Financial Performance - Net sales increased by 3.9% to 1,942.0millioninthethreemonthsendedJune30,2024,andby3.53,831.2 million in the six months ended June 30, 2024, compared to the same prior year periods [93]. - Net earnings for the three months ended June 30, 2024, were 242.8million,upfrom209.6 million in the same period last year, while earnings for the six months decreased to 415.2millionfrom442.1 million due to restructuring charges [93]. - The company expects mid-single-digit revenue growth in 2024, with a projected negative impact of approximately 1.0% from foreign currency exchange rates [94]. - Sales in the United States grew by 3.5% in the three months and 3.6% in the six months ended June 30, 2024, driven by market growth and sales of the ROSA® Robot [102]. - International net sales increased by 4.4% and 3.5% in the three and six months ended June 30, 2024, respectively, despite a negative impact of 4.1% and 3.5% from foreign currency exchange rates [102]. - Demand trends positively affected sales by 4.8% and 4.5% in the three and six months ended June 30, 2024, respectively, due to market growth and new product introductions [99]. - Global selling prices contributed positively by 0.8% and 0.5% to year-over-year sales in the three and six months ended June 30, 2024, respectively [100]. Expenses and Costs - Cost of products sold as a percentage of net sales increased to 28.5% in the three months ended June 30, 2024, from 28.1% in the same period last year, primarily due to higher manufacturing costs [104]. - Research and development expenses decreased to 5.6% of net sales in the three months ended June 30, 2024, down from 6.3% in the same period last year, due to lower spending on EU MDR compliance [105]. - Selling, general and administrative expenses increased in amount but decreased as a percentage of net sales to 38.0% in the three months ended June 30, 2024, from 38.8% in the same period last year [106]. Restructuring and Charges - In the three and six-month periods ended June 30, 2024, the company recognized restructuring expenses of 41.5millionand165.9 million, respectively, compared to 24.4millionand66.3 million in the same periods of 2023 [107]. - The 2023 Restructuring Plan is expected to incur pre-tax charges of 120millionto135 million by the end of 2025, with approximately 107millionincurredthroughJune30,2024[127].−Thecompanyanticipatesreducinggrossannualpre−taxoperatingexpensesby175 million to 200millionrelativeto2023baselineexpensesbytheendof2025asbenefitsfromthe2023RestructuringPlanarerealized[127].−The2021RestructuringPlanisprojectedtoresultintotalpre−taxrestructuringchargesofapproximately180 million by the end of 2024, with about 170millionincurredthroughJune30,2024[127].−The2019RestructuringPlanisexpectedtoincurtotalpre−taxrestructuringchargesofapproximately370 million by the end of 2025, with around 341millionincurredthroughJune30,2024[127].−Thecompanyexpectstoachieveapproximately190 million in gross annual pre-tax operating expense reductions relative to the 2021 baseline expenses by the end of 2024 [127]. - The full benefits of the 2019 Restructuring Plan will not be realized until the closure of a manufacturing facility, expected to occur in 2025 [127]. Tax and Cash Flow - The effective tax rate for the three and six-month periods ended June 30, 2024, was 19.6%, a decrease from 24.2% and 21.5% in the same periods of 2023, primarily due to a favorable mix of earnings between U.S. and foreign locations [111]. - Cash flows provided by operating activities were 597.4millioninthesix−monthperiodendedJune30,2024,downfrom655.6 million in the same prior year period, attributed to higher bonus, income tax, and restructuring-related payments [119]. - As of June 30, 2024, the company had 420.1millionincashandcashequivalents,withanadditional1.0 billion available to borrow under its 2024 364-Day Credit Agreement [118]. Share Repurchase and Profitability - The company repurchased approximately 0.9 million shares for 95.4millioninthethree−monthperiodendedJune30,2024,with1,904.6 million remaining authorized under the new 2.0billionsharerepurchaseprogram[126].−IntheAmericas,operatingprofitincreasedinthethreeandsix−monthperiodsendedJune30,2024,drivenbyhighernetsalesfrommarketgrowthandnewproductintroductions[115].−InEMEA,operatingprofitandoperatingprofitasapercentageofnetsalesincreasedinthethreeandsix−monthperiodsendedJune30,2024,duetohighernetsalesandlowerexpensesfromthe2023RestructuringPlan[116].−InAsiaPacific,operatingprofitincreaseddespiteadeclineinnetsalesduetoforeigncurrencyexchangeratechanges,withhigherhedgegainspartiallyoffsettingthenegativeimpact[117].LitigationandFutureObligations−Estimatedtotalliabilitiesforlitigationmattersstoodat208.2 million as of June 30, 2024, with potential future payments ranging from 0toapproximately395 million [129]. - The company is involved in various litigation matters, which may result in charges exceeding current estimates upon resolution [129]. - Future payments related to development and distribution contracts may be significant but are uncertain and have not been recognized on the balance sheets [129]. - The company is actively disputing proposed tax adjustments from the IRS for multiple years, which may significantly impact future operating cash flows [128].
Zimmer Biomet(ZBH)2024-08-07 20:05