"The coronavirus pandemic has had an unprecedented impact on global economic activity and we are responding by taking decisive actions designed to ensure the safety of our team members, strengthen our financial position and navigate this new environment," said Bryan Hanson, President and CEO. "While we cannot predict the duration of this crisis, we remain confident in our team, our strategy and in the long-term underlying strength of the Zimmer Biomet portfolio and innovation pipeline."
In March 2020, COVID-19 reached a pandemic level and Zimmer Biomet was impacted by a significant and sudden global decline in elective procedure volumes. As a result, based on preliminary, unaudited financial results, Zimmer Biomet estimates revenue growth for the first quarter 2020 will be approximately -9.5 to -10.5 percent on a reported basis and -8.5 to -9.5 percent on a constant currency basis(1) when compared to the first quarter of 2019. The company is currently conducting its closing process for the first quarter of 2020 and is unable to provide a more precise estimate of its full financial results. Final results for the first quarter are scheduled to be announced on May 11, 2020.
Zimmer Biomet expects the decline in elective procedure volumes observed in the first quarter to continue to have a significant negative impact in the second quarter of 2020. Given the ongoing uncertainty around the scope and duration of COVID-19, the company is currently unable to quantify the impact on its results of operations, financial condition and cash flows, which could be material, for 2020 and is withdrawing the full-year financial guidance it previously issued on February 4, 2020. During this time of COVID-19 challenge and disruption, Zimmer Biomet is taking several measures to contain costs and to further support its liquidity profile, including, among others:
- Positioning the company to support healthcare systems, customers and patients now and as elective procedures return to normal volumes;
- Taking steps to further reinforce business continuity in its manufacturing facilities and overall supply chain;
- Modulating manufacturing output;
- Proactively reducing certain variable costs and discretionary spending; and
- Implementing compensation reductions for its leadership team and Board of Directors, with President and CEO Bryan Hanson forgoing 100 percent of his salary.
Related to the company's liquidity profile, Zimmer Biomet recently completed the issuance of $1.5 billion of notes in two tranches due in 2026 and 2030, the net proceeds of which were used to repay at maturity its $1.5 billion in outstanding notes due April 1, 2020. As of December 31, 2019, Zimmer Biomet had cash on hand of $618 million and a five-year unsecured multicurrency revolving facility of $1.5 billion. There were no outstanding borrowings under this facility as of April 6, 2020.
Protecting Zimmer Biomet Colleagues, Communities and Healthcare Professionals
The company is continuing to take an active role in supporting healthcare professionals, hospitals and communities during the COVID-19 pandemic, including:
Donating supplies of Personal Protective Equipment (PPE) to local hospitals and non-profit organizations;
Partnering with an industry coalition and using 3D printing technology to produce critical components for ventilators and face shields for healthcare professionals; and
Providing monetary donations through the company's philanthropic foundation to multiple non-profit organizations in support of COVID-19 initiatives.
"As the COVID-19 situation continues to rapidly evolve around the world, Zimmer Biomet is committed to safeguarding the health and well-being of our team members and their families, the communities in which we live and work, the healthcare professionals with whom we partner and the patients that we serve," continued Hanson.
Zimmer Biomet also provided details regarding its previously disclosed plans to change its revenue reporting format. These changes are designed to further align with the company's recent reorganization. The company will use this format for its fiscal first quarter 2020 results.
Product Category Sales will include the following changes:
- Surgical products, previously reported in the S.E.T. (Sports Medicine, Extremities and Trauma) product category, will be included in the Other product category;
- Dental products will be combined with Spine and CMF (Craniomaxillofacial) products into one product category; and
- The CMF product category name will be changed to CMFT (Craniomaxillofacial and Thoracic), to reflect the Thoracic business, which is included in that category.
In addition to these changes, other immaterial adjustments related to brand alignment within product categories in the Asia Pacific region will be made. Zimmer Biomet has posted updated sales tables for fiscal 2019 and 2018 reflecting these changes on the Investor Relations section of its website, https://investor.zimmerbiomet.com. These changes have no impact on the company's consolidated results of operations.