• | Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations; |
• | Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk; |
• | Part II, Item 8. Financial Statements and Supplementary Data; and |
• | Part IV, Item 15(a)(2), Financial Statement Schedule. |
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Year Ended December 31, |
Volume/ |
Foreign |
||||||||||||||||||||||
2021 |
2020 |
% Inc |
Mix |
Price |
Exchange |
|||||||||||||||||||
Americas |
$ | 4,102.1 | $ | 3,699.5 | 10.9 | % | 11.9 | % | (1.3 | )% | 0.3 | % | ||||||||||||
EMEA |
1,477.2 | 1,237.3 | 19.4 | 16.1 | (0.4 | ) | 3.7 | |||||||||||||||||
Asia Pacific |
1,248.0 | 1,190.7 | 4.8 | 9.1 | (6.1 | ) | 1.8 | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
$ | 6,827.3 | $ | 6,127.5 | 11.4 | 12.3 | (2.1 | ) | 1.2 | |||||||||||||||
|
|
|
|
Year Ended December 31, |
Volume/ |
Foreign |
||||||||||||||||||||||
2020 |
2019 |
% (Dec) |
Mix |
Price |
Exchange |
|||||||||||||||||||
Americas |
$ | 3,699.5 | $ | 4,148.8 | (10.8 | )% | (7.4 | )% | (3.4 | )% | — | % | ||||||||||||
EMEA |
1,237.3 | 1,554.8 | (20.4 | ) | (20.2 | ) | (1.0 | ) | 0.8 | |||||||||||||||
Asia Pacific |
1,190.7 | 1,257.0 | (5.3 | ) | (5.1 | ) | (1.6 | ) | 1.4 | |||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
$ | 6,127.5 | $ | 6,960.6 | (12.0 | ) | (9.9 | ) | (2.5 | ) | 0.4 | |||||||||||||
|
|
|
|
Year Ended December 31, |
Volume/ |
Foreign |
||||||||||||||||||||||
2021 |
2020 |
% Inc |
Mix |
Price |
Exchange |
|||||||||||||||||||
Knees |
$ | 2,647.9 | $ | 2,378.3 | 11.3 | % | 12.4 | % | (2.4 | )% | 1.3 | % | ||||||||||||
Hips |
1,856.1 | 1,750.5 | 6.0 | 8.2 | (3.3 | ) | 1.1 | |||||||||||||||||
S.E.T. |
1,727.8 | 1,525.6 | 13.3 | 12.2 | (0.3 | ) | 1.4 | |||||||||||||||||
Other |
595.5 | 473.1 | 25.9 | 26.7 | (1.7 | ) | 0.9 | |||||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
$ | 6,827.3 | $ | 6,127.5 | 11.4 | 12.3 | (2.1 | ) | 1.2 | |||||||||||||||
|
|
|
|
Year Ended December 31, |
Volume/ |
Foreign |
||||||||||||||||||||||
2020 |
2019 |
% (Dec) |
Mix |
Price |
Exchange |
|||||||||||||||||||
Knees |
$ | 2,378.3 | $ | 2,780.6 | (14.5 | )% | (12.1 | )% | (2.7 | )% | 0.3 | % | ||||||||||||
Hips |
1,750.5 | 1,931.5 | (9.4 | ) | (7.1 | ) | (2.8 | ) | 0.5 | |||||||||||||||
S.E.T. |
1,525.6 | 1,652.5 | (7.7 | ) | (5.9 | ) | (2.1 | ) | 0.3 | |||||||||||||||
Other |
473.1 | 596.0 | (20.6 | ) | (19.1 | ) | (1.9 | ) | 0.4 | |||||||||||||||
|
|
|
|
|||||||||||||||||||||
Total |
$ | 6,127.5 | $ | 6,960.6 | (12.0 | ) | (9.9 | ) | (2.5 | ) | 0.4 | |||||||||||||
|
|
|
|
Year Ended December 31, |
||||||||||||||||||||
2021 |
2020 |
2019 |
2021 vs. 2020 % Inc/(Dec) |
2020 vs. 2019 % Inc/(Dec) |
||||||||||||||||
Knees |
||||||||||||||||||||
Americas |
$ | 1,574.2 | $ | 1,444.7 | $ | 1,645.4 | 9.0 | % | (12.2 | )% | ||||||||||
EMEA |
588.9 | 485.6 | 650.6 | 21.3 | (25.4 | ) | ||||||||||||||
Asia Pacific |
484.8 | 448.0 | 484.6 | 8.2 | (7.6 | ) | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 2,647.9 | $ | 2,378.3 | $ | 2,780.6 | 11.3 | (14.5 | ) | |||||||||||
|
|
|
|
|
|
|||||||||||||||
Hips |
||||||||||||||||||||
Americas |
$ | 997.8 | $ | 941.5 | $ | 1,016.3 | 6.0 | % | (7.4 | )% | ||||||||||
EMEA |
474.0 | 407.8 | 499.8 | 16.2 | (18.4 | ) | ||||||||||||||
Asia Pacific |
384.3 | 401.2 | 415.4 | (4.2 | ) | (3.4 | ) | |||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 1,856.1 | $ | 1,750.5 | $ | 1,931.5 | 6.0 | (9.4 | ) | |||||||||||
|
|
|
|
|
|
Global |
Global |
Zimmer Biomet |
||||||||
Market |
Historic Market |
Market |
||||||||
Size** |
% Growth*** |
Position** |
||||||||
Knees |
$ | 10 | Low-Single Digit |
1 | ||||||
Hips |
8 | Low-Single Digit |
1 | |||||||
S.E.T. |
25 | Mid-Single Digit |
N/A |
* | Estimates are not precise and are based on competitor annual filings, Wall Street equity research and Company estimates |
** | Only includes the subsegments in these markets in which we compete |
*** | Represents historic growth in recent years, absent the effects of the COVID-19 pandemic, and excludes the effect of changes in foreign currency exchange rates on sales growth |
N/A | In these product categories, due to the breadth of subcategories and since some major competitors are privately owned, it is difficult to determine our exact position. |
Year Ended December 31, |
||||||||||||||||||||
2021 |
2020 |
2019 |
2021 vs. 2020 Inc/(Dec) |
2020 vs. 2019 Inc/(Dec) |
||||||||||||||||
Cost of products sold, excluding intangible asset amortization |
28.7 | % | 29.8 | % | 27.9 | % | (1.1 | )% | 1.9 | % | ||||||||||
Intangible asset amortization |
7.8 | 8.4 | 7.2 | (0.6 | ) | 1.2 | ||||||||||||||
Research and development |
6.4 | 5.3 | 5.7 | 1.1 | (0.4 | ) | ||||||||||||||
Selling, general and administrative |
41.6 | 44.3 | 40.4 | (2.7 | ) | 3.9 | ||||||||||||||
Goodwill and intangible asset impairment |
0.2 | 8.2 | 1.0 | (8.0 | ) | 7.2 | ||||||||||||||
Restructuring and other cost reduction initiatives |
1.8 | 1.7 | 0.7 | 0.1 | 1.0 | |||||||||||||||
Quality remediation |
0.8 | 0.8 | 1.2 | — | (0.4 | ) | ||||||||||||||
Acquisition, integration, divestiture and related |
— | 0.2 | — | (0.2 | ) | 0.2 | ||||||||||||||
Operating Profit |
12.6 | 1.4 | 16.0 | 11.2 | (14.6 | ) |
Year Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Prior year gross margin |
61.9 | % | 64.9 | % | ||||
Lower average selling prices |
(0.6 | ) | (0.7 | ) | ||||
Average cost per unit |
(0.3 | ) | 0.6 | |||||
Excess and obsolete inventory charges |
1.2 | (0.5 | ) | |||||
Discontinued products inventory charges |
0.9 | (0.4 | ) | |||||
Royalties |
— | 0.2 | ||||||
Impact of foreign currency hedges |
(0.8 | ) | 0.2 | |||||
Temporarily suspended or limited production |
0.8 | (1.3 | ) | |||||
Intangible asset amortization |
0.6 | (1.2 | ) | |||||
Other |
(0.2 | ) | 0.1 | |||||
|
|
|
|
|||||
Current year gross margin |
63.5 | % | 61.9 | % | ||||
|
|
|
|
Operating Profit as a |
||||||||||||||||||||||||||||||||||||
Net Sales |
Operating Profit |
Percentage of Net Sales |
||||||||||||||||||||||||||||||||||
Year Ended December 31, |
Year Ended December 31, |
Year Ended December 31, |
||||||||||||||||||||||||||||||||||
(dollars in millions) |
2021 |
2020 |
2019 |
2021 |
2020 |
2019 |
2021 |
2020 |
2019 |
|||||||||||||||||||||||||||
Americas |
$ | 4,102.1 | $ | 3,699.5 | $ | 4,148.8 | $ | 1,709.3 | $ | 1,528.2 | $ | 1,831.8 | 41.7 | % | 41.3 | % | 44.2 | % | ||||||||||||||||||
EMEA |
1,477.2 | 1,237.3 | 1,554.8 | 380.3 | 303.0 | 478.5 | 25.7 | 24.5 | 30.8 | |||||||||||||||||||||||||||
Asia Pacific |
1,248.0 | 1,190.7 | 1,257.0 | 401.3 | 395.4 | 447.9 | 32.2 | 33.2 | 35.6 |
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Net Earnings (Loss) from Continuing Operations of Zimmer Biomet Holdings, Inc. |
$ | 445.0 | $ | (10.7 | ) | $ | 1,118.2 | |||||
Inventory and manufacturing related charges (1) |
5.1 | 55.0 | 59.3 | |||||||||
Intangible asset amortization (2) |
529.5 | 512.1 | 500.9 | |||||||||
Goodwill and intangible asset impairment (3) |
16.3 | 503.0 | 70.1 | |||||||||
Restructuring and other cost reduction initiatives (4) |
125.7 | 107.2 | 48.2 | |||||||||
Quality remediation (5) |
52.8 | 51.1 | 87.2 | |||||||||
Acquisition, integration, divestiture and related (6) |
3.1 | 11.4 | (0.5 | ) | ||||||||
Litigation (7) |
192.9 | 159.8 | 65.0 | |||||||||
Litigation settlement gain (8) |
— | — | (23.5 | ) | ||||||||
European Union Medical Device Regulation (9) |
40.8 | 22.5 | 27.0 | |||||||||
Loss on early extinguishment of debt (10) |
165.1 | — | — | |||||||||
Other charges (11) |
11.3 | 12.1 | 114.3 | |||||||||
Taxes on above items (12) |
(227.0 | ) | (224.0 | ) | (201.2 | ) | ||||||
Swiss tax reform (13) |
30.1 | (5.0 | ) | (315.0 | ) | |||||||
Other certain tax adjustments (14) |
(9.7 | ) | (80.1 | ) | (13.6 | ) | ||||||
|
|
|
|
|
|
|||||||
Adjusted Net Earnings |
$ | 1,381.0 | $ | 1,114.4 | $ | 1,536.4 | ||||||
|
|
|
|
|
|
Year ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Diluted Earnings (Loss) per share from Continuing Operations |
$ | 2.12 | $ | (0.05 | ) | $ | 5.41 | |||||
Inventory and manufacturing related charges (1) |
0.03 | 0.26 | 0.29 | |||||||||
Intangible asset amortization (2) |
2.52 | 2.47 | 2.42 | |||||||||
Goodwill and intangible asset impairment (3) |
0.08 | 2.43 | 0.34 | |||||||||
Restructuring and other cost reduction initiatives (4) |
0.60 | 0.52 | 0.23 | |||||||||
Quality remediation (5) |
0.25 | 0.24 | 0.42 | |||||||||
Acquisition, integration, divestiture and related (6) |
0.01 | 0.06 | — | |||||||||
Litigation (7) |
0.92 | 0.77 | 0.31 | |||||||||
Litigation settlement gain (8) |
— | — | (0.11 | ) | ||||||||
European Union Medical Device Regulation (9) |
0.19 | 0.11 | 0.13 | |||||||||
Loss on early extinguishment of debt (10) |
0.78 | — | — | |||||||||
Other charges (11) |
0.05 | 0.06 | 0.55 | |||||||||
Taxes on above items (12) |
(1.08 | ) | (1.08 | ) | (0.97 | ) | ||||||
Swiss tax reform (13) |
0.14 | (0.02 | ) | (1.52 | ) | |||||||
Other certain tax adjustments (14) |
(0.05 | ) | (0.39 | ) | (0.07 | ) | ||||||
Effect of dilutive shares assuming net earnings (15) |
— | (0.03 | ) | — | ||||||||
|
|
|
|
|
|
|||||||
Adjusted Diluted EPS |
$ | 6.56 | $ | 5.35 | $ | 7.43 | ||||||
|
|
|
|
|
|
(1) |
Inventory and manufacturing-related charges include excess and obsolete inventory charges on certain product lines we intend to discontinue, incremental cost of products sold from stepping up inventory to its fair value from its manufactured cost in business combination accounting and other inventory and manufacturing-related charges or gains. |
(2) |
We exclude intangible asset amortization as well as deferred tax rate changes on our intangible assets from our non-GAAP financial measures because we internally assess our performance against our peers without this amortization. Due to various levels of acquisitions among our peers, intangible asset amortization can vary significantly from company to company. |
(3) |
In 2020, we recognized a goodwill impairment charge of $470.0 million related to our EMEA reporting unit. In 2021, 2020 and 2019, we recognized $16.3 million, $33.0 million and $70.1 million, respectively, of IPR&D intangible asset impairments on certain IPR&D projects. |
(4) |
In 2019 and 2021, we initiated global restructuring programs that include a reorganization of key businesses and an overall effort to reduce costs in order to accelerate decision-making, focus the organization on priorities to drive growth and to prepare for the planned spinoff of ZimVie. Restructuring and other cost reduction initiatives also include other cost reduction initiatives that have the goal of reducing costs across the organization. The costs include employee termination benefits; contract terminations for facilities and sales agents; and other charges, such as retention period salaries and benefits and relocation costs. |
(5) |
We are addressing inspectional observations on Form 483 and a warning letter issued by the FDA following its previous inspections of our Warsaw North Campus facility, among other matters. This quality remediation has required us to devote significant financial resources and is for a discrete period of time. The majority of the expenses are related to consultants who are helping us to update previous documents and redesign certain processes. |
(6) |
The acquisition, integration, divestiture and related net expenses we have excluded from our non-GAAP financial measures included costs from various acquisitions as well as gains from a transition manufacturing and supply agreement for us to supply ZimVie products for a limited time period. |
(7) |
We are involved in routine patent litigation, product liability litigation, commercial litigation and other various litigation matters. We review litigation matters from both a qualitative and quantitative perspective to determine if excluding the losses or gains will provide our investors with useful incremental information. Litigation matters can vary in their characteristics, frequency and significance to our operating results. The litigation charges and gains excluded from our non-GAAP financial measures in the periods presented relate to product liability matters where we have received numerous claims on specific products, patent litigation and commercial litigation related to a common matter in multiple jurisdictions. In regards to the product liability matters, due to the complexities involved and claims filed in multiple districts, the expenses associated with these matters are significant to our operating results. Once the litigation matter has been excluded from our non-GAAP financial measures in a particular period, any additional expenses or gains from changes in estimates are also excluded, even if they are not significant, to ensure consistency in our non-GAAP financial measures from period-to-period. |
(8) |
In the first quarter of 2019, we settled a patent infringement lawsuit out of court, and the other party agreed to pay us an upfront, lump-sum amount for a non-exclusive license to the patent. |
(9) |
The European Union Medical Device Regulation imposes significant additional premarket and postmarket requirements. The new regulations provided a transition period until May 2021 for previously-approved medical devices to meet the additional requirements. For certain devices, this transition period can be extended until May 2024. We are excluding from our non-GAAP financial measures the incremental costs incurred to establish initial compliance with the regulations related to our previously-approved medical devices. The incremental costs primarily include temporary personnel and third-party professionals necessary to supplement our internal resources. |
(10) |
We recognized a loss on early extinguishment of debt during the year ended December 31, 2021, as a result of cash tender offers for certain outstanding series of senior notes. |
(11) |
We have incurred other various expenses from specific events or projects that we consider highly variable or that have a significant impact to our operating results that we have excluded from our non-GAAP measures. These include costs related to legal entity, distribution and manufacturing optimization, including contract terminations, gains and losses from changes in fair value on our equity investments, as well as, in the 2020 and 2019 periods, our costs of complying with the DPA with the U.S. government related to certain Foreign Corrupt Practices Act matters involving Biomet and certain of its subsidiaries, which DPA concluded in February 2021. |
(12) |
Represents the tax effects on the previously specified items, including the deferred tax rate changes on intangible assets. The tax effect for the U.S. jurisdiction is calculated based on an effective rate considering federal and state taxes, as well as permanent items. For jurisdictions outside the U.S., the tax effect is calculated based upon the statutory rates where the items were incurred. |
(13) |
We recognized a tax benefit related to TRAF in addition to an impact from certain restructuring transactions in Switzerland. Also included are tax adjustments relating to the ongoing impacts of tax only amortization resulting from TRAF as well as certain restructuring transactions in Switzerland. |
(14) |
Other certain tax adjustments relate to various discrete tax period adjustments. In 2021, the adjustments were primarily related to tax reform planning. In 2020, the adjustments were primarily related to the resolution of or changes in estimates of significant uncertain tax positions as a result of settlements or favorable rulings. In |
2019, the adjustments were primarily related to changes in tax rates on deferred tax liabilities recorded on intangible assets recognized in acquisition-related accounting and adjustments from internal restructuring transactions that provide us access to offshore funds in a tax efficient manner. |
(15) |
Due to the reported net loss for 2020, the effect of dilutive shares assuming net earnings is shown as an adjustment. Diluted share count used in Adjusted Diluted EPS is (in millions): |
Year ended December 31, 2020 |
||||
Diluted shares |
207.0 | |||
Dilutive shares assuming net earnings |
1.4 | |||
|
|
|||
Adjusted diluted shares |
208.4 | |||
|
|
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
Item 8. |
Financial Statements and Supplementary Data |
Page |
||||
Financial Statements: |
||||
Report of Independent Registered Public Accounting Firm (PCAOB ID: 238) |
18 | |||
21 | ||||
22 | ||||
23 | ||||
24 | ||||
25 | ||||
26 |
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Net Sales |
$ | $ | $ | |||||||||
, |
||||||||||||
Intangible asset amortization |
||||||||||||
Research and development |
||||||||||||
Selling, general and administrative |
||||||||||||
Goodwill and intangible asset impairment |
||||||||||||
Restructuring and other cost reduction initiatives |
||||||||||||
Quality remediation |
||||||||||||
Acquisition, integration, divestiture and related |
( |
) | ||||||||||
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|||||||
Operating expenses |
||||||||||||
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|||||||
Operating Profit |
||||||||||||
Other income (expense), net |
( |
) | ||||||||||
Interest expense, net |
( |
) | ( |
) | ( |
) | ||||||
Loss on early extinguishment of debt |
( |
) | ||||||||||
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|
|||||||
Earnings (loss) from continuing operations before income taxes |
( |
) | ||||||||||
Provision (benefit) for income taxes from continuing operations |
( |
) | ( |
) | ||||||||
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|
|||||||
Net Earnings (Loss) from Continuing Operations |
( |
) | ||||||||||
Less: Net earnings (loss) attributable to noncontrolling interest |
( |
) | ||||||||||
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|
|
|
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|
|||||||
Net Earnings (Loss) from Continuing Operations of Zimmer Biomet Holdings, Inc. |
( |
) | ||||||||||
(Loss) Earnings from Discontinued Operations, Net of Tax |
( |
) | ( |
) | ||||||||
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|
|||||||
Net Earnings (Loss) of Zimmer Biomet Holdings, Inc. |
$ | $ | ( |
) | $ | |||||||
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|||||||
Basic Earnings Per Common Share |
||||||||||||
Earnings (Loss) from Continuing Operations |
$ | $ | ( |
) | $ | |||||||
(Loss) Earnings from Discontinued Operations |
( |
) | ( |
) | ||||||||
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|
|||||||
Basic Earnings (Loss) Per Common Share |
$ | $ | ( |
) | $ | |||||||
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|||||||
Diluted Earnings Per Common Share |
||||||||||||
Earnings (Loss) from Continuing Operations |
$ | $ | ( |
) | $ | |||||||
(Loss) Earnings from Discontinued Operations |
( |
) | ( |
) | ||||||||
|
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|
|||||||
Diluted Earnings (Loss) Per Common Share |
$ | $ | ( |
) | $ | |||||||
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|
|||||||
Weighted Average Common Shares Outstanding |
||||||||||||
Basic |
||||||||||||
Diluted |
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Net Earnings (Loss) of Zimmer Biomet Holdings, Inc. |
$ | $ | ( |
) | $ | |||||||
Other Comprehensive Income (Loss): |
||||||||||||
Foreign currency cumulative translation adjustments, net of tax |
( |
) | ( |
) | ||||||||
Unrealized cash flow hedge gains/(losses), net of tax |
( |
) | ||||||||||
Reclassification adjustments on hedges, net of tax |
( |
) | ( |
) | ||||||||
Adjustments to prior service cost and unrecognized actuarial assumptions, net of tax |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Total Other Comprehensive Income (Loss) |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Comprehensive Income (Loss) Attributable to Zimmer Biomet Holdings, Inc. |
$ | $ | ( |
) | $ | |||||||
|
|
|
|
|
|
As of December 31, |
||||||||
2021 |
2020 |
|||||||
ASSETS |
||||||||
Current Assets: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, less allowance for credit losses |
||||||||
Inventories |
||||||||
Prepaid taxes |
||||||||
Prepaid expenses and other current assets |
||||||||
Current assets of discontinued operations |
||||||||
Total Current Assets |
||||||||
Property, plant and equipment, net |
||||||||
Goodwill |
||||||||
Intangible assets, net |
||||||||
Other assets |
||||||||
Noncurrent assets of discontinued operations |
||||||||
Total Assets |
$ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current Liabilities: |
||||||||
Accounts payable |
$ | $ | ||||||
Income taxes payable |
||||||||
Other current liabilities |
||||||||
Current portion of long-term debt |
||||||||
Current liabilities of discontinued operations |
||||||||
Total Current Liabilities |
||||||||
Deferred income taxes, net |
||||||||
Long-term income tax payable |
||||||||
Other long-term liabilities |
||||||||
Long-term debt |
||||||||
Noncurrent liabilities of discontinued operations |
||||||||
Total Liabilities |
||||||||
Commitments and Contingencies (Note 22) |
||||||||
Stockholders’ Equity: |
||||||||
Common stock, $ |
||||||||
Paid-in capital |
||||||||
Retained earnings |
||||||||
Accumulated other comprehensive loss |
( |
) | ( |
) | ||||
Treasury stock, |
( |
) | ( |
) | ||||
Total Zimmer Biomet Holdings, Inc. stockholders’ equity |
||||||||
Noncontrolling interest |
||||||||
Total Stockholders’ Equity |
||||||||
Total Liabilities and Stockholders’ Equity |
$ | $ | ||||||
Zimmer Biomet Holdings, Inc. Stockholders |
||||||||||||||||||||||||||||||||||||
Accumulated |
||||||||||||||||||||||||||||||||||||
Other |
Total |
|||||||||||||||||||||||||||||||||||
Common Shares |
Paid-in |
Retained |
Comprehensive |
Treasury Shares |
Noncontrolling |
Stockholders’ |
||||||||||||||||||||||||||||||
Number |
Amount |
Capital |
Earnings |
(Loss) Income |
Number |
Amount |
Interest |
Equity |
||||||||||||||||||||||||||||
Balance January 1, 2019 |
$ | $ | $ | $ | ( |
) | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||
Net earnings |
— | — | — | — | — | — | ( |
) | ||||||||||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | — | — | — | ( |
) | |||||||||||||||||||||||||
Cash dividends declared ($ |
— | — | — | ( |
) | — | — | — | — | ( |
) | |||||||||||||||||||||||||
Stock compensation plans |
— | — | — | — | ||||||||||||||||||||||||||||||||
Balance December 31, 2019 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Net loss |
— | — | — | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||||||
Other comprehensive loss |
— | — | — | — | ( |
) | — | — | — | ( |
) | |||||||||||||||||||||||||
Cash dividends declared ($ |
— | — | — | ( |
) | — | — | — | — | ( |
) | |||||||||||||||||||||||||
Adoption of new accounting standard |
— | — | — | ( |
) | — | — | — | — | ( |
) | |||||||||||||||||||||||||
Acquisition of noncontrolling interest |
— | — | — | — | — | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||
Stock compensation plans |
— | — | — | |||||||||||||||||||||||||||||||||
Balance December 31, 2020 |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Net earnings |
— | — | — | — | — | — | ||||||||||||||||||||||||||||||
Other comprehensive income |
— | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Cash dividends declared ($ |
— | — | — | ( |
) | — | — | — | — | ( |
) | |||||||||||||||||||||||||
Stock compensation plans |
— | — | — | — | ||||||||||||||||||||||||||||||||
Balance December 31, 2021 |
$ | $ | $ | $ | ( |
) | ( |
) | $ | ( |
) | $ | $ | |||||||||||||||||||||||
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Cash flows provided by (used in) operating activities from continuing operations: |
||||||||||||
Net earnings (loss) from continuing operations |
$ | $ | ( |
) | $ | |||||||
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: |
||||||||||||
Depreciation and amortization |
||||||||||||
Share-based compensation |
||||||||||||
Goodwill and intangible asset impairment |
||||||||||||
Loss on early extinguishment of debt |
— | — | ||||||||||
Deferred income tax (benefit) provision |
( |
) | ( |
) | ||||||||
Changes in operating assets and liabilities, net of acquired assets and liabilities |
||||||||||||
Income taxes |
( |
) | ( |
) | ||||||||
Receivables |
( |
) | ( |
) | ( |
) | ||||||
Inventories |
( |
) | ( |
) | ( |
) | ||||||
Accounts payable and accrued liabilities |
( |
) | ( |
) | ||||||||
Other assets and liabilities |
( |
) | ( |
) | ||||||||
Net cash provided by operating activities from continuing operations |
||||||||||||
Cash flows provided by (used in) investing activities from continuing operations: |
||||||||||||
Additions to instruments |
( |
) | ( |
) | ( |
) | ||||||
Additions to other property, plant and equipment |
( |
) | ( |
) | ( |
) | ||||||
Net investment hedge settlements |
||||||||||||
Acquisition of intellectual property rights |
( |
) | ( |
) | ( |
) | ||||||
Business combination investments, net of acquired cash |
( |
) | ( |
) | ||||||||
Investments in other assets |
( |
) | ( |
) | ( |
) | ||||||
Net cash used in investing activities from continuing operations |
( |
) | ( |
) | ( |
) | ||||||
Cash flows provided by (used in) financing activities from continuing operations: |
||||||||||||
Proceeds from senior notes |
||||||||||||
Redemption of senior notes |
( |
) | ( |
) | ( |
) | ||||||
Proceeds from term loans |
— | — | ||||||||||
Payments on term loans |
— | — | ( |
) | ||||||||
Net payments on other debt |
— | — | ( |
) | ||||||||
Dividends paid to stockholders |
( |
) | ( |
) | ( |
) | ||||||
Proceeds from employee stock compensation plans |
||||||||||||
Net cash flows from unremitted collections from factoring programs |
— | ( |
) | ( |
) | |||||||
Business combination contingent consideration payments |
( |
) | ( |
) | ( |
) | ||||||
Debt issuance costs |
( |
) | ( |
) | ( |
) | ||||||
Deferred business combination payments |
( |
) | — | — | ||||||||
Other financing activities |
( |
) | ( |
) | ( |
) | ||||||
Net cash used in financing activities from continuing operations |
( |
) | ( |
) | ( |
) | ||||||
Cash flows provided by (used in) discontinued operations: |
||||||||||||
Net cash provided by operating activities |
||||||||||||
Net cash used in investing activities |
( |
) | ( |
) | ( |
) | ||||||
Net cash used in financing activities |
— | ( |
) | ( |
) | |||||||
Net cash provided by discontinued operations |
||||||||||||
Effect of exchange rates on cash and cash equivalents |
( |
) | ( |
) | ||||||||
(Decrease) increase in cash and cash equivalents |
( |
) | ||||||||||
Cash and cash equivalents, beginning of year (includes $ |
||||||||||||
Cash and cash equivalents, end of year (includes $ |
$ | $ | $ | |||||||||
1. |
Business |
2. |
Significant Accounting Policies |
• | Consulting and professional fees related to third-party integration and divestiture consulting performed in a variety of areas, such as finance, tax, compliance, logistics and human resources, and legal fees related to the consummation of mergers and acquisitions or divestitures. |
• | Employee termination benefits related to terminating employees with overlapping responsibilities in various areas of our business. |
• | Dedicated project personnel expenses which include the salary, benefits, travel expenses and other costs directly associated with employees who are |
• | Contract termination expenses related to terminated contracts, primarily with sales agents and distribution agreements. |
• | Other various expenses to relocate facilities, integrate information technology, losses incurred on assets resulting from the applicable acquisition, and other various expenses. |
3. |
Discontinued Operations |
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Net Sales |
$ | $ | $ | |||||||||
Cost of products sold, excluding intangible asset amortization |
||||||||||||
Intangible asset amortization |
||||||||||||
Research and development |
||||||||||||
Selling, general and administrative |
||||||||||||
Goodwill and intangible asset impairment |
— | — | ||||||||||
Restructuring and other cost reduction initiatives |
||||||||||||
Quality remediation |
||||||||||||
Acquisition, integration, divestiture and related |
||||||||||||
Other expense (income), net |
( |
) | ( |
) | ||||||||
(Loss) Earnings from discontinued operations before income taxes |
( |
) | ( |
) | ||||||||
(Benefit) Provision for income taxes from discontinued operations |
( |
) | ( |
) | ||||||||
(Loss) Earnings from discontinued operations, net of tax |
$ | ( |
) | $ | ( |
) | $ | |||||
December 31, 2021 |
December 31, 2020 |
|||||||
Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, less allowance for credit losses |
||||||||
Inventories |
||||||||
Prepaid expenses and other current assets |
||||||||
Total Current Assets of Discontinued Operations |
$ | $ | ||||||
Property, plant and equipment, net |
$ | $ | ||||||
Goodwill |
||||||||
Intangible assets, net |
||||||||
Other assets |
||||||||
Total Noncurrent Assets of Discontinued Operations |
$ | $ | ||||||
Accounts payable |
$ | $ | ||||||
Income taxes payable |
||||||||
Other current liabilities |
||||||||
Total Current Liabilities of Discontinued Operations |
$ | $ | ||||||
Deferred income taxes, net |
$ | $ | ||||||
Other long-term liabilities |
||||||||
Total Noncurrent Liabilities of Discontinued Operations |
$ | $ | ||||||
4 . |
Revenue Recognition |
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Americas |
$ | $ | $ | |||||||||
EMEA |
||||||||||||
Asia Pacific |
||||||||||||
Total |
$ | $ | $ | |||||||||
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Knees |
$ | $ | $ | |||||||||
Hips |
||||||||||||
S.E.T |
||||||||||||
Other |
||||||||||||
Total |
$ | $ | $ | |||||||||
• | Orthopedic robotic capital sales and services, previously reported in the Knee product category, are included in the Other product category; |
• | Disposable products used in computer-assisted surgeries, previously reported in the Other product category, are included in the Knees product category; |
• | CMFT products are included in the S.E.T. product category; |
• | Other immaterial adjustments across product categories related to brand alignment. |
5. |
Restructuring |
Employee |
||||||||||||||||
Termination |
Contract |
|||||||||||||||
Benefits |
Terminations |
Other |
Total |
|||||||||||||
Balance, December 31, 2020 |
$ | — | $ | — | $ | — | $ | — | ||||||||
Additions |
||||||||||||||||
Cash payments |
— | — | — | — | ||||||||||||
Foreign currency exchange rate changes |
— | — | — | — | ||||||||||||
Balance, December 31, 2021 |
||||||||||||||||
Expense estimated to be recognized for the 2021 Restructuring Plan |
$ | $ | $ | $ |
Employee |
||||||||||||||||
Termination |
Contract |
|||||||||||||||
Benefits |
Terminations |
Other |
Total |
|||||||||||||
Balance, December 31, 2018 |
$ | — | $ | — | $ | — | $ | — | ||||||||
Additions |
— | |||||||||||||||
Cash Payments |
— | — | ( |
) | ( |
) | ||||||||||
Balance, December 31, 2019 |
— | |||||||||||||||
Additions |
||||||||||||||||
Cash payments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Foreign currency exchange rate changes |
— | |||||||||||||||
Balance, December 31, 2020 |
||||||||||||||||
Additions |
||||||||||||||||
Cash payments |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Foreign currency exchange rate changes |
( |
) | — | ( |
) | ( |
) | |||||||||
Balance, December 31, 2021 |
$ | $ | $ | $ | ||||||||||||
Expense incurred since the start of the 2019 Restructuring Plan |
$ | $ | $ | $ | ||||||||||||
Expense estimated to be recognized for the 2019 Restructuring Plan |
$ | $ | $ | $ |
6. |
Share-Based Compensation |
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Total expense, pre-tax |
$ | $ | $ | |||||||||
Tax benefit related to awards |
||||||||||||
|
|
|
|
|
|
|||||||
Total expense, net of tax |
$ | $ | $ | |||||||||
|
|
|
|
|
|
Stock Options |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life |
Intrinsic Value (in millions) |
|||||||||||||
Outstanding at January 1, 2021 |
$ | |||||||||||||||
Options granted |
||||||||||||||||
Options exercised |
( |
) | ||||||||||||||
Options forfeited |
( |
) | ||||||||||||||
Options expired |
( |
) | ||||||||||||||
|
|
|||||||||||||||
Outstanding at December 31, 2021 |
$ | $ | ||||||||||||||
|
|
|||||||||||||||
Vested or expected to vest as of December 31, 2021 |
$ | $ | ||||||||||||||
Exercisable at December 31, 2021 |
$ | $ |
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Dividend yield |
% | % | % | |||||||||
Volatility |
% | % | % | |||||||||
Risk-free interest rate |
% | % | % | |||||||||
Expected life (years) |
||||||||||||
Weighted average fair value of options granted |
$ | $ | $ | |||||||||
Intrinsic value of options exercised (in millions) |
$ | $ | $ | |||||||||
Tax benefit of options exercised (in millions) |
$ | $ | $ |
RSUs |
Weighted Average Grant Date Fair Value |
|||||||
Outstanding at January 1, 2021 |
$ | |||||||
Granted |
||||||||
Vested |
( |
) | ||||||
Forfeited |
( |
) | ||||||
|
|
|||||||
Outstanding at December 31, 2021 |
||||||||
|
|
7. |
Inventories |
As of December 31, |
||||||||
2021 |
2020 |
|||||||
Finished goods |
$ | $ | ||||||
Work in progress |
||||||||
Raw materials |
||||||||
|
|
|
|
|||||
Inventories |
$ | $ | ||||||
|
|
|
|
8. |
Property, Plant and Equipment |
As of December 31, |
||||||||
2021 |
2020 |
|||||||
Land |
$ | $ | ||||||
Building and equipment |
||||||||
Capitalized software costs |
||||||||
Instruments |
||||||||
Construction in progress |
||||||||
|
|
|
|
|||||
Accumulated depreciation |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Property, plant and equipment, net |
$ | $ | ||||||
|
|
|
|
9. |
Transfers of Financial Assets |
10. |
Fair Value Measurements of Assets and Liabilities |
As of December 31, 2021 |
||||||||||||||||
Fair Value Measurements at Reporting Date Using: |
||||||||||||||||
Description |
Recorded Balance |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
Assets |
||||||||||||||||
Derivatives designated as hedges, current and long-term |
||||||||||||||||
Foreign currency forward contracts |
$ | $ | — | $ | $ | — | ||||||||||
Cross-currency interest rate swaps |
— | — | ||||||||||||||
Derivatives not designated as hedges, current and long-term |
||||||||||||||||
Foreign currency forward contracts |
— | — | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Assets |
$ | $ | — | $ | $ | — | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Liabilities |
||||||||||||||||
Derivatives designated as hedges, current and long-term |
||||||||||||||||
Foreign currency forward contracts |
$ | $ | — | $ | $ | — | ||||||||||
Cross-currency interest rate swaps |
— | — | ||||||||||||||
Interest rate swaps |
— | — | ||||||||||||||
Derivatives not designated as hedges, current and long-term |
||||||||||||||||
Foreign currency forward contracts |
— | — | ||||||||||||||
Contingent payments related to acquisitions |
— | — | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Liabilities |
$ | $ | — | $ | $ | |||||||||||
|
|
|
|
|
|
|
|
As of December 31, 2020 |
||||||||||||||||
Fair Value Measurements at Reporting Date Using: |
||||||||||||||||
Description |
Recorded Balance |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
Assets |
||||||||||||||||
Derivatives designated as hedges, current and long-term |
||||||||||||||||
Foreign currency forward contracts |
$ | $ | — | $ | $ | — | ||||||||||
Derivatives not designated as hedges, current and long-term |
||||||||||||||||
Foreign currency forward contracts |
$ | — | $ | — | ||||||||||||
Total Assets |
$ | $ | — | $ | $ | — | ||||||||||
Liabilities |
||||||||||||||||
Derivatives designated as hedges, current and long-term |
||||||||||||||||
Foreign currency forward contracts |
$ | $ | — | $ | $ | — | ||||||||||
Cross-currency interest rate swaps |
— | — | ||||||||||||||
Derivatives not designated as hedges, current and long-term |
||||||||||||||||
Foreign currency forward contracts |
— | — | ||||||||||||||
Contingent payments related to acquisitions |
— | — | ||||||||||||||
Total Liabilities |
$ | $ | — | $ | $ | |||||||||||
Level 3 - Liabilities |
||||
Contingent payments related to acquisitions |
||||
Beginning balance December 31, 2020 |
$ | |||
Change in estimates |
||||
Settlements |
( |
) | ||
Foreign currency impact |
( |
) | ||
Ending balance December 31, 2021 |
$ | |||
11. |
Acquisitions |
Current assets |
$ | |||
Intangible assets subject to amortization: |
||||
Technology |
||||
Trademarks and trade names |
||||
Customer relationships |
||||
Goodwill |
||||
Other assets |
||||
Total assets acquired |
||||
Current liabilities |
||||
Deferred income taxes |
||||
Total liabilities assumed |
||||
Net assets acquired |
$ | |||
12. |
Goodwill and Other Intangible Assets |
Americas |
EMEA |
Asia Pacific |
Total |
|||||||||||||
Balance at January 1, 2020 |
||||||||||||||||
Goodwill |
$ | $ | $ | $ | ||||||||||||
Accumulated impairment losses |
( |
) | ( |
) | — | ( |
) | |||||||||
Other acquisitions |
||||||||||||||||
Currency translation |
||||||||||||||||
Impairment |
— | ( |
) | — | ( |
) | ||||||||||
Balance at December 31, 2020 |
||||||||||||||||
Goodwill |
||||||||||||||||
Accumulated impairment losses |
( |
) | ( |
) | — | ( |
) | |||||||||
Purchase accounting adjustments |
||||||||||||||||
Other acquisitions |
— | — | ||||||||||||||
Currency translation |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Balance at December 31, 2021 |
||||||||||||||||
Goodwill |
||||||||||||||||
Accumulated impairment losses |
( |
) | ( |
) | — | ( |
) | |||||||||
$ | $ | $ | $ | |||||||||||||
Technology |
Intellectual Property Rights |
Trademarks and Trade Names |
Customer Relationships |
IPR&D |
Other |
Total |
||||||||||||||||||||||
As of December 31, 2021: |
||||||||||||||||||||||||||||
Intangible assets subject to amortization: |
||||||||||||||||||||||||||||
Gross carrying amount |
$ | $ | $ | $ | $ | — | $ | $ | ||||||||||||||||||||
Accumulated amortization |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||||
Intangible assets not subject to amortization: |
||||||||||||||||||||||||||||
Gross carrying amount |
— | — | — | — | ||||||||||||||||||||||||
Total identifiable intangible assets |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
As of December 31, 2020: |
||||||||||||||||||||||||||||
Intangible assets subject to amortization: |
||||||||||||||||||||||||||||
Gross carrying amount |
$ | $ | $ | $ | $ | — | $ | $ | ||||||||||||||||||||
Accumulated amortization |
( |
) | ( |
) | ( |
) | ( |
) | — | ( |
) | ( |
) | |||||||||||||||
Intangible assets not subject to amortization: |
||||||||||||||||||||||||||||
Gross carrying amount |
— | — | — | — | ||||||||||||||||||||||||
Total identifiable intangible assets |
$ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
For the Years Ending December 31, |
||||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
13. |
Other Current Liabilities |
As of December 31, |
||||||||
2021 |
2020 |
|||||||
Other current liabilities: |
||||||||
License and service agreements |
$ | $ | ||||||
Salaries, wages and benefits |
||||||||
Litigation and product liability |
||||||||
Deferred business combination payments |
— | |||||||
Accrued liabilities |
||||||||
Total other current liabilities |
$ | $ | ||||||
14. |
Debt |
As of December 31, |
||||||||
2021 |
2020 |
|||||||
Current portion of long-term debt |
||||||||
Floating Rate Notes due 2021 |
— | |||||||
— | ||||||||
— | ||||||||
— | ||||||||
Japan Term Loan A |
— | |||||||
Japan Term Loan B |
— | |||||||
Total short-term debt |
$ | $ | ||||||
Long-term debt |
||||||||
— | ||||||||
— | ||||||||
— | ||||||||
— | ||||||||
Japan Term Loan A |
— | |||||||
Japan Term Loan B |
— | |||||||
Debt discount and issuance costs |
( |
) | ( |
) | ||||
Adjustment related to interest rate swaps |
( |
) | ||||||
Total long-term debt |
$ | $ | ||||||
15. |
Accumulated Other Comprehensive Income |
Foreign |
Cash |
Defined |
||||||||||||||
Currency |
Flow |
Benefit |
Total |
|||||||||||||
Translation |
Hedges |
Plan Items |
AOCI |
|||||||||||||
Balance December 31, 2020 |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
AOCI before reclassifications |
( |
) | ||||||||||||||
Reclassifications to statements of earnings |
— | |||||||||||||||
Balance December 31, 2021 |
$ | ( |
) | $ | $ | ( |
) | $ | ( |
) | ||||||
Amount of Gain / (Loss) |
||||||||||||||
Reclassified from AOCI |
||||||||||||||
For the Years Ended December 31, |
Location on | |||||||||||||
Component of AOCI |
2021 |
2020 |
2019 |
Statements of Earnings | ||||||||||
Cash flow hedges |
||||||||||||||
Foreign exchange forward contracts |
$ | ( |
) | $ | $ | Cost of products sold | ||||||||
Interest rate swaps |
— | — | Interest expense, net | |||||||||||
Forward starting interest rate swaps |
( |
) | ( |
) | ( |
) | Interest expense, net | |||||||
( |
) | Total before tax | ||||||||||||
( |
) | Provision (benefit) for income taxes | ||||||||||||
$ | ( |
) | $ | $ | Net of tax | |||||||||
Defined benefit plans |
||||||||||||||
Prior service cost |
$ | $ | $ | Other income (expense), net | ||||||||||
Curtailment gain |
— | — | Other income (expense), net | |||||||||||
Unrecognized actuarial loss |
( |
) | ( |
) | ( |
) | Other income (expense), net | |||||||
( |
) | ( |
) | ( |
) | Total before tax | ||||||||
( |
) | ( |
) | ( |
) | Provision (benefit) for income taxes | ||||||||
$ | ( |
) | $ | ( |
) | $ | ( |
) | Net of tax | |||||
Total reclassifications |
$ | ( |
) | $ | $ | Net of tax | ||||||||
For the Years Ended December 31, |
||||||||||||||||||||||||||||||||||||
Before Tax |
Tax |
Net of Tax |
||||||||||||||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 |
2020 |
2019 |
2021 |
2020 |
2019 |
||||||||||||||||||||||||||||
Foreign currency cumulative translation adjustments |
$ | ( |
) | $ | ( |
) | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||||
Unrealized cash flow hedge gains (losses) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Reclassification adjustments on cash flow hedges |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Adjustments to prior service cost and unrecognized actuarial assumptions |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
Total Other Comprehensive Income (Loss) |
$ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||
16. |
Derivative Instruments and Hedging Activities |
Carrying Amount of the Hedged Liabilities |
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities |
|||||||||||||||
Balance Sheet Line Item |
December 31, 2021 |
December 31, 2020 |
December 31, 2021 |
December 31, 2020 |
||||||||||||
Current portion of long-term debt |
$ | — | $ | $ | — | $ | ||||||||||
Long-term debt |
— | ( |
) | — |
Amount of Gain / (Loss) |
Amount of Gain / (Loss) |
|||||||||||||||||||||||||
Recognized in AOCI |
Location on |
Reclassified from AOCI |
||||||||||||||||||||||||
Years Ended December 31, |
Statement of |
Years Ended December 31, |
||||||||||||||||||||||||
Derivative Instrument |
2021 |
2020 |
2019 |
Earnings |
2021 |
2020 |
2019 |
|||||||||||||||||||
Foreign exchange forward contracts |
$ | $ | ( |
) | $ | Cost of products sold | $ | ( |
) | $ | $ | |||||||||||||||
Interest rate swaps |
— | — | — | Interest expense, net | — | — | ||||||||||||||||||||
Forward starting interest rate swaps |
— | — | — | Interest expense, net | ( |
) | ( |
) | ( |
) | ||||||||||||||||
$ | $ | ( |
) | $ | $ | ( |
) | $ | $ | |||||||||||||||||
Location and Amount of Gain/(Loss) Recognized in Income on Fair Value, Cash Flow and Net Investment Hedging Relationships |
||||||||||||||||||||||||
Years Ended December 31, |
||||||||||||||||||||||||
2021 |
2020 |
2019 |
||||||||||||||||||||||
Cost of |
Interest |
Cost of |
Interest |
Cost of |
Interest |
|||||||||||||||||||
Products |
Expense, |
Products |
Expense, |
Products |
Expense, |
|||||||||||||||||||
Sold |
Net |
Sold |
Net |
Sold |
Net |
|||||||||||||||||||
Total amounts of income and expense line items presented in the statements of earnings in which the effects of fair value, cash flow and net investment hedges are recorded |
$ | $ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | ||||||||||||
The effects of fair value, cash flow and net investment hedging: |
||||||||||||||||||||||||
Gain on fair value hedging relationships |
||||||||||||||||||||||||
Discontinued interest rate swaps |
— | — | — | |||||||||||||||||||||
Interest rate swaps |
— | — | — | — | — | |||||||||||||||||||
Gain (loss) on cash flow hedging relationships |
||||||||||||||||||||||||
Foreign exchange forward contracts |
( |
) | — | — | — | |||||||||||||||||||
Interest rate swaps |
— | — | — | — | — | |||||||||||||||||||
Forward starting interest rate swaps |
— | ( |
) | — | ( |
) | — | ( |
) | |||||||||||||||
Gain on net investment hedging relationships |
||||||||||||||||||||||||
Cross-currency interest rate swaps |
— | — | — |
Location on |
Years Ended December 31, |
|||||||||||||
Derivative Instrument |
Statements of Earnings |
2021 |
2020 |
2019 |
||||||||||
Foreign exchange forward contracts |
Other income (expense), net | $ | ( |
) | $ | $ | ( |
) | ||||||
Reverse treasury lock |
Other income |
— | — |
As of December 31, 2021 |
As of December 31, 2020 |
|||||||||||||||
Balance Sheet |
Fair |
Balance Sheet |
Fair |
|||||||||||||
Location |
Value |
Location |
Value |
|||||||||||||
Asset Derivatives Designated as Hedges |
||||||||||||||||
Foreign exchange forward contracts |
Other current assets | $ | Other current assets | $ | ||||||||||||
Cross-currency interest rate swaps |
Other current assets | Other current assets | — | |||||||||||||
Foreign exchange forward contracts |
Other assets | Other assets | ||||||||||||||
Cross-currency interest rate swaps |
Other assets | Other assets | — | |||||||||||||
|
|
|
|
|||||||||||||
Total asset derivatives |
$ | $ | ||||||||||||||
|
|
|
|
|||||||||||||
Asset Derivatives Not Designated as Hedges |
||||||||||||||||
Foreign exchange forward contracts |
Other current assets | $ | Other current assets | $ | ||||||||||||
Liability Derivatives Designated as Hedges |
||||||||||||||||
Foreign exchange forward contracts |
Other current liabilities | $ | Other current liabilities | $ | ||||||||||||
Cross-currency interest rate swaps |
Other current liabilities | Other current liabilities | ||||||||||||||
Foreign exchange forward contracts |
Other long-term liabilities |
Other long-term liabilities |
||||||||||||||
Cross-currency interest rate swaps |
Other long-term liabilities | Other long-term liabilities | ||||||||||||||
Interest rate swaps |
Other long-term liabilities | Other long-term liabilities | — | |||||||||||||
|
|
|
|
|||||||||||||
Total liability derivatives |
$ | $ | ||||||||||||||
|
|
|
|
|||||||||||||
Liability Derivatives Not Designated as Hedges |
||||||||||||||||
Foreign exchange forward contracts |
Other current liabilities | $ | Other current liabilities | $ |
As of December 31, 2021 |
As of December 31, 2020 |
|||||||||||||||||||||||||
Description |
Location |
Gross Amount |
Offset |
Net Amount in Balance Sheet |
Gross Amount |
Offset |
Net Amount in Balance Sheet |
|||||||||||||||||||
Asset Derivatives |
||||||||||||||||||||||||||
Cash flow hedges |
Other current assets | $ | $ | $ | $ | $ | $ | |||||||||||||||||||
Cash flow hedges |
Other assets | — | ||||||||||||||||||||||||
Derivatives not designated as hedges |
Other current assets | |||||||||||||||||||||||||
Liability Derivatives |
||||||||||||||||||||||||||
Cash flow hedges |
Other current liabilities | |||||||||||||||||||||||||
Cash flow hedges |
Other long-term liabilities |
|||||||||||||||||||||||||
Derivatives not designated as hedges |
Other current liabilities |
Amount of Gain / (Loss) |
||||||||||||
Recognized in AOCI |
||||||||||||
Years Ended December 31, |
||||||||||||
Derivative Instrument |
2021 |
2020 |
2019 |
|||||||||
Euro Notes |
$ | $ | ( |
) | $ | |||||||
Cross-currency interest rate swaps |
( |
) | ||||||||||
$ | $ | ( |
) | $ | ||||||||
17. |
Retirement Benefit Plans |
For the Years Ended December 31, |
||||||||||||||||||||||||
U.S. and Puerto Rico |
Foreign |
|||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 |
2020 |
2019 |
|||||||||||||||||||
Service cost |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Interest cost |
||||||||||||||||||||||||
Expected return on plan assets |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Curtailment gain |
— | — | ( |
) | — | — | — | |||||||||||||||||
Settlements |
( |
) | — | |||||||||||||||||||||
Amortization of prior service cost |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||||||
Amortization of unrecognized actuarial loss |
||||||||||||||||||||||||
Net periodic benefit (income) expense |
$ | ( |
) | $ | ( |
) | $ | $ | $ | $ | ||||||||||||||
For the Years Ended December 31, |
||||||||||||||||||||||||
U.S. and Puerto Rico |
Foreign |
|||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 |
2020 |
2019 |
|||||||||||||||||||
Discount rate |
% | % | % | % | % | % | ||||||||||||||||||
Rate of compensation increase |
— | — | % | % | % | % | ||||||||||||||||||
Expected long-term rate of return on plan assets |
% | % | % | % | % | % |
For the Years Ended December 31, |
||||||||||||||||
U.S. and Puerto Rico |
Foreign |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Projected benefit obligation - beginning of year |
$ | $ | $ | $ | ||||||||||||
Service cost |
||||||||||||||||
Interest cost |
||||||||||||||||
Plan amendments |
— | — | — | |||||||||||||
Employee contributions |
— | — | ||||||||||||||
Benefits paid |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Actuarial loss |
||||||||||||||||
Expenses paid |
— | — | ( |
) | ( |
) | ||||||||||
Settlement |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Translation (gain) loss |
— | — | ( |
) | ||||||||||||
Projected benefit obligation - end of year |
$ | $ | $ | $ | ||||||||||||
For the Years Ended December 31, |
||||||||||||||||
U.S. and Puerto Rico |
Foreign |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Plan assets at fair market value - beginning of year |
$ | $ | $ | $ | ||||||||||||
Actual return on plan assets |
||||||||||||||||
Employer contributions |
||||||||||||||||
Employee contributions |
— | — | ||||||||||||||
Settlements |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Benefits paid |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Expenses paid |
— | — | ( |
) | ( |
) | ||||||||||
Translation (loss) gain |
— | — | ( |
) | ||||||||||||
Plan assets at fair market value - end of year |
$ | $ | $ | $ | ||||||||||||
Funded status |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
For the Years Ended December 31, |
||||||||||||||||
U.S. and Puerto Rico |
Foreign |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Amounts recognized in consolidated balance sheet: |
||||||||||||||||
Prepaid pension |
$ | $ | — | $ | $ | |||||||||||
Short-term accrued benefit liability |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Long-term accrued benefit liability |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net amount recognized |
$ | ( |
) | $ | ( |
) | $ | $ | ( |
) | ||||||
For the Years Ended December 31, |
||||||||||||||||||||||||
U.S. and Puerto Rico |
Foreign |
|||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 |
2020 |
2019 |
|||||||||||||||||||
Discount rate |
% | % | % | % | % | % | ||||||||||||||||||
Rate of compensation increase |
— | — | % | % | % | % |
As of December 31, |
||||||||||||||||
U.S. and Puerto Rico |
Foreign |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Projected benefit obligation |
$ | $ | $ | $ | ||||||||||||
Plan assets at fair market value |
As of December 31, |
||||||||||||||||
U.S. and Puerto Rico |
Foreign |
|||||||||||||||
2021 |
2020 |
2021 |
2020 |
|||||||||||||
Total accumulated benefit obligations |
$ | $ | $ | $ | ||||||||||||
Plans with accumulated benefit obligations in excess of plan assets: |
||||||||||||||||
Accumulated benefit obligation |
||||||||||||||||
Plan assets at fair market value |
For the Years Ending December 31, |
U.S. and Puerto Rico |
Foreign |
||||||
2022 |
$ | $ | ||||||
2023 |
||||||||
2024 |
||||||||
2025 |
||||||||
2026 |
||||||||
2027-2031 |
As of December 31, 2021 |
||||||||||||||||
Fair Value Measurements at Reporting Date Using: |
||||||||||||||||
Asset Category |
Total |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
Cash and cash equivalents |
$ | $ | $ | — | $ | — | ||||||||||
Equity securities |
— | — | ||||||||||||||
Intermediate fixed income securities |
— | — | ||||||||||||||
Total |
$ | $ | $ | $ | — | |||||||||||
As of December 31, 2020 |
||||||||||||||||
Fair Value Measurements at Reporting Date Using: |
||||||||||||||||
Asset Category |
Total |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
Cash and cash equivalents |
$ | $ | $ | — | $ | — | ||||||||||
Equity securities |
— | — | ||||||||||||||
Intermediate fixed income securities |
— | — | ||||||||||||||
Total |
$ | $ | $ | $ | — | |||||||||||
As of December 31, 2021 |
||||||||||||||||
Fair Value Measurements at Reporting Date Using: |
||||||||||||||||
Asset Category |
Total |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
Cash and cash equivalents |
$ | $ | $ | — | $ | — | ||||||||||
Equity securities |
— | |||||||||||||||
Fixed income securities |
— | — | ||||||||||||||
Other types of investments |
— | — | ||||||||||||||
Real estate |
— | — | ||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
As of December 31, 2020 |
||||||||||||||||
Fair Value Measurements at Reporting Date Using: |
||||||||||||||||
Asset Category |
Total |
Quoted Prices in Active Markets for Identical Assets (Level 1) |
Significant Other Observable Inputs (Level 2) |
Significant Unobservable Inputs (Level 3) |
||||||||||||
Cash and cash equivalents |
$ | $ | $ | — | $ | — | ||||||||||
Equity securities |
— | |||||||||||||||
Fixed income securities |
— | — | ||||||||||||||
Other types of investments |
— | — | ||||||||||||||
Real estate |
— | — | ||||||||||||||
Total |
$ | $ | $ | $ | ||||||||||||
December 31, 2021 |
||||
Beginning Balance |
$ | |||
Gain on assets sold |
||||
Change in fair value of assets |
||||
Net purchases and sales |
||||
Translation gain |
( |
) | ||
Ending Balance |
$ | |||
18. |
Income Taxes |
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
United States operations |
$ | ( |
) | $ | ( |
) | $ | ( |
) | |||
Foreign operations |
||||||||||||
Total |
$ | $ | ( |
) | $ | |||||||
Current: |
||||||||||||
Federal |
$ | $ | ( |
) | $ | |||||||
State |
||||||||||||
Foreign |
( |
) | ||||||||||
( |
) | |||||||||||
Deferred: |
||||||||||||
Federal |
( |
) | ( |
) | ( |
) | ||||||
State |
( |
) | ( |
) | ( |
) | ||||||
Foreign |
( |
) | ||||||||||
( |
) | ( |
) | |||||||||
Provision (benefit) for income taxes |
$ | $ | ( |
) | $ | ( |
) | |||||
Net income taxes paid |
$ | $ | $ |
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
U.S. statutory income tax rate |
% | % | % | |||||||||
State taxes, net of federal deduction |
( |
) | ||||||||||
Tax impact of foreign operations, including U.S. taxes on international income and foreign tax credits |
( |
) | ( |
) | ||||||||
Change in valuation allowance |
( |
) | ||||||||||
Non-deductible expenses |
( |
) | ||||||||||
Goodwill impairment |
— | ( |
) | — | ||||||||
Tax rate change |
||||||||||||
Tax impact of certain significant transactions |
— | — | ||||||||||
Tax benefit relating to foreign derived intangible income and U.S. manufacturer’s deduction |
( |
) | ||||||||||
R&D tax credit |
( |
) | ( |
) | ||||||||
Share-based compensation |
( |
) | ( |
) | ( |
) | ||||||
Net uncertain tax positions, including interest and penalties |
||||||||||||
U.S. tax reform |
— | — | ||||||||||
Switzerland tax reform and certain restructuring transactions |
— | ( |
) | |||||||||
Other |
( |
) | ( |
) | ( |
) | ||||||
Effective income tax rate |
% | % | ( |
)% | ||||||||
As of December 31, |
||||||||
2021 |
2020 |
|||||||
Deferred tax assets: |
||||||||
Inventory |
$ | $ | ||||||
Net operating loss carryover |
||||||||
Tax credit carryover |
||||||||
Capital loss carryover |
||||||||
Product liability and litigation |
||||||||
Accrued liabilities |
||||||||
Share-based compensation |
||||||||
Accounts receivable |
||||||||
Foreign currency items |
— | |||||||
Other |
||||||||
|
|
|
|
|||||
Total deferred tax assets |
||||||||
Less: Valuation allowances |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Total deferred tax assets after valuation allowances |
||||||||
|
|
|
|
|||||
Deferred tax liabilities: |
||||||||
Fixed assets |
$ | $ | ||||||
Intangible assets |
||||||||
Foreign currency items |
— | |||||||
Other |
||||||||
|
|
|
|
|||||
Total deferred tax liabilities |
||||||||
|
|
|
|
|||||
Total net deferred income taxes |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
Expiration Period: |
Net operating loss carryover |
Tax credit carryover |
Capital loss carryover |
|||||||||
1-5 years |
$ | $ | $ | |||||||||
6-10 years |
— | |||||||||||
11+ years |
— | |||||||||||
Indefinite |
||||||||||||
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|||||||
Valuation allowances |
$ | $ | $ | |||||||||
|
|
|
|
|
|
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Balance at January 1 |
$ | $ | $ | |||||||||
Increases related to prior periods |
||||||||||||
Decreases related to prior periods |
( |
) | ( |
) | ( |
) | ||||||
Increases related to current period |
||||||||||||
Decreases related to settlements with taxing authorities |
( |
) | ( |
) | ( |
) | ||||||
Decreases related to lapse of statute of limitations |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Balance at December 31 |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Amounts impacting effective tax rate, if recognized balance at December 31 |
$ | $ | $ | |||||||||
|
|
|
|
|
|
19. |
Capital Stock and Earnings per Share |
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Weighted average shares outstanding for basic net earnings per share |
||||||||||||
Effect of dilutive stock options and other equity awards |
— | |||||||||||
Weighted average shares outstanding for diluted net earnings per share |
||||||||||||
20. |
Segment Data |
Net Sales |
Operating Profit (Loss) |
Depreciation and Amortization |
||||||||||||||||||||||||||||||||||
Year Ended December 31, |
Year Ended December 31, |
Year Ended December 31, |
||||||||||||||||||||||||||||||||||
2021 |
2020 |
2019 |
2021 |
2020 |
2019 |
2021 |
2020 |
2019 |
||||||||||||||||||||||||||||
Americas |
$ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
EMEA |
||||||||||||||||||||||||||||||||||||
Asia Pacific |
||||||||||||||||||||||||||||||||||||
Total |
$ | $ | $ | |||||||||||||||||||||||||||||||||
Corporate Functions |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Inventory and manufacturing-related charges |
( |
) | ( |
) | ( |
) | — | — | — | |||||||||||||||||||||||||||
Intangible asset amortization |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Goodwill and intangible asset impairment |
( |
) | ( |
) | ( |
) | — | — | — | |||||||||||||||||||||||||||
Restructuring and other cost reduction initiatives |
( |
) | ( |
) | ( |
) | — | — | — | |||||||||||||||||||||||||||
Quality remediation |
( |
) | ( |
) | ( |
) | — | — | — | |||||||||||||||||||||||||||
Acquisition, integration, divestiture and related |
( |
) | ( |
) | — | — | — | |||||||||||||||||||||||||||||
Litigation |
( |
) | ( |
) | ( |
) | — | — | — | |||||||||||||||||||||||||||
Litigation settlement gain |
— | — | — | — | — | |||||||||||||||||||||||||||||||
European Union Medical Device Regulation |
( |
) | ( |
) | ( |
) | — | — | — | |||||||||||||||||||||||||||
Certain R&D agreements |
( |
) | — | — | — | — | — | |||||||||||||||||||||||||||||
Other charges |
( |
) | ( |
) | ( |
) | — | — | — | |||||||||||||||||||||||||||
Total |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||
As of December 31, |
||||||||
2021 |
2020 |
|||||||
United States |
$ | $ | ||||||
Other countries |
||||||||
Property, plant and equipment, net |
$ | $ | ||||||
21. |
Leases |
For the Years Ended December 31, |
||||||||||||
2021 |
2020 |
2019 |
||||||||||
Lease cost |
$ | $ | $ | |||||||||
Cash paid for leases recognized in operating cash flows |
$ | $ | $ | |||||||||
Right-of-use |
$ | $ | $ |
As of December 31, |
||||||||
2021 |
2020 |
|||||||
Right-of-use |
$ | $ | ||||||
Lease liabilities recognized in |
$ | $ | ||||||
Lease liabilities recognized in |
$ | $ | ||||||
Weighted-average remaining lease term |
||||||||
Weighted-average discount rate |
% | % |
For the Years Ending December 31, |
||||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
Total |
||||
Less imputed interest |
||||
Total |
$ |
22. |
Commitments and Contingencies |
23. |
Subsequent Events (Unaudited) |
Item 15. |
Exhibits and Financial Statement Schedules |
Description |
Balance at Beginning of Period |
Additions Charged (Credited) to Expense |
Deductions / Other Additions to Reserve |
Effects of Foreign Currency |
Balance at End of Period |
|||||||||||||||
Allowance for Doubtful Accounts: |
||||||||||||||||||||
Year Ended December 31, 2019 |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||
Year Ended December 31, 2020 |
( |
) (1) |
||||||||||||||||||
Year Ended December 31, 2021 |
( |
) | ( |
) | ||||||||||||||||
Deferred Tax Asset Valuation Allowances: |
||||||||||||||||||||
Year Ended December 31, 2019 |
$ | $ | ( |
) | $ | (2) |
$ | ( |
) | $ | ||||||||||
Year Ended December 31, 2020 |
( |
) | ( |
) (2) |
||||||||||||||||
Year Ended December 31, 2021 |
( |
) | ( |
) (2) |
( |
) |
(1) |
Includes the $ 2016-13, Financial Instruments – Credit Losses (Topic 326). |
(2) |
Primarily relate to amounts generated by tax rate changes or current year activity which have offsetting changes to the associated attribute and therefore there is no resulting impact on tax expense in the consolidated financial statements. |