Paid-In

 

 

Accumulated

 

 

Company

 

 

Comprehensive

 

 

Total

 

 

 

Stock

 

 

Capital

 

 

Deficit

 

 

Investment

 

 

(Loss) Income

 

 

Equity

 

Balance December 31, 2021

 

$

 

 

$

 

 

$

 

 

$

1,494,157

 

 

$

(42,780

)

 

$

1,451,377

 

Net loss

 

 

 

 

 

 

 

 

(17,188

)

 

 

(16,349

)

 

 

 

 

 

(33,537

)

Net transactions with Zimmer Biomet Holdings, Inc., including separation adjustments

 

 

 

 

 

 

 

 

 

 

 

(70,430

)

 

 

 

 

 

(70,430

)

Net consideration paid to Zimmer Biomet Holdings, Inc. in connection with distribution

 

 

 

 

 

 

 

 

 

 

 

(540,567

)

 

 

 

 

 

(540,567

)

Reclassification of net parent company investment to additional paid-in capital

 

 

261

 

 

 

866,550

 

 

 

 

 

 

(866,811

)

 

 

 

 

 

 

Stock activity under stock plans

 

 

 

 

 

50

 

 

 

 

 

 

 

 

 

 

 

 

50

 

Share-based compensation expense

 

 

 

 

 

24,086

 

 

 

 

 

 

 

 

 

 

 

 

24,086

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(97,203

)

 

 

(97,203

)

Balance September 30, 2022

 

$

261

 

 

$

890,686

 

 

$

(17,188

)

 

$

 

 

$

(139,983

)

 

$

733,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2020

 

$

 

 

$

 

 

$

 

 

$

1,485,978

 

 

$

4,577

 

 

$

1,490,555

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(34,563

)

 

 

 

 

 

(34,563

)

Net transactions with Zimmer Biomet Holdings, Inc.

 

 

 

 

 

 

 

 

 

 

 

(19,741

)

 

 

 

 

 

(19,741

)

Other comprehensive loss