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 June 30, 2023

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 July 28, 2023 was 26,529,642.

 

 


 

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

 

 

 

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

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

24

 

 

 

PART II.

OTHER INFORMATION

24

 

 

 

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

24

Item 5.

Other Information

25

Item 6.

Exhibits

25

Signatures

26

 

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 June 30,

 

 

For the Six Months Ended June 30,

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net Sales

 

 

 

 

 

 

 

 

 

 

 

 

Third party, net

 

$

224,896

 

 

$

233,367

 

 

$

449,984

 

 

$

468,049

 

Related party, net

 

 

 

 

 

1,197

 

 

 

339

 

 

 

2,116

 

Total Net Sales

 

 

224,896

 

 

 

234,564

 

 

 

450,323

 

 

 

470,165

 

Cost of products sold, excluding intangible asset amortization

 

 

(74,500

)

 

 

(80,011

)

 

 

(145,217

)

 

 

(165,021

)

Related party cost of products sold, excluding intangible asset amortization

 

 

 

 

 

(1,061

)

 

 

(328

)

 

 

(1,858

)

Intangible asset amortization

 

 

(20,663

)

 

 

(19,916

)

 

 

(41,172

)

 

 

(40,821

)

Research and development

 

 

(13,231

)

 

 

(15,282

)

 

 

(28,604

)

 

 

(32,935

)

Selling, general and administrative

 

 

(128,480

)

 

 

(126,052

)

 

 

(256,448

)

 

 

(260,164

)

Restructuring and other cost reduction initiatives

 

 

(8,445

)

 

 

(5,055

)

 

 

(13,420

)

 

 

(5,797

)

Acquisition, integration, divestiture and related

 

 

(1,396

)

 

 

(8,723

)

 

 

(3,079

)

 

 

(17,728

)

Operating Expenses

 

 

(246,715

)

 

 

(256,100

)

 

 

(488,268

)

 

 

(524,324

)

Operating Loss

 

 

(21,819

)

 

 

(21,536

)

 

 

(37,945

)

 

 

(54,159

)

Other income (expense), net

 

 

598

 

 

 

107

 

 

 

(308

)

 

 

362

 

Interest expense, net

 

 

(9,005

)

 

 

(4,894

)

 

 

(17,971

)

 

 

(5,605

)

Loss Before Income Taxes

 

 

(30,226

)

 

 

(26,323

)

 

 

(56,224

)

 

 

(59,402

)

Income tax benefit

 

 

6,853

 

 

 

17,611

 

 

 

2,883

 

 

 

25,034

 

Net Loss

 

$

(23,373

)

 

$

(8,712

)

 

$

(53,341

)

 

$

(34,368

)

Net Loss Per Common Share - Basic

 

$

(0.89

)

 

$

(0.33

)

 

$

(2.02

)

 

$

(1.32

)

Net Loss Per Common Share - Diluted

 

 

(0.89

)

 

 

(0.33

)

 

 

(2.02

)

 

 

(1.32

)

 

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 June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net Loss

 

$

(23,373

)

 

$

(8,712

)

 

$

(53,341

)

 

$

(34,368

)

Other Comprehensive Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency cumulative translation adjustments, net of tax

 

 

580

 

 

 

(45,674

)

 

 

11,097

 

 

 

(60,340

)

Total Other Comprehensive Income (Loss)

 

 

580

 

 

 

(45,674

)

 

 

11,097

 

 

 

(60,340

)

Comprehensive Loss

 

$

(22,793

)

 

$

(54,386

)

 

$

(42,244

)

 

$

(94,708

)

 

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)

 

 

As of

 

 

June 30, 2023

 

 

December 31, 2022

 

ASSETS

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

66,212

 

 

$

89,601

 

Accounts receivable, net of allowance for credit losses of $14,546 and $15,026, respectively

 

 

168,121

 

 

 

168,961

 

Related party receivable

 

 

 

 

 

8,483

 

Inventories

 

 

227,532

 

 

 

233,854

 

Prepaid expenses and other current assets

 

 

45,514

 

 

 

36,964

 

Total Current Assets

 

 

507,379

 

 

 

537,863

 

Property, plant and equipment, net of accumulated depreciation of $393,422 and $392,888, respectively

 

 

129,671

 

 

 

148,439

 

Goodwill

 

 

261,211

 

 

 

259,999

 

Intangible assets, net

 

 

624,614

 

 

 

654,965

 

Other assets

 

 

37,664

 

 

 

40,790

 

Total Assets

 

$

1,560,539

 

 

$

1,642,056

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

Accounts payable

 

$

59,418

 

 

$

43,998

 

Related party payable

 

 

 

 

 

13,176

 

Income taxes payable

 

 

4,544

 

 

 

14,356

 

Other current liabilities

 

 

125,778

 

 

 

145,779

 

Total Current Liabilities

 

 

189,740

 

 

 

217,309

 

Deferred income taxes

 

 

92,773

 

 

 

98,062

 

Lease liability

 

 

17,583

 

 

 

22,287

 

Other long-term liabilities

 

 

10,334

 

 

 

13,561

 

Non-current portion of debt

 

 

522,267

 

 

 

532,233

 

Total Liabilities

 

 

832,697

 

 

 

883,452

 

Commitments and Contingencies (Note 11)

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Common stock, $0.01 par value, 150,000 shares authorized
  Shares, issued and outstanding, of
26,530 and 26,222, respectively

 

 

265

 

 

 

262

 

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

 

 

 

 

 

 

Additional paid in capital

 

 

908,507

 

 

 

897,028

 

Accumulated deficit

 

 

(100,873

)

 

 

(47,532

)

Accumulated other comprehensive loss

 

 

(80,057

)

 

 

(91,154

)

Total Stockholders' Equity

 

 

727,842

 

 

 

758,604

 

Total Liabilities and Stockholders' Equity

 

$

1,560,539

 

 

$

1,642,056

 

 

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) Income

 

 

Equity

 

Balance March 31, 2023

 

$

264

 

 

$

901,476

 

 

$

(77,500

)

 

$

 

 

$

(80,637

)

 

$

743,603

 

Net loss

 

 

 

 

 

 

 

 

(23,373

)

 

 

 

 

 

 

 

 

(23,373

)

Stock activity under stock plans

 

 

1

 

 

 

49

 

 

 

 

 

 

 

 

 

 

 

 

50

 

Share-based compensation expense

 

 

 

 

 

5,815

 

 

 

 

 

 

 

 

 

 

 

 

5,815

 

Employee stock purchase plan

 

 

 

 

 

1,167

 

 

 

 

 

 

 

 

 

 

 

 

1,167

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

580

 

 

 

580

 

Balance June 30, 2023

 

$

265

 

 

$

908,507

 

 

$

(100,873

)

 

$

 

 

$

(80,057

)

 

$

727,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance March 31, 2022

 

$

261

 

 

$

878,948

 

 

$

(9,307

)

 

$

 

 

$

(57,446

)

 

$

812,456

 

Net loss

 

 

 

 

 

 

 

 

(8,712

)

 

 

 

 

 

 

 

 

(8,712

)

Stock activity under stock plans

 

 

 

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

28

 

Share-based compensation expense

 

 

 

 

 

6,459

 

 

 

 

 

 

 

 

 

 

 

 

6,459

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,674

)

 

 

(45,674

)

Balance June 30, 2022

 

$

261

 

 

$

885,435

 

 

$

(18,019

)

 

$

 

 

$

(103,120

)

 

$

764,557

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Net Parent

 

 

Other

 

 

 

 

 

Common

 

 

Paid-In

 

 

Accumulated

 

 

Company

 

 

Comprehensive

 

 

Total

 

 

Stock

 

 

Capital

 

 

Deficit

 

 

Investment

 

 

(Loss) Income

 

 

Equity

 

Balance December 31, 2022

 

$

262

 

 

$

897,028

 

 

$

(47,532

)

 

$

 

 

$

(91,154

)

 

$

758,604

 

Net loss

 

 

 

 

 

 

 

 

(53,341

)

 

 

 

 

 

 

 

 

(53,341

)

Stock activity under stock plans

 

 

3

 

 

 

(344

)

 

 

 

 

 

 

 

 

 

 

 

(341

)

Share-based compensation expense

 

 

 

 

 

10,656

 

 

 

 

 

 

 

 

 

 

 

 

10,656

 

Employee stock purchase plan

 

 

 

 

 

1,167

 

 

 

 

 

 

 

 

 

 

 

 

1,167

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,097

 

 

 

11,097

 

Balance June 30, 2023

 

$

265

 

 

$

908,507

 

 

$

(100,873

)

 

$

 

 

$

(80,057

)

 

$

727,842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance December 31, 2021

 

$

 

 

$

 

 

$

 

 

$

1,494,157

 

 

$

(42,780

)

 

$

1,451,377

 

Net loss

 

 

 

 

 

 

 

 

(18,019

)

 

 

(16,349

)

 

 

 

 

 

(34,368

)

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

 

 

 

 

 

(4

)

 

 

 

 

 

 

 

 

 

 

 

(4

)

Share-based compensation expense