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Zimmer Biomet Reports Third Quarter 2016 Financial Results

-- Net Sales of $1.83 billion represent an increase of 4.0% over the prior year period, and an increase of 3.5% on an adjusted constant currency basis
-- Diluted EPS for the third quarter were $0.78, an increase of 609.1% over the prior year period, and $1.79 adjusted, an increase of 9.1% over the prior year period
-- Company updates 2016 revenue and earnings guidance

WARSAW, Ind., Oct. 31, 2016 /PRNewswire/ -- Zimmer Biomet Holdings, Inc. (NYSE and SIX: ZBH) today reported financial results for the quarter ended September 30, 2016.  The Company reported third quarter net sales of $1.83 billion, an increase of 4.0% compared to the third quarter of 2015.  On an adjusted constant currency basis, revenue increased 3.5% over the prior year period, with the recently acquired LDR Holding Corporation contributing 190 basis points.  Diluted earnings per share for the quarter were $0.78, an increase of 609.1% over the prior year period, and adjusted diluted earnings per share were $1.79, an increase of 9.1% over the prior year period.

ZIMMER BIOMET INC. LOGO

"Zimmer Biomet's third quarter performance was highlighted by further acceleration of our global S.E.T. category, as well as our continued strength in the Asia Pacific region," said David Dvorak, President and CEO of Zimmer Biomet.  "We believe that our comprehensive and expanding portfolio of musculoskeletal solutions positions us extremely well to address the evolving needs of customers in the dynamic healthcare environment in which they operate.  Going forward, we will continue to focus on enhancements to our commercial and operational execution to more fully leverage our opportunities to improve the quality of life for patients and create value for our stockholders."

Net earnings for the third quarter were $158.8 million, an increase of 612.5% over the prior year period, and $362.4 million on an adjusted basis, an increase of 7.1% over the prior year period.  Operating cash flow for the third quarter was $352.6 million.

In addition, during the quarter, Zimmer Biomet announced several strategic acquisitions to broaden and complement the Company's musculoskeletal offerings.  In July, the Company completed the acquisition of a market leader in cervical disc replacement, LDR Holding Corporation.  In August, Zimmer Biomet announced the acquisition of CD Diagnostics, a company focused on developing immunoassays and biomarker testing to inform musculoskeletal treatment decisions that improve patient outcomes.  Earlier this month, the Company completed the acquisition of all outstanding shares of Medtech SA, developer of the ROSA® robotics platform for a range of minimally invasive brain, neurological and spinal procedures.

In the quarter, the Company paid $47.9 million in dividends and declared a third quarter dividend of $0.24 per share.  The Company also repaid $200 million on its outstanding term loan during the quarter, and borrowed $750 million under a new term loan to repay borrowings under its revolving credit facility.

Guidance
The Company updated its full-year 2016 constant currency revenue and adjusted earnings per share guidance.  The Company now estimates full-year revenue to be in a range of $7.630 billion to $7.650 billion, an increase of approximately 27% on a reported basis, or 2.4% to 2.7% on an adjusted pro forma basis, in each case as compared to the prior year. The Company now expects foreign currency translation to decrease revenue for the full year by approximately 0.3%, compared to its previous estimate of 0.5%.  Revenue growth, excluding the contribution from LDR Holding Corporation, on a constant currency adjusted pro forma basis, is now expected to be in a range of 1.65% to 1.90% for the full year 2016.  Previously, the Company estimated full-year revenue growth to be in a range of 2.5% to 3.0% on a similar basis. 

Additionally, the Company now expects its full-year 2016 diluted earnings per share to be in a range of $1.50 to $1.60, and $7.90 to $7.95 on an adjusted basis.  Previously, the Company estimated diluted earnings per share to be in a range of $1.50 to $1.75 on a reported basis, and $7.90 to $8.00 on an adjusted basis. 

Conference Call
The Company will conduct its third quarter 2016 investor conference call today, October 31, 2016, at 8:00 a.m. Eastern Time.  The live audio webcast can be accessed via Zimmer Biomet's Investor Relations website at http://investor.zimmerbiomet.com.  It will be archived for replay following the conference call.

Individuals in the U.S. and Canada who wish to dial into the conference call may do so by dialing (888) 312-9837 and entering conference ID 8873986.  For a complete listing of international toll-free and local numbers, please visit http://investor.zimmerbiomet.com.  A digital recording will be available 24 hours after the completion of the conference call, from November 1, 2016 to November 30, 2016.  To access the recording, U.S. callers should dial (888) 203-1112 and international callers should dial +1 (719) 457-0820, and enter the Access Code ID 8873986.

Sales Tables
The following sales tables provide results by geography and product category, as well as the percentage change compared to the prior year period on a reported basis, and for the quarterly period, on an adjusted constant currency basis. 

 

NET SALES - THREE MONTHS ENDED SEPTEMBER 30, 2016


(in millions, unaudited)















































Adjusted









Constant




Net


Reported


Currency




Sales


% Change


% Change

Geographic Results









Americas

$     1,176


3.7

%

3.7

%


EMEA

369


(1.7)



0.9



Asia Pacific

288


13.7



6.4




Total 

$     1,833


4.0



3.5






















Product Categories









Knees









   Americas

$       397


(0.9)



(0.9)



   EMEA

130


(2.8)



0.3



   Asia Pacific

104


7.2



2.6




       Total

631


(0.1)



(0.1)













Hips









   Americas

239


(0.3)



(0.2)



   EMEA

112


(3.7)



(1.4)



   Asia Pacific

90


15.7



5.9




       Total

441


1.7



0.6













S.E.T (1)

402


8.5



7.8













Dental

96


(7.3)



(7.6)













Spine & CMF

184


24.3



23.9













Other

79


5.4



5.2














Total

$     1,833


4.0



3.5






















(1) Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma


 

 

NET SALES - NINE MONTHS ENDED SEPTEMBER 30, 2016

(in millions, unaudited)























Net






Sales


% Change

Geographic Results






Americas

$     3,534


43.8

%


EMEA

1,286


33.4



Asia Pacific

851


32.5




Total 

$     5,671


39.5
















Product Categories






Knees






   Americas

$     1,244


30.9



   EMEA

473


28.3



   Asia Pacific

315


27.8




       Total

2,032


29.8










Hips






   Americas

733


35.9



   EMEA

388


21.4



   Asia Pacific

265


29.3




       Total

1,386


30.3










S.E.T (1)

1,216


49.8










Dental

322


46.4










Spine & CMF

470


83.7










Other

245


65.6











Total

$     5,671


39.5
















(1) Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma

 

About the Company
Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer Biomet is a global leader in musculoskeletal healthcare. We design, manufacture and market orthopaedic reconstructive products; sports medicine, biologics, extremities and trauma products; office based technologies; spine, craniomaxillofacial and thoracic products; dental implants; and related surgical products.

We collaborate with healthcare professionals around the globe to advance the pace of innovation. Our products and solutions help treat patients suffering from disorders of, or injuries to, bones, joints or supporting soft tissues. Together with healthcare professionals, we help millions of people live better lives.

We have operations in more than 25 countries around the world and sell products in more than 100 countries. For more information, visit www.zimmerbiomet.com or follow Zimmer Biomet on Twitter at www.twitter.com/zimmerbiomet

Website Information
We routinely post important information for investors on our website, www.zimmerbiomet.com, in the "Investor Relations" section.  We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD.  Accordingly, investors should monitor the Investor Relations section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts.  The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Note on Non-GAAP Financial Measures
This press release includes non-GAAP financial measures that differ from financial measures calculated in accordance with U.S. generally accepted accounting principles ("GAAP").  These non-GAAP financial measures may not be comparable to similar measures reported by other companies and should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP. 

Net earnings and diluted earnings per share for the three-month period ended September 30, 2016 and projected diluted earnings per share for the full-year 2016 are presented on a GAAP (reported) basis and an adjusted basis.  Adjusted earnings and earnings per share measures exclude the effects of inventory step-up and other inventory and manufacturing related charges, certain claims, special items, intangible asset amortization, financing and other expenses/gains related to the Biomet merger and other acquisitions, the tax effects of these items and other certain tax adjustments.  Special items include expenses resulting directly from our business combinations and/or global restructuring, quality and operational excellence initiatives, including employee termination benefits, certain contract terminations, consulting and professional fees, dedicated project personnel, asset impairment or loss on disposal charges and other items.  Other certain tax adjustments primarily include internal restructuring transactions that provide the Company access to offshore funds in a tax efficient manner and adjustments to deferred tax liabilities recognized as part of acquisition-related accounting.

Sales growth information for the three and nine month periods ended September 30, 2016 is presented on a GAAP (reported) basis and, for the three-month period, on an adjusted constant currency basis.  Adjusted growth rates reflect the impact of the previously announced divesture remedies.  Constant currency growth rates exclude the effects of foreign currency exchange rates.  They are calculated by translating current and prior-period sales at the same predetermined exchange rate.  The translated results are then used to determine year-over-year percentage increases or decreases.  Projected revenue growth information for the full-year 2016 is presented on a GAAP (reported) basis, an adjusted pro forma basis, an adjusted pro forma constant currency basis and an adjusted pro forma constant currency basis excluding the contribution from LDR Holding Corporation.  Pro forma revenue growth refers to a comparison against revenue for the prior year that has been adjusted to reflect the inclusion of Biomet revenue on a GAAP basis.  Adjusted pro forma revenue growth refers to a comparison against pro forma revenue for the prior year adjusted to reflect the impact of the previously announced divestiture remedies.  Adjusted pro forma constant currency revenue growth excludes the effects of changes in foreign currency exchange rates in both years. 

We use these non-GAAP financial measures internally to evaluate the performance of the business and believe they are useful measures that provide meaningful supplemental information to investors to consider when evaluating the performance of the Company.  We believe these measures offer the ability to make period-to-period comparisons that are not impacted by certain items that can cause dramatic changes in reported operating results, to perform trend analysis, to better identify operating trends that may otherwise be masked or distorted by these types of items and to provide additional transparency of certain items.  In addition, certain of these non-GAAP financial measures are used as performance metrics in our incentive compensation programs.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are included in this press release.

Cautionary Statement Regarding Forward-Looking Statements
This communication contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements may be identified by the use of forward-looking terms such as "may," "will," "expects," "believes," "anticipates," "plans," "estimates," "projects," "assumes," "guides," "targets," "forecasts," "sees" and "seeks" or the negative of such terms or other variations on such terms or comparable terminology.  All statements other than statements of historical or current fact are, or may be deemed to be, forward-looking statements.  Such statements are based upon the current beliefs and expectations of management and are subject to significant risks and uncertainties that could cause actual outcomes and results to differ materially.  These risks and uncertainties 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 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, vendors and lenders and on our operating results and businesses generally; Biomet's compliance with its Deferred Prosecution Agreement, as extended; the outcome of government investigations; price and product competition; the success of our quality and operational excellence initiatives; 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; the ability to form and implement alliances; challenges relating to changes in and compliance with governmental laws and regulations, including regulations of the U.S. Food and Drug Administration (the "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; changes in tax obligations arising from tax reform measures or examinations by tax authorities; product liability and intellectual property 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; changes in general industry and market conditions, including domestic and international growth rates and general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; and the impact of the ongoing economic uncertainty affecting countries in the Euro zone on the ability to collect accounts receivable in affected countries.  For a further list and description of such risks and uncertainties, see our reports filed with the U.S. Securities and Exchange Commission.  Copies of these filings, as well as subsequent filings, are available online at www.sec.gov, www.zimmerbiomet.com or on request from us.  We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be set forth in our periodic reports.  Readers of this communication are cautioned not to place undue reliance on these forward-looking statements, since, while management believes the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate.  This cautionary statement is applicable to all forward-looking statements contained in this communication.

 


 ZIMMER BIOMET HOLDINGS, INC. 

 CONSOLIDATED STATEMENTS OF EARNINGS 

 FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 and 2015 

 (in millions, except per share amounts, unaudited) 






2016


2015

 Net Sales 

$     1,832.8


$     1,762.2





 Cost of products sold, excluding intangible asset amortization 

479.3


552.1

 Intangible asset amortization 

164.3


122.6

 Research and development 

95.6


83.3

 Selling, general and administrative 

727.7


692.3

 Special items 

170.4


195.9

      Operating expenses 

1,637.3


1,646.2





 Operating Profit 

195.5


116.0





 Other (expense) income, net 

(1.1)


4.3

 Interest income  

0.6


2.3

 Interest expense 

(91.5)


(90.8)





 Earnings before income taxes 

103.5


31.8





 (Benefit) provision for income taxes 

(54.4)


9.6





 Net Earnings 

157.9


22.2





 Less: Net Loss attributable to noncontrolling interest 

(0.9)


-





 Net Earnings of Zimmer Biomet Holdings, Inc. 

$        158.8


$          22.2





 Earnings Per Common Share 




     Basic 

$          0.79


$          0.11

     Diluted 

$          0.78


$          0.11





 Weighted Average Common Shares Outstanding 




     Basic 

200.1


203.5

     Diluted 

202.9


205.7





 Cash Dividends Declared Per Common Share 

$          0.24


$          0.22

 

 


 ZIMMER BIOMET HOLDINGS, INC. 

 CONSOLIDATED STATEMENTS OF EARNINGS 

 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 and 2015 

 (in millions, except per share amounts, unaudited) 







2016


2015


 Net Sales 

$     5,670.8


$     4,064.2







 Cost of products sold, excluding intangible asset amortization 

1,760.0


1,131.3


 Intangible asset amortization 

424.7


176.0


 Research and development 

269.9


182.9


 Selling, general and administrative 

2,176.6


1,560.6


 Certain claims 

-


7.7


 Special items 

397.0


751.9


      Operating expenses 

5,028.2


3,810.4







 Operating Profit 

642.6


253.8







 Other expense, net 

(8.7)


(44.6)


 Interest income  

2.7


7.4


 Interest expense 

(267.8)


(196.6)







 Earnings before income taxes 

368.8


20.0







 Provision for income taxes 

133.9


0.5







 Net Earnings 

234.9


19.5







 Less: Net Loss attributable to noncontrolling interest 

(1.4)


(0.5)







 Net Earnings of Zimmer Biomet Holdings, Inc. 

$        236.3


$          20.0







 Earnings Per Common Share 





     Basic 

$          1.18


$          0.11


     Diluted 

$          1.17


$          0.11







 Weighted Average Common Shares Outstanding 





     Basic 

199.9


182.1


     Diluted 

202.3


184.7







 Cash Dividends Declared Per Common Share 

$          0.72


$          0.66


 

 

ZIMMER BIOMET HOLDINGS, INC. 

CONDENSED CONSOLIDATED BALANCE SHEETS 

 (in millions, unaudited) 







September 30,


December 31,





2016


2015

 Assets 







 Current Assets: 







   Cash and cash equivalents 




$               475.3


$            1,459.3

   Short-term investments 




13.4


164.6

   Receivables, net 




1,603.6


1,446.5

   Inventories 




2,070.0


2,254.1

   Other current assets 




535.8


529.2

       Total current assets 




4,698.1


5,853.7








 Property, plant and equipment, net 



2,080.8


2,062.6

 Goodwill 




10,770.1


9,934.2

 Intangible assets, net 




9,001.1


8,746.3

 Other assets 




486.4


563.8

 Total Assets 




$          27,036.5


$          27,160.6








 Liabilities and Stockholders' Equity 













 Current liabilities 




$            2,312.1


$            1,617.9

 Other long-term liabilities 




3,972.0


4,155.9

 Long-term debt 




11,006.2


11,497.4

 Stockholders' equity 




9,746.2


9,889.4

 Total Liabilities and Stockholders' Equity 


$          27,036.5


$          27,160.6

 

 

ZIMMER BIOMET HOLDINGS, INC. 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 and 2015 

(in millions, unaudited) 














2016


2015









 Cash flows provided by (used in) operating activities 






 Net earnings 




$        234.9


$          19.5


 Depreciation and amortization 




787.3


428.1


 Share-based compensation 




45.9


34.7


 Biomet merger consideration compensation expense 


-


164.1


 Intangible asset impairment 




28.0


-


 Income tax benefit from stock option exercises 


26.8


77.7


 Excess income tax benefits from employee stock compensation plans 


-


(10.3)


 Inventory step-up 




300.9


137.1


 Gain on divestiture of assets 




-


(8.9)


 Changes in operating assets and liabilities, net of acquired assets and liabilities 





     Income taxes 




(152.2)


29.9


     Receivables 




(80.3)


29.4


     Inventories 




44.2


(196.5)


     Accounts payable and accrued expenses 



(76.0)


(293.8)


     Other assets and liabilities 




(154.5)


(23.7)


 Net cash provided by operating activities 



1,005.0


387.3









 Cash flows provided by (used in) investing activities 






 Additions to instruments 




(251.3)


(186.0)


 Additions to other property, plant and equipment 


(130.1)


(118.6)


 Purchases of investments 




(1.4)


(179.0)


 Sales of investments 




273.3


578.8


 Proceeds from divestiture of assets 



-


57.9


 Biomet acquisition, net of acquired cash 



-


(7,760.1)


 LDR acquisition, net of acquired cash 



(1,021.1)


-


 Other business combination investments, net of acquired cash 


(421.9)


-


 Other investing activities 




7.8


(19.6)


 Net cash used in investing activities 



(1,544.7)


(7,626.6)









 Cash flows provided by (used in) financing activities 






 Proceeds from senior notes 




-


7,628.2


 Proceeds from term loan 




750.0


3,000.0


 Redemption of senior notes 




-


(2,740.0)


 Payments on term loan 




(700.0)


(150.0)


 Net (payments) proceeds on other debt 



(33.1)


0.8


 Dividends paid to stockholders 



(140.3)


(112.3)


 Proceeds from employee stock compensation plans 


113.5


77.0


 Restricted stock witholdings 




(5.3)


(10.5)


 Excess income tax benefits from employee stock compensation plans 


-


10.3


 Debt issuance costs 




(3.4)


(58.4)


 Repurchase of common stock 




(415.5)


-


 Net cash (used in) provided by financing activities 


(434.1)


7,645.1









 Effect of exchange rates on cash and cash equivalents 


(10.2)


(22.2)








-


 (Decrease) increase in cash and cash equivalents 


(984.0)


383.6

 Cash and cash equivalents, beginning of period 



1,459.3


1,083.3

 Cash and cash equivalents, end of period



$        475.3


$     1,466.9

 

 

 ZIMMER BIOMET HOLDINGS, INC. 

 NET SALES BY GEOGRAPHY 

 FOR THE THREE and NINE MONTHS ENDED SEPTEMBER 30, 2016 and 2015 

 (in millions, unaudited) 








 Three Months Ended September 30


 Nine Months Ended September 30



2016


2015


% Inc / (Dec)



2016


2015


% Inc

















 Americas 


$     1,175.9


$     1,133.5


3.7

%


$     3,534.1


$     2,458.2


43.8

%

 EMEA 


368.8


375.2


(1.7)



1,286.0


964.2


33.4


 Asia Pacific 


288.1


253.5


13.7



850.7


641.8


32.5


 Total 


$     1,832.8


$     1,762.2


4.0



$     5,670.8


$     4,064.2


39.5















































 ZIMMER BIOMET HOLDINGS, INC. 

 NET SALES BY PRODUCT CATEGORY 

 FOR THE THREE and NINE MONTHS ENDED SEPTEMBER 30, 2016 and 2015 

 (in millions, unaudited) 








 Three Months Ended September 30


 Nine Months Ended September 30



2016


2015


% Inc / (Dec)



2016


2015


% Inc

















 Knees 


$        631.3


$        632.0


(0.1)

%


$     2,031.5


$     1,564.8


29.8

%

 Hips 


440.6


433.5


1.7



1,385.7


1,063.9


30.3


 S.E.T 


402.1


370.4


8.5



1,215.6


811.3


49.8


 Dental 


95.9


103.4


(7.3)



322.5


220.2


46.4


 Spine & CMF 


183.6


147.7


24.3



470.6


256.1


83.7


 Other 


79.3


75.2


5.4



244.9


147.9


65.6


 Total 


$     1,832.8


$     1,762.2


4.0



$     5,670.8


$     4,064.2


39.5


 

 

ZIMMER BIOMET HOLDINGS, INC.

RECONCILIATION OF REPORTED % CHANGE TO

ADJUSTED CONSTANT CURRENCY % CHANGE AND

% CHANGE EXCLUDING LDR HOLDING CORPORATION

(unaudited)




























For the Three Months Ended




September 30, 2016

































Adjusted










Foreign




Constant







Divestiture



Exchange




Currency




 % Change 



Impact



Impact




% Change

Geographic Results
















Americas

3.7

%

-

%



-

%




3.7

%


EMEA

(1.7)



-




(2.6)





0.9



Asia Pacific

13.7



(0.9)




8.2





6.4




Total 

4.0



(0.1)




0.6





3.5




































Product Categories

















Knees

















   Americas

(0.9)



-




-





(0.9)




   EMEA

(2.8)



-




(3.1)





0.3




   Asia Pacific

7.2



(1.9)




6.5





2.6




       Total

(0.1)



(0.3)




0.3





(0.1)





















Hips

















   Americas

(0.3)



-




(0.1)





(0.2)




   EMEA

(3.7)



-




(2.3)





(1.4)




   Asia Pacific

15.7



-




9.8





5.9




       Total

1.7



-




1.1





0.6





















S.E.T

8.5



(0.1)




0.8





7.8





















Dental

(7.3)



-




0.3





(7.6)





















Spine & CMF

24.3



-




0.4





23.9








-




-









Other

5.4



-




0.2





5.2





















       Total

4.0



(0.1)




0.6





3.5




















Impact of LDR Holding Corporation

(1.9)



-




-





(1.9)




% Change excluding LDR Holding Corporation

2.1



(0.1)




0.6





1.6


 

 

 ZIMMER BIOMET HOLDINGS, INC. 


 RECONCILIATION OF NET EARNINGS AND ADJUSTED NET EARNINGS 


 FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 and 2015 


 (in millions, unaudited) 










 Three Months 




 Ended September 30




2016


2015


Net Earnings of Zimmer Biomet Holdings, Inc.

$       158.8


$         22.2


Inventory step-up and other inventory 





   and manufacturing-related charges

22.8


132.6


Intangible asset amortization

164.3


122.6


Special items






   Biomet merger-related


113.8


146.6


   Other special items


56.6


49.3


Merger-related income in other (expense) income, net

(2.6)


(11.9)


Taxes on above items (1)


(111.6)


(129.2)


Other certain tax adjustments(2)

(39.7)


6.2


Adjusted Net Earnings


$       362.4


$       338.4








(1)  The tax effect for the U.S. jurisdiction is calculated based on an effective rate considering federal and state taxes, 
     
as well as permanent items.  For jurisdictions outside the U.S., the tax effect is calculated based upon the statutory 
     
rates where the items were incurred.







(2)  Other certain tax adjustments primarily include a favorable adjustment to certain deferred tax liabilities recognized 
     
as part of acquisition-related accounting partially by internal restructuring transactions that provide the 
     
Company access to offshore funds in a tax efficient manner. 













 ZIMMER BIOMET HOLDINGS, INC. 


 RECONCILIATION OF NET EARNINGS AND ADJUSTED NET EARNINGS 


 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 and 2015 


 (in millions, unaudited) 










 Nine Months 




 Ended September 30




2016


2015


Net Earnings of Zimmer Biomet Holdings, Inc.

$       236.3


$         20.0


Inventory step-up and other inventory 





   and manufacturing-related charges

357.7


151.2


Certain claims


-


7.7


Intangible asset amortization

424.7


176.0


Special items






   Biomet merger-related


313.5


563.0


   Other special items


83.5


188.9


Merger-related (income) expense in other (expense) income, net

(1.1)


33.1


Interest expense on Biomet merger financing

-


70.0


Taxes on above items (1)


(297.0)


(363.6)


Biomet merger-related measurement period tax adjustments (2) 

52.7


-


Other certain tax adjustments(3)

6.4


35.9


Adjusted Net Earnings


$    1,176.7


$       882.2








(1)  The tax effect for the U.S. jurisdiction is calculated based on an effective rate considering federal and state taxes, 
     
as well as permanent items.  For jurisdictions outside the U.S., the tax effect is calculated based upon the statutory 
     
rates where the items were incurred.







(2)  The 2016 period includes negative effects from finalizing the tax accounts for the Biomet merger.  Under the
     
applicable U.S. GAAP rules, these measurement period adjustments are recognized on a prospective basis
     
in the period of change.








(3)  Other certain tax adjustments primarily include a favorable adjustment to certain deferred tax liabilities recognized 
     
as part of acquisition-related accounting offset by internal restructuring transactions that provide the 
     
Company access to offshore funds in a tax efficient manner. 







 

 

 ZIMMER BIOMET HOLDINGS, INC. 



                           RECONCILIATION OF DILUTED EPS AND ADJUSTED DILUTED EPS 



 FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2016 and 2015 



 (unaudited) 










 Three Months 




 Ended September 30




2016


2015



Diluted EPS

$                   0.78


$                   0.11



Inventory step-up and other inventory 






   and manufacturing-related charges

0.11


0.64



Intangible asset amortization

0.81


0.60



Special items






   Biomet merger-related

0.56


0.71



   Other special items

0.28


0.24



Merger-related income in other (expense) income, net

(0.01)


(0.06)



Taxes on above items (1)

(0.55)


(0.64)



Other certain tax adjustments(2)

(0.19)


0.04



Adjusted Diluted EPS

$                   1.79


$                   1.64









(1)  The tax effect for the U.S. jurisdiction is calculated based on an effective rate considering federal and state taxes, 

      as well as permanent items.  For jurisdictions outside the U.S., the tax effect is calculated based upon the statutory 

      rates where the items were incurred.









(2)  Other certain tax adjustments primarily include a favorable adjustment to certain deferred tax liabilities recognized 

      as part of acquisition-related accounting partially offset by internal restructuring transactions that provide the 

      Company access to offshore funds in a tax efficient manner. 





















 ZIMMER BIOMET HOLDINGS, INC. 



                           RECONCILIATION OF DILUTED EPS AND ADJUSTED DILUTED EPS 

 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 and 2015 



 (unaudited) 










 Nine Months 




 Ended September 30




2016


2015



Diluted EPS

$                   1.17


$                   0.11



Inventory step-up and other inventory 






   and manufacturing-related charges

1.77


0.82



Certain claims

-


0.04



Intangible asset amortization

2.10


0.95



Special items






   Biomet merger-related

1.55


3.05



   Other special items

0.41


1.02



Merger-related (income) expense in other (expense) income, net

(0.01)


0.18



Interest expense on Biomet merger financing

-


0.38



Taxes on above items (1)

(1.47)


(1.98)



Biomet merger-related measurement period tax adjustments (2) 

0.26


-



Other certain tax adjustments(3)

0.04


0.21



Adjusted Diluted EPS

$                   5.82


$                   4.78















(1)  The tax effect for the U.S. jurisdiction is calculated based on an effective rate considering federal and state taxes, 

      as well as permanent items.  For jurisdictions outside the U.S., the tax effect is calculated based upon the statutory 

      rates where the items were incurred.









(2)  The 2016 period includes negative effects from finalizing the tax accounts for the Biomet merger.  Under the

      applicable U.S. GAAP rules, these measurement period adjustments are recognized on a prospective basis

      in the period of change.









(3)  Other certain tax adjustments primarily include a favorable adjustment to certain deferred tax liabilities recognized 

      as part of acquisition-related accounting partially offset by internal restructuring transactions that provide the 

      Company access to offshore funds in a tax efficient manner. 



 

 

  ZIMMER BIOMET HOLDINGS, INC. 


  SUMMARY OF EXPENSES INCLUDED IN SPECIAL ITEMS 


 FOR THE THREE and NINE MONTHS ENDED SEPTEMBER 30, 2016 and 2015 


 (in millions, unaudited) 






























 Three Months 


 Nine Months 






Ended September 30,


Ended September 30,






2016


2015


2016


2015


 Biomet-related 











 Merger consideration compensation expense 


$          -


$          -


$          -


$   164.1



 Retention plans 


-


-


-


73.0



 Consulting and professional fees 


59.0


28.0


138.4


114.6



 Employee termination benefits 


7.1


14.2


14.3


79.1



 Dedicated project personnel 


21.9


36.8


64.8


45.9



 Relocated facilities 


9.5


1.6


17.5


2.5



 Contract terminations 


3.5


59.2


28.8


75.1



 Information technology integration 


4.8


1.1


9.3


1.1



 Intangible asset impairment 


-


-


28.0


-



 Other 


8.0


5.7


12.4


7.6




 Total Biomet-related 


113.8


146.6


313.5


563.0














 Other 











 Consulting and professional fees 


14.6


30.2


30.3


109.5



 Employee termination benefits 


3.2


1.1


3.2


1.9



 Dedicated project personnel 


8.2


6.4


11.5


28.9



 Impairment/loss on disposal of assets 


-


-


1.1


2.3



 LDR merger consideration compensation expense 


24.1


-


24.1


-



 Relocated facilities 


-


-


0.2


-



 Certain litigation matters 


3.7


-


3.7


20.3



 Contract terminations 


0.1


-


1.1


-



 Information technology integration 


0.8


1.8


1.1


1.8



 Contingent consideration adjustments 


-


0.1


-


2.4



 Accelerated software amortization 


-


-


-


1.5



 Other 


1.9


9.7


7.2


20.3




 Total Other 


56.6


49.3


83.5


188.9


 Special items 


$   170.4


$   195.9


$   397.0


$   751.9


 

 

ZIMMER BIOMET HOLDINGS, INC.


RECONCILIATION OF 2016 PROJECTED REVENUE % GROWTH TO


2016 PROJECTED ADJUSTED PRO FORMA % GROWTH AND


2016 PROJECTED CONSTANT CURRENCY ADJUSTED PRO FORMA % GROWTH


(unaudited)




















 Projected Year Ended December 31, 2016

 High 



 Low 








 Revenue % growth 

27.00

%


27.00

%

 Effect from product divestitures 

(0.90)



(0.90)


 Effect from full year of Biomet revenue 

(23.40)



(23.70)


    Adjusted pro forma % growth 

2.70



2.40


 Effect of LDR revenue 

(1.10)



(1.10)


 Foreign exchange impact 

0.30



0.35


    Constant currency adjusted pro forma % growth 

1.90

%


1.65

%







 

 

 ZIMMER BIOMET HOLDINGS, INC. 

 RECONCILIATION OF 2016 PROJECTED DILUTED EPS 

 AND PROJECTED ADJUSTED DILUTED EPS 

 (unaudited) 













Projected Year Ended December 31, 2016:

High


Low





Diluted EPS

$                      1.60


$            1.50

Inventory step-up and other inventory and manufacturing related




   charges, intangible asset amortization, special items and other expense 

7.90


8.00

Taxes on above items(1) and other certain tax adjustments

(1.55)


(1.60)

Adjusted Diluted EPS

$                      7.95


$            7.90









(1)  The tax effect for the U.S. jurisdiction is estimated based on an effective rate considering federal and state taxes, 

      as well as permanent items.  For jurisdictions outside the U.S., the tax effect is estimated based upon the statutory 

      rates where the items were or are projected to be incurred.





 

 

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SOURCE Zimmer Biomet Holdings, Inc.

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