Zimmer Biomet Holdings (ZBH) 10-K risk factor changes: FY2020 vs FY2019
The 2020-12-31 10-K against the 2019-12-31 one, compared heading by heading and sentence by sentence.
Item 1A47 rewritten110 added35 removed331 unchanged
All filing items1,005 rewritten719 added566 removed1,777 unchanged
Summary
counted, not written
- Item 1A headings could not be compared: only 0 carried over between the two years, which usually means one filing was read wrongly, so none is reported as new or removed.
- Sentence by sentence, 719 added, 566 removed, 1,005 rewritten and 1,777 unchanged across 19 items that differ.
Sentences by item
22 items, with every count and a link to each item that changed
Underlined words on a shaded ground are new in FY2020; struck-through words were in FY2019. Sentences that are wholly new or wholly gone are labelled rather than marked.
Item 1A. Risk Factors
47 rewritten, 110 added, 35 removed, 331 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
[removed: Any of these events] [added: As a result, any determination that our independent agents and distributors are our employees] could have a material adverse effect on our business, financial [removed: condition,] [added: condition and] results of [removed: operations and cash flows.][added: operations.]
[removed: We] [added: We] may not be able to effectively integrate acquired businesses into our operations or achieve expected cost savings or profitability from our [removed: acquisitions.][added: acquisitions.]
| | • | unforeseen difficulties in integrating personnel and sales forces, operations, manufacturing, logistics, research and development, information technology, [added: compliance, vendor management,] communications, purchasing, accounting, marketing, administration and other systems and processes; |
Damage to one or more of our facilities from weather or natural disaster-related events, vulnerabilities in our technology, cyber-attacks against our information systems [added: or the information systems of our business partners] (such as ransomware attacks), or issues in our manufacturing arising from failure to follow specific internal protocols and procedures, compliance concerns relating to the QSR and Good Manufacturing Practice requirements, equipment breakdown or [removed: malfunction] [added: malfunction, reductions in operations and/or worker absences due to the COVID-19 pandemic] or other [added: health epidemics, or other] factors could adversely affect our ability to manufacture our products.
A reduction or interruption in the supply of materials or components used in manufacturing our [removed: products;] [added: products, such as due to one or more suppliers experiencing reductions in operations and/or worker absences due to the COVID-19 pandemic or other health epidemics;] an inability to timely develop and validate alternative sources if required; or a significant increase in the price of such materials or components could adversely affect our business, financial condition and results of operations.
To the extent we or our contract sterilizers are unable to sterilize our products, whether due to capacity, availability of materials for sterilization, regulatory or other constraints, including federal and state regulations on the use of ethylene oxide, [added: or reductions in operations and/or worker absences due to the COVID-19 pandemic or other health epidemics,] we may be unable to transition to other contract sterilizers, [added: sterilizer locations or sterilization methods in a timely or cost effective manner or at all, which could have a material impact on our results of operations and financial condition.]
We have a complex supply chain and we may not be able to sufficiently verify the origins of the minerals and metals used in our products through our [removed: due diligence procedures.]
As of February 14, [removed: 2020, these] [added: 2021, this] warning [removed: letters] [added: letter] remained pending.
Additional information regarding these and other FDA regulatory matters can be found in Note [removed: 20] [added: 21] to our consolidated financial statements.
In the EU, for example, the MDR [removed: will] [added: is expected to] become effective in May [removed: 2020] [added: 2021] and will include significant additional premarket and post-market requirements.
[removed: Additionally, the availability of EU notified body services certified to the new requirements is limited,] which may delay the marketing approval for some of our products under the MDR.
[added: Any such delays, or any failure to meet the] requirements of the new regulation, could adversely impact our business in the EU and other regions that tie their product registrations to the EU requirements.
In addition to the FDA guidance and HIPAA regulations described above, a number of U.S. states have also enacted data privacy and security laws and regulations that govern the collection, use, disclosure, transfer, storage, disposal, and protection of personal information, such as social security numbers, medical and financial information and other [added: personal] information.
Other state laws include the CCPA, which [removed: was signed into law on June 28, 2018 and largely] took effect on January 1, 2020.
Outside of the U.S., data protection laws, including the GDPR [added: in Europe] and [removed: LGPD,] [added: the LGPD in Brazil,] also apply to [removed: some of] our operations in [removed: the] [added: those] countries in which we provide services to our customers.
[removed: things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data, a requirement for prompt notice of data breaches to data subjects and] supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to the greater of 20 million Euros or 4% of total worldwide annual turnover of the preceding financial year).
At December 31, [removed: 2019,] [added: 2020,] our total indebtedness was [removed: $8.2] [added: $8.1] billion, as compared to $1.4 billion at December 31, 2014.
As of December 31, [removed: 2019,] [added: 2020,] our debt service obligations, comprised of principal and interest (excluding leases and equipment notes), during the next 12 months are expected to be [removed: $1.7] [added: $0.7] billion.
Further, in July 2017, the U.K.’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates [removed: for] [added: to] the [removed: calculation of LIBOR after 2021.][added: ICE Benchmark Administration Limited (together with any successor, “IBA”).]
[removed: Additionally,] [added: At this time,] it is [added: not possible to predict whether SOFR will attain market traction as a LIBOR replacement, and it remains] uncertain if LIBOR [added: in applicable tenors and applicable currencies] will cease to exist after calendar year 2021, or whether additional reforms to LIBOR may be enacted, or whether alternative reference rates will gain market acceptance as a replacement for LIBOR.
Further, other central banks have convened working groups to determine replacements or reforms of other interest rate benchmarks, such as EURIBOR, and it is expected, although not known, that a transition away from the use of certain of these other interest rate benchmarks will occur over the course of the next few years and alternative reference rates [added: (such as the euro short-term rate (€STR))] will be [removed: established.][added: established or gain market acceptance.]
Accordingly, the potential effect of the phase-out, replacement or unavailability of LIBOR, or the unavailability of any other interest rate benchmark such as EURIBOR or TIBOR, on our cost of capital cannot yet [removed: be determined.]
As a result of technology initiatives, [removed: recently enacted regulations,] [added: expanding privacy and cybersecurity laws,] changes in our system platforms and integration of new business acquisitions, we have been consolidating and integrating the number of systems we operate and have upgraded and expanded our information systems capabilities.
Our information systems, and those of third-party suppliers with whom we contract, require an ongoing commitment of significant resources to maintain, protect and enhance existing systems and develop new systems to keep pace with continuing changes in information technology, evolving systems and regulatory [removed: standards] [added: standards, changing threats] and [added: vulnerabilities, and] the increasing need to protect patient and customer information.
In addition, given their size and complexity, these systems could be vulnerable to service interruptions or to security breaches from inadvertent or intentional actions by our employees, third-party [removed: suppliers] [added: vendors] and/or business partners, or from cyber-attacks by malicious third parties attempting to gain unauthorized access to our products, systems or Confidential Information.
| | • | lose existing [removed: customers;] [added: customers, vendors and business partners;] |
[removed: Our] [added: Our] success depends on our ability to effectively develop and market our products against those of our [removed: competitors.][added: competitors.]
[removed: If] [added: If] we do not introduce new products in a timely manner, our products may become obsolete over time, customers may not buy our products and our revenue and profitability may [removed: decline][added: decline.]
We sell our products and services to hospitals, doctors, dentists and other healthcare providers, [removed: all of] which receive reimbursement for the healthcare services provided to their patients from third-party payors, such as domestic and international government programs, private insurance plans and managed care programs.
If third-party payors reduce reimbursement levels [removed: to] [added: or change reimbursement models for] hospitals and other healthcare providers for our products, demand for our products may decline, or we may experience increased pressure to reduce the prices of our products, which could have a material adverse effect on our sales and results of operations.
If key participants in government healthcare systems reduce the reimbursement levels for our products, [added: including through political changes or transitions,] our sales and results of operations may be adversely affected.
We sell our products in more than 100 countries and derived approximately 40 percent of our net sales in [removed: 2019] [added: 2020] from outside the U.S. We intend to continue to pursue growth opportunities in sales internationally, including in emerging markets, which could expose us to additional risks associated with international sales and operations.
| | • | complex data privacy [added: and cybersecurity] requirements and labor relations laws; |
[removed: Other changes] [added: Changes] in the tax laws of the jurisdictions where we do business, including an increase in tax rates or an adverse change in the treatment of an item of income or expense, could result in a material increase in our tax expense.
These changes, as adopted by countries, could increase tax uncertainty and may [removed: adversely affect] [added: have a material adverse impact on] our [removed: provision for income taxes.][added: business, financial condition or results of operations.]
[added: As discussed further in] Note [removed: 20] [added: 21] to our consolidated financial statements, we are defending product liability lawsuits relating to the Durom® Acetabular Component (“Durom Cup”), certain products within the M/L Taper and M/L Taper with Kinectiv® Technology hip stems and Versys® Femoral Head implants, and the M2a-MagnumTM hip system.
As [removed: discussed further in Note 20 to our consolidated financial statements, in 2015 we paid a compensatory damages award of approximately $90 million and] [added: previously disclosed,] in March 2019 we paid approximately $168 million related to an award of treble damages and attorneys’ fees in a patent infringement lawsuit.
To prevent or respond to unauthorized uses of our intellectual property, we might be required to engage in costly and time-consuming litigation or other proceedings [removed: and we may not ultimately prevail.]
[removed: Zimmer Biomet Holdings, Inc. et al.,*] [added: For example, as discussed further in Note 21 to our consolidated financial statements, there have been four shareholder derivative actions] filed [added: purportedly on our behalf] against [removed: us,] certain of our current and former [removed: officers, certain current] [added: directors] and [removed: former members of our Board of Directors,] [added: officers] and certain former stockholders of ours who sold shares of our common stock in secondary public offerings in 2016, alleging [added: breaches of fiduciary duties and insider trading, based on allegations] that we [removed: and other defendants violated federal securities laws by making] [added: made] materially false and/or misleading statements and/or omissions about our compliance with FDA regulations and our ability to continue to accelerate our organic revenue growth rate in the second half of [removed: 2016.][added: 2016*.* Although we believe there are substantial defenses in these matters, litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future.]
At December 31, [removed: 2019,] [added: 2020,] we had [removed: $9.6] [added: $9.3] billion in goodwill and [removed: $7.3] [added: $7.1] billion of intangible assets.
Risks Related to our Business, Operations and Strategy
The COVID-19 pandemic has adversely impacted, and continues to pose risks to, our business, results of operations and financial condition, the nature and extent of which are highly uncertain and unpredictable.
Our global operations expose us to risks associated with public health crises and outbreaks of epidemic, pandemic, or contagious diseases, such as COVID-19.
The global spread of COVID‑19 has had, and we expect it to continue to have, an adverse impact on demand for our products, our sales, our operations, our supply chains and distribution systems, and our expenses, including as a result of preventive and precautionary measures that we, other businesses, and governments have taken and may continue to take.
Due to these impacts and measures, we have experienced and expect to continue to experience significant and unpredictable reductions in the demand for our products as healthcare customers divert medical resources and priorities towards the treatment of COVID-19.
During 2020, we experienced a significant decline in procedure volumes globally as healthcare systems diverted resources to meet the increasing demands of managing COVID-19, and that decline has continued.
Additionally, public health bodies around the globe have at times recommended delaying elective surgeries during the COVID-19 pandemic, and patients, surgeons and medical societies are evaluating the risks of elective surgeries in the presence of infectious diseases, which we expect will continue to negatively impact demand for our products and the number of procedures performed.
As a result of the COVID-19 outbreak, we have experienced significant business disruptions, including restrictions on our ability to travel and to distribute our products, temporary closures of, or limited operations at, certain of our facilities and the facilities of our suppliers and contract manufacturers, as well as reduction in access to our customers due to diverted resources and priorities and the business hours of hospitals as governments institute prolonged shelter-in-place and/or self-quarantine mandates.
The unprecedented measures to slow the spread of the virus taken by local governments and healthcare authorities globally, including the deferral of elective surgical procedures and social distancing measures, have had, and we expect them to continue to have, a significant adverse effect on our financial position, results of operations and cash flows.
These disruptions have resulted in the following among other unfavorable outcomes:
| | • | lower revenues, profits and cash flows compared to historic trends, including a net loss recognized in 2020 and negative operating cash flows in the second quarter of 2020; |
| | • | bad debt charges as a result of being unable to collect on our accounts receivable; |
| | • | additional charges from operating our manufacturing facilities at less than normal capacity; |
| | • | goodwill impairment charges; and |
| | • | delays in certain strategic projects and investments, including our restructuring plans, which will delay or may eliminate the effectiveness of these strategic initiatives. |
If preventative and precautionary measures and/or the distribution of vaccines do not curb the spread of COVID-19, our financial position, results of operations and cash flows may continue to be adversely affected.
Prolonged disruptions that cause deferral of elective surgical procedures may result in the following among other potential negative outcomes:
| | • | net losses and negative operating cash flows; |
| | • | excess inventory we cannot sell, which would result in increased inventory charges; |
| | • | our customers returning inventory to us, which would result in a reduction to our net sales; |
| | • | additional charges from operating our manufacturing facilities at less than normal capacity; |
| | • | additional goodwill impairment charges; |
| | • | failing to satisfy the covenants in our credit facilities, which may cause any outstanding amounts to be payable immediately and could affect our access to capital to fund our business; and |
| | • | downgrades to our credit ratings, which could result in increased interest expense. |
In addition, the COVID-19 pandemic has adversely affected, and we expect it to continue to adversely affect, the economies and financial markets of many countries, which may result in a period of regional, national, and global economic slowdown or regional, national, or global recessions that could further negatively affect demand for our products as hospitals curtail or delay spending and individuals experiencing unemployment and/or a loss of healthcare benefits cancel or delay elective procedures, and could also increase the risk of customer defaults or delays in payments.
Our customers may terminate or amend their agreements for the purchase of our products due to bankruptcy, lack of liquidity, lack of funding, operational failures or other reasons.
COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas, present material uncertainty and risk with respect to our performance, financial condition, volume of business, results of operations and cash flows.
Due to the uncertain scope and duration of the pandemic and uncertain timing of global recovery and economic normalization, we are unable to estimate the impacts on our operations and financial results.
In December 2019, our Board of Directors approved, and we initiated, a global restructuring program (the “2019 Restructuring Plan”) with an objective of reducing costs to allow us to further invest in higher priority growth opportunities, which program is ongoing.
Our success largely depends on key personnel, including our senior management, and having adequate succession plans in place.
We may not be able to attract, retain and develop the highly skilled employees we need to support our business, which could harm our business.
Our future performance depends, in large part, on the continued services of our senior management and other key personnel, including our ability to attract, retain and motivate key personnel.
Competition for key personnel in the various localities and business segments in which we operate is intense.
Our ability to attract and retain key personnel, in particular senior management, will be dependent on a number of factors, including prevailing market conditions and compensation packages offered by companies competing for the same talent.
There is no guarantee that we will have the continued service of key employees who we rely upon to execute our business strategy and identify and pursue strategic opportunities and initiatives.
The loss of the services of any of our senior management or other key personnel, or our inability to attract highly qualified senior management and other key personnel, could harm our business.
In particular, we may have to incur costs to replace senior officers or other key employees who leave, and our ability to execute our business strategy could be impaired if we are unable to replace such persons in a timely manner.
Effective succession planning is also important to our long-term success.
Failure to ensure effective transfer of knowledge and smooth transitions involving key employees could hinder our strategic planning and execution.
Further, changes in our management team may be disruptive to our business, and any failure to successfully integrate key new hires or promoted employees could adversely affect our business and results of operations.
If we fail to comply with the terms of the DPA that we entered into in January 2017, we may be subject to criminal prosecution and/or exclusion from federal healthcare programs.
On January 12, 2017, we resolved previously-disclosed FCPA matters involving Biomet and certain of its subsidiaries.
As part of the settlement, we entered into a DPA with the DOJ.
A copy of the DPA is incorporated by reference as an exhibit to this report.
If we do not comply with the terms of the DPA, we could be subject to prosecution for violating the internal controls provisions of the FCPA and the conduct of Biomet and its subsidiaries described in the DPA, which conduct pre-dated our acquisition of Biomet, as well as any new or continuing violations.
We could also be subject to exclusion by OIG-HHS from participation in federal healthcare programs, including Medicare, Medicaid and Veterans Administration health programs.
In December 2019, our Board of Directors approved, and we initiated, a new global restructuring program that includes a restructuring of key businesses to better align our resources with our growth strategies, achieve operating efficiencies that we expect to reduce costs, simplify our organizational structure, accelerate decision-making and allow us to invest in higher priority growth opportunities.
sterilizer locations or sterilization methods in a timely or cost effective manner or at all, which could have a material impact on our results of operations and financial condition.
In 2012, we received a warning letter from the FDA citing concerns relating to certain processes pertaining to products manufactured at our Ponce, Puerto Rico manufacturing facility.
Any such delays, or any failure to meet the
On December 12, 2018, the Office for Civil Rights of HHS issued a request for information seeking input from the public on how the HIPAA regulations could be modified to amend existing obligations relating to the processing of protected health information.
We will monitor this process and assess the impact of changes to the HIPAA regulations to our business.
Regulations from the California Attorney General have not been finalized, and it is expected that additional amendments to the CCPA will be introduced.
Meanwhile, over fifteen other states have considered privacy laws like the CCPA, and in October 2019, Nevada enacted a similar but generally less restrictive privacy law.
The GDPR imposes, among other
At this time, it is not possible to predict whether SOFR will attain market traction as a LIBOR replacement.
We have significant global sales and operations and face risks related to health epidemics that could impact our sales and operating results.
Our business could be adversely affected by the effects of a widespread outbreak of contagious disease, including the recent outbreak of respiratory illness caused by a novel coronavirus first identified in Wuhan, Hubei Province, China.
Any outbreak of contagious diseases, and other adverse public health developments, could have a material adverse effect on our business operations.
These could include disruptions or restrictions on our ability to travel or to distribute our products, as well as temporary closures of our facilities or the facilities of our suppliers or customers, the deferral of elective procedures in impacted countries or the temporary suspension of operations by us or our suppliers or customers.
Any disruption of our operations, or those of our suppliers or customers, would likely impact our sales and operating results.
In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and likely impact our operating results.
The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017 (the “2017 Tax Act”), with significant changes to the U.S. corporate income tax system, including a federal corporate income tax rate reduction from 35 percent to 21 percent, limitations on the deductibility of interest expense, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system.
Our tax expense and cash flow could be impacted in the event of adverse future regulatory guidance provided by the U.S. Treasury clarifying certain aspects of the 2017 Tax Act or other changes to the U.S. corporate income tax system.
As discussed further in
For example, as discussed further in Note 20 to our consolidated financial statements, we are defending a purported class action lawsuit, *Shah v.
There have also been four shareholder derivative actions filed purportedly on our behalf against certain of our current and former directors and officers and certain former stockholders of ours who sold shares of our common stock in secondary public offerings in 2016, alleging breaches of fiduciary duties
and insider trading, based on substantially the same factual allegations as *Shah.* Although we believe there are substantial defenses in these matters, litigation and other claims are subject to inherent uncertainties and management’s view of these matters may change in the future.
As discussed further in Note 10 to our consolidated financial statements, we recorded goodwill impairment charges of $975.9 million in 2018.
The UK held a referendum in June 2016 in which voters chose to leave the EU, commonly referred to as “Brexit”.
Following a protracted period of negotiation, the UK ceased to be a member of the EU on January 31, 2020, after the ratification and approval of a withdrawal agreement by the EU and the UK.
Throughout the Transition Period, the legal and regulatory framework as between the UK and the EU will remain the same.
Brexit could also result in the UK or the EU significantly altering its regulations affecting the clearance and approval of medical products.
In addition, as a result of Brexit, other European countries may seek to conduct referenda with respect to their continuing membership with the EU.
If there is no agreed upon long-term trading arrangement by the end of the Transition Period (a so-called “hard Brexit”), it would likely have a significant adverse impact on labor and trade and create significant short-term currency volatility.
An excerpt. Shown here: 40 of 47 rewritten, 40 of 110 added and all 35 removed. The counts are complete. For every sentence, read Item 1A. Risk Factors in the FY2020 filing and the FY2019 filing.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
139 rewritten, 131 added, 159 removed, 143 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
The following discussion, analysis and comparisons generally focus on the operating results for the years ended December 31, [removed: 2019] [added: 2020] and [removed: 2018.][added: 2019.]
Discussion, analysis and comparisons of the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, [removed: 2018.][added: 2019.]
[removed: 2019] [added: 2020] Financial Highlights
[removed: RESULTS] [added: RESULTS] OF [removed: OPERATIONS][added: OPERATIONS]
We analyze sales by three geographies, the Americas, EMEA and Asia Pacific, and by the following product categories: [removed: Knees, Hips, S.E.T.,] [added: Knees; Hips; S.E.T.;] Dental, Spine & [removed: CMF] [added: CMFT;] and Other.
[removed: Net] [added: Net] Sales by [removed: Geography][added: Geography]
| | | [removed: 2018] [added: 2020] | | | | [removed: 2017] [added: 2019] | | | | % [removed: Inc/(Dec)] [added: (Dec)] | | | | Mix | | | | Price | | | | Exchange | | | |
| | | [removed: 2018] [added: 2020] | | | | [removed: 2017] [added: 2019] | | | | % [removed: Inc/(Dec)] [added: (Dec)] | | | | Mix | | | | Price | | | | Exchange | | | |
| | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2019] [added: 2020] vs. [removed: 2018] [added: 2019] % [removed: Inc/(Dec)] [added: (Dec)] | | | | [removed: 2018] [added: 2019] vs. [removed: 2017] [added: 2018] % Inc/(Dec) | | | |
| Americas | | $ | [removed: 1,676.6] [added: 1,461.1] | | | $ | [removed: 1,642.7] [added: 1,676.6] | | | $ | [removed: 1,656.5] [added: 1,642.7] | | | | [removed: 2.1] [added: (12.9] | [added: )] | % | | [removed: (0.8] [added: 2.1] | [removed: )] | % |
| EMEA | | | [removed: 654.1] [added: 487.0] | | | | [removed: 672.3] [added: 654.1] | | | | [removed: 644.4] [added: 672.3] | | | | [removed: (2.7] [added: (25.6] | ) | | | [removed: 4.4] [added: (2.7] | [added: )] | |
| Asia Pacific | | | [removed: 479.4] [added: 441.7] | | | | [removed: 458.7] [added: 479.4] | | | | [removed: 433.1] [added: 458.7] | | | | [removed: 4.5] [added: (7.8] | [added: )] | | | [removed: 5.9] [added: 4.5] | | |
| Total | | $ | [removed: 2,810.1] [added: 2,389.8] | | | $ | [removed: 2,773.7] [added: 2,810.1] | | | $ | [removed: 2,734.0] [added: 2,773.7] | | | | [removed: 1.3] [added: (15.0] | [added: )] | | | [removed: 1.5] [added: 1.3] | | |
| Americas | | $ | [removed: 1,016.3] [added: 941.5] | | | $ | [removed: 996.3] [added: 1,016.3] | | | $ | [removed: 968.9] [added: 996.3] | | | | [removed: 2.0] [added: (7.4] | [added: )] | % | | [removed: 2.8] [added: 2.0] | | % |
| EMEA | | | [removed: 499.8] [added: 407.8] | | | | [removed: 519.9] [added: 499.8] | | | | [removed: 518.4] [added: 519.9] | | | | [removed: (3.9] [added: (18.4] | ) | | | [removed: 0.3] [added: (3.9] | [added: )] | |
[removed: Increased] [added: Changes in] volume and [removed: changes in the] mix of product sales had a [removed: positive] [added: negative] effect of [removed: 4.9] [added: 10.0] percent on year-over-year sales during [removed: 2019.][added: the year ended December 31, 2020.]
Global selling prices had a negative effect of [removed: 2.7] [added: 2.4] percent on year-over-year sales during [removed: 2019.][added: 2020.]
In [removed: 2019,] [added: 2020,] changes in foreign currency exchange rates had a [removed: negative] [added: positive] effect of [removed: 1.6] [added: 0.4] percent on year-over-year sales.
If foreign currency exchange rates remain at levels consistent with recent rates, we estimate they will have a [removed: minimal] [added: less than 1 percent positive] effect on sales in [removed: 2020] [added: 2021] for the full year.
The following table presents estimated* [removed: 2019] [added: 2020] global market information (dollars in billions):
| | | Market | | | | [added: Historic] Market | | Market | | |
| | | [removed: Size] [added: Size] | | | | % [removed: Growth] [added: Growth*] | | [removed: Position] [added: Position] | | |
| Knees | | $ | [removed: 8] [added: 9] | | | Low-Single Digit | | | 1 | |
| Hips | | | [removed: 7] [added: 8] | | | Low-Single Digit | | | 1 | |
| S.E.T. | | | [removed: 22] [added: 24] | | | Mid-Single Digit | | | 5 | |
| Spine [removed: & CMF] | | | 11 | | | Low-Single Digit | | | [removed: 5] [added: 6] | |
| Dental | | | [removed: 5] [added: 10] | | | Mid-Single Digit | | | [removed: 4] [added: 5] | |
| [added: *] | [removed: Excludes] [added: Represents historic growth in recent years, absent] the [added: effects of the COVID-19 pandemic, and excludes the] effect of changes in foreign currency exchange rates on sales growth |
| | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2019] [added: 2020] vs. [removed: 2018] [added: 2019] Inc/(Dec) | | | | [removed: 2018] [added: 2019] vs. [removed: 2017] [added: 2018] Inc/(Dec) | | | |
| Cost of products sold, excluding intangible asset amortization | | | [removed: 28.2] [added: 30.3] | | % | | [removed: 28.6] [added: 28.2] | | % | | [removed: 27.3] [added: 28.6] | | % | | [removed: (0.4] [added: 2.1] | [removed: )] | % | | [removed: 1.3] [added: (0.4] | [added: )] | % |
| Intangible asset amortization | | | [removed: 7.3] [added: 8.5] | | | | [removed: 7.5] [added: 7.3] | | | | [removed: 7.7] [added: 7.5] | | | | [removed: (0.2] [added: 1.2] | [removed: )] | | | (0.2 | ) | |
| Research and development | | | [removed: 5.6] [added: 5.3] | | | | [removed: 4.9] [added: 5.6] | | | | [removed: 4.7] [added: 4.9] | | | | [removed: 0.7] [added: (0.3] | [added: )] | | | [removed: 0.2] [added: 0.7] | | |
| Selling, general and administrative | | | [removed: 41.9] [added: 45.2] | | | | [removed: 42.6] [added: 41.9] | | | | [removed: 39.8] [added: 42.6] | | | | [removed: (0.7] [added: 3.3] | [removed: )] | | | [removed: 2.8] [added: (0.7] | [added: )] | |
| Goodwill and intangible asset impairment | | | [removed: 0.9] [added: 9.2] | | | | [removed: 12.3] [added: 0.9] | | | | [removed: 4.2] [added: 12.3] | | | | [removed: (11.4] [added: 8.3] | [removed: )] | | | [removed: 8.1] [added: (11.4] | [added: )] | |
| Quality remediation | | | [removed: 1.0] [added: 0.7] | | | | [removed: 1.9] [added: 1.0] | | | | [removed: 2.3] [added: 1.9] | | | | [removed: (0.9] [added: (0.3] | ) | | | [removed: (0.4] [added: (0.9] | ) | |
| Restructuring and other cost reduction initiatives | | | [removed: 0.6] [added: 1.7] | | | | [removed: 0.4] [added: 0.6] | | | | [removed: 0.2] [added: 0.4] | | | | [removed: 0.2] [added: 1.1] | | | | 0.2 | | |
| Acquisition, integration and related | | | [removed: 0.2] [added: 0.3] | | | | [removed: 1.3] [added: 0.2] | | | | [removed: 3.4] [added: 1.3] | | | | [removed: (1.1] [added: 0.1] | [removed: )] | | | [removed: (2.1] [added: (1.1] | ) | |
| Operating [added: (Loss)] Profit | | | [removed: 14.2] [added: (1.2] | [added: )] | | | [removed: 0.4] [added: 14.2] | | | | [removed: 10.2] [added: 0.4] | | | | [removed: 13.8] [added: (15.4] | [added: )] | | | [removed: (9.8] [added: 13.8] | [removed: )] | |
[removed: Cost] [added: Cost] of Products Sold and Intangible Asset [removed: Amortization][added: Amortization]
The following table sets forth the factors that contributed to the gross margin changes in each of [removed: 2019] [added: 2020] and [removed: 2018] [added: 2019] compared to the prior year:
Impact of the COVID-19 Global Pandemic
Our results have been significantly impacted by the COVID-19 global pandemic.
The vast majority of our net sales are derived from products used in elective surgical procedures.
As COVID-19 rapidly started to spread throughout the world in early 2020, our net sales decreased dramatically as countries took precautions to prevent the spread of the virus with lockdowns and stay-at-home measures and as hospitals deferred elective surgical procedures.
This resulted in net sales declines of 9.7 percent and 38.3 percent in the first and second quarters of 2020, respectively, when compared to the same prior year periods.
In the third quarter of 2020, various levels of recovery in elective surgical procedures occurred resulting in net sales growth of 2.0 percent when compared to the same prior year period.
However, in the fourth quarter of 2020 we saw the pandemic worsen and elective surgical procedures were deferred again, especially late in the quarter.
This was particularly prevalent in EMEA.
As a result, our net sales declined in the fourth quarter of 2020 by 1.9 percent when compared to the same prior year period.
With the deferral of elective surgical procedures, we have taken prudent measures in an effort to maintain an adequate financial profile to have access to capital to fund the business during these unprecedented times.
In response to the COVID-19 pandemic, we have temporarily reduced discretionary spending such as travel, meetings and other project spend that can be delayed with limited long-term detriment to the business, and we have temporarily suspended or limited production at certain manufacturing facilities.
However, to date we have not experienced significant disruptions in our supply chain, or in our ability to meet our customer demands.
In 2020, our net sales decreased by 12.0 percent compared to 2019 due to the deferral of elective surgical procedures from the COVID-19 pandemic.
We recognized a net loss of $138.9 million in the year ended December 31, 2020.
The loss was largely attributable to the impacts of COVID-19, which caused lower net sales and was the primary driver behind $645.0 million of goodwill and intangible asset impairment charges.
The temporarily suspended or limited production at certain manufacturing facilities resulted in higher costs of products sold that relate to certain fixed overhead costs and hourly production worker labor expenses that are included in the cost of inventory when these facilities are operating at normal capacity.
Pursuant to our 2019 Restructuring Plan, we also incurred higher restructuring and other cost reduction initiative expenses in 2020 when compared to 2019.
Lastly, in 2020 we recognized net litigation-related charges of $159.8 million compared to net litigation-related charges of $41.5 million in 2019.
These unfavorable items were partially offset by savings from our 2019 Restructuring Plan and lower costs for travel, meetings and other projects due to COVID-19.
2021 Outlook
We believe the COVID-19 surges that occurred late in 2020 will continue to negatively impact our net sales in 2021.
However, at this time we are optimistic the rollout of vaccines around the world will change those dynamics and elective surgical procedures will be able to return to pre-pandemic levels at some point during 2021.
Additionally, since the clinical need for many of our products does not go away, it is possible once patients and hospitals have confidence to return to elective surgical procedures the patient backlog from deferred procedures may have a positive effect on the underlying market growth.
However, the consequences of COVID-19 continue to be fluid, and it is difficult to predict its ongoing impacts to our business and broader economic and market environments.
If the negative impacts of COVID-19 on our net sales subsides, we believe we can improve our operating profit margin since our fixed costs would not increase proportionally to net sales.
| Americas | | $ | 4,335.4 | | | $ | 4,875.8 | | | | (11.1 | ) | % | | (7.9 | ) | % | | (3.1 | ) | % | | (0.1 | ) | % |
| EMEA | | | 1,391.3 | | | | 1,746.9 | | | | (20.4 | ) | | | (20.5 | ) | | | (0.8 | ) | | | 0.9 | | |
| Asia Pacific | | | 1,297.8 | | | | 1,359.5 | | | | (4.5 | ) | | | (4.5 | ) | | | (1.5 | ) | | | 1.5 | | |
| Total | | $ | 7,024.5 | | | $ | 7,982.2 | | | | (12.0 | ) | | | (10.0 | ) | | | (2.4 | ) | | | 0.4 | | |
| Knees | | $ | 2,389.8 | | | $ | 2,810.1 | | | | (15.0 | ) | % | | (12.6 | ) | % | | (2.7 | ) | % | | 0.3 | | % |
| Hips | | | 1,750.5 | | | | 1,931.5 | | | | (9.4 | ) | | | (7.1 | ) | | | (2.8 | ) | | | 0.5 | | |
| S.E.T. | | | 1,322.0 | | | | 1,444.1 | | | | (8.4 | ) | | | (6.5 | ) | | | (2.3 | ) | | | 0.4 | | |
| Dental, Spine & CMFT | | | 1,043.7 | | | | 1,161.3 | | | | (10.1 | ) | | | (9.4 | ) | | | (1.2 | ) | | | 0.5 | | |
| Other | | | 518.5 | | | | 635.2 | | | | (18.4 | ) | | | (16.9 | ) | | | (1.9 | ) | | | 0.4 | | |
| Total | | $ | 7,024.5 | | | $ | 7,982.2 | | | | (12.0 | ) | | | (10.0 | ) | | | (2.4 | ) | | | 0.4 | | |
| Hips | | | 1,931.5 | | | | 1,918.9 | | | | 0.7 | | | | 5.6 | | | | (3.1 | ) | | | (1.8 | ) | |
| S.E.T. | | | 1,444.1 | | | | 1,401.2 | | | | 3.1 | | | | 6.0 | | | | (1.6 | ) | | | (1.3 | ) | |
| Dental, Spine & CMFT | | | 1,161.3 | | | | 1,175.1 | | | | (1.2 | ) | | | 2.1 | | | | (2.0 | ) | | | (1.3 | ) | |
| Other | | | 635.2 | | | | 664.0 | | | | (4.3 | ) | | | 0.8 | | | | (4.0 | ) | | | (1.1 | ) | |
| Asia Pacific | | | 401.2 | | | | 415.4 | | | | 402.7 | | | | (3.4 | ) | | | 3.2 | | |
Certain amounts in the 2018 and 2017 consolidated financial statements have been reclassified to conform to the 2019 presentation.
In 2019, our net sales increased by 0.6 percent compared to 2018.
We estimate changes in volume/mix of our products and pricing had a positive effect of 2.2 percent on our 2019 sales while changes in foreign currency exchange rates had a negative effect of 1.6 percent.
Notably, our sales growth was higher in the second half of the year compared to the first half of the year primarily due to various product launches in our Knees product category, which drove improved commercial execution.
The improved second half performance was present in all of our product categories and geographic regions.
Additionally, the negative impact of changes in foreign currency exchange rates was less in the second half of 2019 compared to the first half.
Our net earnings increased by more than $1.5 billion in 2019 from 2018.
We had significant goodwill and intangible asset impairments and litigation-related charges in 2018, which contributed to a net loss that year.
In 2019, expenses related to quality remediation, as well as acquisition and integration, declined due to the continued progress in completing those projects.
Higher sales, lower interest expense and the recognition of a deferred tax benefit related to Switzerland tax reform resulted in the significant increase in earnings in 2019 compared to 2018.
2020 Outlook
We believe that the improved sales performance in the second half of 2019 will continue into 2020.
We estimate sales growth in 2020 compared to 2019 will be in a range of 2.5 percent to 3.5 percent.
We anticipate the impact from changes in foreign currency exchange rates will be minimal for 2020.
We expect to be able to leverage the sales growth into higher operating profits.
Additionally, we expect reductions in quality remediation costs, as well as other various project costs, as we complete these initiatives.
We have recently initiated restructuring activities designed to reduce our operating costs in the long-term.
These activities are expected to result in expenses of approximately $350 million to $400 million through the end of 2023, with slightly more than half of that expected to be incurred in 2020.
Further, we expect interest expense, net, will continue to decline in 2020 due to lower average outstanding debt balances.
Our 2020 outlook does not consider any impacts from the recent outbreak of the coronavirus.
While there could be a near-term effect on our operating results, it is difficult to assess or predict how material the impact will be and what long-term effects the outbreak may have.
| Americas | | $ | 4,837.2 | | | $ | 4,844.8 | | | | (0.2 | ) | % | | 2.3 | | % | | (2.4 | ) | % | | (0.1 | ) | % |
| EMEA | | | 1,801.9 | | | | 1,745.2 | | | | 3.2 | | | | 1.7 | | | | (1.6 | ) | | | 3.1 | | |
| Asia Pacific | | | 1,293.8 | | | | 1,213.3 | | | | 6.6 | | | | 9.2 | | | | (3.5 | ) | | | 0.9 | | |
| Total | | $ | 7,932.9 | | | $ | 7,803.3 | | | | 1.7 | | | | 3.2 | | | | (2.4 | ) | | | 0.9 | | |
| Hips | | | 1,935.1 | | | | 1,921.4 | | | | 0.7 | | | | 5.5 | | | | (3.0 | ) | | | (1.8 | ) | |
| S.E.T. | | | 1,795.7 | | | | 1,751.8 | | | | 2.5 | | | | 5.4 | | | | (1.6 | ) | | | (1.3 | ) | |
| Spine & CMF | | | 747.3 | | | | 763.9 | | | | (2.2 | ) | | | 1.4 | | | | (2.6 | ) | | | (1.0 | ) | |
| Dental | | | 414.0 | | | | 411.2 | | | | 0.7 | | | | 3.2 | | | | (0.9 | ) | | | (1.6 | ) | |
| Other | | | 280.0 | | | | 310.9 | | | | (9.9 | ) | | | (2.1 | ) | | | (6.5 | ) | | | (1.3 | ) | |
| Knees | | $ | 2,773.7 | | | $ | 2,734.0 | | | | 1.5 | | % | | 3.6 | | % | | (2.9 | ) | % | | 0.8 | | % |
| Hips | | | 1,921.4 | | | | 1,871.8 | | | | 2.6 | | | | 4.3 | | | | (2.8 | ) | | | 1.1 | | |
| S.E.T. | | | 1,751.8 | | | | 1,701.8 | | | | 2.9 | | | | 3.9 | | | | (1.8 | ) | | | 0.8 | | |
| Spine & CMF | | | 763.9 | | | | 757.9 | | | | 0.8 | | | | 2.1 | | | | (1.7 | ) | | | 0.4 | | |
| Dental | | | 411.2 | | | | 418.6 | | | | (1.8 | ) | | | (1.7 | ) | | | (1.5 | ) | | | 1.4 | | |
| Other | | | 310.9 | | | | 319.2 | | | | (2.6 | ) | | | (1.7 | ) | | | (1.5 | ) | | | 0.6 | | |
| Total | | $ | 7,932.9 | | | $ | 7,803.3 | | | | 1.7 | | | | 3.2 | | | | (2.4 | ) | | | 0.9 | | |
| Asia Pacific | | | 419.0 | | | | 405.2 | | | | 384.5 | | | | 3.4 | | | | 5.4 | | |
| Total | | $ | 1,935.1 | | | $ | 1,921.4 | | | $ | 1,871.8 | | | | 0.7 | | | | 2.6 | | |
Volume/mix growth was driven by recent product introductions, particularly in our Knees product category, sales in key emerging markets and market growth.
An excerpt. Shown here: 40 of 139 rewritten, 40 of 131 added and 40 of 159 removed. The counts are complete. For every sentence, read Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in the FY2020 filing and the FY2019 filing.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
8 rewritten, 0 added, 21 removed, 44 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
For contracts outstanding at December 31, [removed: 2019,] [added: 2020,] we had obligations to purchase U.S. Dollars and sell Euros, Japanese Yen, British Pounds, Canadian Dollars, Australian Dollars, Korean Won, Swedish Krona, Czech Koruna, Thai Baht, Taiwan Dollars, South African Rand, Russian Rubles, Indian Rupees, Turkish Lira, Polish Zloty, Danish Krone, and Norwegian Krone and purchase Swiss Francs and sell U.S. Dollars at set maturity dates ranging from January [removed: 2020] [added: 2021] through June [removed: 2022.][added: 2023.]
The notional amounts of outstanding forward contracts entered into with third parties to purchase U.S. Dollars at December 31, [removed: 2019] [added: 2020] were [removed: $1,496.3] [added: $1,605.9] million.
The notional amounts of outstanding forward contracts entered into with third parties to purchase Swiss Francs at December 31, [removed: 2019] [added: 2020] were [removed: $276.0] [added: $283.8] million.
A sensitivity analysis of changes in the fair value of foreign currency exchange forward contracts outstanding at December 31, [removed: 2019] [added: 2020] indicated that, if the U.S. Dollar uniformly [removed: changed] [added: strengthened/weakened] in value by 10 percent relative to [removed: the various] [added: all] currencies, with no change in the interest differentials, the fair value of those contracts would increase or decrease earnings before income taxes in periods through June [removed: 2022, depending on the direction of the change,] [added: 2023] by [removed: the following average approximate amounts (in millions):][added: approximately $55.0 million.]
We had net assets, excluding goodwill and intangible assets, in legal entities with non-U.S. Dollar functional currencies of [removed: $1,193.5] [added: $1,369.0] million at December 31, [removed: 2019, primarily in Euros, Japanese Yen and Australian Dollars.][added: 2020.]
For details about these and other financial instruments, including fair value methodologies, see Note [removed: 14] [added: 15] to our consolidated financial statements.
[removed: COMMODITY] [added: COMMODITY] PRICE [removed: RISK][added: RISK]
Based upon our overall interest rate exposure as of December 31, [removed: 2019,] [added: 2020,] a change of 10 percent in interest rates, assuming the principal amount outstanding remains constant, would not have a material effect on interest expense, net.
The weighted average contract rates outstanding at December 31, 2019 were Euro:USD 1.21, USD:Swiss Franc 0.94, USD:Japanese Yen 104.34, British Pound:USD 1.37, USD:Canadian Dollar 1.30, Australian Dollar:USD 0.73, USD:Korean Won 1,138, USD:Swedish Krona 8.80, USD:Czech Koruna 22.11, USD:Thai Baht 31.17, USD:Taiwan Dollar 29.60, USD:South African Rand 15.40, USD:Russian Ruble 68.81, USD:Indian Ruppee 74.26, USD:Polish Zloty 3.72, USD:Danish Krone 6.15, and USD:Norwegian Krone 8.36.
| | | Average | | |
| --- | --- | --- | --- | --- |
| Currency | | Amount | | |
| Euro | | $ | 43.5 | |
| Swiss Franc | | | 28.5 | |
| Japanese Yen | | | 54.0 | |
| British Pound | | | 1.6 | |
| Canadian Dollar | | | 14.3 | |
| Australian Dollar | | | 13.3 | |
| Korean Won | | | 2.6 | |
| Swedish Krona | | | 2.4 | |
| Czech Koruna | | | 1.7 | |
| Thai Baht | | | 0.9 | |
| Taiwan Dollars | | | 4.1 | |
| South African Rand | | | 1.1 | |
| Russian Rubles | | | 2.3 | |
| Indian Rupees | | | 0.8 | |
| Polish Zloty | | | 3.4 | |
| Danish Krone | | | 3.0 | |
| Norwegian Krone | | | 1.8 | |
Item 1. Business
54 rewritten, 86 added, 44 removed, 265 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
We design, manufacture and market orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; office based technologies; spine, craniomaxillofacial and thoracic [added: (“CMFT”)] products; dental implants; and related surgical products.
In 2015, we acquired LVB Acquisition, Inc. (“LVB”), the parent company of Biomet, Inc. (“Biomet”), and LVB and Biomet became our wholly-owned [removed: subsidiaries (sometimes hereinafter referred to as the “Biomet merger” or the “merger”).][added: subsidiaries.]
With sales to stocking distributors, some healthcare [removed: dealers,] [added: dealers and hospitals,] dental practices and dental laboratories, title to product passes upon shipment.
Consignment sales represented approximately 80 percent of our net sales in [removed: 2019.][added: 2020.]
No individual customer accounted for more than 1 percent of our net sales for [removed: 2019.][added: 2020.]
We allocate resources to achieve our operating profit goals through [removed: seven] [added: three] operating segments.
The following is a summary of our [removed: seven] operating segments.
See Note [removed: 18] [added: 19] to our consolidated financial statements for more information regarding our segments.
[added: *Americas* *and Global Businesses.*] The Americas [removed: geographic] [added: and Global Businesses] operating segment is our largest operating segment.
The U.S. accounts for [removed: 94] [added: 95] percent of net sales in this region.
The EMEA [removed: geographic] operating segment is our second largest operating segment.
France, Germany, Italy, Spain and the United Kingdom collectively account for [removed: 55] [added: 57] percent of net sales in the region.
The Asia Pacific [removed: geographic] operating segment includes key markets such as Japan, China, Australia, New Zealand, Korea, Taiwan, India, Thailand, Singapore, Hong Kong and Malaysia.
Japan is the largest market within this segment, accounting for [removed: 47] [added: 50] percent of the region’s sales.
[removed: Our] [added: In our Dental products division, our] sales force is primarily composed of employees who market our products to customers.
[added: Additionally, with sales to customers where title to product passes upon] shipment, these customers may purchase items in large quantities if incentives are offered or if there are new product offerings in a market, which could cause period-to-period differences in sales.
Our products include orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; office based technologies; spine and [removed: CMF] [added: CMFT] products; dental implants; and related surgical products.
Our S.E.T. product category includes [removed: surgical,] sports medicine, biologics, foot and ankle, extremities and trauma products.
[added: DENTAL,] SPINE and [removed: CMF][added: CMFT]
Our [removed: CMF] [added: CMFT] division includes face and skull reconstruction products as well as products that fixate and stabilize the bones of the chest in order to facilitate healing or reconstruction after open heart surgery, trauma or for deformities of the chest.
Our significant [added: dental,] spine and [removed: CMF] [added: CMFT] brands include the following:
Our other product category primarily includes our [added: surgical,] bone cement and office based technology products.
We are broadening our offerings in certain of our product categories and exploring new [removed: technologies] [added: technologies, including artificial intelligence and machine learning,] with possible applications in multiple areas.
As of December 31, [removed: 2019,] [added: 2020,] we employed approximately [removed: 2,100] [added: 2,000] research and development employees worldwide.
The U.S. Food and Drug Administration (“FDA”) has enacted regulations that control all [removed: aspects of the development, manufacture, advertising, promotion and postmarket surveillance of medical products, including medical devices.]
[added: QSR] compliance is necessary to receive and maintain FDA clearance or approval to market new and existing products and is also necessary for distributing in the U.S. certain devices exempt from FDA clearance and approval requirements.
For information regarding certain warning letters and Form 483 inspectional observations that we are addressing, see Note [removed: 20] [added: 21] to our consolidated financial statements.
[removed: In] addition, exported medical products are subject to the regulatory requirements of each country to which the medical product is exported.
In May 2017, a new EU Medical Device Regulation (“MDR”) was published that will replace the MDD and will impose significant additional premarket and postmarket [removed: requirements beginning in May 2020.][added: requirements.]
Under a corrigendum to the MDR finalized in December 2019, some low-risk medical devices being up-classified as a result of the MDR, including low-risk instruments, may now receive a [removed: four-year] transitional period to [removed: comply.][added: comply by May 2024.]
[added: Violations of] these laws are punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, within the U.S., exclusion from participation in government healthcare programs, including Medicare, Medicaid and Veterans Administration health programs.
The FDA has issued guidance to which we may be subject concerning data security for medical [removed: devices.]
Other state laws include the California Consumer Privacy Act (“CCPA”), which was signed into law on June 28, 2018 and [removed: largely] took effect on January 1, 2020.
We will continue to monitor and assess the impact of these state laws, which may impose substantial penalties for violations, impose significant costs for investigation and compliance, allow private class-action [removed: litigation,] [added: litigation] and carry significant potential liability for our business.
[added: The GDPR, which became effective on May 25, 2018, imposes data protection requirements that include] strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to the greater of 20 million Euros or 4% of total worldwide annual turnover of the preceding financial year).
In the spine and [removed: CMF] [added: CMFT] categories, we compete globally primarily with the spinal and biologic business of Medtronic plc, the DePuy Synthes Companies, Stryker Corporation, NuVasive, Inc. and Globus Medical, Inc.
[added: We own or control through licensing arrangements over 9,000 issued] patents and patent applications throughout the world that relate to aspects of the technology incorporated in many of our products.
As of December 31, [removed: 2019,] [added: 2020,] we employed approximately [removed: 19,900] [added: 20,000] employees worldwide, including approximately [removed: 2,100] [added: 2,000] employees dedicated to research and development.
Approximately [removed: 9,500] [added: 10,000] employees are located within the U.S. and approximately [removed: 10,400] [added: 10,000] employees are located outside of the U.S., primarily throughout Europe and in [removed: Japan.][added: Japan and China.]
We have approximately [removed: 8,600] [added: 8,500] employees dedicated to manufacturing our products worldwide.
Our operating segments are comprised of Americas and Global Businesses, Europe, Middle East and Africa (“EMEA”) and Asia Pacific.
This segment is comprised principally of the U.S. and includes other North, Central and South American markets for all of our product categories as well as the global results for our Dental products division.
This segment also includes our global manufacturing operations for all product categories and research, development engineering, medical education, and brand management for our global product category headquarter locations.
This operating segment includes all product categories in these markets, except for Dental.
This operating segment includes all product categories in these markets, except for Dental.
Due to the COVID-19 global pandemic, the typical seasonal patterns did not occur in 2020.
| | • | Avenir Complete® Hip System |
A developing trend in spine surgeries is the use of robotic technologies to assist a surgeon in performing minimally invasive procedures.
We have entered the robotic market with our ROSA ONE® Spine.
| | • | The TetherTM |
aspects of the development, manufacture, advertising, promotion and postmarket surveillance of medical products, including medical devices.
In January 2021, the FDA announced a new “Action Plan” to address software as a medical device (“SaMD”) and artificial intelligence and machine learning (“AI/ML”).
Certain of our new products will likely incorporate innovations related to AI/ML, and therefore we will monitor developments in this area closely to determine our compliance obligations and risks.
In
The effective date for the MDR has been extended due to the COVID-19 pandemic, with it currently scheduled to become effective in May 2021.
As part of that settlement, we entered into a Deferred Prosecution Agreement (“DPA”) with the DOJ, which concluded on February 9, 2021, six months following certification to the DOJ and the U.S. Securities and Exchange Commission (“SEC”) by an independent compliance monitor that our compliance program, including its policies and procedures, is reasonably designed and implemented to prevent and detect violations of the FCPA and is functioning effectively.
devices.
On December 10, 2020, HHS issued a notice of proposed rulemaking (“NPR”) to modify the HIPAA privacy rule.
The proposed modifications would remove communication barriers between providers and health plans, allow individuals more access to their health information and impose new requirements on entities that receive patient data requests.
Separately, HHS (through the National Coordinator for Health Information Technology) issued a new rule, to be effective April 5, 2021, that seeks to limit “blocking” of electronic health information by imposing data access, software licensing and inter-operability requirements on healthcare providers and information technology vendors.
We intend to monitor both the NPR and the “information blocking” rule and assess their impact on the use of data in our business.
A second law called the California Privacy Rights Act (“CPRA”) passed via a ballot referendum in November 2020.
The CPRA expands the scope of the CCPA, imposes new restrictions on behavioral advertising and establishes a new California Privacy Protection Agency which will enforce the law and issue regulations.
Other states have considered and/or enacted similar privacy laws.
Human Capital
Our mission is to alleviate pain and improve the quality of life for people around the world.
Our commitment to patients shapes all day-to-day decisions at Zimmer Biomet.
To be able to accomplish our mission we have established guiding principles.
These guiding principles are central to our human capital management policies and practices.
The guiding principles are:
| | • | Respect the contributions and perspectives of all employees |
| | • | Commit to the highest standards of patient safety, quality and integrity |
| | • | Focus our resources in areas where we will make a difference |
| | • | Ensure the company’s return is equivalent to the value we provide our customers and patients |
| | • | Give back to our communities and people in need. |
Diversity, Equity and Inclusion
We believe that each of us as individuals can drive change every day.
We remain wholly committed to creating, supporting and celebrating diverse and equal workplaces and communities.
Together, we will continue to foster and embrace diversity and inclusion within our team and our communities, and commit our voices and our resources to community groups, business platforms and other organizations united to driving meaningful change and sustained improvement.
We believe that representation matters.
Our operating segments are comprised of both geographic and product category business units.
We are organized through a combination of geographic and product category operating segments for various reasons, including the distribution channels through which products are sold.
Our product category operating segments generally have distribution channels focused specifically on those product categories, whereas our geographic operating segments have
distribution channels that sell multiple product categories.
Americas.
In the Americas, we monitor and rank independent sales agents and our direct sales force across a range of performance metrics, including the achievement of sales targets and maintenance of efficient levels of working capital.
Spine, less Asia Pacific (“Spine”).
The Spine product category operating segment includes all spine product results except those in Asia Pacific.
The U.S. accounts for the majority of sales in this operating segment.
The market dynamics of the Spine business are similar to those described in the geographic operating segments.
However, our Spine business maintains a separate sales force of employees and independent sales agents.
Office Based Technologies.
Our Office Based Technologies product category operating segment only sells to U.S. customers.
In this product category, we market our products to doctors who prescribe them for use by patients.
The products are mostly provided directly by Zimmer Biomet to patients and are paid for through patients’ insurance or by patients themselves.
Products are also sold through wholesale channels on a limited basis.
Craniomaxillofacial and Thoracic (“CMF”).
Our CMF product category operating segment competes across the world through a combination of direct and independent sales agents.
The U.S. accounts for the majority of sales in this operating segment.
The U.S. sales force consists of a combination of employees and independent sales agents.
Internationally, our primary customers are independent stocking distributors who market our products to their customers.
Dental.
Our Dental product category operating segment competes across the world.
Additionally, with sales to customers where title to product passes upon
Our surgical products are used to support various surgical procedures.
| | • | A.T.S.® Tourniquet Systems |
DENTAL
Our significant dental brands include the following:
QSR
Violations of
As part of that settlement, we entered into a Deferred Prosecution Agreement (“DPA”) with the DOJ.
For information regarding the DPA, see Note 20 to our consolidated financial statements.
On December 12, 2018, the Office for Civil Rights of HHS issued a request for information seeking input from the public on how the HIPAA regulations could be modified to amend existing obligations relating to the processing of protected health information.
We will monitor this process and assess the impact of changes to the HIPAA regulations to our business.
Regulations from the California Attorney General have not been finalized, and it is expected that additional amendments to the CCPA will be introduced.
Meanwhile, a number of other states have considered privacy laws like the CCPA, and in October 2019, Nevada enacted a similar but generally less restrictive privacy law.
The GDPR, which became effective on May 25, 2018, imposes, among other things, data protection requirements that include
We own or control through licensing arrangements over 9,000 issued
Employees
The Warsaw, Indiana production facilities employ approximately 3,100 employees in the aggregate.
An excerpt. Shown here: 40 of 54 rewritten, 40 of 86 added and 40 of 44 removed. The counts are complete. For every sentence, read Item 1. Business in the FY2020 filing and the FY2019 filing.
Item 3. Legal Proceedings
1 rewritten, 0 added, 0 removed, 1 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
Information pertaining to certain legal proceedings in which we are involved can be found in Note [removed: 20] [added: 21] to our consolidated financial statements included in Part II, Item 8 of this report and is incorporated herein by reference.
Cover and table of contents
31 rewritten, 2 added, 0 removed, 84 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
For year ended December 31, [removed: 2019][added: 2020]
The aggregate market value of shares held by non-affiliates [removed: was $24,106,325,697] [added: was$24,675,479,718] (based on the closing price of these shares on the New York Stock Exchange on June [removed: 28, 2019] [added: 30, 2020] and assuming solely for the purpose of this calculation that all directors and executive officers of the registrant are “affiliates”).
As of February [removed: 7, 2020, 206,403,646] [added: 8, 2021, 207,855,504] shares of the registrant’s $.01 par value common stock were outstanding.
| Portions of the Proxy Statement with respect to the [removed: 2020] [added: 2021] Annual Meeting of Stockholders | | Part III |
This Annual Report contains forward-looking statements within the meaning of federal securities laws, including, among others, statements regarding sales and earnings guidance and any statements about our expectations, plans, [added: intentions,] strategies or prospects.
[removed: These risks, uncertainties and changes in circumstances include, but are not limited to: the possibility that the anticipated synergies and other benefits from mergers and acquisitions will not be realized, or will not be realized within the expected time periods; the risks and uncertainties related to our ability to successfully integrate the operations, products, employees and distributors of acquired companies; the risks and uncertainties related to our ability to successfully execute our restructuring plans; the effect of the potential disruption of management’s attention from ongoing business operations due to integration matters related to mergers and acquisitions; the effect of mergers and acquisitions on our relationships with customers, suppliers and lenders and on our operating results and businesses generally; compliance with the Deferred Prosecution Agreement (“DPA”) entered into in January 2017; the success of our quality and operational excellence initiatives, including ongoing quality remediation efforts at our Warsaw North Campus facility; challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the U.S. Food and Drug Administration (“FDA”) and foreign government regulators, such as more stringent requirements for regulatory clearance of products; the ability to remediate matters identified in any inspectional observations or warning letters issued by the FDA, while continuing to satisfy the demand for our products; the outcome of government investigations; competition; pricing pressures; changes in customer demand for our products and services caused by demographic changes or other factors; the impact of healthcare reform measures; reductions in reimbursement levels by third-party payors and cost containment efforts of healthcare purchasing organizations; 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; control of costs and expenses; 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 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; the ability to retain the independent agents and distributors who market our products; dependence on a limited number of suppliers for key raw materials and outsourced activities; the impact of substantial indebtedness on our ability to service our debt obligations and/or refinance amounts outstanding under our debt obligations at maturity on terms favorable to us, or at all; changes in general industry and market conditions, including domestic and international growth rates; changes in general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; 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.][added: These risks, uncertainties and changes in circumstances include, but are not limited to: 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; the risks and uncertainties related to our ability to successfully execute our restructuring plans; our ability to attract, retain and develop the highly skilled employees we need to support our business; the possibility that the anticipated synergies and other benefits from mergers and acquisitions will not be realized, or will not be realized within the expected time periods; the risks and uncertainties related to our ability to successfully integrate the operations, products, employees and distributors of acquired companies; the effect of the potential disruption of management's attention from ongoing business operations due to integration matters related to mergers and acquisitions; the effect of mergers and acquisitions on our relationships with customers, suppliers and lenders and on our operating results and businesses generally; the risks and uncertainties associated with the proposed spin-off of our Spine and Dental businesses, including, without limitation, the significant expenses, time and efforts related to implementing such transaction, the ability to complete the transaction on our expected timeline or at all, the tax-free nature of the transaction, possible disruptions in our relationships with customers, suppliers and other business partners, and the possibility that the anticipated benefits and synergies of the transaction, strategic and competitive advantages of each company, and future growth and other opportunities for each company will not be realized within the expected time periods or at all; the success of our quality and operational excellence initiatives, including ongoing quality remediation efforts at our Warsaw North Campus facility; the ability to remediate matters identified in inspectional observations or warning letters issued by the U.S. Food and Drug Administration (FDA), while continuing to satisfy the demand for our products; the impact of substantial indebtedness on our ability to service our debt obligations and/or refinance amounts outstanding under our debt obligations at maturity on terms favorable to us, or at all; the ability to retain the independent agents and distributors who market our products; dependence on a limited number of suppliers for key raw materials and outsourced activities; challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the FDA and foreign government regulators, such as more stringent requirements for regulatory clearance of products; the outcome of government investigations; competition; pricing pressures; changes in customer demand for our products and services caused by demographic changes or other factors; the impact of healthcare reform measures; reductions in reimbursement levels by third-party payors and cost containment efforts of healthcare purchasing organizations; 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; control of costs and expenses; 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 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 interest rate and currency exchange rate fluctuations; 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.]
[removed: You are advised,] however, to consult any further disclosures we make on related subjects in our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]
| Item 1A. | [Risk Factors](#ITEM_1A_RISK_FACTORS) | | [removed: 14] [added: 15] |
| Item 1B. | [Unresolved Staff Comments](#ITEM_1B_UNRESOLVED_STAFF_COMMENTS) | | [removed: 26] [added: 29] |
| Item 2. | [Properties](#ITEM_2_PROPERTIES) | | [removed: 27] [added: 29] |
| Item 3. | [Legal Proceedings](#ITEM_3_LEGAL_PROCEEDINGS) | | [removed: 27] [added: 29] |
| Item 4. | [Mine Safety Disclosures](#ITEM_4_MINE_SAFETY_DISCLOSURES) | | [removed: 27] [added: 29] |
| [PART II](#PART_II) | | | [removed: 28] [added: 30] |
| Item 5. | [Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](#ITEM_5_MARKET_FOR_REGISTRANTS_COMMON_EQU) | | [removed: 28] [added: 30] |
| Item 6. | [Selected Financial Data](#ITEM_6_SELECTED_FINANCIAL_DATA) | | [removed: 29] [added: 31] |
| Item 7. | [Management’s Discussion and Analysis of Financial Condition and Results of Operations](#ITEM_7_MANAGEMENTS_DISCUSSION_ANALYSIS_F) | | [removed: 30] [added: 32] |
| Item 7A. | [Quantitative and Qualitative Disclosures About Market Risk](#ITEM_7A_QUANTITATIVE_QUALITATIVE_DISCLOS) | | [removed: 43] [added: 44] |
| Item 8. | [Financial Statements and Supplementary Data](#ITEM_8_FINANCIAL_STATEMENTS_SUPPLEMENTAR) | | [removed: 46] [added: 47] |
| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#ITEM_9_CHANGES_IN_DISAGREEMENTS_WITH_ACC) | | [removed: 96] [added: 97] |
| Item 9A. | [Controls and Procedures](#ITEM_9A_CONTROLS_PROCEDURES) | | [removed: 96] [added: 97] |
| Item 9B. | [Other Information](#ITEM_9B_OR_INFORMATION) | | [removed: 97] [added: 98] |
| [PART III](#PART_III) | | | [removed: 98] [added: 99] |
| Item 10. | [Directors, Executive Officers and Corporate Governance](#ITEM_10_DIRECTORS_EXECUTIVE_FICERS_CORPO) | | [removed: 98] [added: 99] |
| Item 11. | [Executive Compensation](#ITEM_11_EXECUTIVE_COMPENSATION) | | [removed: 98] [added: 99] |
| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#ITEM_12_SECURITY_OWNERSHIP_CERTAIN_BENEF) | | [removed: 98] [added: 99] |
| Item 13. | [Certain Relationships and Related Transactions and Director Independence](#ITEM_13_CERTAIN_RELATIONSHIPS_RELATED_TR) | | [removed: 98] [added: 99] |
| Item 14. | [Principal Accountant Fees and Services](#ITEM_14_PRINCIPAL_ACCOUNTING_FEES_SERVIC) | | [removed: 98] [added: 99] |
| [PART IV](#PART_IV) | | | [removed: 99] [added: 100] |
| Item 15. | [Exhibits and Financial Statement Schedules](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH) | | [removed: 99] [added: 100] |
| Item 16. | [Form 10-K Summary](#ITEM_16_10K_SUMMARY) | | [removed: 104] [added: 105] |
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
You are advised,
Item 2. Properties
3 rewritten, 0 added, 0 removed, 11 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
We own or lease approximately [removed: 340] [added: 350] different facilities around the world, of which approximately half are in the U.S. Our corporate headquarters is in Warsaw, Indiana.
Warsaw, Indiana is also home to our most significant manufacturing, research and development (“R&D”), and other business activities for our Knees, Hips and S.E.T. product [removed: categories.][added: divisions.]
Our Spine, [removed: CMF,] [added: CMFT,] Office Based Technologies and Dental [removed: product categories] [added: products divisions] also have business unit headquarters located in the U.S. that are the primary facilities for these product [removed: categories’] [added: divisions’] manufacturing, R&D and other business activities.
Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
1 rewritten, 0 added, 0 removed, 4 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
Our common stock is traded on the New York Stock Exchange and the SIX Swiss Exchange under the symbol “ZBH.” As of February [removed: 7, 2020,] [added: 3, 2021,] there were approximately [removed: 17,900] [added: 16,700] holders of record of our common stock.
Item 6. Selected Financial Data
13 rewritten, 0 added, 4 removed, 6 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
| | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015 (1)(2)] [added: 2016] | | |
| Net sales | | $ | [removed: 7,982.2] [added: 7,024.5] | | | $ | [removed: 7,932.9] [added: 7,982.2] | | | $ | [removed: 7,803.3] [added: 7,932.9] | | | $ | [removed: 7,668.4] [added: 7,803.3] | | | $ | [removed: 5,997.8] [added: 7,668.4] | |
| Net [removed: earnings] (loss) [added: earnings] of Zimmer Biomet Holdings, Inc. | | | [added: (138.9 | ) | | |] 1,131.6 | | | | (379.2 | ) | | | 1,813.8 | | | | 305.9 | | [removed: | | 147.0 | |]
| [removed: Earnings (loss)] [added: (Loss) earnings] per common share | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | [removed: 5.52] [added: (0.67] | [added: )] | | $ | [removed: (1.86] [added: 5.52] | [removed: )] | | $ | [removed: 8.98] [added: (1.86] | [added: )] | | $ | [removed: 1.53] [added: 8.98] | | | $ | [removed: 0.78] [added: 1.53] | |
| Diluted | | | [added: (0.67 | ) | | |] 5.47 | | | | (1.86 | ) | | | 8.90 | | | | 1.51 | | [removed: | | 0.77 | |]
| Dividends declared per share of common stock | | $ | 0.96 | | | $ | 0.96 | | | $ | 0.96 | | | $ | 0.96 | | | $ | [removed: 0.88] [added: 0.96] | |
| Basic | | | [removed: 205.1] [added: 207.0] | | | | [removed: 203.5] [added: 205.1] | | | | [removed: 201.9] [added: 203.5] | | | | [removed: 200.0] [added: 201.9] | | | | [removed: 187.4] [added: 200.0] | |
| Diluted | | | [removed: 206.7] [added: 207.0] | | | | [removed: 203.5] [added: 206.7] | | | | [removed: 203.7] [added: 203.5] | | | | [removed: 202.4] [added: 203.7] | | | | [removed: 189.8] [added: 202.4] | |
| Total assets | | $ | [removed: 24,638.7] [added: 24,417.7] | | | $ | [removed: 24,126.8] [added: 24,638.7] | | | $ | [removed: 26,014.0] [added: 24,126.8] | | | $ | [removed: 26,684.4] [added: 26,014.0] | | | $ | [removed: 27,160.6] [added: 26,684.4] | |
| Long-term debt | | | [removed: 6,721.4] [added: 7,626.5] | | | | [removed: 8,413.7] [added: 6,721.4] | | | | [removed: 8,917.5] [added: 8,413.7] | | | | [removed: 10,665.8] [added: 8,917.5] | | | | [removed: 11,497.4] [added: 10,665.8] | |
| Other long-term obligations | | | [removed: 2,083.0] [added: 2,034.9] | | | | [removed: 2,015.7] [added: 2,083.0] | | | | [removed: 2,291.3] [added: 2,015.7] | | | | [removed: 3,967.2] [added: 2,291.3] | | | | [removed: 4,155.9] [added: 3,967.2] | |
| Stockholders' equity | | | [removed: 12,392.8] [added: 12,199.4] | | | | [removed: 11,276.1] [added: 12,392.8] | | | | [removed: 11,735.5] [added: 11,276.1] | | | | [removed: 9,669.9] [added: 11,735.5] | | | | [removed: 9,889.4] [added: 9,669.9] | |
| --- | --- |
| (1) | Effective January 1, 2018 we adopted Accounting Standards Update 2014-09 – Revenue from Contracts with Customers (Topic 606). We adopted this new standard using the retrospective method, which resulted in us restating the 2017 and 2016 periods. The 2015 period has not been restated. |
| --- | --- |
| (2) | On June 24, 2015 we acquired LVB Acquisition, Inc. Accordingly, the results of this significant acquisition have only been reflected in 2015 starting on that date. |
Item 8. Financial Statements and Supplementary Data
587 rewritten, 362 added, 276 removed, 795 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
| [Report of Independent Registered Public Accounting Firm](#REPORT_INDEPENDENT_REGISTERED_PUBLIC_ACC) | | [removed: 47] [added: 48] |
| [Consolidated Statements of Earnings for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#CONSOLIDATED_STATEMENTS_EARNINGS)] [added: 2018](#CONSOLIDATED_STATEMENTS_EARNINGS)] | | [removed: 50] [added: 51] |
| [Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#CONSOLIDATED_STATEMENTS_COMPREHENSIVE_IN)] [added: 2018](#CONSOLIDATED_STATEMENTS_COMPREHENSIVE_IN)] | | [removed: 51] [added: 52] |
| [Consolidated Balance Sheets as of December 31, [removed: 2019] [added: 2020] and [removed: 2018](#CONSOLIDATED_BALANCE_SHEETS)] [added: 2019](#CONSOLIDATED_BALANCE_SHEETS)] | | [removed: 52] [added: 53] |
| [Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#CONSOLIDATED_STATEMENTS_STOCKHOLDERS_EQU)] [added: 2018](#CONSOLIDATED_STATEMENTS_STOCKHOLDERS_EQU)] | | [removed: 53] [added: 54] |
| [Consolidated Statements of Cash Flows for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] [added: 2018](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] | | [removed: 54] [added: 55] |
| [Notes to Consolidated Financial Statements](#NOTES_TO_CONSOLIDATED_FINANCIAL_STATEMEN) | | [removed: 55] [added: 56] |
We have audited the accompanying consolidated balance sheets of Zimmer Biomet Holdings, Inc. and its subsidiaries (the [removed: “Company)] [added: “Company”)] as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the related consolidated statements of earnings, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2019,] [added: 2020,] including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, [removed: 2019] [added: 2020] appearing under Item 15(a)(2), (collectively referred to as the “consolidated financial statements”).
We also have audited the Company's internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2019] [added: 2020] in conformity with accounting principles generally accepted in the United States of America.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] based on criteria established in *Internal Control - Integrated Framework* (2013) issued by the COSO.
Goodwill Impairment Assessment [removed: – EMEA and] [added: - EMEA,] Dental [added: and Americas CMFT] Reporting Units
As described in Notes 2 and [removed: 10] [added: 11] to the consolidated financial statements, the Company’s consolidated goodwill balance was [removed: $9,599.7] [added: $9,261.8] million as of December 31, [removed: 2019,] [added: 2020,] and the goodwill associated with the EMEA reporting [removed: unit and the] [added: unit,] Dental reporting [removed: unit] [added: unit, and Americas CMFT reporting unit,] was [removed: $749.8] [added: $325.9 million, $273.7] million and [removed: $397.7] [added: $271] million, respectively.
The Company estimated the fair value of the [added: EMEA,] Dental and [removed: EMEA] [added: Americas CMFT] reporting units based on income and market approaches.
Fair value under the market approach utilized the guideline public company methodology, which uses valuation indicators from other businesses that are similar to the [removed: EMEA and] [added: EMEA,] Dental [added: and Americas CMFT] reporting units.
Significant assumptions are incorporated into the discounted cash flow analysis such as [removed: estimated] [added: revenue] growth rates and risk-adjusted discount rates.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the [removed: EMEA and] [added: EMEA,] Dental [added: and Americas CMFT] reporting units is a critical audit matter are [removed: there was] [added: the] significant judgment by management when developing the fair value measurement of the reporting units.
This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and in evaluating management’s discounted cash flow analysis and significant assumptions, [removed: including estimated] [added: related to revenue] growth rates and risk-adjusted discount rates.
In addition, the audit effort involved the use of professionals with specialized skill and [removed: knowledge to assist in performing these procedures and evaluating the audit evidence obtained.][added: knowledge.]
As described in Notes 2 and [removed: 16] [added: 17] to the consolidated financial statements, the Company has recorded tax liabilities for unrecognized tax benefits of [removed: $741.8] [added: $619.4] million as of December 31, [removed: 2019.][added: 2020.]
The calculation of the Company’s estimated tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a [added: multitude of jurisdictions across the Company’s global operations.]
[removed: The Company’s income tax filings are regularly] under audit in multiple federal, state and foreign jurisdictions.
The principal considerations for our determination that performing procedures relating to tax liabilities for unrecognized tax benefits is a critical audit matter are [removed: that there was] [added: the] significant judgment by management when determining the tax liabilities, [removed: including] [added: related to] a high degree of estimation uncertainty relative to the numerous and complex tax laws and regulations, frequency of income tax audits, and potential for significant adjustments as a result of such audits.
Also, the evaluation of audit evidence available to support the estimates is complex and required significant auditor judgment as the nature of the evidence is often highly subjective, and the audit effort involved the use of professionals with specialized skill and [removed: knowledge to assist in performing these procedures and evaluating the audit evidence obtained.][added: knowledge.]
| | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | |
| Net Sales | | $ | [removed: 7,982.2] [added: 7,024.5] | | | $ | [removed: 7,932.9] [added: 7,982.2] | | | $ | [removed: 7,803.3] [added: 7,932.9] | |
| Cost of products sold, excluding intangible asset amortization | | | [removed: 2,252.6] [added: 2,128.3] | | | | [removed: 2,271.9] [added: 2,252.6] | | | | [removed: 2,132.9] [added: 2,271.9] | |
| Intangible asset amortization | | | [removed: 584.3] [added: 597.6] | | | | [removed: 595.9] [added: 584.3] | | | | [removed: 603.9] [added: 595.9] | |
| Research and development | | | [removed: 449.3] [added: 372.0] | | | | [removed: 391.7] [added: 449.3] | | | | [removed: 369.9] [added: 391.7] | |
| Selling, general and administrative | | | [removed: 3,343.8] [added: 3,177.8] | | | | [removed: 3,379.3] [added: 3,343.8] | | | | [removed: 3,104.7] [added: 3,379.3] | |
| Goodwill and intangible asset impairment | | | [removed: 70.1] [added: 645.0] | | | | [removed: 979.7] [added: 70.1] | | | | [removed: 331.5] [added: 979.7] | |
| Quality remediation | | | [removed: 82.4] [added: 50.9] | | | | [removed: 146.9] [added: 82.4] | | | | [removed: 181.3] [added: 146.9] | |
| Restructuring and other cost reduction initiatives | | | [removed: 50.0] [added: 116.9] | | | | [removed: 34.2] [added: 50.0] | | | | [removed: 17.6] [added: 34.2] | |
| Acquisition, integration and related | | | [removed: 12.2] [added: 23.8] | | | | [removed: 99.5] [added: 12.2] | | | | [removed: 262.2] [added: 99.5] | |
| Operating expenses | | | [removed: 6,844.7] [added: 7,112.3] | | | | [removed: 7,899.1] [added: 6,844.7] | | | | [removed: 7,004.0] [added: 7,899.1] | |
| Operating [added: (Loss)] Profit | | | [removed: 1,137.5] [added: (87.8] | [added: )] | | | [removed: 33.8] [added: 1,137.5] | | | | [removed: 799.3] [added: 33.8] | |
| Other [removed: expense,] [added: income (expense),] net | | | [removed: (4.8] [added: 25.4] | [removed: )] | | | [removed: (15.6] [added: (4.8] | ) | | | [removed: (9.4] [added: (15.6] | ) |
| Interest expense, net | | | [removed: (226.9] [added: (212.0] | ) | | | [removed: (289.3] [added: (226.9] | ) | | | [removed: (325.3] [added: (289.3] | ) |
| [added: (Loss)] Earnings [removed: (loss)] before income taxes | | | [removed: 905.8] [added: (274.4] | [added: )] | | | [removed: (271.1] [added: 905.8] | [removed: )] | | | [removed: 464.6] [added: (271.1] | [added: )] |
| (Benefit) provision for income taxes | | | [removed: (225.7] [added: (137.0] | ) | | | [removed: 108.2] [added: (225.7] | [added: )] | | | [removed: (1,348.8] [added: 108.2] | [removed: )] |
The Company’s income tax filings are regularly
February 22, 2021
| | | 2020 | | | | 2019 | | |
| Net loss | | | \- | | | | \- | | | | \- | | | | (138.9 | ) | | | \- | | | | \- | | | | \- | | | | 1.5 | | | | (137.4 | ) |
| Other comprehensive loss | | | \- | | | | \- | | | | \- | | | | \- | | | | (55.9 | ) | | | \- | | | | \- | | | | \- | | | | (55.9 | ) |
| Acquisition of noncontrolling interest | | | \- | | | | \- | | | | \- | | | | \- | | | | \- | | | | \- | | | | \- | | | | (1.0 | ) | | | (1.0 | ) |
| Stock compensation plans | | | 1.5 | | | | \- | | | | 201.5 | | | | 0.5 | | | | \- | | | | 0.1 | | | | 0.9 | | | | \- | | | | 202.9 | |
| Balance December 31, 2020 | | | 311.4 | | | $ | 3.1 | | | $ | 9,121.6 | | | $ | 10,086.9 | | | $ | (297.8 | ) | | | (103.8 | ) | | $ | (6,719.6 | ) | | $ | 5.2 | | | $ | 12,199.4 | |
| Debt issuance costs | | | (22.3 | ) | | | (3.5 | ) | | | (4.9 | ) |
| Other financing activities | | | (8.3 | ) | | | (6.7 | ) | | | 0.9 | |
Risks and Uncertainties - Our results have been and are expected to continue to be impacted by the COVID-19 global pandemic.
The vast majority of our net sales are derived from products used in elective surgical procedures which are being deferred due to lockdowns, stay-at-home measures and other precautions in certain markets.
The consequences of COVID-19 continue to be extremely fluid and there are many market dynamics that are difficult to predict.
The COVID-19 pandemic may have a significant unfavorable effect on our financial position, results of operations and cash flows in the near term.
We have made our best estimates, as appropriate under GAAP, in the recognition of our assets and liabilities.
These estimates have considered the impact the COVID-19 pandemic may have on our financial position, results of operations and cash flows.
Such estimates included, but were not limited to, variable consideration to our customers, our allowance for doubtful accounts for expected credit losses, the net realizable value of our inventory, the fair value of our goodwill and the recoverability of other long-lived assets.
Restructuring charges for the years ended December 31, 2020 and 2019 were primarily attributable to this program.
We terminated our purchase arrangements in the U.S. and Japan during the year ended December 31, 2020, but continue to have arrangements in Europe.
In Europe, we have no continuing involvement with the factored receivable.
For cloud computing arrangements that are considered a service contract, our capitalization of implementation costs is aligned with the internal use software requirements.
However, on our consolidated balance sheet these implementation costs are recognized in other noncurrent assets.
On our consolidated statement of cash flows, these implementations costs are recognized in operating cash flows.
The implementation costs are recognized on a straight-line basis over the expected term of the related service contract.
Our concentrations of credit risks are limited due to the large number of customers and their dispersion across a number of geographic areas.
Substantially all of our trade receivables are concentrated in the public and private hospital and healthcare industry in the U.S. and internationally or with distributors or dealers who operate in international markets.
Our historical credit losses have not been significant due to this dispersion and the financial stability of our customers.
We consider credit losses immaterial to our business and, therefore, have not provided all the disclosures otherwise required by the standard.
In August 2018, the FASB issued ASU 2018-15, Intangibles-Goodwill and Other-Internal-Use Software.
ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
Our policy for capitalizing implementation costs in a hosting arrangement was already aligned with the new guidance.
ASU 2018-15 also provides guidance on how these implementation costs are to be recorded in the statement of earnings, balance sheet and statement of cash flows.
We adopted this standard on a prospective basis as of January 1, 2020.
The adoption of this standard did not have a material impact on our financial position, results of operations or cash flows.
In December 2019, the FASB issued ASU 2019-12 Simplifying the Accounting for Income Taxes.
ASU 2019-12 eliminates certain exceptions in the current rules regarding the approach for intraperiod tax allocations and the methodology for calculating income taxes in an interim period, and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill, among other things.
The standard becomes effective for us in the first quarter of 2021.
percent of our net sales in 2020.
The net sales by geography includes sales of all product categories including Dental which is included as a global business in the Americas and Global Businesses operating segment.
| Hips | | | 1,750.5 | | | | 1,931.5 | | | | 1,918.9 | |
multitude of jurisdictions across the Company’s global operations.
February 21, 2020
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Balance January 1, 2017 | | | 304.7 | | | $ | 3.1 | | | $ | 8,368.5 | | | $ | 8,467.1 | | | $ | (434.0 | ) | | | (104.1 | ) | | $ | (6,735.8 | ) | | $ | 1.0 | | | $ | 9,669.9 | |
| Net earnings | | | \- | | | | \- | | | | \- | | | | 1,813.8 | | | | \- | | | | \- | | | | \- | | | | (0.4 | ) | | | 1,813.4 | |
| Stock compensation plans | | | 1.8 | | | | \- | | | | 146.4 | | | | 13.8 | | | | \- | | | | 0.2 | | | | 14.0 | | | | \- | | | | 174.2 | |
| Inventory step-up | | | \- | | | | \- | | | | 32.8 | |
| Other financing activities | | | (10.2 | ) | | | (4.0 | ) | | | (8.6 | ) |
We have reclassified $34.2 million and $17.6 million in the years ended December 31, 2018 and 2017, respectively, from the “Acquisition, integration and related” line item to the “Restructuring and other cost reduction initiatives” line item, which amounts were primarily attributable to project costs related to our supply chain optimization initiative.
This ASU requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet.
This ASU was effective for us as of January 1, 2019.
This ASU required a modified retrospective transition method that could either be applied at the earliest comparative period in the financial statements or the period of adoption.
We elected to use the period of adoption (January 1, 2019) transition method and therefore did not recast prior periods.
This ASU allowed for certain practical expedients to make the adoption of the ASU less burdensome.
We elected the practical expedients upon transition which permitted us to not reassess lease identification, classification, and initial direct costs under the new standard for leases that commenced prior to
the effective date.
On January 1, 2019, we recognized a right-of-use asset of $274.7 million in other assets and lease liabilities of $62.2 million and $221.2 million in other current liabilities and other long-term liabilities, respectively.
No cumulative adjustment to retained earnings was required upon adoption.
We do not have any significant finance leases.
See Note 19 for additional information.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326).
The standard is effective for interim and annual periods after December 15, 2019.
Our costs to obtain contracts consist primarily of sales
As discussed in Note 18, we have seven operating segments that are based upon geography and product categories.
The geographic segments include sales of all product categories exclusive of the specific product category operating segments.
These three operating segments are our reporting segments.
The product category operating segments are Spine, less Asia Pacific; Office Based Technologies; CMF; and Dental.
The product operating segments do not constitute a reporting segment because they are, individually and on a combined basis, insignificant to our consolidated results.
| Hips | | | 1,935.1 | | | | 1,921.4 | | | | 1,871.8 | |
| S.E.T | | | 1,795.7 | | | | 1,751.8 | | | | 1,701.8 | |
| Spine & CMF | | | 747.3 | | | | 763.9 | | | | 757.9 | |
| Dental | | | 414.0 | | | | 411.2 | | | | 418.6 | |
| Other | | | 280.0 | | | | 310.9 | | | | 319.2 | |
The restructuring charges incurred in 2019
| Outstanding at January 1, 2019 | | | 7,763 | | | $ | 100.29 | | | | | | | | | |
| Options granted | | | 1,488 | | | | 123.76 | | | | | | | | | |
| Options exercised | | | (1,633 | ) | | | 85.97 | | | | | | | | | |
| Options forfeited | | | (303 | ) | | | 117.28 | | | | | | | | | |
| Outstanding at December 31, 2019 | | | 7,285 | | | $ | 107.53 | | | | 6.6 | | | $ | 307.1 | |
An excerpt. Shown here: 40 of 587 rewritten, 40 of 362 added and 40 of 276 removed. The counts are complete. For every sentence, read Item 8. Financial Statements and Supplementary Data in the FY2020 filing and the FY2019 filing.
Item 9A. Controls and Procedures
5 rewritten, 0 added, 3 removed, 18 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, [removed: 2019,] [added: 2020,] the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2019.][added: 2020.]
Based on their assessment, management has concluded that, as of December 31, [removed: 2019,] [added: 2020,] the Company’s internal control over financial reporting is effective based on those criteria.
The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2019,] [added: 2020,] as stated in its report which appears in Item 8 of this Annual Report on Form 10-K.
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, [removed: 2019] [added: 2020] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
As previously reported, on January 1, 2019 we adopted ASU 2016-02 – Leases (Topic 842).
This ASU requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet.
As a result, we added additional internal controls to comply with the new standard in the first quarter of 2019.
Item 9B. Other Information
1 rewritten, 0 added, 0 removed, 3 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
During the fourth quarter of [removed: 2019,] [added: 2020,] the Audit Committee of our Board of Directors approved the engagement of PricewaterhouseCoopers LLP, our independent registered public accounting firm, to perform certain non-audit services.
Item 10. Directors, Executive Officers and Corporate Governance
1 rewritten, 0 added, 0 removed, 4 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
Information required by this item is incorporated by reference from our definitive Proxy Statement for the annual meeting of stockholders to be held on May [removed: 8, 2020] [added: 14, 2021] (the [removed: “2020] [added: “2021] Proxy Statement”).
Item 11. Executive Compensation
1 rewritten, 0 added, 0 removed, 1 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
Information required by this item is incorporated by reference from our [removed: 2020] [added: 2021] Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
1 rewritten, 0 added, 0 removed, 1 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
Information required by this item is incorporated by reference from our [removed: 2020] [added: 2021] Proxy Statement.
Item 13. Certain Relationships and Related Transactions and Director Independence
1 rewritten, 0 added, 0 removed, 1 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
Information required by this item is incorporated by reference from our [removed: 2020] [added: 2021] Proxy Statement.
Item 14. Principal Accountant Fees and Services
1 rewritten, 0 added, 0 removed, 2 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
Information required by this item is incorporated by reference from our [removed: 2020] [added: 2021] Proxy Statement.
Item 15. Exhibits and Financial Statement Schedules
82 rewritten, 12 added, 8 removed, 46 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
Consolidated Statements of Earnings for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017][added: 2018]
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017][added: 2018]
Consolidated Balance Sheets as of December 31, [removed: 2019] [added: 2020] and [removed: 2018][added: 2019]
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017][added: 2018]
Consolidated Statements of Cash Flows for the Years Ended December 31, [removed: 2019, 2018] [added: 2020, 2019] and [removed: 2017][added: 2018]
| | | | | | | Additions | | | | | | | | | | | | | | | [removed: | | | |]
| | | Balance at | | | | Charged | | | | Deductions / | | | | Effects of | | | | [removed: | | | |] Balance at | | |
| | | Beginning | | | | (Credited) | | | | Other Additions | | | | Foreign | | | | [removed: Acquired | | | |] End of | | |
| Description | | of Period | | | | to Expense | | | | to Reserve | | | | Currency | | | | [removed: Allowances | | | |] Period | | |
| Allowance for Doubtful Accounts: | | | | | | | | | | | | | | | | | | | | | [removed: | | | |]
| Year Ended December 31, 2018 | | [added: $] | 60.2 | | | [added: $] | 10.7 | | | [added: $] | (3.6 | ) | | [added: $] | (1.6 | ) | | [removed: | \- | | |] [added: $] | 65.7 | |
| Year Ended December 31, 2019 | | | 65.7 | | | | 5.5 | | | | (5.3 | ) | | | (0.9 | ) | | | [removed: \- | | | |] 65.0 | |
| Deferred Tax Asset Valuation Allowances: | | | | | | | | | | | | | | | | | | | | | [removed: | | | |]
| Year Ended December 31, 2018 | | [added: $] | 140.6 | | | [added: $] | 48.2 | | | [added: $] | 206.2 | | [removed: (1)] [added: (2)] | [added: $] | (4.1 | ) | | [removed: | \- | | |] [added: $] | 390.9 | |
| Year Ended December 31, 2019 | | | 390.9 | | | | (6.6 | ) | | | 165.7 | | [removed: (1)] [added: (2)] | | (3.9 | ) | | | [removed: \- | | | |] 546.1 | |
| | [removed: (1)] [added: (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. |
[removed: INDEX] [added: INDEX] TO [removed: EXHIBITS][added: EXHIBITS]
| 3.2 | | [Restated By-Laws of Zimmer Biomet Holdings, Inc. dated [removed: October 11, 2019] [added: February 19, 2021] (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed [removed: October 11, 2019)](http://www.sec.gov/Archives/edgar/data/1136869/000156459019036854/zbh-ex31_15.htm)] [added: February 22, 2021)](http://www.sec.gov/Archives/edgar/data/1136869/000119312521049865/d104367dex31.htm)] |
| 4.1 | | [Description of Securities Registered under Section 12 of the Securities Exchange Act of [removed: 1934](https://www.sec.gov/Archives/edgar/data/1136869/000156459020005657/zbh-ex41_494.htm)] [added: 1934](https://www.sec.gov/Archives/edgar/data/1136869/000156459021007163/zbh-ex41_335.htm)] |
| 4.9 | | [Form of [removed: 2.700%] [added: 3.150%] Notes due [removed: 2020] [added: 2022] (incorporated by reference to Exhibit 4.8 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm) |
| 4.10 | | [Form of [removed: 3.150%] [added: 3.550%] Notes due [removed: 2022] [added: 2025] (incorporated by reference to Exhibit 4.8 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm) |
| 4.11 | | [Form of [removed: 3.550%] [added: 4.250%] Notes due [removed: 2025] [added: 2035] (incorporated by reference to Exhibit 4.8 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm) |
| 4.12 | | [Form of [removed: 4.250%] [added: 4.450%] Notes due [removed: 2035] [added: 2045] (incorporated by reference to Exhibit 4.8 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm) |
| [removed: 4.13] [added: 4.14] | | [Form of [removed: 4.450%] [added: 1.414%] Notes due [removed: 2045] [added: 2022] (incorporated by reference to Exhibit [removed: 4.8 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm)] [added: 4.13 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex42.htm)] |
| [removed: 4.14] [added: 4.13] | | [Fourth Supplemental Indenture, dated as of December 13, 2016, between Zimmer Biomet Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed December 13, 2016)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex42.htm) |
| 4.15 | | [Form of [removed: 1.414%] [added: 2.425%] Notes due [removed: 2022] [added: 2026] (incorporated by reference to Exhibit [removed: 4.14] [added: 4.13] above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex42.htm) |
| [removed: 4.16] [added: 4.25] | | [Form of [removed: 2.425%] [added: 3.050%] Notes due 2026 (incorporated by reference to Exhibit [removed: 4.14 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex42.htm)] [added: 4.24 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312520080651/d869142dex42.htm)] |
| [removed: 4.17] [added: 4.16] | | [Agency Agreement, dated as of December 13, 2016, by and among Zimmer Biomet Holdings, Inc., as issuer, Elavon Financial Services DAC, UK Branch, as paying agent, Elavon Financial Services DAC, as registrar and transfer agent, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed December 13, 2016)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex43.htm) |
| [removed: 4.18] [added: 4.17] | | [Amendment No. 1, dated as of January 4, 2017, to the Agency Agreement dated as of December 13, 2016, by and among Zimmer Biomet Holdings, Inc., as issuer, Elavon Financial Services DAC, UK Branch, as paying agent, Elavon Financial Services DAC, as original registrar and original transfer agent, U.S. Bank National Association, as successor registrar and successor transfer agent, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form 8-A filed January 4, 2017)](http://www.sec.gov/Archives/edgar/data/1136869/000119312517001314/d306834dex44.htm) |
| [removed: 4.19] [added: 4.18] | | [Fifth Supplemental Indenture, dated as of March 19, 2018, between Zimmer Biomet Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed March 19, 2018)](http://www.sec.gov/Archives/edgar/data/1136869/000119312518087778/d657056dex42.htm) |
| [removed: 4.20] [added: 4.19] | | [Form of Floating Rate Notes due 2021 (incorporated by reference to Exhibit [removed: 4.19] [added: 4.18] above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312518087778/d657056dex42.htm) |
| [removed: 4.21] [added: 4.20] | | [Form of 3.700% Notes due 2023 (incorporated by reference to Exhibit [removed: 4.19] [added: 4.18] above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312518087778/d657056dex42.htm) |
| [removed: 4.22] [added: 4.21] | | [Sixth Supplemental Indenture, dated as of November 15, 2019, between Zimmer Biomet Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed November 15, 2019)](http://www.sec.gov/Archives/edgar/data/1136869/000119312519293426/d796220dex42.htm) |
| [removed: 4.23] [added: 4.22] | | [Form of 1.164% Notes due 2027 (incorporated by reference to Exhibit [removed: 4.22] [added: 4.21] above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312519293426/d796220dex42.htm) |
| [removed: 4.24] [added: 4.23] | | [Agency Agreement, dated as of November 15, 2019, by and between Zimmer Biomet Holdings, Inc., as issuer, Elavon Financial Services DAC, UK Branch, as paying agent, U.S. Bank National Association, as transfer agent and registrar, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on November 15, 2019)](http://www.sec.gov/Archives/edgar/data/1136869/000119312519293426/d796220dex43.htm) |
| [removed: 10.3*] [added: 10.4*] | | [Zimmer Biomet Deferred Compensation Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed January 7, 2016)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516423531/d116893dex103.htm) |
| [removed: 10.4*] [added: 10.5*] | | [Restated Zimmer Biomet Holdings, Inc. Long Term Disability Income Plan for Highly Compensated Employees (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed January 7, 2016)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516423531/d116893dex104.htm) |
| [removed: 10.5*] [added: 10.6*] | | [Restated Benefit Equalization Plan of Zimmer Holdings, Inc. and Its Subsidiary or Affiliated Corporations Participating in the Zimmer Holdings, Inc. Savings and Investment Program (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K filed February 27, 2009)](http://www.sec.gov/Archives/edgar/data/1136869/000095015209001918/c48761exv10w16.htm) |
| [removed: 10.6*] [added: 10.7*] | | [First Amendment to the Restated Benefit Equalization Plan of Zimmer Holdings, Inc. and its Subsidiary or Affiliated Corporations Participating in the Zimmer Holdings, Inc. Savings and Investment Program (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed January 7, 2016)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516423531/d116893dex102.htm) |
| [removed: 10.7*] [added: 10.8*] | | [Offer Letter, dated as of December 18, 2017, by and between Zimmer Biomet Holdings, Inc. and Bryan C. Hanson (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 21, 2017)](http://www.sec.gov/Archives/edgar/data/1136869/000119312517376624/d520208dex101.htm) |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Year Ended December 31, 2020 | | | 65.0 | | | | 21.8 | | | | (12.7 | ) | (1) | | 1.7 | | | | 75.8 | |
| Year Ended December 31, 2020 | | | 546.1 | | | | (3.8 | ) | | | (3.2 | ) | (2) | | 3.0 | | | | 542.1 | |
| | (1) | Includes the $3.1 cumulative-effect adjustment related to the adoption of ASU 2016-13, Financial Instruments – Credit Losses (Topic 326). |
| 4.26 | | [Form of 3.550% Notes due 2030 (incorporated by reference to Exhibit 4.24 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312520080651/d869142dex42.htm) |
| 10.19* | | [Letter of Appointment by and between Zimmer Asia (HK) Limited and Sang Yi dated June 15, 2020 (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q filed August 5, 2020)](http://www.sec.gov/Archives/edgar/data/1136869/000156459020036314/zbh-ex107_159.htm) |
| 10.45 | | [First Amendment, dated as of April 23, 2020, to the Credit Agreement dated as of November 1, 2019, among Zimmer Biomet Holdings, Inc., Zimmer Biomet G.K., Zimmer Luxembourg II S.À.R.L., the other borrowing subsidiaries referred to therein, JPMorgan Chase Bank, N.A., as General Administrative Agent, JPMorgan Chase Bank, N.A., Tokyo Branch, as Japanese Administrative Agent, J.P. Morgan Europe Limited, as European Administrative Agent, and the lenders from time to time party thereto (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed April 29, 2020)](http://www.sec.gov/Archives/edgar/data/1136869/000119312520126216/d900112dex102.htm) |
| 10.48 | | [First Amendment and Limited Waiver, dated as of February 25, 2020, between Zimmer Biomet G.K. and Sumitomo Mitsui Banking Corporation, to the JP¥21,300,000,000 Term Loan Agreement dated as of September 22, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed May 11, 2020)](http://www.sec.gov/Archives/edgar/data/1136869/000156459020024235/zbh-ex101_185.htm) |
| 10.49 | | [Second Amendment, dated as of April 28, 2020, to the Term Loan Agreement JP¥21,300,000,000 dated as of September 22, 2017, between Zimmer Biomet G.K. and Sumitomo Mitsui Banking Corporation (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed April 29, 2020)](http://www.sec.gov/Archives/edgar/data/1136869/000119312520126216/d900112dex103.htm) |
| 10.52 | | [Second Amendment and Limited Waiver, dated as of February 25, 2020, between Zimmer Biomet G.K. and Sumitomo Mitsui Banking Corporation, to the JP¥11,700,000,000 Amended and Restated Term Loan Agreement dated as of September 22, 2017, as amended by the First Amendment dated as of April 23, 2018 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed May 11, 2020)](http://www.sec.gov/Archives/edgar/data/1136869/000156459020024235/zbh-ex102_186.htm) |
| 10.53 | | [Third Amendment, dated as of April 28, 2020, to the Amended and Restated Term Loan Agreement JP¥11,700,000,000 dated as of September 22, 2017, between Zimmer Biomet G.K. and Sumitomo Mitsui Banking Corporation (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed April 29, 2020)](http://www.sec.gov/Archives/edgar/data/1136869/000119312520126216/d900112dex104.htm) |
| --- | --- | --- |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Year Ended December 31, 2017 | | $ | 51.6 | | | $ | 13.6 | | | $ | (5.1 | ) | | $ | 0.1 | | | $ | \- | | | $ | 60.2 | |
| Year Ended December 31, 2017 | | $ | 88.3 | | | $ | 41.3 | | | $ | (10.3 | ) | | $ | 2.8 | | | $ | 18.5 | | | $ | 140.6 | |
| 10.19* | | [Form of Change in Control Severance Agreement with Chad F. Phipps (incorporated by reference to Exhibit 10.13 to the Registrant’s Annual Report on Form 10-K filed February 27, 2009)](http://www.sec.gov/Archives/edgar/data/1136869/000095015209001918/c48761exv10w13.htm) |
| 10.29* | | [Form of Indemnification Agreement with Non-Employee Directors and Officers (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed July 31, 2008)](http://www.sec.gov/Archives/edgar/data/1136869/000095013708009963/c33992exv10w1.htm) |
| 10.43* | | [Form of Performance-Based Restricted Stock Unit Award Agreement (Upadhyay one-time award) under the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan](https://www.sec.gov/Archives/edgar/data/1136869/000156459020005657/zbh-ex1043_438.htm) |
| 10.53 | | [Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings and Imposing a Cease-and-Desist Order against Biomet, Inc., dated January 12, 2017 (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed January 18, 2017)](http://www.sec.gov/Archives/edgar/data/1136869/000119312517011702/d328998dex102.htm) |
| 10.54 | | [Plea Agreement, dated as of January 12, 2017, between JERDS Luxembourg Holding S.à r.l. and the U.S. Department of Justice, Criminal Division, Fraud Section (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed January 18, 2017)](http://www.sec.gov/Archives/edgar/data/1136869/000119312517011702/d328998dex103.htm) |
An excerpt. Shown here: 40 of 82 rewritten, all 12 added and all 8 removed. The counts are complete. For every sentence, read Item 15. Exhibits and Financial Statement Schedules in the FY2020 filing and the FY2019 filing.
Item 16. Form 10-K Summary
28 rewritten, 16 added, 16 removed, 10 unchanged
Read the full itemFY2020 item · filed February 22, 2021FY2019 item · filed February 21, 2020
| Dated: February [removed: 21, 2020] [added: 22, 2021] | | | | Bryan Hanson |
| SIGNATURE | | TITLE | | DATE | [added: |]
| /s/ Bryan Hanson | | President, Chief Executive Officer and Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Bryan Hanson | | (Principal Executive Officer) | | | [added: |]
| /s/ Suketu Upadhyay | | Executive Vice President and Chief Financial Officer | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Suketu Upadhyay | | (Principal Financial Officer) | | | [added: |]
| /s/ Carrie Nichol | | Vice President, Controller and Chief Accounting Officer | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Carrie Nichol | | (Principal Accounting Officer) | | | [added: |]
| /s/ Christopher Begley | | Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Christopher Begley | | | | | [added: |]
| /s/ Betsy Bernard | | Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Betsy Bernard | | | | | [added: |]
| /s/ Gail Boudreaux | | Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Gail Boudreaux | | | | | [added: |]
| /s/ Michael Farrell | | Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Michael Farrell | | | | | [added: |]
| /s/ Larry Glasscock | | Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Larry Glasscock | | | | | [added: |]
| /s/ Robert Hagemann | | Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Robert Hagemann | | | | | [added: |]
| /s/ Arthur Higgins | | Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Arthur Higgins | | | | | [added: |]
| | | Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Maria Teresa Hilado | | | | | [added: |]
| /s/ Syed Jafry | | Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Syed Jafry | | | | | [added: |]
| /s/ Michael Michelson | | Director | | February [removed: 21, 2020] [added: 22, 2021] | [added: |]
| Michael Michelson | | | | | [added: |]
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| /s/ Maria Teresa Hilado | | Director | | February 22, 2021 | |
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| Sreelakshmi Kolli | | | | | |
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