ZimVie (US:ZIMV)2023-05-02 16:00PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Q1 2023 and 2022, showing a net loss of $30.0 million for the current quarter Financial Highlights | Metric | Three Months Ended March 31, 2023 ($M) | Three Months Ended March 31, 2022 ($M) | | :--- | :--- | :--- | | Total Net Sales | $225.4 | $235.6 | | Operating Loss | ($16.1) | ($32.6) | | Net Loss | ($30.0) | ($25.7) | | Net Loss Per Share - Basic & Diluted | ($1.14) | ($0.98) | Balance Sheet Highlights | Metric | March 31, 2023 ($M) | December 31, 2022 ($M) | | :--- | :--- | :--- | | Total Assets | $1,588.1 | $1,642.1 | | Total Liabilities | $844.5 | $883.5 | | Total Stockholders' Equity | $743.6 | $758.6 | Cash Flow Highlights | Metric | Three Months Ended March 31, 2023 ($M) | Three Months Ended March 31, 2022 ($M) | | :--- | :--- | :--- | | Net cash used in operating activities | ($7.2) | ($9.9) | | Net cash used in investing activities | ($5.8) | ($8.1) | | Net cash (used in) provided by financing activities | ($10.9) | $22.2 | Notes to Unaudited Condensed Consolidated Financial Statements Detailed notes support financial statements, covering company background, segment data, debt, and restructuring initiatives - As of February 1, 2023, former parent company Zimmer Biomet had sold all of its 19.7% ownership in ZimVie and is no longer considered a related party237174 Segment Performance | Segment | Net Sales (Q1 2023, $M) | Net Sales (Q1 2022, $M) | Operating Profit (Q1 2023, $M) | Operating Profit (Q1 2022, $M) | | :--- | :--- | :--- | :--- | :--- | | Dental | $120.2 | $120.6 | $23.0 | $25.7 | | Spine | $104.9 | $114.1 | $10.2 | $5.1 | - In June 2022, the company initiated a restructuring plan, which included exiting its spine products activities in China. In April 2023, additional restructuring was initiated to reduce the global cost structure, with anticipated total charges of $15-16 million8587 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 performance, highlighting a 4.3% decrease in total net sales and narrowed operating loss Results of Operations Total net sales decreased by 4.3% to $225.4 million in Q1 2023, with improved operating loss due to reduced cost of products sold Net Sales by Product Category | Product Category | Q1 2023 Net Sales ($M) | % Change vs Q1 2022 (%) | Volume/Mix Change (%) | Price Change (%) | Foreign Exchange Impact (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Dental | $120.2 | (0.3)% | 2.0% | (0.2)% | (2.1)% | | Spine | $104.9 | (8.1)% | (6.9)% | (0.9)% | (0.3)% | | Total Third Party | $225.1 | (4.1)% | (2.3)% | (0.6)% | (1.2)% | - The decrease in cost of products sold as a percentage of net sales was primarily due to a reduction in inventory charges in the spine product category and non-recurrence of certain share-based compensation expenses from the prior year107 - SG&A expenses decreased due to lower variable selling expenses, cost containment measures, and a $7.0 million decrease in share-based compensation that was recorded in the prior year period related to the spin-off110 Restructuring and Other Cost Reduction Initiatives Restructuring includes exiting China spine market and a new program to reduce global workforce by 5%, targeting $17-20 million in annualized savings - The company is exiting its spine products activities in China following an unsuccessful bid in the national volume-based procurement (VBP) program in late 202296 - In April 2023, a new restructuring program was initiated with the objective of reducing the global workforce by approximately 5% and generating $17-20 million in annualized net savings by 2024100101 Liquidity and Capital Resources Cash and cash equivalents decreased to $66.4 million as of March 31, 2023, with $7.2 million net cash used in operating activities - Cash and cash equivalents decreased to $66.4 million as of March 31, 2023, from $89.6 million as of December 31, 2022120 - Net cash used in operating activities was $7.2 million in Q1 2023, compared to $9.9 million in Q1 2022121 - In Q1 2023, the company used $10.9 million in financing activities, which included prepaying debt scheduled for the first half of 2024123 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency and interest rates, with a 100 basis point SOFR increase potentially raising annual pre-tax loss by $5.3 million - The company is primarily exposed to foreign currency exchange rate risk with respect to the Euro, Chinese Renminbi, Israeli Shekel, New Zealand Dollar, Japanese Yen, Canadian Dollar, and Swedish Krona129 - A hypothetical 100 basis point increase in the SOFR interest rate on the company's $525.9 million of floating rate debt would increase its annual pre-tax loss by approximately $5.3 million131 - Credit risk is concentrated with public and private hospitals and dental practices, particularly in Europe where healthcare is often government-sponsored, exposing the company indirectly to government budget constraints133 Item 4. Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2023, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2023135 - No changes in internal control over financial reporting occurred during the three months ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls136 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, but management does not anticipate a material adverse impact on financial results - The company is subject to various claims and legal proceedings but does not currently expect the outcome of these matters to have a material adverse impact on its financial results138 Item 1A. Risk Factors No material changes have occurred in the risk factors previously disclosed in the company's Annual Report on Form 10-K - There have been no material changes in the risk factors from those discussed in the company's Annual Report on Form 10-K140 Item 6. Exhibits This section indexes exhibits filed with the Form 10-Q, including corporate governance documents and officer certifications - The report includes a list of filed exhibits, such as the Amended and Restated Certificate of Incorporation, Bylaws, and officer certifications pursuant to the Sarbanes-Oxley Act of 2002141