WARSAW, Ind., Feb. 4, 2020 /PRNewswire/ — Zimmer Biomet Holdings, Inc. (NYSE and SIX: ZBH) today reported financial results for the quarter and year ended December 31, 2019. The Company reported fourth quarter net sales of $2.126 billion, an increase of 2.6% over the prior year period, and an increase of 3.2% on a constant currency basis. Net sales for the full year were $7.982 billion, an increase of 0.6% over 2018 and an increase of 2.2% on a constant currency basis. Net earnings for the fourth quarter were $321 million and $478 million on an adjusted basis, and for the full year were $1.132 billion and $1.626 billion on an adjusted basis.
Diluted earnings per share were $1.54 for the fourth quarter and $5.47 for the full year. Adjusted diluted earnings per share were $2.30 for the fourth quarter, an increase of 5.5% over the prior year period, and were $7.87 for the full year, an increase of 3.0% over 2018.
“In 2019 we continued to successfully execute our plan to reposition the company for success, driven by our global team’s focus on our One ZB mission and culture,” said Bryan Hanson, President and CEO of Zimmer Biomet. “We continued to invest for growth and drove improved performance in 2019, especially in the second half of the year. We are operating from a position of strength for 2020 and beyond. I am proud of the entire ZB team and their unyielding commitment to the ZB mission and bettering the lives of patients around the world.”
Key drivers in the fourth quarter included solid performance from the Americas and Asia Pacific, with continued strong results across our global Knee and Hip businesses. Additionally, ROSA® Knee System sales accelerated from the third quarter of 2019.
Please see the attached schedules accompanying this press release for additional details on performance in the quarter, including sales by Zimmer Biomet’s three geographies and six product categories.
Recent Highlights
- Fourth quarter launch, positive customer feedback and good momentum for the Persona® Revision and Avenir Complete™ products
- The Company began a number of restructuring initiatives, including reorganizing business units to create greater strategic alignment, increased efficiency and improved resource allocation for accelerated growth
- Zimmer Biomet named 2019 Medtech Company of the Year by Medical Device and Diagnostic Industry (MD+DI)
Geographic and Product Category Sales
The following sales tables provide results by geography and product category for the three-month period and year ended December 31, 2019, as well as the percentage change compared to the prior year periods, on both a reported basis and a constant currency basis.
Cash Flow and Balance Sheet
Operating cash flow for the fourth quarter was $423 million and free cash flow was $295 million. In the fourth quarter, the Company paid down $161 million of debt, net of debt proceeds, paid $49 million in dividends and declared a dividend of $0.24 per share. Operating cash flow for the full year was $1.586 billion and free cash flow was $1.063 billion. In the full year, the Company paid down $716 million of debt, net of debt proceeds, paid $197 million in dividends and declared dividends of $0.96 per share.
Conference Call
The Company will conduct its fourth quarter and full-year 2019 investor conference call today, February 4, 2020, at 8:30 a.m. Eastern Time. The audio webcast can be accessed via Zimmer Biomet’s Investor Relations website at https://investor.zimmerbiomet.com. It will be archived for replay following the conference call.
About the Company
Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer Biomet is a global leader in musculoskeletal healthcare. We design, manufacture and market orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; office based technologies; spine, craniomaxillofacial and thoracic products; dental implants; and related surgical products.
We collaborate with healthcare professionals around the globe to advance the pace of innovation. Our products and solutions help treat patients suffering from disorders of, or injuries to, bones, joints or supporting soft tissues. Together with healthcare professionals, we help millions of people live better lives.
We have operations in more than 25 countries around the world and sell products in more than 100 countries. For more information, visit www.zimmerbiomet.com or follow Zimmer Biomet on Twitter at www.twitter.com/zimmerbiomet.
Website Information
We routinely post important information for investors on our website, www.zimmerbiomet.com, in the “Investor Relations” section. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.
Note on Non-GAAP Financial Measures
This press release includes non-GAAP financial measures that differ from financial measures calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). These non-GAAP financial measures may not be comparable to similar measures reported by other companies and should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP.
Sales change information for the three-month period and the year ended December 31, 2019 is presented on a GAAP (reported) basis and on a constant currency basis. Constant currency percentage changes exclude the effects of foreign currency exchange rates. They are calculated by translating current and prior-period sales at the same predetermined exchange rate. The translated results are then used to determine year-over-year percentage increases or decreases.
Net earnings and diluted earnings per share for the three-month period and the year ended December 31, 2019 are presented on a GAAP (reported) basis and on an adjusted basis. Adjusted earnings and adjusted diluted earnings per share exclude the effects of certain inventory and manufacturing-related charges, including charges to terminate a raw material supply agreement and to discontinue certain product lines; intangible asset amortization; intangible asset impairment; quality remediation expenses; restructuring and other cost reduction initiative expenses; acquisition, integration and related gains and expenses; certain litigation gains and charges; expenses to establish initial compliance with the European Union Medical Device Regulation; other charges; any related effects on our income tax provision associated with these items, the effect of Switzerland tax reform and other certain tax adjustments.
Free cash flow is an additional non-GAAP measure that is presented in this press release. Free cash flow is computed by deducting additions to instruments and other property, plant and equipment from net cash provided by operating activities.
Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in this press release. This press release also contains supplemental reconciliations of additional non-GAAP financial measures that the Company presents in other contexts. These additional non-GAAP financial measures are computed from the most directly comparable GAAP financial measure as indicated in the applicable reconciliation.
Management uses non-GAAP financial measures internally to evaluate the performance of the business. Additionally, management believes these non-GAAP measures provide meaningful incremental information to investors to consider when evaluating the performance of the Company. Management believes these measures offer the ability to make period-to-period comparisons that are not impacted by certain items that can cause dramatic changes in reported income but that do not impact the fundamentals of our operations. The non-GAAP measures enable the evaluation of operating results and trend analysis by allowing a reader to better identify operating trends that may otherwise be masked or distorted by these types of items that are excluded from the non-GAAP measures. In addition, constant currency sales changes, adjusted operating profit, adjusted diluted earnings per share and free cash flow are used as performance metrics in our incentive compensation programs.
Forward-Looking Non-GAAP Financial Measures
This press release also includes certain forward-looking non-GAAP financial measures for the year ending December 31, 2020. We calculate forward-looking non-GAAP financial measures based on internal forecasts that omit certain amounts that would be included in GAAP financial measures. For instance, we exclude the impact of certain charges related to restructuring and other cost reduction initiatives and certain legal and tax matters. We have not provided quantitative reconciliations of these forward-looking non-GAAP financial measures to the most directly comparable forward-looking GAAP financial measures because the excluded items are not available on a prospective basis without unreasonable efforts. For example, the timing of certain transactions is difficult to predict because management’s plans may change. In addition, the company believes such reconciliations would imply a degree of precision and certainty that could be confusing to investors. It is probable that these forward-looking non-GAAP financial measures may be materially different from the corresponding GAAP financial measures.