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.
Interruption of our manufacturing operations or supply arrangements could adversely affect our business, financial condition and results of operations.
Our success depends on our ability to effectively develop and market our products against those of our competitors, retain our employees and the independent agents and distributors who market our products, and introduce new products.
We are subject to potential declines in reimbursement levels and cost-containment measures in the U.S. and other countries, resulting in pricing pressures.
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.
Financial, Liquidity and Tax Risks
In connection with our separation from Zimmer Biomet, we incurred substantial indebtedness and we and our subsidiaries may not be able to generate sufficient cash flows to meet all of our debt obligations, which could materially adversely affect our business, financial condition and results of operations.
We may have additional tax liabilities, and potential changes in tax laws could unfavorably impact our effective tax rate.
Future material impairments in the carrying value of our intangible assets, including goodwill, would negatively affect our operating results.
If our independent agents and distributors are characterized as employees, we would be subject to additional tax and other liabilities.
Global Operational Risks
We conduct a significant amount of our sales activity outside of the U.S., which subjects us to additional business risks such as global economic conditions and currency exchange rate fluctuations, and may cause our profitability to decline due to increased costs.
Legal, Regulatory and Compliance Risks
If we fail to obtain, or experience significant delays in obtaining, U.S. Food and Drug Administration (“FDA”) clearances or approvals for our future products or product enhancements, our ability to commercially distribute and market our products could suffer.
We are subject to costly and complex laws and governmental regulations relating to the development, design, product standards, packaging, advertising, promotion, post-market surveillance, manufacturing, labeling and marketing of our products, non-compliance with which could adversely affect our business, financial condition and results of operations.
If we fail to comply with healthcare fraud and abuse, anticorruption, data privacy and security, and environmental laws and regulations, we could face substantial penalties and our business, operations and financial condition could be adversely affected.
We are increasingly dependent on sophisticated information technology and if we fail to effectively maintain or protect our information systems or data, including from data breaches, our business could be adversely affected.
Pending and future product liability claims and litigation could adversely impact our financial condition and results of operations and impair our reputation, and we bear the risk of warranty claims on our products.
The industries that we serve have undergone, and are in the process of undergoing, significant changes in an effort to reduce costs, which could adversely affect our business, results of operations and financial condition.
We are substantially dependent on patent and other proprietary rights, and we are involved in legal proceedings that may result in adverse outcomes.
Risks Related to the Separation and Distribution
The historical combined financial information included in this Annual Report is not necessarily representative of the results we would have achieved as a standalone, publicly traded company and may not be a reliable indicator of our future results.
If the distribution, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, we, Zimmer Biomet, and Zimmer Biomet stockholders could be subject to significant tax liabilities and, in certain circumstances, we could be required to indemnify Zimmer Biomet for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement, and U.S. federal income tax consequences may restrict our ability to engage in certain desirable strategic or capital-raising transactions after the separation.
We may not achieve some or all of the expected benefits of the separation, and the separation may materially and adversely affect our financial condition, results of operations and cash flows.
Zimmer Biomet or we may fail to perform under various transaction agreements that were executed as part of the separation, or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.
Certain members of management, directors and stockholders may hold stock in both Zimmer Biomet and ZimVie, and as a result, may face actual or potential conflicts of interest.
In connection with our separation from Zimmer Biomet, Zimmer Biomet will indemnify us for certain liabilities, and we will indemnify Zimmer Biomet for certain liabilities. If we are required to pay under these indemnities to Zimmer Biomet, our financial results could be negatively impacted. The Zimmer Biomet indemnity may not be sufficient to hold us harmless from the full amount of liabilities for which Zimmer Biomet will be allocated responsibility, and Zimmer Biomet may not be able to satisfy its indemnification obligations in the future.
The allocation of intellectual property rights among us and Zimmer Biomet as part of the separation could adversely impact our competitive position and our ability to develop and commercialize certain future products and services.
Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our financial condition and results of operations.
Risks Related to Our Common Stock
We do not expect to pay any cash dividends for the foreseeable future.
There may be substantial changes in our stockholder base, your percentage of ownership in ZimVie may be diluted in the future and a significant number of our shares of common stock are or will be eligible for future sale.
Our certificate of incorporation designates a state or federal court located in the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings and anti-takeover provisions in our certificate of incorporation and bylaws and of Delaware law could enable our board of directors to resist a takeover attempt by a third party and limit the power of our stockholders.
Table of Contents
ITEM 1. BUSINESS.
Overview
ZimVie Inc. (“ZimVie,” “we,” “us,” “our” or the “Company”) was incorporated in the State of Delaware on July 30, 2021 as a wholly owned subsidiary of Zimmer Biomet Holdings, Inc. (“Zimmer Biomet” or “Parent”). We were formed solely for the purpose of effecting the distribution of our outstanding shares of common stock on a pro rata basis to holders of Zimmer Biomet common stock and to hold directly or indirectly the assets and liabilities associated with the spine and dental businesses of Zimmer Biomet prior to the distribution. The distribution was completed on March 1, 2022, and resulted in ZimVie becoming a standalone, publicly traded company. References in this Annual Report on Form 10-K to “our audited historical combined financial statements,” “our combined financial statements” and similar expressions refer to the combined financial statements of the Spine and Dental Businesses of Zimmer Biomet Holdings, Inc., due to the fact that as of and during the periods presented in the financial statements, ZimVie was still a wholly-owned subsidiary of, and operated under those businesses of, Zimmer Biomet.