Zimmer Biomet (NYSE:ZBH) announced that president & CEO Bryan Hanson is forgoing 100% of his salary among other steps the company is taking in response to the COVID-19 pandemic.
The orthopedics company said after yesterday’s market close that it is cutting pay for its leadership team and board of directors. According to Zimmer Biomet’s most recent proxy statement, Hanson’s 2019 salary was $1,088,769 as part of a total compensation of nearly $11.2 million. Like other orthopedics device companies, Zimmer Biomet has been hit hard by federal guidelines recommending the suspension of elective surgeries such as knee and hip replacements during the pandemic.
Zimmer Biomet also reported cost-cutting moves including reductions in discretionary spending and decreasing manufacturing output and “reinforcing business continuity in manufacturing facilities and supply chain,” according to a news release.
“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,” Hanson said in the release. “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.”
The Warsaw, Ind.-based company is projecting a first-quarter sales drop of approximately -9.5% to -10.5% compared to the first quarter of 2019 when it posted sales of approximately $1.98 billion. It is currently conducting its closing process and is set to announce final results on May 11.
As a result of the recent decline in elective procedures and with the expectation of further negative impact in the second quarter, Zimmer Biomet said it can’t currently quantify the overall impact on its operations, financial conditions and cash flows. Because of that, the company is withdrawing its full-year financial guidance, having projected adjusted EPS of $8.15–$8.45 in 2020.
Needham & Company senior research analyst Mike Matson said in an analysis that Zimmer Biomet’s product cycle and pent-up demand should allow the company’s shares to outperform once the COVID-19 pandemic ends, despite the belief that orthopedic procedures are likely to be more vulnerable to deferrals. The analysts lowered their price target from $189 to $153 but maintain their “strong buy” rating.