Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes☒No☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 27, 2017, 202,473,076~~April 22, 2024, 205,728,398 shares of the registrant’s $.01 par value common stock were outstanding.


		Page

Part I - Financial Information

Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Statements of Earnings for the Three Months Ended March 31, 2024 and ~~Nine Month Periods Ended September 30, 2017 and 2016~~2023	3
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2024 and ~~Nine Month Periods Ended September 30, 2017 and 2016~~2023	4
	Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016~~2023	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2024 and 2023	6
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2024 and ~~2016~~2023	67
	Notes to Interim Condensed Consolidated Financial Statements	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2826

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3833

Item 4.	Controls and Procedures	3833

Part II - Other Information

Item 1.	Legal Proceedings	4034

Item 1A.	Risk Factors	4034

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4034

Item 3.	Defaults Upon Senior Securities	4034

Item 4.	Mine Safety Disclosures	4034

Item 5.	Other Information	4034

Item 6.	Exhibits	4136

Signatures		4237

Part I – ~~Financial~~Financial Information

Item 1. Financial Statements

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share amounts, unaudited)


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30,						September 30,						March 31,
	2017			2016			2017			2016			2024			2023
Net Sales	$	1,818.1		$	1,832.8		$	5,749.8		$	5,670.8		$	1,889.2		$	1,831.0
Cost of products sold, excluding intangible asset amortization		500.9			479.3			1,541.5			1,760.0
Cost of products sold, excluding intangible asset amortization														512.3			500.8
Intangible asset amortization		152.7			164.3			452.4			424.7			142.1			133.4
Research and development		91.2			95.6			272.4			269.9			107.9			110.4
Selling, general and administrative		694.5			727.7			2,203.3			2,176.6			736.2			715.9
Special items (Note 2)		165.4			170.4			434.1			397.0
Restructuring and other cost reduction initiatives														124.4			41.8
Acquisition, integration, divestiture and related														0.4			1.3
Operating expenses		1,604.7			1,637.3			4,903.7			5,028.2			1,623.3			1,503.7
Operating Profit		213.4			195.5			846.1			642.6			265.9			327.3
Other expense, net		(4.5	)		(1.1	)		(11.2	)		(8.7	)
Interest income		0.6			0.6			1.4			2.7
Interest expense		(82.3	)		(91.5	)		(247.5	)		(267.8	)
Other (expense) income, net														(0.1	)		7.7
Interest expense, net														(50.7	)		(48.2	)
Earnings before income taxes		127.2			103.5			588.8			368.8			215.1			286.8
Provision (benefit) for income taxes		28.4			(54.4	)		6.6			133.9
Provision for income taxes														42.3			54.1
Net Earnings		98.8			157.9			582.2			234.9			172.8			232.8
Less: Net loss attributable to noncontrolling interest		-			(0.9	)		(0.2	)		(1.4	)
Less: Net earnings attributable to noncontrolling interest														0.4			0.2
Net Earnings of Zimmer Biomet Holdings, Inc.	$	98.8		$	158.8		$	582.4		$	236.3		$	172.4		$	232.5

Earnings Per Common Share
Basic	$	0.49		$	0.79		$	2.89		$	1.18		$	0.84		$	1.11
Diluted	$	0.48		$	0.78		$	2.86		$	1.17		$	0.84		$	1.11
Weighted Average Common Shares Outstanding
Basic		202.3			200.1			201.7			199.9			205.2			209.4
Diluted		204.0			202.9			203.6			202.3			206.2			210.4
Cash Dividends Declared Per Common Share	$	0.24		$	0.24		$	0.72		$	0.72

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions, unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Net Earnings

$
98.8

$
157.9

$
582.2

$
234.9

Other Comprehensive Income:

Foreign currency cumulative translation adjustments, net of tax

129.7

58.3

367.9

113.9

Unrealized cash flow hedge losses, net of tax

(28.3
)

(9.7
)

(79.4
)

(53.0
)
Reclassification adjustments on hedges, net of tax

4.1

(13.9
)

(9.4
)

(58.0
)
Unrealized gains on securities, net of tax

-

-

-

0.4

Adjustments to prior service cost and unrecognized actuarial
assumptions, net of tax

(1.0
)

1.2

(5.0
)

22.3

Total Other Comprehensive Income

104.5

35.9

274.1

25.6

Comprehensive Income

203.3

193.8

856.3

260.5

Comprehensive loss attributable to the noncontrolling interest

(0.2
)

(0.2
)

(0.6
)

(0.8
)
Comprehensive Income attributable to

Zimmer Biomet Holdings, Inc.

$
203.5

$
194.0

$
856.9

$
261.3


	Three Months Ended
	March 31,
	2024			2023
Net Earnings of Zimmer Biomet Holdings, Inc.	$	172.4		$	232.5
Other Comprehensive Income (Loss):
Foreign currency cumulative translation adjustments, net of tax		(35.8	)		12.4
Unrealized cash flow hedge gains, net of tax		34.7			8.8
Reclassification adjustments on hedges, net of tax		(18.0	)		(19.0	)
Adjustments to prior service cost and unrecognized actuarial assumptions, net of tax		(1.1	)		(0.9	)
Total Other Comprehensive (Loss) Income		(20.2	)		1.3
Comprehensive Income Attributable to
Zimmer Biomet Holdings, Inc.	$	152.2		$	233.8

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share amounts, unaudited)


	September 30,			December 31,			March 31,			December 31,
	2017			2016			2024			2023
ASSETS
Current Assets:
Cash and cash equivalents	$	480.8		$	634.1		$	393.0		$	415.8
Accounts receivable, less allowance for doubtful accounts		1,318.5			1,604.4
Accounts receivable, less allowance for credit losses								1,446.4			1,442.4
Inventories		2,084.2			1,959.4			2,388.2			2,385.2
Prepaid taxes		229.6			214.7
Other prepaid expenses and current assets		320.2			251.0
Prepaid expenses and other current assets								403.8			366.1
Total Current Assets		4,433.3			4,663.6			4,631.5			4,609.5
Property, plant and equipment, net		2,048.6			2,037.9			2,090.9			2,060.4
Goodwill		10,904.9			10,643.9			8,791.5			8,818.5
Intangible assets, net		8,464.9			8,785.4			4,734.1			4,856.4
Other assets		565.8			553.6			1,204.4			1,152.1
Total Assets	$	26,417.5		$	26,684.4		$	21,452.4		$	21,496.9
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	327.1		$	364.5		$	370.3		$	410.6
Income taxes payable		289.6			183.5			70.3			61.2
Other current liabilities								1,386.3			1,485.7
Current portion of long-term debt		1,225.0			575.6			970.0			900.0
Other current liabilities		1,168.5			1,257.9
Total Current Liabilities		3,010.2			2,381.5			2,797.0			2,857.4
Deferred income taxes		2,879.8			3,030.9
Deferred income taxes, net								370.4			357.6
Long-term income tax payable								275.8			273.7
Other long-term liabilities		877.6			936.3			577.0			652.1
Long-term debt		9,199.7			10,665.8			4,826.2			4,867.9
Total Liabilities		15,967.3			17,014.5			8,846.4			9,008.7
Commitments and Contingencies (Note 15)
Stockholders' Equity:
Zimmer Biomet Holdings, Inc. Stockholders' Equity:
Common stock, $0.01 par value, one billion shares authorized, 306.3 million shares issued in 2017 (304.7 million in 2016)		3.0			3.1
Common stock, $0.01 par value, one billion shares authorized, 317.2 million shares as of March 31, 2024 (316.2 million as of December 31, 2023) issued								3.2			3.2
Paid-in capital		8,493.9			8,368.5			9,945.9			9,846.1
Retained earnings		8,837.2			8,467.1			10,509.0			10,384.5
Accumulated other comprehensive loss		(159.9	)		(434.0	)		(211.2	)		(191.0	)
Treasury stock, 103.9 million shares in 2017 (104.1 million shares in 2016)		(6,724.4	)		(6,735.8	)
Treasury stock, 111.5 million shares as of March 31, 2024 (110.6 million as of December 31, 2023)								(7,648.9	)		(7,562.3	)
Total Zimmer Biomet Holdings, Inc. stockholders' equity		10,449.8			9,668.9			12,598.0			12,480.5
Noncontrolling interest		0.4			1.0			8.1			7.7
Total Stockholders' Equity		10,450.2			9,669.9			12,606.0			12,488.1
Total Liabilities and Stockholders' Equity	$	26,417.5		$	26,684.4		$	21,452.4		$	21,496.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZIMMER BIOMET ~~HOLDINGS,~~HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS’ EQUITY

(in millions, except per share amounts, unaudited)

For the Nine Months Ended

September 30,

2017

2016

Cash flows provided by (used in) operating activities:

Net earnings

$
582.2

$
234.9

Adjustments to reconcile net earnings to cash provided
by operating activities:

Depreciation and amortization

798.2

787.3

Share-based compensation

40.1

45.9

Goodwill and intangible asset impairment

59.5

28.0

Inventory step-up

32.2

300.9

Changes in operating assets and liabilities, net of effect of acquisitions:

Income taxes

(245.4
)

(125.4
)
Receivables

349.7

(80.3
)
Inventories

(123.2
)

44.2

Accounts payable and accrued expenses

(173.6
)

(76.0
)
Other assets and liabilities

(140.3
)

(154.5
)
Net cash provided by operating activities

1,179.4

1,005.0

Cash flows provided by (used in) investing activities:

Additions to instruments

(255.7
)

(251.3
)
Additions to other property, plant and equipment

(109.8
)

(130.1
)
Purchases of investments

-

(1.4
)
Sales of investments

-

273.3

LDR acquisition, net of acquired cash

-

(1,021.1
)
Other business combination investments, net of acquired cash

(4.0
)

(421.9
)
Other investing activities

(13.1
)

7.8

Net cash used in investing activities

(382.6
)

(1,544.7
)
Cash flows provided by (used in) financing activities:

Proceeds from multicurrency revolving facility

400.0

-

Payments on multicurrency revolving facility

(400.0
)

-

Redemption of senior notes

(500.0
)

-

Proceeds from term loan

192.7

750.0

Payments on term loan

(640.0
)

(700.0
)
Net payments on other debt

(0.9
)

(33.1
)
Dividends paid to stockholders

(145.0
)

(140.3
)
Proceeds from employee stock compensation plans

132.6

113.5

Business combination contingent consideration payments

(9.1
)

-

Restricted stock withholdings

(7.6
)

(5.3
)
Debt issuance costs

(0.3
)

(3.4
)
Repurchase of common stock

-

(415.5
)
Net cash used in financing activities

(977.6
)

(434.1
)
Effect of exchange rates on cash and cash equivalents

27.5

(10.2
)
Decrease in cash and cash equivalents

(153.3
)

(984.0
)
Cash and cash equivalents, beginning of year

634.1

1,459.3

Cash and cash equivalents, end of period

$
480.8

$
475.3


	Zimmer Biomet Holdings, Inc. Stockholders
											Accumulated
											Other											Total
	Common Shares				Paid-in			Retained			Comprehensive			Treasury Shares						Noncontrolling		Stockholders'
	Number		Amount		Capital			Earnings			(Loss) Income			Number			Amount			Interest		Equity


Balance January 1, 2024		316.2	$	3.2	$	9,846.1		$	10,384.5		$	(191.0	)		(110.6	)	$	(7,562.3	)	$	7.7	$	12,488.1
Net earnings		-		-		-			172.4			-			-			-			0.4		172.8
Other comprehensive loss		-		-		-			-			(20.2	)		-			-			-		(20.2	)
Cash dividends declared ($0.24 per share)		-		-		-			(49.3	)		-			-			-			-		(49.3	)
Stock compensation plans		0.8		-		76.4			1.4			-			-			1.4			-		79.2
Embody, Inc. acquisition consideration		0.2		-		23.4			-			-			-			-			-		23.4
Share repurchases		-		-		-			-			-			(0.9	)		(88.0	)		-		(88.0	)
Balance March 31, 2024		317.2	$	3.2	$	9,945.9		$	10,509.0		$	(211.2	)		(111.5	)	$	(7,648.9	)	$	8.1	$	12,606.0

Balance January 1, 2023		313.8	$	3.1	$	9,504.4		$	9,559.3		$	(179.3	)		(104.8	)	$	(6,867.2	)	$	6.7	$	12,027.0
Net earnings		-		-		-			232.5			-			-			-			0.2		232.8
Other comprehensive income		-		-		-			-			1.3			-			-			-		1.3
Cash dividends declared ($0.24 per share)		-		-		-			(50.4	)		-			-			-			-		(50.4	)
Stock compensation plans		0.5		-		55.4			0.3			-			-			0.3			-		56.0
Embody, Inc. acquisition consideration		1.1		0.1		134.9			-			-			-			-			-		135.0
Share repurchases		-		-		(2.3	)		-			-			(2.1	)		(241.7	)		-		(244.0	)
Balance March 31, 2023		315.4	$	3.2	$	9,692.4		$	9,741.7		$	(178.0	)		(106.9	)	$	(7,108.6	)	$	6.9	$	12,157.6

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions, unaudited)



	For the Three Months Ended March 31,
	2024			2023
Cash flows provided by (used in) operating activities:
Net earnings	$	172.8		$	232.8
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization		238.6			231.8
Share-based compensation		29.0			25.0
Changes in operating assets and liabilities, net of acquired assets and liabilities
Income taxes		(8.6	)		21.5
Receivables		(22.7	)		8.6
Inventories		(55.3	)		(94.2	)
Accounts payable and accrued liabilities		(119.4	)		(91.8	)
Other assets and liabilities		(6.4	)		(26.0	)
Net cash provided by operating activities		228.0			307.7
Cash flows provided by (used in) investing activities:
Additions to instruments		(82.0	)		(82.8	)
Additions to other property, plant and equipment		(55.1	)		(46.7	)
Net investment hedge settlements		10.2			13.4
Acquisition of intellectual property rights		(12.5	)		(14.0	)
Business combination investments, net of acquired cash		-			(18.9	)
Other investing activities		(55.6	)		(0.3	)
Net cash used in investing activities		(195.0	)		(149.4	)
Cash flows provided by (used in) financing activities:
Net proceeds from revolving facilities		70.0			210.0
Redemption of senior notes		-			(86.3	)
Payment on term loan		-			(33.9	)
Dividends paid to stockholders		(49.4	)		(50.3	)
Proceeds from employee stock compensation plans		56.4			36.0
Business combination contingent consideration payments		(1.5	)		(9.6	)
Deferred business combination payments		(1.5	)		-
Repurchase of common stock		(113.6	)		(267.6	)
Other financing activities		(10.5	)		(5.1	)
Net cash used in financing activities		(50.1	)		(206.7	)
Effect of exchange rates on cash and cash equivalents		(5.7	)		2.9
Change in cash and cash equivalents		(22.7	)		(45.5	)
Cash and cash equivalents, beginning of year		415.8			375.7
Cash and cash equivalents, end of period	$	393.0		$	330.2

The accompanying notes are an integral part of these condensed consolidated financial statements.

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The financial data presented herein is unaudited and should be read in conjunction with the consolidated financial statements and accompanying notes included in ~~the 2016~~our Annual Report on Form 10-K ~~filed by Zimmer Biomet Holdings, Inc.~~for the year ended December 31, 2023.

In our opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. The December 31, ~~2016~~2023 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). Results for interim periods should not be considered indicative of results for the full year.

Amounts reported in millions within this Quarterly Report on Form 10-Q are computed based on the actual amounts. As a result, the sum of the components may not equal the total amount reported in millions due to rounding. In addition, certain columns and rows within tables may not sum to the totals due to the use of rounded numbers. Percentages presented are calculated from the underlying unrounded amounts.

The words “we,” “us,” “our” and similar words, ~~and~~ “Zimmer Biomet” and “the Company” refer to Zimmer Biomet Holdings, Inc. and its subsidiaries. “Zimmer Biomet Holdings” refers to the parent company only.

2. Significant Accounting Policies

~~Special Items~~ Use of Estimates- We recognize expenses resulting directly from our business combinations, employee termination benefits, certain research and development (“R&D”) agreements, certain contract terminations, goodwill and intangible asset impairment, consulting and professional fees and asset impairment or loss on disposal charges connected with global restructuring, quality enhancement and remediation efforts, operational excellence initiatives, and other items as “Special items” in ourThe accompanying unaudited condensed consolidated ~~statement~~financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of ~~earnings. “Special items” included (in millions):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Biomet merger-related

Consulting and professional fees

$
19.9

$
59.0

$
60.7

$
138.4

Employee termination benefits

5.4

7.1

12.0

14.3

Dedicated project personnel

10.2

21.9

33.1

64.8

Relocated facilities

1.8

9.5

6.1

17.5

Certain litigation matters

5.0

-

5.0

-

Contract terminations

-

3.5

-

28.8

Information technology integration

1.3

4.8

4.9

9.3

Goodwill and intangible asset impairment

32.7

-

59.5

28.0

Other

4.8

8.0

25.0

12.4

Total Biomet merger-related

81.1

113.8

206.3

313.5

Other

Consulting and professional fees

56.3

14.6

158.4

30.3

Employee termination benefits

(0.6
)

3.2

2.0

3.2

Dedicated project personnel

14.0

8.2

35.5

11.5

Impairment/loss on disposal of assets

-

-

-

1.1

LDR merger consideration compensation expense

-

24.1

-

24.1

Relocated facilities

0.6

-

3.1

0.2

Certain litigation matters

3.0

3.7

10.0

3.7

Contract terminations

-

0.1

-

1.1

Information technology integration

1.0

0.8

1.8

1.1

Certain R&D agreements

-

-

2.5

-

Contingent consideration adjustments

1.7

-

(1.5
)

-

Other

8.3

1.9

16.0

7.2

Total Other

84.3

56.6

227.8

83.5

Special items

$
165.4

$
170.4

$
434.1

$
397.0

~~Consulting~~assets and ~~professional fees include expenditures related to third-party integration consulting performed in a variety~~liabilities and disclosure of ~~areas such as tax, compliance, logistics~~contingent assets and ~~human resources for our business combinations including our merger with Biomet, Inc. (“Biomet”); legal fees related to~~liabilities at the consummation of mergers and acquisitions and certain litigation and compliance matters; other consulting and professional fees and contract labor related to our quality enhancement and remediation efforts and operational excellence initiatives; third-party fees related to severance and termination benefits matters; costs of complying with our deferred prosecution agreement; and consulting fees related to certain information system integrations.

Dedicated project personnel expenses include the salary, benefits, travel expenses and other costs directly associated with employees who are 100 percent dedicated to our integration of acquired businesses, employees who have been notified of termination, but are continuing to work on transferring their responsibilities and employees working on our quality enhancement and remediation efforts and operational excellence initiatives.

As part of the Biomet merger (defined below), we recognized $209.0 million of intangible assets for in-process research and development (“IPR&D”) projects. We recorded impairment losses related to IPR&D intangible assets of $18.8 million and $28.0 million during the nine month periods ended September 30, 2017 and 2016, respectively. The impairments were primarily due to the termination of certain IPR&D projects. We also recognized $479.0 million of intangible assets for trademarks that we designated as having an indefinite life. In the nine month period ended September 30, 2017, we reclassified one of these trademarks to a finite life asset which resulted in an impairment of $8.0 million.

During the three and nine month periods ended September 30, 2017, we recognized a $32.7 million goodwill impairment charge on our Office Based Technologies reporting unit. See Note 9 for additional details.

A further detailed description of expenses included in “Special items” can be found in Note 2 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2016.

On June 24, 2015, pursuant to an agreement and plan of merger dated April 24, 2014, we acquired LVB Acquisition, Inc. (“LVB”), the parent company of Biomet, and LVB and Biomet became our wholly-owned subsidiaries (sometimes hereinafter referred to as the “Biomet merger” or the “merger”). After the closing date of the ~~Biomet merger, we started to implement~~financial statements and the reported amounts of revenues and expenses during the reporting period. We have made our ~~integration plans to drive operational synergies. Part~~best estimates, as appropriate under GAAP, in the recognition of our assets and liabilities. Actual results could differ materially from these integration plans included termination of employees and certain contracts with independent agents, distributors, suppliers and lessors. Our integration plans are expected to last through mid-2018 and we expect to incur a total of $170 million for employee termination benefits and $140 million for contract termination expense in that time period. As of September 30, 2017, we have incurred a cumulative total of $163.8 million for employee termination benefits and $134.9 million for contract termination expense. The following table summarizes the liabilities related to these integration plans (in millions):estimates.

Employee

Termination

Contract

Benefits

Terminations

Total

Balance at December 31, 2016

$
38.1

$
35.1

$
73.2

Additions

12.0

-

12.0

Cash payments

(33.1
)

(9.4
)

(42.5
)
Foreign currency exchange rate changes

1.2

0.4

1.6

Balance at September 30, 2017

$
18.2

$
26.1

$
44.3

~~Recent~~ Accounting Pronouncements –Not Yet Adopted - In ~~January 2017,~~November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2017-04 – Simplifying the Test for Goodwill Impairment.~~ ~~This~~2023-07, Improvements to Reportable Segment Disclosures, which is an amendment to ASC Topic 280 - Segment Reporting. The ASU requires ~~goodwill impairment~~more detailed and disaggregated segment information, including the disclosure of significant segment expense categories and amounts for each reportable segment. The ASU also requires certain annual disclosures to also be ~~measured as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill.~~ ~~Under previous~~made in interim periods. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024. The guidance if the carrying amount of a reporting unit’s net assets were greater than its fair value, impairment was measured as the excess of the carrying amount of the reporting unit’s goodwill over its implied fair value. The determination of a reporting unit’s implied goodwill generally required significant estimates to fair value its net assets. Therefore, this ASU simplifies goodwill impairment testing by eliminating the need to estimate the fair value of a reporting unit’s net assets. The impactwill be applied retrospectively unless retrospective adoption is impracticable. Early adoption of this ASU is dependent on the specific facts and circumstances of future impairments and is applied prospectively on testing that occurs subsequent to adoption. We elected to early adopt this ASU in the third quarter of 2017. As a result, the new ASU was used to determine the goodwill impairment charge on our Office Based Technologies reporting unit that was recognized in the third quarter of 2017. See Note 9 for additional details regarding this goodwill impairment charge.

In October 2016, the FASB issued ASU 2016-16 – Intra-Entity Asset Transfers of Assets Other than Inventory. This ASU changes the accounting for the tax effects of intra-entity asset transfers/sales. Under current GAAP, the tax effects of intra-entity asset transfers/sales are deferred until the transferred asset is sold to a third party or otherwise recovered through use. Under the new guidance, the tax expense from the sale of the asset in the seller’s tax jurisdiction is recognized when the transfer occurs, even though the pre-tax effects of that transaction are eliminated in consolidation. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new guidance does not apply to intra-entity transfers/sales of inventory. We early adopted this standard effective January 1, 2017. The modified retrospective approach is required for transition, which resulted in us recognizing a cumulative-effect adjustment in Retained earnings as of January 1, 2017 for intra-entity transfers/sales we had executed prior to that date. The January 1, 2017 cumulative effect adjustment resulted in a $72.7 million decrease to Retained earnings, a $3.9 million decrease to Other prepaid expenses and current assets, a $22.4 million decrease in Other assets, a $2.0 million decrease to Income taxes payable, and a $48.4 million increase to Deferred income taxes. The adoption of this ASU resulted in additional tax expense of $1.5 million and a tax benefit of $2.2 million to our provision for income taxes in the three and nine month periods ended September 30, 2017, respectively, compared to what it would have been under the previous accounting rules.

In May 2014, the FASB issued ASU 2014-09 – Revenue from Contracts with Customers. This ASU provides a five-step model for revenue recognition that all industries will apply to recognize revenue when a customer obtains control of a good or service. This ASU will be effective for us beginning January 1, 2018. Entities are permitted to apply the standard and related amendments either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application.

During the fourth quarter of 2016, we commenced an initial evaluation of the new standard and a related assessment and review of a representative sample of existing revenue contracts with our customers on some of our most significant revenue streams. In 2017, we have expanded our scope to perform an analysis at locations with less significant revenue streams and have provided training on the new standard to finance personnel across all of our locations. Our assessment of our revenue streams is substantially complete. Based upon our assessment, we do not believe there will be a material change to the timing of our revenue recognition. However, we will be required to reclassify certain immaterial costs from selling, general and administrative (“SG&A”) expense to net sales, which will result in a reduction of net sales, but have no impact on operating profit. In the fourth quarter of 2017, we will focus on additional disclosures we may need to make and the effect of this ASU on our internal control over financial reporting or other changes in business practices and processes. We plan to adopt this new standard using the retrospective method, which will result in us restating prior reporting periods presented. As noted previously, we expect this will result in us reclassifying certain immaterial costs from SG&A expense to net sales in each of those prior reporting periods. Our evaluation of ASU 2014-09 is ongoing and not complete.

In February 2016, the FASB issued ASU 2016-02 – Leases. This ASU requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet. This ASU will be effective for us beginning January 1, 2019. Early adoption is permitted. The ASU must be adopted using a modified retrospective transition approach at the beginning of the earliest comparative period in the consolidated financial statements. We own most of our manufacturing facilities, but lease various office space throughout the world. We are formalizing our project team and in the fourth quarter of 2017 will begin evaluating our leases and the related impact this ASU will have on our consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07 – Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU requires us to report the service cost component of pensions in the same location as other compensation costs arising from services rendered by the pertinent employees during the period. We will be required to report the other components of net benefit costs in Other Income (Expense) in the statement of earnings. This ASU will be effective for us beginning January 1, 2018. The ASU must be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost in the statement of earnings and prospectively, on and after the effective date, for the capitalization of the service cost component of net periodic pension cost in assets. See Note 12 for further information on the components of our net benefit cost.

In August 2017, the FASB issued ASU 2017-12 – Targeted Improvements to Accounting for Hedging Activities. This ASU amends the hedge accounting guidance to simplify the application of hedge accounting, makes more financial and nonfinancial hedging strategies eligible for hedge accounting treatment, changes how companies assess effectiveness and updates presentation and disclosure requirements. We are currently evaluating the impact this ASU will have on our ~~consolidated~~ financial ~~statements; however, based on our current hedging portfolio, we do not anticipate that~~statements and disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which is an amendment to ASC Topic 740 - Income Taxes. The ASU improves the transparency of income tax disclosures by requiring greater disaggregated information about an entity’s effective tax rate reconciliation and requiring additional disclosures and disaggregation of income taxes, among other amendments to improve the effectiveness of income tax disclosures. The ASU is effective for fiscal years beginning after December 15, 2024. The guidance will be applied prospectively with an option to apply the guidance retrospectively. Early adoption of this ASU is permitted. We are currently evaluating the impact this ASU will have ~~a significant impact~~ on our financial ~~position, results~~statements and disclosures.

6. Property, Plant and Equipment


	March 31,			December 31,
	2024			2023
	(in millions)
Land	$	18.8		$	18.9
Buildings and equipment		2,254.1			2,245.9
Capitalized software costs		555.2			552.2
Instruments		3,814.6			3,748.6
Construction in progress		206.4			200.6
		6,849.1			6,766.2
Accumulated depreciation		(4,758.2	)		(4,705.8	)
Property, plant and equipment, net	$	2,090.9		$	2,060.4

9We had $25.3 million and $30.8 million of property, plant and equipment included in accounts payable as of March 31, 2024 and December 31, 2023, respectively.

7. Acquisitions

~~LDR Acquisition~~

On ~~July 13, 2016,~~February 14, 2023, we completed ~~our~~the acquisition of ~~LDR Holding Corporation (“LDR”~~all the outstanding shares of Embody, Inc. ("Embody")~~. We paid~~, a medical device company focused on soft tissue healing, that expands our portfolio for the sports medicine market. The initial consideration consisted of the issuance of 1.1 million shares of our common stock valued at $135.0 million and $19.5 million of cash for a total value of ~~$1,138.0~~$154.5 million. The ~~total amount~~fair value of ~~merger~~our common stock was determined to be $127.34 per share, which represented the average of our high and low stock prices on the acquisition date. The Embody acquisition includes additional consideration ~~utilized~~of up to $120.0 million in fair value of our common shares and cash, subject to achieving a future regulatory milestone after closing and commercial milestones based on sales growth over a three-year period. We assigned a fair value of $94.0 million for this contingent consideration as of the acquisition date. The estimated fair value of the contingent consideration liability was calculated based on the probability of achieving the specified regulatory milestone and by simulating numerous potential outcomes for the commercial milestones and discounting to present value the estimated payments.

On April 28, 2023, we completed the acquisition ~~method~~ of ~~accounting, as reduced by~~all the ~~merger consideration paid to holders~~outstanding shares of ~~unvested LDR stock options and LDR stock-based awards of $24.1 million, was $1,113.9 million. The addition of LDR provided us with an immediate position~~a privately held orthopedics medical device company that expands our portfolio in the ~~growing cervical disc replacement~~orthopedics market ("April 2023 acquisition"). The initial consideration consisted of $15.0 million of cash and includes consideration of up to $8.0 million in cash, subject to achieving future regulatory milestones.

On October 6, 2023, we completed the acquisition of all the outstanding shares of a privately held orthopedics medical device company that provides us new surgical technology that can be used in procedures across multiple product categories (“~~CDR”~~October 2023 acquisition”) ~~market.~~. The ~~combination positioned us~~initial consideration consisted of $42.2 million of cash and includes additional consideration of up to ~~accelerate~~$33.0 million in cash contingent upon achieving certain commercial milestones based on sales growth over a three-year period. We assigned a fair value of $21.5 million for this contingent consideration as of the ~~growth~~acquisition date. The estimated fair value of the contingent liability was calculated based on the probability of achieving the commercial milestones and discounting to present value the estimated payments.

On November 15, 2023, we completed the acquisition of a privately held technology company by acquiring certain assets, liabilities and employees of the technology company (“November 2023 acquisition”). The November 2023 acquisition expands our

technology and data capabilities and solutions across multiple product categories to better serve our ~~Spine business through~~customers. The initial consideration consisted of $60.7 million of cash and includes additional consideration of up to $20.0 million in cash contingent upon achieving a commercial milestone based on a certain sales target which must be achieved by December 31, 2025. We assigned a fair value of $15.0 million for this contingent consideration as of the ~~incremental revenues associated with entry into~~acquisition date. The estimated fair value of the ~~CDR market~~contingent liability was calculated based on the probability of achieving the commercial milestone and ~~cross-portfolio selling opportunities~~discounting to ~~both Zimmer Biomet~~present value the estimated payment.

These acquisitions are collectively referred to in this report as the “2023 acquisitions”. Refer to Note 10 for information regarding the issuance of common stock and ~~LDR customer bases.~~ cash payments related to the contingent consideration liabilities that have occurred subsequent to the acquisition dates.

The goodwill ~~was~~related to the 2023 acquisitions represents the excess of the consideration transferred over the fair value of the net assets acquired. The goodwill related to the 2023 acquisitions is generated from the operational synergies and cross-selling opportunities we ~~expected~~expect to achieve from ~~our combined operations. None~~the technologies acquired. A portion of the goodwill is expected to be deductible for U.S. income tax purposes. The goodwill related to the Embody, the October 2023 and the November 2023 acquisitions is included in the Americas operating segment and the Americas Orthopedics reporting unit. The goodwill related to the April 2023 acquisition is included in the Asia Pacific operating segment and reporting unit. The goodwill related to the Embody acquisition was the only significant activity related to our consolidated goodwill balance in the three-month period ended March 31, 2023, other than changes related to foreign currency exchange rate translation adjustments. Foreign currency exchange translations adjustments were the only significant activity impacting goodwill for the three-month period ended March 31, 2024.

The purchase price allocation for the Embody acquisition was final as of March 31, 2024. The purchase price allocations for the other 2023 acquisitions are preliminary as of March 31, 2024. We need additional time to evaluate the tax attributes of those transactions, which may change the recognized tax assets and liabilities. There may be differences between the preliminary estimates of fair value and the final acquisition accounting. The final estimates of fair value are expected to be completed as soon as possible, but no later than one year after the respective acquisition dates.

The following table summarizes the ~~final estimated~~estimates of fair value of the assets acquired and liabilities assumed inrelated to the ~~LDR acquisition~~2023 acquisitions (in millions):




	Final Values
Cash	$	92.8
Accounts receivable, net		30.5
Inventory		97.0
Other current assets		5.6
Property, plant and equipment		24.7
Current assets			$	13.1
Intangible assets subject to amortization:
Technology				144.0
Trademarks and trade names				3.5
Customer relationships				40.1
Intangible assets not subject to amortization:
In-process research and development (IPR&D)		2.0		36.3
Intangible assets subject to amortization:
Technology		447.0
Customer relationships		122.0
Trademarks and trade names		74.0
Goodwill				215.0
Other assets		73.8		4.8
Goodwill		507.2
Total assets acquired		1,476.6		456.8
Current liabilities		122.5		8.2
Long-term debt		0.5
Deferred taxes		236.7
Other long-term liabilities		3.0
Deferred income taxes				37.7
Total liabilities assumed		362.7		45.9
Net assets acquired	$	1,113.9	$	410.9

The weighted average amortization periods selected for technology, customer relationships and trademarks and trade names were 15 years, 8 years and 13 years, respectively. Upon receiving regulatory approval subsequent to the Embody acquisition date, the $36.3 million of IPR&D was reclassified to a definite-lived intangible asset and began amortizing over the applicable estimated useful life.

In the three-month period ended March 31, 2024, there were no material adjustments to the preliminary values of the 2023 acquisitions.

We have not included pro forma information and certain other information under GAAP for ~~the LDR acquisition because it did not have a material impact on our financial position or results of operations.~~

~~Other acquisitions~~

During the year ended December 31, 2016, we completed individually immaterial acquisitions of companies including Cayenne Medical, Inc. (“Cayenne Medical”), a sports medicine company, Compression Therapy Concepts, Inc. (“CTC”), a provider of non-invasive products for the prevention of deep vein thrombosis, CD Diagnostics, Inc. (“CD Diagnostics”), a medical diagnostic testing company, and MedTech SA (“MedTech”), a designer and manufacturer of robotic equipment for brain and spine surgeries. The total aggregate cash consideration was $441.7 million. These acquisitions were completed primarily to expand our product offerings. We have assigned a fair value of $58.0 million for settlement of preexisting relationships and additional payments related to these acquisitions that are contingent on the respective acquired companies’ product sales, commercial milestones and certain cost savings. The fair value of the aggregate contingent payment liabilities was calculated based on the probability of achieving the specified sales growth, cost savings and commercial milestones and discounting to present value the payments. The goodwill was generated from the operational synergies and cross-selling opportunities we expected to achieve from the technologies acquired. None of the goodwill related to these acquisitions is deductible for tax purposes.

The following table summarizes the aggregate final estimated fair value of the assets acquired and liabilities assumed related to the Cayenne Medical, CTC, CD Diagnostics, MedTech, and other immaterial acquisitions that occurred during the year ended December 31, 2016 (in millions):

Current assets

$
66.4

Property, plant and equipment

4.5

Intangible assets

172.9

Goodwill

337.1

Other assets

38.2

Total assets acquired

619.1

Current liabilities

20.0

Long-term liabilities

99.4

Total liabilities assumed

119.4

Net assets acquired

$
499.7

~~We have not included pro forma information and certain other information under GAAP for the Cayenne Medical, CTC, CD Diagnostics, or MedTech acquisitions~~ because ~~individually and in aggregate,~~ they did not have a material impact on our financial position or results of operations.

~~The following table summarizes the changes in the carrying amount of our goodwill (in millions):~~

~~Finished goods inventory as of September 30, 2017 and December 31, 2016 included $0.7 million and $35.3 million, respectively, to step-up acquired inventory to fair value.~~

~~5. Property, Plant and Equipment~~

September 30,

December 31,

2017

2016

(in millions)

Land

$
29.4

$
37.0

Buildings and equipment

1,833.5

1,789.9

Capitalized software costs

406.8

397.2

Instruments

2,634.4

2,347.6

Construction in progress

111.3

99.8

5,015.4

4,671.5

Accumulated depreciation

(2,966.8
)

(2,633.6
)
Property, plant and equipment, net

$
2,048.6

$
2,037.9

~~6. Transfers of Financial Assets~~

In the fourth quarter of 2016, we executed receivables purchase arrangements to liquidate portions of our trade accounts receivable balance with unrelated third parties. The receivables relate to products sold to customers and are short-term in nature. The factorings were treated as sales of our accounts receivable. Proceeds from the transfers reflect either the face value of the accounts receivable or the face value less factoring fees.

In the U.S. and Japan, our programs are executed on a revolving basis with a maximum funding limit as of September 30, 2017 of $315 million. We act as the collection agent on behalf of the third party, but have no significant retained interests or servicing liabilities related to the accounts receivable sold. In order to mitigate credit risk, we purchased credit insurance for the factored accounts receivable. The result is our risk of loss being limited to the factored accounts receivable not covered by the insurance. Additionally, we have provided guarantees for the factored accounts receivable. The maximum exposures to loss associated with these arrangements were $24.4 million and $5.2 million as of September 30, 2017 and December 31, 2016, respectively.

~~In Europe, we sell to a third party and have no continuing involvement or significant risk with the factored accounts receivable.~~

Funds received from the transfers are recorded as an increase to cash and a reduction to accounts receivable outstanding in the condensed consolidated balance sheets. We report the cash flows attributable to the sale of receivables to third parties in cash flows from operating activities in our condensed consolidated statements of cash flows. Net expenses resulting from the sales of receivables are recognized in selling, general and administrative expense. Net expenses include any resulting gains or losses from the sales of receivables, credit insurance and factoring fees.

In the nine month period ended September 30, 2017, we sold receivables having an aggregate face value of $1,050.5 million to third parties in exchange for cash proceeds of $1,049.8 million. Expenses recognized on these sales during the three and nine month periods ended September 30, 2017, were not significant. In the nine month period ended September 30, 2017, under the U.S. and Japan programs, we collected $682.2 million from our customers and remitted that amount to the third party, and we effectively repurchased $58.9 million of previously sold accounts receivable from the third party due to the programs’ revolving nature. We estimate the incremental operating cash inflows related to all of our programs were approximately $273 million in the nine month period ended September 30, 2017.

At September 30, 2017, the outstanding principal amount of receivables that has been derecognized under the U.S. and Japan revolving arrangements amounted to $210.6 million and $65.5 million, respectively.

~~7. Debt~~

Our debt consisted of the following (in millions):

September 30,

December 31,

2017

2016

Current portion of long-term debt

1.450% Senior Notes due 2017

$
-

$
500.0

2.000% Senior Notes due 2018

1,150.0

-

U.S. Term Loan B

75.0

75.0

Other short-term debt

-

0.6

Total current portion of long-term debt

$
1,225.0

$
575.6

Long-term debt

2.000% Senior Notes due 2018

$
-

$
1,150.0

4.625% Senior Notes due 2019

500.0

500.0

2.700% Senior Notes due 2020

1,500.0

1,500.0

3.375% Senior Notes due 2021

300.0

300.0

3.150% Senior Notes due 2022

750.0

750.0

3.550% Senior Notes due 2025

2,000.0

2,000.0

4.250% Senior Notes due 2035

253.4

253.4

5.750% Senior Notes due 2039

317.8

317.8

4.450% Senior Notes due 2045

395.4

395.4

1.414% Euro Notes due 2022

591.1

527.4

2.425% Euro Notes due 2026

591.1

527.4

U.S. Term Loan A

1,135.0

1,700.0

U.S. Term Loan B

600.0

675.0

Japan Term Loan A

103.9

99.6

Japan Term Loan B

189.1

-

Other long-term debt

4.1

4.2

Debt discount and issuance costs

(56.3
)

(65.8
)
Adjustment related to interest rate swaps

25.1

31.4

Total long-term debt

$
9,199.7

$
10,665.8


	March 31,			December 31,
	2024			2023
Current portion of long-term debt
Uncommitted Credit Facility	$	120.0		$	50.0
1.450% Senior Notes due 2024		850.0			850.0
Total current portion of long-term debt	$	970.0		$	900.0
Long-term debt
3.550% Senior Notes due 2025	$	863.0		$	863.0
3.050% Senior Notes due 2026		600.0			600.0
5.350% Senior Notes due 2028		500.0			500.0
3.550% Senior Notes due 2030		257.5			257.5
2.600% Senior Notes due 2031		750.0			750.0
4.250% Senior Notes due 2035		253.4			253.4
5.750% Senior Notes due 2039		317.8			317.8
4.450% Senior Notes due 2045		395.4			395.4
2.425% Euro Notes due 2026		540.1			552.3
1.164% Euro Notes due 2027		540.1			552.3
Debt discount and issuance costs		(27.4	)		(29.1	)
Adjustment related to interest rate swaps		(163.7	)		(144.7	)
Total long-term debt	$	4,826.2		$	4,867.9

At ~~September 30, 2017,~~March 31, 2024, our total current and non-current debt ~~balance~~of $5.8 billion consisted of ~~$8.3~~$5.9 billion aggregate principal amount of our senior notes, which included ~~$1.2~~€1.0 billion of Euro-denominated senior notes (“Euro Notes”), ~~$1.14 billion~~and $120.0 million of outstanding borrowings under a U.S. term loan (“U.S. Term Loan A”) that will mature on June 24, 2020, $675.0 million outstanding under a U.S. term loan (“U.S. Term Loan B”) that will mature on September 30, 2019, an 11.7 billion Japanese Yen term loan agreement (“Japan Term Loan A”) and a 21.3 billion Japanese Yen term loan agreement (“Japan Term Loan B”) that each will mature on September 27, 2022, and other debt and fair value adjustments totaling $29.2 million,the Uncommitted Credit Facility (defined below), partially offset by debt discount and issuance costs of ~~$56.3~~$27.4 million and fair value adjustments related to interest rate swaps totaling$163.7 million.

In the three-month period ended March 31, 2023, we redeemed $83.0 million outstanding principal amount on a short-term term loan by paying $33.9 million in cash and by transferring all our common shares we owned of a publicly traded company we previously spun-off. The transfer of the common shares as part of the settlement resulted in a $49.1 million noncash financing activity. In the three-month period ended March 31, 2023 we also redeemed $86.3 million outstanding principal amount of our 3.700% Senior Notes due 2023.

On ~~September 22, 2017,~~August 28, 2023, we entered into an uncommitted facility letter (the "Uncommitted Credit Facility"), which provides that from time to time, we may request, and the lender in its absolute and sole discretion may provide, short-term loans. Borrowings under the Uncommitted Credit Facility may be used only for general corporate and working capital purposes. The Uncommitted Credit Facility provides that the aggregate principal amount of outstanding borrowings at any time shall not exceed $300.0 million. Each borrowing under the Uncommitted Credit Facility will mature on the maturity date specified by the lender at the time of the advance, which will be no more than 90 days following the date of the advance. The Uncommitted Credit Facility and borrowings thereunder are unsecured. Borrowings under the Uncommitted Credit Facility bear interest at floating rates, based upon either an adjusted term secured overnight financing rate (“Term SOFR”) for the applicable interest period, the prime rate, or lender’s cost of funds, in each case, plus an applicable margin determined at the time of each borrowing. The Uncommitted Credit Facility includes customary affirmative and negative covenants and events of default for unsecured uncommitted financing arrangements. We were in compliance with all covenants under the Uncommitted Credit Facility as of March 31, 2024. As of March 31, 2024, there were outstanding borrowings of $120.0 million under the Uncommitted Credit Facility.

On July 7, 2023, we entered into a term loan agreement for the Japan Term Loan B, and an amended and restated term loan agreement, which amended and restated the Japan Term Loan A loan agreement dated as of May 24, 2012, as amended as of October 31, 2014. As described above, the term loans under both of these agreements will mature on September 27, 2022. Each of these term loans bears interest at a fixed rate of 0.635% per annum.

~~We have a~~new five-year revolving credit ~~and term loan~~ agreement (the ~~“2016~~“2023 Five-Year Credit Agreement”) and a ~~first amendment to our~~new 364-day revolving credit agreement ~~executed in 2014~~ (the ~~“2014~~“2023 364-Day Revolving Credit Agreement”). , as described below. Borrowings under these credit agreements will be used for general corporate purposes.

The ~~2016~~2023 Five-Year Credit Agreement contains ~~the U.S. Term Loan B and~~ a five-year unsecured ~~multicurrency~~ revolving facility of ~~$1.5~~$1.5 billion (the ~~“Multicurrency~~“2023 Five-Year Revolving Facility”). The ~~Multicurrency Revolving Facility~~2023 Five-Year Credit Agreement replaced the previous ~~multicurrency~~revolving credit agreement entered into on August 19, 2022 (the “2022 Five-Year Credit Agreement”), which contained a five-year unsecured revolving facility of $1.5 billion (the “2022 Five-Year Revolving Facility”). There was approximately $520.0 million in aggregate outstanding borrowings under the ~~2014~~2022 Five-Year Credit Agreement at the time it was terminated, which borrowings were repaid in full through borrowings under the 2023 Five-Year Credit Agreement on July 7, 2023 in the same amount and on the same interest rate and margin terms.

The 2023 Five-Year Credit Agreement will mature on ~~September 30, 2021,~~July 7, 2028, with two ~~available~~ one-year extensions exercisable at our ~~discretion.~~discretion and subject to required lender consent. The ~~2014~~2023 Five-Year Credit Agreement also ~~provided for~~includes an uncommitted incremental feature allowing us to request an increase of the ~~U.S. Term Loan A, which remains in effect.~~facility by an aggregate amount of up to $500.0 million.

Borrowings under the ~~2014 and 2016~~2023 Five-Year Credit ~~Agreements generally~~Agreement bear interest at floating ~~rates.~~rates, based upon either an adjusted Term SOFR for the applicable interest period or an alternate base rate, in each case, plus an applicable margin determined by reference to our senior unsecured long-term debt credit rating. We pay a facility fee on the aggregate amount of the ~~Multicurrency~~2023 Five-Year Revolving ~~Facility. If~~Facility at a rate determined by reference to our senior unsecured long-term debt credit ~~rating falls below investment grade, additional restrictions would result,~~rating. The 2023 Five-Year Credit Agreement contains customary affirmative and negative covenants and events of default for unsecured financing arrangements, including, ~~restrictions~~among other things, limitations on ~~investments~~consolidations, mergers, and ~~payment~~sales of ~~dividends.~~assets. The 2023 Five-Year Credit Agreement also requires us to maintain a consolidated indebtedness to consolidated EBITDA ratio of no greater than 4.5 to 1.0 as of the last day of any period of four consecutive fiscal quarters (with such ratio subject to increase to 5.0 to 1.0 for a period of time in connection with a qualified material acquisition and certain other restrictions). We were in compliance with all ~~financial~~ covenants

under the ~~2014 and 2016~~2023 Five-Year Credit ~~Agreements~~Agreement as of ~~September 30, 2017.~~March 31, 2024. As of ~~September 30, 2017,~~March 31, 2024, there were no outstanding borrowings under the 2023 Five-Year Credit Agreement.

The 2023 364-Day Revolving Credit Agreement is an unsecured revolving credit facility in the principal amount of $1.0 billion (the “2023 364-Day Revolving Facility”). The 2023 364-Day Revolving Credit Agreement replaced a credit agreement entered into on August 19, 2022, which was also a 364- day unsecured revolving credit facility of $1.0 billion (the “2022 364-Day Revolving Facility”). There were no borrowings outstanding under the ~~Multicurrency~~2022 364-Day Revolving ~~Facility.~~ Facility when it was terminated.

~~Under~~

The 2023 364-Day Revolving Facility will mature on July 5, 2024. Borrowings under the ~~terms~~2023 364-Day Revolving Credit Agreement bear interest at floating rates based upon either an adjusted Term SOFR for the applicable interest period or an alternate base rate, in each case, plus an applicable margin determined by reference to our senior unsecured long-term debt credit rating. We pay a facility fee on the aggregate amount of ~~U.S. Term Loan A, starting September 30, 2015, principal payments are due~~the 2023 364-Day Revolving Facility at a rate determined by reference to our senior unsecured long-term debt credit rating. The 2023 364-Day Revolving Credit Agreement contains customary affirmative and negative covenants and events of default for an unsecured financing arrangement including, among other things, limitations on consolidations, mergers, and sales of assets. The 2023 364-Day Revolving Credit Agreement also requires us to maintain a consolidated indebtedness to consolidated EBITDA ratio of no greater than 4.5 to 1.0 as ~~follows: $75.0 million on~~of the last day of any period of four consecutive fiscal quarters (with such ratio subject to increase to 5.0 to 1.0 in connection with a ~~quarterly basis during~~qualified material acquisition and certain other restrictions). We were in compliance with all covenants under the first three years, $112.5 million on a quarterly basis during the fourth year, and $412.5 million on a quarterly basis during the fifth year. We have paid $1.86 billion in principal under U.S. Term Loan A, resulting in $1.14 billion in2023 364-Day Revolving Credit Agreement as of March 31, 2024. As of March 31, 2024, there were no outstanding borrowings under the 2023 364-Day Revolving Credit Agreement.

Borrowings under our revolving credit facilities have been executed with underlying notes that have maturities of three months or less. At maturity of the underlying note, we elect to either repay the note, borrow the same amount, or some combination thereof. On our condensed consolidated statements of cash flows, we present the borrowings and repayments of these underlying notes as ~~of September 30, 2017.~~ net cash inflows or outflows due to their short-term nature.

Under the terms of U.S. Term Loan B, future principal payments are due as follows: $75.0 million on September 30, 2018, with the remaining balance due on the maturity date of September 30, 2019. We have paid $75.0 million in principal under U.S. Term Loan B, resulting in $675.0 million outstanding on the U.S. Term Loan B as of September 30, 2017.

The estimated fair value of our senior notes, which includes our Euro notes, as of ~~September 30, 2017,~~March 31, 2024, based on quoted prices for the specific securities from transactions in over-the-counter markets (Level 2), was $8,520.9 million. The estimated fair value of Japan Term Loan A and Japan Term Loan B, in the aggregate, as of September 30, 2017, based upon publicly available market yield curves and the terms of the debt (Level 2), was $291.8$5,553.8 million. The carrying ~~values~~value of ~~U.S. Term Loan A and U.S. Term Loan B approximate their~~the outstanding $120.0 million principal balance of the Uncommitted Credit Facility approximates its fair ~~values~~value as ~~they bear~~it bears interest at short-term ~~variable~~ market rates.

The following table shows the tax effects on each component of AOCI recognized in our condensed consolidated statements of comprehensive income (in millions):

We value our foreign currency forward contracts ~~and foreign currency options~~ using a market approach based on foreign currency exchange rates obtained from active markets, and we perform ongoing assessments of counterparty credit risk.

We value our interest rate swaps using a market approach based on publicly available market yield curves and the terms of our swaps, and we perform ongoing assessments of counterparty credit risk. The valuation of our cross-currency interest rate swaps also includes consideration of foreign currency exchange rates.

Contingent payments related to acquisitions consist of ~~commercial milestone, cost savings~~sales-based payments and ~~sales-based payments,~~regulatory milestones, and are valued using discounted cash flow techniques. The fair value of commercial milestone payments reflects management’s expectations of probability of payment, and increases as the probability of payment increases or expectation of timing of payments is accelerated. The fair value of cost savings and sales-based payments is based upon significant unobservable inputs such as probability-weighted future ~~cost savings and~~ revenue estimates and ~~increases~~simulating the numerous potential outcomes, and changes as ~~cost savings and~~ revenue estimates increase ~~probability weighting of higher cost savings and revenue scenarios increase~~ or expectation of timing of payment is accelerated. In the three and nine month periods ended September 30, 2017, we recognized $1.7 million of loss and $1.5 million of income, respectively, related to contingent payments due to changes in estimates. In the nine month period ended September 30, 2017, we also paid $13.7 million in contingent payments and made a fair value adjustment of $3.6 million to the preliminary estimate of contingent consideration that reduced the contingent payment liability.

In the third quarter of 2017, we performed a goodwill impairment test on our Office Based Technologies reporting unit due to continued revenue declines. As a result, we recognized a $32.7 million impairment charge.decrease. The $32.7 million impairment represented the entire goodwill balance of the reporting unit and therefore no goodwill remains. This reporting unit was acquired as part of the Biomet merger in 2015 and therefore its assets and liabilities were recognized at their estimated fair values at the merger date. Since the merger date valuation, operating performance has been lower than expected due to integration issues, management turnover and poor execution of its operating plans.

~~We estimated the~~ fair value of the ~~Office Based Technologies reporting unit using~~regulatory milestones is based on the probability of success in obtaining the specified regulatory approval.

Contingent payments related to the Embody acquisition are to be settled by issuance of our common stock and cash payments. The Embody acquisition is discussed in Note 7. During the three-month period ended March 31, 2024, we issued 0.2 million shares of our common stock valued at $23.4 million and paid $1.5 million of cash for a ~~market approach. GAAP defines~~commercial milestone related to the Embody acquisition. The fair value ~~as “the price that would~~of common stock was determined to be ~~received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at~~$123.87 per share, which represented the ~~measurement~~average of our high and low stock prices on the settlement date.~~” We used market indicators based upon the reporting unit’s operating performance to estimate what price would be paid~~ To minimize dilution from issuing shares for the ~~assets~~milestone settlement, we repurchased 0.2 million shares of our common stock in ~~an orderly transaction.~~ February of 2024.

Changes in estimates for contingent payments related to ~~them. We did not perform goodwill impairment tests~~acquisitions are recognized in the Acquisition, integration, divestiture and related line item on our ~~other reporting units as there were no indicators that their goodwill may be impaired.~~ condensed consolidated statements of earnings.

11. Derivative Instruments and Hedging Activities

We are exposed to certain market risks relating to our ongoing business operations, including foreign currency exchange rate risk, commodity price risk, interest rate risk and credit risk. We manage our exposure to these and other market risks through regular operating and financing activities. Currently, the only risks that we manage through the use of derivative instruments are interest rate risk and foreign currency exchange rate risk.

Interest Rate Risk

Derivatives Designated as Fair Value Hedges

~~In prior years, we entered into various~~We currently use fixed-to-variable interest rate ~~swap agreements that were accounted for~~swaps to manage our exposure to interest rate risk from our cash investments and debt portfolio. These derivative instruments are designated as fair value hedges ~~of a portion of our 4.625% Senior Notes due 2019 and all of our 3.375% Senior Notes due 2021. In August 2016, we received cash for these interest rate swap assets by terminating~~under GAAP. Changes in the hedging instruments with the counterparties. The remaining unamortized balance as of September 30, 2017 was $25.1 million, which will be recognized using the effective interest rate method over the remaining maturity periodfair value of the ~~hedged notes.~~ derivative instrument are recorded in current earnings and are offset by gains or losses on the underlying debt instrument.

As of March 31, 2024 and December 31, 2023, the following amounts were recorded on our condensed consolidated balance sheets related to cumulative basis adjustments for fair value hedges (in millions):


	Carrying Amount of the Hedged Liabilities				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities
Balance Sheet Line Item	March 31, 2024		December 31, 2023		March 31, 2024			December 31, 2023
Long-term debt	$	832.3	$	851.3	$	(163.7	)	$	(144.7	)

Derivatives Designated as Cash Flow Hedges

In 2014, we entered into forward starting interest rate swaps that were designated as cash flow hedges of our thirty-year tranche of senior notes ~~(the 4.450% Senior Notes~~ due ~~2045)~~2045 we expected to issue in 2015. The forward starting interest rate swaps mitigated the risk of changes in interest rates prior to the completion of the ~~offering of senior~~ notes ~~in connection with the Biomet merger.~~offering. The interest rate swaps were settled, and the remaining loss to be recognized at ~~September 30, 2017~~March 31, 2024 was ~~$27.8~~$23.7 million, which will be recognized using the effective interest rate method over the remaining maturity period of the hedged notes.

In September 2016, we entered into various variable-to-fixed interest rate swap agreements with a notional amount of $375 million that were accounted for as cash flow hedges of U.S. Term Loan B. The interest rate swaps minimize the exposure to changes in the LIBOR interest rates while the variable-rate debt is outstanding. The weighted average fixed interest rate for all of the swaps executed is approximately 0.82 percent through September 30, 2019.

Foreign Currency Exchange Rate Risk

We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. We also designated our Euro Notes as net investment hedges of investments in foreign subsidiaries. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and net assets denominated in Euros, Swiss Francs, Japanese Yen, British Pounds, Chinese Renmimbi, 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. We do not use derivative financial instruments for trading or speculative purposes.

Derivatives Designated as Net Investment Hedges

We are exposed to the impact of foreign exchange rate fluctuations in the investments in our wholly-owned foreign subsidiaries that are denominated in currencies other than the U.S. Dollar. In order to mitigate the volatility in foreign exchange rates, we issued Euro Notes in December 2016 and November 2019 and designated 100 percent of the Euro Notes to hedge our net investment in certain wholly-owned foreign subsidiaries that have a functional currency of the Euro. All changes in the fair value of ~~the~~a hedging instrument designated as a net investment hedge are recorded as a component of ~~accumulated other comprehensive loss~~AOCI in the condensed consolidated balance ~~sheet.~~sheets.

~~In the three~~At March 31, 2024, we had receive-fixed-rate, pay-fixed-rate cross-currency interest swaps with notional amounts outstanding of Euro 700 million, Japanese Yen 54.1 billion and ~~nine month periods ended September 30, 2017, we recognized foreign exchange losses of $41.7 million and $127.5 million, respectively, in AOCI in foreign currency translation adjustments on~~Swiss Franc 125 million. These transactions further hedge our net investment ~~hedges. We recognized no ineffectiveness from our~~in certain wholly-owned foreign subsidiaries that have a functional currency of Euro, Japanese Yen and Swiss Franc. All changes in the fair value of a derivative instrument designated as a net investment ~~hedges for~~hedge are recorded as a component of AOCI in the ~~three~~condensed consolidated balance sheets. The portion of this change related to the excluded component will be amortized into earnings over the life of the derivative while the remainder will be recorded in AOCI until the hedged net investment is sold or substantially liquidated. We recognize the excluded component in interest expense, net on our condensed consolidated statements of earnings. The net cash received related to the receive-fixed-rate, pay-fixed-rate component of the cross-currency interest rate swaps is reflected in investing cash flows in our condensed consolidated statements of cash flows. In the three-month period ended March 31, 2023, Euro 100

million and ~~nine month periods~~Swiss Franc 50 million of these cross-currency interest rate swaps matured at a gain of $6.0 million and loss of $3.0 million, respectively. The settlement of these gains and losses with the counterparties is reflected in investing cash flows in our condensed consolidated statements of cash flows and will remain in AOCI on our condensed consolidated balance sheet until the hedged net investment is sold or substantially liquidated. No cross-currency interest rate swaps matured in the three-month period ended ~~September 30, 2017.~~March 31, 2024.

Derivatives Designated as Cash Flow Hedges

Our revenues are generated in various currencies throughout the world. However, a significant amount of our inventory is produced in U.S. Dollars. Therefore, movements in foreign currency exchange rates may have different proportional effects on our revenues compared to our cost of products sold. To minimize the effects of foreign currency exchange rate movements on cash flows, we hedge intercompany sales of inventory expected to occur within the next 30 months with foreign currency exchange forward contracts. We designate these derivative instruments as cash flow hedges.

We perform quarterly assessments of hedge effectiveness by verifying and documenting the critical terms of the hedge instrument and confirming that forecasted transactions have not changed significantly. We also assess on a quarterly basis whether there have been adverse developments regarding the risk of a counterparty default. For derivatives which qualify as hedges of future cash flows, the ~~effective portion of changes in fair value is~~gains and losses are temporarily recorded in ~~other comprehensive income~~AOCI and then recognized in cost of products sold when the hedged item affects net earnings. ~~The ineffective portion of a derivative’s change in fair value, if any, is immediately reported in cost of products sold.~~ On our condensed consolidated ~~statement~~statements of cash flows, the settlements of these cash flow hedges are recognized in operating cash flows.

For foreign currency exchange forward contracts and options outstanding at ~~September 30, 2017,~~March 31, 2024, 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 obligations to purchase Swiss Francs and sell U.S. Dollars. These derivatives mature at dates ranging from ~~October 2017~~April 2024 through ~~March 2020.~~August 2026. As of ~~September 30, 2017,~~March 31, 2024, the notional amounts of outstanding forward contracts and options entered into with third parties to purchase U.S. Dollars were ~~$1,683.9~~$1,526.7 million. As of ~~September 30, 2017,~~March 31, 2024, the notional amounts of outstanding forward contracts and options entered into with third parties to purchase Swiss Francs were ~~$285.0~~$435.4 million.

Derivatives Not Designated as Hedging Instruments

We enter into foreign currency forward exchange contracts with terms of one ~~month~~to three months to manage currency exposures for monetary assets and liabilities denominated in a currency other than an entity’s functional currency. As a result, any foreign currency ~~re-measurement~~remeasurement gains/losses recognized in earnings are generally offset with gains/losses on the foreign currency forward exchange contracts in the same reporting period. The net amount of these offsetting gains/losses is recorded in ~~Other expense. These~~other (expense) income, net. Any outstanding contracts are ~~settled on the last day of each reporting period. Therefore, there is no outstanding balance related to these contracts~~ recorded on the balance sheet at fair value as of the end of the reporting period. The notional amounts of these contracts are typically in a range of ~~$1.5~~$1.25 billion to ~~$2.0~~$1.75 billion per quarter.

Income Statement Presentation

~~Derivatives Designated as Fair Value Hedges~~

~~Derivative instruments designated as fair value hedges had the following effects on our condensed consolidated statements of earnings (in millions):~~

Gain (Loss) on

Gain (Loss) on

Instrument

Hedged Item

Three Months Ended

Nine Months Ended

Three Months Ended

Nine Months Ended

Location on

September 30,

September 30,

September 30,

September 30,

Derivative Instrument

Statement of Earnings

2017

2016

2017

2016

2017

2016

2017

2016

Interest rate swaps

Interest expense

$
-

$
(3.8
)

$
-

$
10.1

$
-

$
3.8

$
-

$
(10.1
)

Derivatives Designated as Cash Flow Hedges

Derivative instruments designated as cash flow hedges had the following effects, before taxes, on AOCI and ~~Net~~net earnings on our condensed consolidated statements of earnings, condensed consolidated statements of comprehensive income and condensed consolidated balance sheets (in millions):


	Amount of Gain					Amount of Gain (Loss)
	Recognized in AOCI					Reclassified from AOCI
	Three Months Ended					Three Months Ended
	March 31,				Location on	March 31,
Derivative Instrument	2024		2023		Statements of Earnings	2024			2023
Foreign exchange forward contracts	$	43.4	$	11.1	Cost of products sold	$	22.0		$	23.1
Forward starting interest rate swaps		-		-	Interest expense, net		(0.2	)		(0.2	)
	$	43.4	$	11.1		$	21.8		$	22.9

Amount of Gain (Loss)

Amount of Gain (Loss)

Recognized in AOCI

Reclassified from AOCI

Three Months Ended

Nine Months Ended

Three Months Ended

Nine Months Ended

September 30,

September 30,

Location on

September 30,

September 30,

Derivative Instrument

2017

2016

2017

2016

Statement of Earnings

2017

2016

2017

2016

Foreign exchange
forward contracts

$
(35.6
)

$
(16.1
)

$
(98.7
)

$
(80.9
)

Cost of products sold

$
(5.1
)

$
18.1

$
12.0

$
76.5

Interest rate swaps

(0.3
)

-

(0.3
)

-

Interest expense

-

-

-

-

Forward starting
interest rate swaps

-

-

-

-

Interest expense

(0.1
)

(0.4
)

(0.4
)

(1.3
)

$
(35.9
)

$
(16.1
)

$
(99.0
)

$
(80.9
)

$
(5.2
)

$
17.7

$
11.6

$
75.2

The net amounts recognized in earnings during the three and nine month periods ended September 30, 2017 and 2016 due to ineffectiveness and amounts excluded from the assessment of hedge effectiveness were not significant.

The fair value of outstanding derivative instruments designated as cash flow hedges and recorded on ~~the~~our condensed consolidated balance sheet at ~~September 30, 2017,~~March 31, 2024, together with settled derivatives where the hedged item has not yet affected earnings, was a net unrealized ~~loss~~gain of ~~$74.3~~$93.1 million, or ~~$56.6~~$79.9 million after taxes, which is deferred in AOCI. A ~~loss~~gain of ~~$29.3~~$75.2 million, or ~~$24.1~~$62.0 million after taxes, is expected to be reclassified to earnings in cost of products sold and a loss of ~~$0.6~~$0.7 million, or ~~$0.4~~$0.5 million after taxes, is expected to be reclassified to earnings in interest expense, net over the next twelve months.

The following table presents the effect of fair value, cash flow and net investment hedge accounting on our condensed consolidated statements of earnings (in millions):


	Location and Amount of Gain/(Loss) Recognized in Income on Fair Value, Cash Flow and Net Investment Hedging Relationships
	Three Months Ended					Three Months Ended
	March 31, 2024					March 31, 2023
	Cost of		Interest			Cost of		Interest
	Products		Expense,			Products		Expense,
	Sold		Net			Sold		Net
Total amounts of income and expense line items presented in the statements of earnings in which the effects of fair value, cash flow and net investment hedges are recorded	$	512.3	$	(50.7	)	$	500.8	$	(48.2	)
The effects of fair value, cash flow and net investment hedging:
Gain (loss) on fair value hedging relationships
Interest rate swaps		-		(10.6	)		-		(8.2	)
Gain (loss) on cash flow hedging relationships
Foreign exchange forward contracts		22.0		-			23.1		-
Forward starting interest rate swaps		-		(0.2	)		-		(0.2	)
Gain on net investment hedging relationships
Cross-currency interest rate swaps		-		8.2			-		9.0

Derivatives Not Designated as Hedging Instruments

The following ~~losses~~gains / (losses) from these derivative instruments were recognized on our condensed consolidated statements of earnings (in millions):


		Three Months Ended						Nine Months Ended							Three Months Ended
	Location on	September 30,						September 30,						Location on	March 31,
Derivative Instrument	Statement of Earnings	2017			2016			2017			2016			Statements of Earnings	2024		2023
Foreign exchange forward contracts	Other expense, net	$	(16.3	)	$	(5.1	)	$	(54.9	)	$	(42.3	)	Other (expense) income, net	$	8.4	$	(3.6	)

These ~~losses~~gains / (losses) do not reflect offsetting ~~gains~~losses of ~~$11.1 million and $1.3~~$12.2 million in the ~~three month periods~~three-month period ended ~~September 30, 2017 and 2016, respectively,~~March 31, 2024, and offsetting gains of ~~$43.0 million and $33.6 million~~$0.4 in the ~~nine month periods~~three-month period ended ~~September 30, 2017 and 2016, respectively,~~March 31, 2023, recognized in ~~Other expense,~~other income (expense), net as a result of foreign currency ~~re-measurement~~remeasurement of monetary assets and liabilities denominated in a currency other than an entity’s functional currency.

1920

Balance Sheet Presentation

As of ~~September 30, 2017~~March 31, 2024 and December 31, ~~2016,~~2023, all ~~derivative instruments~~derivatives designated as fair value hedges, ~~and~~ cash flow hedges ~~were~~and net investment hedges are recorded at fair value on ~~the~~our condensed consolidated balance ~~sheet.~~sheets. On our condensed consolidated balance sheets, we recognize individual forward contracts ~~and options~~ with the same counterparty on a net asset/liability basis if we have a master netting agreement with the counterparty. Under these master netting agreements, we are able to settle derivative instrument assets and liabilities with the same counterparty in a single transaction, instead of settling each derivative instrument separately. We have master netting agreements with substantially all of our counterparties. The fair value of derivative instruments on a gross basis is as follows (in millions):

As of September 30, 2017

As of December 31, 2016

Balance

Balance

Sheet

Fair

Sheet

Fair

Location

Value

Location

Value

Asset Derivatives

Foreign exchange forward contracts

Other current assets

$
15.9

Other current assets

$
57.9

Foreign exchange forward contracts

Other assets

7.4

Other assets

34.9

Interest rate swaps

Other assets

3.8

Other assets

4.0

Total asset derivatives

$
27.1

$
96.8

Liability Derivatives

Foreign exchange forward contracts

Other current liabilities

$
37.2

Other current liabilities

$
20.9

Foreign exchange forward contracts

Other long-term liabilities

21.7

Other long-term liabilities

6.9

Total liability derivatives

$
58.9

$
27.8


	As of March 31, 2024			As of December 31, 2023
	Balance			Balance
	Sheet	Fair		Sheet	Fair
	Location	Value		Location	Value
Asset Derivatives Designated as Hedges
Foreign exchange forward contracts	Other current assets	$	66.3	Other current assets	$	58.4
Cross-currency interest rate swaps	Other current assets		-	Other current assets		-
Foreign exchange forward contracts	Other assets		21.2	Other assets		17.2
Cross-currency interest rate swaps	Other assets		27.3	Other assets		5.4
Total asset derivatives		$	114.8		$	81.0

Asset Derivatives Not Designated as Hedges
Foreign exchange forward contracts	Other current assets	$	3.7	Other current assets	$	1.2

Liability Derivatives Designated as Hedges
Foreign exchange forward contracts	Other current liabilities	$	8.5	Other current liabilities	$	13.9
Cross-currency interest rate swaps	Other current liabilities		35.0	Other current liabilities		33.3
Foreign exchange forward contracts	Other long-term liabilities		6.3	Other long-term liabilities		11.0
Cross-currency interest rate swaps	Other long-term liabilities		8.8	Other long-term liabilities		34.8
Interest rate swaps	Other long-term liabilities		163.8	Other long-term liabilities		144.7
Total liability derivatives		$	222.4		$	237.7

Liability Derivatives Not Designated as Hedges
Foreign exchange forward contracts	Other current liabilities	$	2.8	Other current liabilities	$	2.4

The table below presents the effects of our master netting agreements on our condensed consolidated balance sheets (in millions):


		As of March 31, 2024						As of December 31, 2023
Description	Location	Gross Amount		Offset		Net Amount in Balance Sheet		Gross Amount		Offset		Net Amount in Balance Sheet
Asset Derivatives
Cash flow hedges	Other current assets	$	66.3	$	8.4	$	57.9	$	58.4	$	13.0	$	45.4
Cash flow hedges	Other assets		21.2		4.7		16.5		17.2		8.2		9.0
Derivatives Not Designated as Hedges	Other current assets		3.7		1.3		2.4		1.2		0.8		0.4

Liability Derivatives
Cash flow hedges	Other current liabilities		8.5		8.4		0.1		13.9		13.0		0.9
Cash flow hedges	Other long-term liabilities		6.3		4.7		1.6		11.0		8.2		2.8
Derivatives Not Designated as Hedges	Other current liabilities		2.8		1.3		1.5		2.4		0.8		1.6

As of September 30, 2017

As of December 31, 2016

Description

Location

Gross
Amount

Offset

Net Amount in
Balance Sheet

Gross
Amount

Offset

Net Amount in
Balance Sheet

Asset Derivatives

Cash flow hedges

Other current assets

$
15.9

$
13.6

$
2.3

$
57.9

$
20.6

$
37.3

Cash flow hedges

Other assets

7.4

5.8

1.6

34.9

6.8

28.1

Liability Derivatives

Cash flow hedges

Other current liabilities

37.2

13.6

23.6

20.9

20.6

0.3

Cash flow hedges

Other long-term liabilities

21.7

5.8

15.9

6.9

6.8

0.1

The following net investment hedge ~~losses~~gains (losses) were recognized on our condensed consolidated statements of comprehensive income (in millions):


	Amount of Gain (Loss)
	Recognized in AOCI
	Three Months Ended
	March 31,
Derivative Instrument	2024		2023
Euro Notes	$	24.4	$	(19.2	)
Cross-currency interest rate swaps		46.1		(4.5	)
	$	70.5	$	(23.7	)

Amount of Loss

Recognized in OCI

Three Months Ended

Nine Months Ended

September 30,

September 30,

Derivative Instrument

2017

2016

2017

2016

Euro Notes

$
(41.7
)

$
-

$
(127.5
)

$
-

We operate on a global basis and are subject to numerous and complex tax laws and regulations. Additionally, tax laws continue to undergo rapid changes in both application and interpretation by various countries, including state aid interpretations and initiatives led by the ~~Organization~~Organisation for Economic Cooperation and Development ~~led initiatives.~~("OECD"). Our income tax filings are subject to examinations by taxing authorities throughout the world. Income tax audits may require an extended period of time to reach resolution and may result in significant income tax adjustments when interpretation of tax laws or allocation of company profits is disputed. Although ultimate timing is uncertain, the net amount of tax liability for unrecognized tax benefits may change within the next twelve months due to changes in audit status, expiration of statutes of limitations, settlements of tax assessments and other events. Management’s best estimate of such change is within the range of a ~~$115~~$270 million decrease to a ~~$25~~$20 million increase.

We are under continuous audit by the IRS and have disputes with the IRS and other foreign taxing authorities in the jurisdictions where we operate. In addition, some jurisdictions in which we operate require payment of disputed taxes to petition a court or taxing authority, or we may elect to make such payments prior to final resolution. We record any prepayments as income tax receivables when we believe our position is more likely than not to be upheld. We assess our position on these disputes at each reporting period. During the course of these audits and disputes, we receive proposed adjustments from taxing authorities that may be material. Therefore, there is a possibility that an adverse outcome in these audits or disputes could have a material effect on our results of operations and financial condition. Our U.S. ~~Federal~~federal income tax returns have been audited through ~~2009 and are currently under audit for years 2010-2015.~~ 2019.

The IRS has proposed adjustments for tax years ~~2005-2012,~~2010-2012, primarily related to reallocating profits between certain ~~of our~~ U.S. and foreign ~~subsidiaries.~~subsidiaries, which remain unsettled. We have

disputed these adjustments and intend to continue to vigorously defend our ~~positions. For~~positions as we pursue resolution through the administrative process with the IRS Independent Office of Appeals.

The IRS has proposed adjustments for tax years ~~2005-2007,~~2013-2015, primarily related to transfer pricing involving our cost sharing agreement between the U.S. and Switzerland affiliated companies and the reallocation of profits between certain of our U.S. and foreign subsidiaries. This includes a proposed increase to our U.S. federal taxable income, which would result in additional tax expense related to 2013 of approximately $370 million, subject to interest and penalties. We strongly believe that the position of the IRS, with regard to this matter, is inconsistent with the applicable U.S. Treasury Regulations governing our cost sharing agreement. We intend to vigorously contest the adjustment, and we ~~have filed a petition with~~will pursue all available administrative and, if necessary, judicial remedies. If we pursue judicial remedies in the U.S. Tax ~~Court. For~~Court for years ~~2008-2009,~~2013-2015, a number of years will likely elapse before such matters are finally resolved. No payment of any amount related to this matter is required to be made, if at all, until all applicable proceedings have been completed.

The IRS has proposed adjustments for tax years 2016-2019, primarily related to the U.S. taxation of foreign earnings and profits, which could result in additional material tax expense if we are ~~pursuing~~unsuccessful in defending our position. We disagree with the proposed adjustments and intend to continue to vigorously contest the adjustments. We do not expect a final resolution ~~through~~of these issues in the ~~IRS Administrative Appeals Process.~~next 12 months. No payment of any amount related to his matter is required to be made, if at all, until all applicable proceedings have been completed.

~~Our~~In the three-month period ended March 31, 2024, our effective tax rate (“ETR”) ~~has been affected by~~was 19.7 percent compared to 18.9 percent for the significant expenses associated with the Biomet merger and other acquisitions which have generally been recognized in higher income tax jurisdictions. Accordingly, this has reduced our ETR as our earnings have been lower in these higher income tax jurisdictions. In the nine monththree-month period ended September 30, 2017, we recognized a tax benefit of $69.7 million resulting from a tax restructuring that lowered the tax rate on certain deferred tax liabilities recorded on intangible assets recognizedMarch 31, 2023. The 19.7 percent and 18.9 percent ETR in the ~~Biomet merger acquisition-related accounting. In the three and nine month~~three-month periods ended ~~September 30, 2017, we recognized tax benefits~~March 31, 2024 and 2023, respectively, were primarily driven by our mix of $39.8 million and $128.6 million, respectively, related to resolution of certain tax matters. In the three and nine month periods ended September 30, 2017, we recognized net income tax expense of $7.7 million and $11.8 million, respectively, that related to previous periods for resolution of certain tax matters, certain tax restructurings and product liability matters. We have evaluated the effect of these out-of-period corrections on the three and nine month periods ended September 30, 2017, as well as on the previous interim and annual periods in which they should have been recognized, and concluded for both quantitative and qualitative reasons that these adjustments are not material to any of the periods affected. Further, we do not believe these adjustments will be material to our estimated net earnings ~~for the full year ended December 31, 2017.~~

We have defined benefit pension plans covering certain U.S. and Puerto Rico employees. The employees who are not participating in the defined benefit plans receive additional benefits under our defined contribution plans. Plan benefits are primarily based on years of credited service and the participant’s compensation. In addition to the U.S. and Puerto Rico defined benefit pension plans, we sponsor various foreign pension arrangements, including retirement and termination benefit plans required by local law or coordinated with government sponsored plans.

~~The components of net periodic pension expense for our~~between U.S. and foreign ~~defined benefit pension plans are as follows (in millions):~~

Welocations. Absent discrete tax events, we expect ~~that we~~our future ETR will ~~have minimal legally required funding obligations in 2017 for~~be lower than the U.S. corporate income tax rate of 21.0 percent due to our mix of earnings between U.S. and ~~Puerto Rico defined benefit pension plans,~~foreign locations, which generally have lower corporate income tax rates. Our ETR in future periods could also potentially be impacted by: changes in our mix of pre-tax earnings; changes in tax rates, tax laws or their interpretation; including the European Union adoption of Pillar Two proposals which began to take effect in 2024; the outcome of various federal, state and ~~therefore~~foreign audits, appeals, and litigation; and the expiration of certain statutes of limitations. Currently, we ~~have not made, nor do we voluntarily expect to make, any material contributions to~~cannot reasonably estimate the impact of these ~~plans during 2017. We contributed $13.2 million to~~items on our ~~foreign-based defined benefit pension plans in the nine month period ended September 30, 2017, and we expect to contribute $4.7 million to these foreign-based plans during the remainder of 2017.~~financial results.

13. Earnings Per Share

The following is a reconciliation of weighted average shares for the basic and diluted shares computations (in millions):

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Weighted average shares outstanding for basic
net earnings per share

202.3

200.1

201.7

199.9

Effect of dilutive stock options and other equity awards

1.7

2.8

1.9

2.4

Weighted average shares outstanding for diluted
net earnings per share

204.0

202.9

203.6

202.3


	Three Months Ended
	March 31,
	2024		2023
Weighted average shares outstanding for basic net earnings per share		205.2		209.4
Effect of dilutive stock options and other equity awards		1.0		1.0
Weighted average shares outstanding for diluted net earnings per share		206.2		210.4

During the ~~three and nine month~~three-month periods ended ~~September 30, 2017,~~March 31, 2024 and 2023, an average of ~~0.9~~1.6 million options and ~~0.8~~2.0 million options, respectively, to purchase shares of common stock were not included in the computation of diluted earnings per share because the effect would have been antidilutive.

exercise prices of these options were greater than the average market price of our common stock. In the three and nine month periods ended September 30, 2016, an average of 0.1 million options and 0.5 million options, respectively, were not included for the same reason.

14. Segment Information

We design, manufacture and market ~~orthopaedic~~orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; ~~spine,~~ craniomaxillofacial and thoracic products (“~~CMF”~~CMFT”); ~~office based technologies; dental implants;~~surgical products; and ~~related surgical products. We allocate~~a suite of integrated digital and robotic technologies that leverage data, data analytics and artificial intelligence. Our chief operating decision maker (“CODM”) allocates resources to achieve our operating profit goals through ~~seven~~three operating segments. ~~Our~~These operating segments, ~~are comprised of both geographic and product category business units. The geographic operating~~which also constitute our reportable segments, are ~~the~~Americas; EMEA; and Asia Pacific.

Our CODM evaluates performance based upon segment operating profit exclusive of operating expenses and income pertaining to intangible asset amortization, certain inventory and manufacturing-related charges, restructuring and other cost reduction initiatives, acquisition, integration, divestiture and related, litigation, certain European Union Medical Device Regulation (“EU MDR”) expenses, other charges and corporate functions (collectively referred to as “Corporate items”). Corporate functions include finance, corporate legal, information technology, human resources and other corporate departments as well as stock-based compensation and certain operations, distribution, quality assurance, regulatory assurance, research and development ("R&D") and marketing expenses. Intercompany transactions have been eliminated from segment operating profit.

Our Americas ~~which~~operating segment is comprised principally of the U.S. and includes other North, Central and South American ~~markets;~~markets. Our EMEA ~~which~~operating segment is comprised principally of Europe and includes the Middle East and African ~~markets; and~~markets. Our Asia Pacific ~~which~~operating segment is comprised ~~primarily~~principally of Japan, China and Australia and includes other Asian and Pacific markets. The Americas, EMEA and Asia Pacific operating segments include the commercial operations as well as regional headquarter expenses to operate in those markets. Our operating segments do not include many centralized, product category expenses such as R&D and global marketing that benefit all regions.

In the three-month period ended March 31, 2024, the segment operating profit measures our CODM reviews were revised. Certain product category headquarter costs, primarily R&D and marketing, that were previously in our Americas operating segment are now included in Corporate items. In addition, certain support function costs from our operating segments are Spine less Asia Pacific, Office Based Technologies, CMF and Dental. The geographic operating segments include results from all of our product categories except those in the product category operating segments. The Office Based Technologies, CMF and Dental product category operating segments reflect those respective product category results from all regions, whereas the Spine less Asia Pacific product category operating segment includes all spine product results excluding those from Asia Pacific.

As it relates to the geographic operating segments, management evaluates performance based upon segment operating profit exclusive of operating expenses pertaining to inventory step-up and certain other inventory and manufacturing related charges, “Certain claims,” goodwill impairment, intangible asset amortization, “Special items,” and global operations and corporate functions. Global operations and corporate functions include research, development engineering, medical education, brand management, corporate legal, finance and human resource functions, manufacturing operations and logistics and share-based payment expense. As it relates to each product category operating segment, research, development engineering, medical education, brand management and other various costs that are specific to the product category operating segment’s operations are reflected in its operating profit results. Due to these additional costsnow included in ~~the product category operating segments, profitability metrics among the geographic operating segments and product category operating segments are not comparable. Intercompany transactions~~Corporate items. We have ~~been eliminated from segment operating profit.~~

~~Management does not review asset information by operating segment. Instead, management reviews cash flow and other financial ratios by operating segment.~~

These seven operating segments are the basis for our reportable segment information provided below. The four product category operating segments are individually insignificant to our consolidated results and therefore do not constitute a reportable segment either individually or combined. For presentation purposes,reclassified these product category ~~operating segments have been aggregated. In 2017, due to a change~~headquarter and support function expenses in ~~management responsibilities,~~ the sales and operating profit results of our Spine business in EMEA were combined with the previous Americas Spine operating segment to form the product category operating segment, Spine less Asia Pacific. Priorprior period ~~reportable segment financial information has been restated~~ to conform to the current period presentation.

Net sales and operating profit by segment are as follows (in millions):


	Net Sales				Operating Profit
	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2024		2023		2024			2023
Americas	$	1,186.5	$	1,141.3	$	639.3		$	608.9
EMEA		444.8		425.6		153.0			149.5
Asia Pacific		258.0		264.1		93.3			90.2
Total	$	1,889.2	$	1,831.0
Corporate items						(477.6	)		(387.9	)
Intangible asset amortization						(142.1	)		(133.4	)
Operating profit					$	265.9		$	327.3

Net Sales

Operating Profit

Three Months Ended

Three Months Ended

September 30,

September 30,

2017

2016

2017

2016

Americas

$
921.2

$
946.6

$
502.3

$
515.6

EMEA

335.4

322.1

97.5

92.3

Asia Pacific

281.7

274.5

101.5

106.3

Product Category Operating Segments

279.8

289.6

51.1

47.5

Global Operations and Corporate Functions

-

-

(210.5
)

(208.7
)
Total

$
1,818.1

$
1,832.8

Inventory step-up and other inventory and manufacturing
related charges

(10.4
)

(22.8
)
Intangible asset amortization

(152.7
)

(164.3
)
Special items

(165.4
)

(170.4
)
Operating profit

$
213.4

$
195.5

Net Sales

Operating Profit

Nine Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Americas

$
2,900.0

$
2,909.6

$
1,568.8

$
1,574.1

EMEA

1,108.5

1,122.7

348.2

368.0

Asia Pacific

850.5

806.9

318.5

331.4

Product Category Operating Segments

890.8

831.6

197.2

177.1

Global Operations and Corporate Functions

-

-

(641.6
)

(628.6
)
Total

$
5,749.8

$
5,670.8

Inventory step-up and other inventory and manufacturing
related charges

(58.5
)

(357.7
)
Intangible asset amortization

(452.4
)

(424.7
)
Special items

(434.1
)

(397.0
)
Operating profit

$
846.1

$
642.6

~~Net sales by product category are as follows (in millions):~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Knees

$
623.7

$
631.5

$
2,005.9

$
2,031.7

Hips

434.5

440.6

1,380.0

1,385.7

S.E.T.

406.6

401.8

1,254.5

1,215.0

Dental

92.9

95.9

311.1

322.5

Spine & CMF

184.9

183.7

565.2

470.7

Other

75.5

79.3

233.1

245.2

Total

$
1,818.1

$
1,832.8

$
5,749.8

$
5,670.8

~~“S.E.T” refers to our Surgical, Sports Medicine, Foot and Ankle, Extremities and Trauma product category.~~

15. Commitments and Contingencies

From time to time, we are involved in various legal proceedings, including product liability, intellectual property, stockholder matters, tax disputes, commercial disputes, employment matters, whistleblower and qui tam claims and investigations, governmental proceedings and investigations, and other legal matters that arise in the normal course of our business, including those described below. On a quarterly and annual basis, we review relevant information with respect to loss contingencies and update our accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews. We establish liabilities for loss contingencies on an undiscounted basis when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. For matters where a loss is believed to be reasonably possible, but not probable, or if no reasonable estimate of known or probable loss is available, no accrual has been made.

~~Litigation~~When determining the estimated loss or range of loss, significant judgment is required. Estimates of probable losses resulting from litigation and other contingencies are inherently difficult to predict, particularly when the matters are in early procedural stages with incomplete facts or legal discovery, involve unsubstantiated or indeterminate claims for damages, and/or potentially involve penalties, fines or punitive damages. In addition to the matters described herein, we remain subject to the risk of future governmental, regulatory and legal actions. Governmental and regulatory actions may lead to product recalls, injunctions and other restrictions on our operations and monetary sanctions, which may include substantial civil or criminal penalties. Actions involving intellectual property could result in a loss of patent protection or the ability to market products, which could lead to significant sales reductions or cost increases, or otherwise materially affect the results of our operations.

We recognize litigation-related charges and gains in Selling, general and administrative expense on our condensed consolidated statement of earnings. During the three-month periods ended March 31, 2024 and 2023, we recognized $1.0 million and $3.3 million, respectively, of net litigation-related charges. At March 31, 2024 and December 31, 2023, accrued litigation liabilities were $226.5 million and $244.1 million, respectively. These litigation-related charges and accrued liabilities reflect all of our litigation-related contingencies and not just the matters discussed below. The ultimate cost of litigation could be materially different than the amount of the current estimates and accruals and could have a material adverse impact on our financial condition and results of operations.

Litigation

Durom^® Cup-related claims: On July 22, 2008, we temporarily suspended marketing and distribution of the Durom Cup in the U.S. Subsequently, a number of product liability lawsuits were filed against us in various U.S. and foreign jurisdictions. The plaintiffs seek damages for personal injury, and they generally allege that the Durom Cup contains defects that result in complications and ~~premature~~ revision of the device. We have settled ~~some~~the majority of these claims ~~and others are still pending. The majority of the pending U.S. lawsuits are currently in a federal Multidistrict Litigation (“MDL”) in the District of New Jersey (In Re: Zimmer Durom Hip Cup Products Liability Litigation). Multi-plaintiff state court cases are pending in St. Clair County, Illinois (Santas, et al. v. Zimmer, Inc., et al.) and Los Angeles County, California (McAllister, et al. v. Zimmer, Inc., et al.). The initial trial in~~ ~~Santas~~ ~~took place in November 2014, the initial trial in the MDL took place in May 2015 and the initial trial in~~ ~~McAllister~~ ~~took place in July 2015. As of September 30, 2017, litigation activity in the MDL,~~ ~~Santas~~ ~~and~~ ~~McAllister~~ ~~is stayed to allow participation~~ in the U.S. ~~Durom Cup Settlement Program, an extrajudicial program created to resolve actions and claims of eligible U.S. plaintiffs and claimants. Other~~, but other lawsuits are pending in various ~~domestic and~~ foreign jurisdictions and additional claims may be asserted in the future. The majority of claims outside the U.S. are pending in ~~Canada,~~ Germany, Netherlands ~~Italy~~ and ~~the U.K. A Canadian class settlement was approved in late 2016. Trials have commenced in Germany, and the majority of claims in the U.K. are consolidated in a Group Litigation Order.~~Italy.

~~Since 2008, we have recognized expense of $479.4 million for Durom Cup-related claims.~~ ~~Our estimate of our total liability for these claims as of September 30, 2017 remains consistent with our estimate as of December 31, 2016, and, accordingly, we did not~~

~~record any additional expense during the nine month period ended September 30, 2017. With respect to the same prior year period, we also did not record any expense for Durom Cup-related claims.~~

We maintain insurance for product liability claims, subject to self-insurance retention requirements. As of September 30, 2017, we have exhausted our self-insured retention under our insurance program and have a claim for insurance proceeds for ultimate losses which exceed the self-insured retention amount, subject to a 20 percent co-payment requirement and a cap. We believe our contracts with the insurance carriers are enforceable for these claims and, therefore, it is probable that we will recover some amount from our insurance carriers. We have received a portion of the insurance proceeds we estimate we will recover. We have a $95.3 million receivable in “Other assets” remaining on our condensed consolidated balance sheet as of September 30, 2017 for estimated insurance recoveries for Durom Cup-related claims. As is customary in this process, our insurance carriers have reserved all rights under their respective policies and could still ultimately deny coverage for some or all of our insurance claims.

Our estimate as of September 30, 2017 of the remaining liability for all Durom Cup-related claims is $218.3 million, of which $75.0 million is classified as short-term in “Other current liabilities” and $143.3 million is classified as long-term in “Other long-term liabilities” on our condensed consolidated balance sheet. We expect to pay the majority of the Durom Cup-related claims within the next few years.

~~Our understanding of clinical outcomes with the Durom Cup and other large diameter hip cups continues to evolve.~~ We rely on significant estimates in determining the provisions for Durom Cup-related claims, including our estimate of the number of claims that we will receive and the average amount we will pay per claim. The actual number of claims and the actual amount we pay per claim may differ from our estimates. ~~Among other factors, since our understanding of the clinical outcomes is still evolving,~~For various reasons, we cannot reasonably estimate the possible loss or range of loss that may result from Durom Cup-related claims in excess of the losses we have accrued. Although we are vigorously defending these lawsuits, their ultimate resolution is uncertain.

~~Margo and Daniel Polett v. Zimmer, Inc. et al.: On August 20, 2008, Margo and Daniel Polett filed~~We accrued a litigation-related charge in this matter based on an action against us and an unrelated third party, Public Communications, Inc. (“PCI”), in the Court of Common Pleas, Philadelphia, Pennsylvania seeking an unspecified amount of damages for injuries and loss of consortium allegedly suffered by Mrs. Polett and her spouse, respectively. The complaint alleged that defendants were negligent in connection with Mrs. Polett’s participation in a promotional video featuring one of our knee products. The case was tried in November 2010 and the jury returned a verdict in favor of plaintiffs. The jury awarded $27.6 million in compensatory damages and apportioned fault 30 percent to plaintiffs, 34 percent to us and 36 percent to PCI. Under applicable law, we may be liable for any portionestimate of the ~~damages apportioned to PCI that it does not pay. On December 2, 2010, we~~reasonably possible loss, as discussed above.

Zimmer M/L Taper, M/L Taper with Kinectiv Technology, and ~~PCI filed~~Versys Femoral Head-related claims (“Metal Reaction” claims): We are a motion for post-trial relief seeking a judgment notwithstanding the verdict, a new trial or a remittitur. On June 10, 2011, the trial court entered an order denying our motion for post-trial relief and affirming the jury verdictdefendant in full and entered judgment for $20.3 million against us and PCI. On June 29, 2011, we filed a notice of appeal to the Superior Court of Pennsylvania and posted a bond for the verdict amount plus interest. Oral argument before the appellate court in Philadelphia, Pennsylvania was held on March 13, 2012. On March 1, 2013, the Superior Court of Pennsylvania vacated the $27.6 million judgment and remanded the case for a new trial. On March 15, 2013, plaintiffs filed a motion for re-argument ~~en banc, and on March 28, 2013, we filed our response in opposition. On May 9, 2013, the Superior Court of Pennsylvania granted plaintiffs’ motion for re-argument~~ ~~en banc. Oral argument (re-argument~~ ~~en banc~~) before the Superior Court of Pennsylvania was held on October 16, 2013. On December 20, 2013, the Court issued its opinion again vacating the trial court judgment and remanding the case for a new trial. On January 21, 2014, plaintiffs filed a petition for allowance of appeal in the Supreme Court of Pennsylvania, which was granted on May 21, 2014. Oral argument before the Supreme Court of Pennsylvania took place on October 8, 2014. On October 27, 2015, the Supreme Court of Pennsylvania reversed the order of the Superior Court of Pennsylvania and remanded the case to that court to consider the question of whether the trial court erred in refusing to remit the jury’s compensatory damages award. ~~On June 6, 2016, an~~ ~~en banc~~ ~~panel of the~~ ~~Superior Court of Pennsylvania~~ vacated the $27.6 million verdict and remanded the case back to the trial court for remittitur. On December 2, 2016, the trial court remitted the verdict to $21.5 million. On December 5, 2016, we filed a notice of appeal to the Superior Court of Pennsylvania. Oral argument before the Superior Court of Pennsylvania took place on September 20, 2017. The Court has not yet issued its opinion. Although we are defending this lawsuit vigorously, its ultimate resolution is uncertain. In the future, we could be required to record a charge that could have a material adverse effect on our results of operations and cash flows.

~~NexGen~~^® ~~Knee System claims:~~ ~~Following a wide-spread advertising campaign conducted by certain law firms beginning in 2010,~~ a number of product liability lawsuits ~~have been filed against us in various jurisdictions.~~relating to our M/L Taper and M/L Taper with Kinectiv Technology hip stems, and Versys Femoral Head implants. The plaintiffs seek damages for personal injury, alleging that ~~certain~~defects in the products ~~within~~lead to corrosion at the ~~NexGen Knee System, specifically the NexGen Flex Femoral Components~~head/stem junction resulting in, among other things, pain, inflammation and ~~MIS Stemmed Tibial Component, suffer from defects that cause them to loosen prematurely.~~ revision surgery.

The majority of the cases are ~~currently pending~~consolidated in ~~a federal~~an MDL that was created on October 3, 2018 in the ~~Northern~~U.S. District Court for the Southern District of ~~Illinois~~New York (In Re: Zimmer ~~NexGen Knee Implant~~M/L Taper Hip Prosthesis or M/L Taper Hip Prosthesis with Kinectiv Technology and Versys Femoral Head Products Liability Litigation). Most of the cases in the MDL have been resolved. Other related cases are pending in various state and federal courts and in courts in Canada, and additional ~~lawsuits~~claims may be ~~filed. Thus far, all cases decided by the MDL court or a jury on the merits have involved NexGen Flex Femoral Components, which represent the majority of cases~~asserted in the MDL. The initial bellwether trial took place in October 2015 and resulted in a defense verdict. The next scheduled bellwether trial, which was set to commence in November 2016, was dismissed following the court’s grant of summary judgment in our favor in

~~October 2016. The second bellwether trial took place in January 2017 and resulted in a defense verdict.~~future. Although we are vigorously defending these lawsuits, their ultimate resolution is uncertain. We accrued a litigation-related charge in this matter based on an estimate of the reasonably possible loss, as discussed above.

Biomet metal-on-metal hip implant claims: Biomet is a defendant in a number of product liability lawsuits relating to metal-on-metal hip ~~implants. The majority~~implants, most of ~~these cases~~which involve the M2a-Magnum^TM hip system. ~~The majority of the cases are currently~~Cases were originally consolidated in ~~one federal~~an MDL ~~proceeding~~ in the U.S. District Court for the Northern District of Indiana (In Re: Biomet M2a Magnum Hip Implant Product Liability Litigation)~~. Other~~, but the majority of the claims in the U.S. have been settled. Trials may still occur in the future, and although each case will be tried on its particular facts, a verdict and subsequent final judgment for the plaintiff in one or more of these cases could have a substantial impact on our potential liability. Lawsuits are pending in various ~~state~~foreign jurisdictions and ~~foreign courts.~~

~~On February 3, 2014, Biomet announced the settlement~~additional claims are expected to be asserted. We continue to refine our estimates of the ~~MDL. Lawsuits filed in the MDL by April 15, 2014 were eligible~~potential liability to participate in the settlement. Those claims that did not settle via the MDL settlement program have re-commenced litigation in the MDL under a new case management plan. The settlement does not affect certain other claims relating to Biomet’s metal-on-metal hip products that are pending in various state and foreign courts, or other claims that may be filed in the future. Our estimate as of September 30, 2017 ofresolve the remaining ~~liability for all Biomet metal-on-metal hip implant~~ claims ~~is $39.7 million.~~

~~Biomet has exhausted the self-insured retention in its insurance program~~ and has been reimbursed for claims related to its metal-on-metal products up to its policy limits in the program. Zimmer Biomet is responsible for any amounts by which the ultimate losses exceed the amount of Biomet’s third-party insurance coverage. As of September 30, 2017, Biomet had received all of the insurance proceeds it expects to recover under the excess policies.lawsuits. Although we are vigorously

defending these lawsuits, their ultimate resolution is uncertain.

~~Heraeus trade secret misappropriation lawsuits:~~ ~~In December 2008, Heraeus Kulzer GmbH (together with its affiliates, “Heraeus”) initiated legal proceedings~~ We accrued a litigation-related charge in Germany against Biomet, Inc., Biomet Europe BV, certain other entities and certain employees alleging that the defendants misappropriated Heraeus trade secrets when developing Biomet Europe’s Refobacin and Biomet Bone Cement line of cements (“European Cements”). The lawsuit sought to preclude the defendants from producing, marketing and offering for sale their current line of European Cements and to compensate Heraeus for any damages incurred.

On June 5, 2014, the German appeals court in Frankfurt (i) enjoined Biomet, Inc., Biomet Europe BV and Biomet Deutschland GmbH from manufacturing, selling or offering the European Cements to the extent they contain certain raw materials in particular specifications; (ii) held the defendants jointly and severally liable to Heraeus for any damages from the sale of European Cements since 2005; and (iii) ruled that no further review may be sought (the “Frankfurt Decision”). The Heraeus and Biomet parties both sought appeal against the Frankfurt Decision. In a decision dated June 16, 2016, the German Supreme Court dismissed the parties’ appeals without reaching the merits, rendering that decision final.

In December 2016, Heraeus filed papers to restart proceedings against Biomet Orthopaedics Switzerland GmbH, seeking to require that entity to relinquish its CE certificates for the European Cements. In January 2017, Heraeus notified Biomet it had filed a claim for damages in the amount of €121.9 million for sales in Germany. In September 2017, Heraeus filedthis matter based on an enforcement action in the Frankfurt court against Biomet Europe, requesting that a fine be imposed against Biomet Europe for failure to prevent Biomet Orthopaedics Switzerland from having bone cements for the Chinese market manufactured in Germany. Also in September 2017, Heraeus filed suit against Zimmer Biomet Deutschland in the court of first instance in Freiberg concerning the sale of the European Cements with certain changed raw materials. Heraeus seeks an injunction on the basis that the continued use of the product names for the European Cements is misleading for customers and thus an act of unfair competition. As of September 30, 2017, these claims were still pending.

On September 8, 2014, Heraeus filed a complaint against a Biomet supplier, Esschem, Inc. (“Esschem”), in the United States District Court for the Eastern District of Pennsylvania. The lawsuit contains allegations that focus on two copolymer compounds that Esschem sells to Biomet, which Biomet incorporates into certain bone cement products that compete with Heraeus’ bone cement products. The complaint alleges that Biomet helped Esschem to develop these copolymers, using Heraeus trade secrets that Biomet allegedly misappropriated. The complaint asserts a claim under the Pennsylvania Trade Secrets Act, as well as other various common law tort claims, all based upon the same trade secret misappropriation theory. Heraeus is seeking to enjoin Esschem from supplying the copolymers to any third party and actual damages. The complaint also seeks punitive damages, costs and attorneys’ fees. If Esschem is enjoined, Biomet may not be able to obtain the copolymers from another supplier and as a result may not be able to continue to manufacture the subject bone cement products. Although Biomet is not a party to this lawsuit, Biomet has agreed, at Esschem’s request and subject to certain limitations, to indemnify Esschem for any liability, damages and legal costs related to this matter. On November 3, 2014, the court entered an order denying Heraeus’ motion for a temporary restraining order. On June 30, 2016, the court entered an order denying Heraeus’ request to give preclusive effect to the factual findings in the Frankfurt Decision. On June 6, 2017, the court entered an order denying Heraeus’ motion to add Biomet as a party to the lawsuit. The court has not set a trial date.

Heraeus continues to pursue other related legal proceedings in Europe seeking various forms of relief, including injunctive relief and damages, against Biomet-related entities relating to the European Cements.

We have accrued an estimated loss relating to the Frankfurt Decision, but have not recognized any losses for Heraeus-related lawsuits in other jurisdictions because we do not believe it is probable that we have incurred a liability, and we cannot reasonably estimate any loss that might eventually be incurred. Damages relating to the Frankfurt Decision are subject to separate proceedings and it is reasonably possible that our estimate of the reasonably possible loss, weas discussed above.

Other Contingencies

Contractual obligations: We have entered into development, distribution and other contractual arrangements that may ~~incur may change~~result in future payments dependent upon various events such as the ~~future. Although we are vigorously defending these lawsuits, their ultimate resolution~~achievement of certain product R&D milestones, sales milestones, or, at our discretion, maintenance of exclusive rights to distribute a product. Since there is ~~uncertain.~~

~~Stryker patent infringement lawsuit: On December 10, 2010, Stryker Corporation and related entities (“Stryker”) filed suit against us in~~uncertainty on the ~~U.S. District Court for the Western District of Michigan, alleging that certain of our Pulsavac~~^® ~~Plus Wound Debridement Products infringe three U.S. patents assigned~~timing or whether such payments will have to Stryker. The case was tried beginning on January 15, 2013, and on February 5, 2013, the jury found that we infringed certain claims of the subject patents. The jury awarded $70.0 million in monetary damages for lost profits. The jury also found that we willfully infringed the subject patents. We filed multiple post-trial motions, including a motion seeking a new trial. On August 7, 2013, the trial court issued a ruling denying all of our motions and awarded treble damages and attorneys’ fees to Stryker. We filed a notice of appeal to the Court of Appeals for the Federal Circuit to seek reversal of both the jury’s verdict and the trial court’s rulingsbe made, they have not been recognized on our ~~post-trial motions. Oral argument before the Court~~condensed consolidated balance sheets. These estimated payments could range from $0 to approximately $405 million.

Item 2. Management’s Discussion and Analysis of Appeals for the Federal Circuit took place on September 8, 2014. On December 19, 2014, the Federal Circuit issued a decision affirming the $70.0 million lost profits award but reversed the willfulness finding, vacating the treble damages award Financial Condition and ~~vacating and remanding the attorneys’ fees award. We accrued an estimated loss~~Results of ~~$70.0 million related to this matter in the three month period ended December 31, 2014. On January 20, 2015, Stryker filed a motion with the Federal Circuit for a rehearing~~ ~~en banc~~. On March 23, 2015, the Federal Circuit denied Stryker’s petition. Stryker subsequently filed a petition for certiorari to the U.S. Supreme Court. In July 2015, we paid the final award of $90.3 million, which includes the original $70.0 million plus pre- and post-judgment interest and damages for sales that occurred post-trial but prior to our entry into a license agreement with Stryker. On October 19, 2015, the U.S. Supreme Court granted Stryker’s petition for certiorari. Oral argument took place on February 23, 2016. On June 13, 2016, the U.S. Supreme Court issued its decision, vacating the judgment of the Federal Circuit and remanding the case for further proceedings related to the willfulness issue. On September 12, 2016, the Federal Circuit issued an opinion affirming the jury’s willfulness finding and vacating and remanding the trial court’s award of treble damages, its finding that this was an exceptional case and its award of attorneys’ fees. The case was remanded back to the trial court. Oral argument on Stryker’s renewed consolidated motion for enhanced damages and attorneys’ fees took place on June 28, 2017. On July 12, 2017, the trial court issued an order reaffirming its award of treble damages, its finding that this was an exceptional case and its award of attorney’s fees. On July 24, 2017, we appealed the ruling to the Federal Circuit and obtained a supersedeas bond staying enforcement of the judgment pending appeal. Although we are defending this lawsuit vigorously, the ultimate resolution of this matter is uncertain. In the future, we could be required to record a charge of up to $165.0 million that could have a material adverse effect on our results of operations and cash flows.Operations

~~Putative Class Action:~~ ~~On December 2, 2016, a complaint was filed in the U.S. District Court for the Northern District of Indiana (Shah v. Zimmer Biomet Holdings, Inc. et al.)~~, naming us, two of our officers and one of our now former officers as defendants. On June 28, 2017, the plaintiffs filed a corrected amended complaint, naming as defendants, in addition to those previously named, current and former members of our Board of Directors, one additional officer, and the underwriters in connection with secondary offerings of our common stock by certain selling stockholders in 2016. On October 6, 2017, the plaintiffs voluntarily dismissed the underwriters without prejudice. On October 8, 2017, the plaintiffs filed a second amended complaint, naming as defendants, in addition to those current and former officers and Board members previously named, certain former stockholders of ours who sold shares of our common stock in secondary public offerings in 2016. The second amended complaint relates to a putative class action on behalf of persons who purchased our common stock between June 7, 2016 and November 7, 2016. The second amended complaint alleges that the defendants violated federal securities laws by making materially false and/or misleading statements and/or omissions about our compliance with ~~U.S. Food and Drug Administration (“FDA”)~~ regulations and our ability to continue to accelerate our organic revenue growth rate in the second half of 2016. The plaintiffs seek unspecified damages and interest, attorneys’ fees, costs and other relief. We believe this lawsuit is without merit, and we and the individual defendants are defending it vigorously.

~~Regulatory Matters, Government Investigations and Other Matters~~

~~FDA warning letters~~: In September 2012, Zimmer received a warning letter from the FDA citing concerns relating to certain processes pertaining to products manufactured at our Ponce, Puerto Rico manufacturing facility. In May 2016, Zimmer received a warning letter from the FDA related to observed non-conformities with current good manufacturing practice requirements of the FDA’s Quality System Regulation (21 CFR Part 820) (“QSR”) at our facility in Montreal, Quebec, Canada. We have provided detailed responses to the FDA as to our corrective actions and will continue to work expeditiously to address the issues identified by the FDA during inspections in Ponce and Montreal. As of September 30, 2017, these warning letters remained pending. Until the violations cited in the pending warning letters are corrected, we may be subject to additional regulatory action by the FDA, as described more fully below. Additionally, requests for Certificates to Foreign Governments related to products manufactured at certain of our facilities may not be granted and premarket approval applications for Class III devices to which the QSR deviations at these facilities are reasonably related will not be approved until the violations have been corrected. In addition to responding to the warning letters described above, we are in the process of addressing various FDA Form 483 inspectional observations at certain of our manufacturing facilities, including at both the legacy Zimmer and the legacy Biomet manufacturing facilities in Warsaw, Indiana. The

ultimate outcome of these matters is presently uncertain. Among other available regulatory actions, the FDA may impose operating restrictions, including a ceasing of operations, at one or more facilities, enjoining and restraining certain violations of applicable law pertaining to medical devices and assessing civil or criminal penalties against our officers, employees or us. The FDA could also issue a corporate warning letter, a recidivist warning letter or a consent decree of permanent injunction. The FDA may also recommend prosecution by the U.S. Department of Justice (“DOJ”). Any adverse regulatory action, depending on its magnitude, may restrict us from effectively manufacturing, marketing and selling our products and could have a material adverse effect on our business, financial condition and results of operations.

~~Deferred Prosecution Agreement (“DPA”) relating to U.S. Foreign Corrupt Practices Act (“FCPA”) matters:~~ On January 12, 2017, we resolved previously-disclosed FCPA matters involving Biomet and certain of its subsidiaries. As part of the settlement, Biomet resolved matters with the U.S. Securities and Exchange Commission (“SEC”) through an administrative cease-and-desist order (the “Order”); (ii) we entered into a DPA with the DOJ; and (iii) JERDS Luxembourg Holding S.à r.l. (“JERDS”), the direct parent company of Biomet 3i Mexico SA de CV and an indirect, wholly-owned subsidiary of Biomet, entered into a plea agreement (the “Plea Agreement”) with the DOJ. The conduct underlying these resolutions occurred prior to our acquisition of Biomet.

Pursuant to the terms of the Order, Biomet resolved claims with the SEC related to violations of the books and records, internal controls and anti-bribery provisions of the FCPA by disgorging profits to the U.S. government in an aggregate amount of approximately $6.5 million, inclusive of pre-judgment interest, and paying a civil penalty in the amount of $6.5 million (collectively, the “Civil Settlement Payments”). We also agreed to pay a criminal penalty of approximately $17.5 million (together with the Civil Settlement Payments, the “Settlement Payments”) to the U.S. government pursuant to the terms of the DPA. We made the Settlement Payments in January 2017 and, as previously disclosed, had accrued, as of June 24, 2015, the closing date of the Biomet merger, an amount sufficient to cover this matter.

Under the DPA, which has a term of three years, the DOJ agreed to defer criminal prosecution of us in connection with the charged violation of the internal controls provision of the FCPA as long as we comply with the terms of the DPA. In addition, we will be subject to oversight by an independent compliance monitor for at least 12 months. The monitor, who was appointed effective as of July 2017, will focus on legacy Biomet operations as integrated into our operations. If we remain in compliance with the DPA during its term, the charges against us will be dismissed with prejudice. The term of the DPA may be extended for up to one additional year at the DOJ’s discretion. In addition, under its Plea Agreement with the DOJ, JERDS pleaded guilty on January 13, 2017 to aiding and abetting a violation of the books and records provision of the FCPA. In light of the DPA we entered into, JERDS paid only a nominal assessment and no criminal penalty.

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 ~~the Office of Inspector General of the Department of Health and Human Services (“OIG”)~~ from participation in federal healthcare programs, including Medicaid and Medicare. Any of these events could have a material adverse effect on our business, financial condition, results of operations and cash flows.

~~OIG subpoena~~: In June 2017, we received a subpoena from the OIG. The subpoena requests that we produce a variety of records primarily related to our healthcare professional consulting arrangements (including in the areas of medical education, product development, and clinical research) for the period spanning January 1, 2010 to the present. The subpoena does not indicate the nature of the OIG’s investigation beyond reference to possible false or otherwise improper claims submitted for payment. We are in the process of responding to the subpoena. We cannot currently predict the outcome of this investigation.

~~Item 2.~~

~~Management’s Discussion and Analysis of~~ ~~Financial Condition and Results of Operations~~

The following discussion and analysis should be read in conjunction with the interim condensed consolidated financial statements and corresponding notes included elsewhere in this Form 10-Q. ~~Certain percentages~~Amounts reported in millions within this Quarterly Report on Form 10-Q are computed based on the actual amounts. As a result, the sum of the components may not equal the total amount reported in millions due to rounding. In addition, certain columns and rows within tables may not sum to the totals due to the use of rounded numbers. Percentages presented ~~in this discussion and analysis~~ are calculated from the underlying whole-dollar amounts and, therefore, may not recalculate from the rounded numbers used for disclosure purposes. In addition, certain amounts in the 2016 condensed consolidated financial statements have been reclassified to conform to the 2017 presentation.unrounded amounts.

Executive Level Overview

Results for the ~~Three and Nine Month Periods~~Three-Month Period ended ~~September 30, 2017~~March 31, 2024

~~Net sales declined by 0.8 percent in~~In the ~~three month~~three-month period ended ~~September 30, 2017 and~~March 31, 2024, our net sales increased ~~by 1.4~~3.2 percent ~~in the nine month period ended September 30, 2017, in each case~~when compared to the same prior year period. ~~The~~Net sales ~~decline in the three month period~~growth was driven ~~primarily~~ by a ~~decrease~~combination of market growth, new product introductions and commercial execution across the organization. These favorable items were tempered by a negative 1.2 percent effect from changes in sales in the U.S. due to ongoing production challenges related to our legacy Biomet Warsaw facility, one less billing day, surgeries delayed by the recent hurricanes and a government mandated industry wide price reduction on all knee sales in India. We continued to experience challenges across our Knees, Hips and S.E.T. product categories, as a result of production delays that impacted our ability to fully meet customer demand. The production shortfall is directly impacting our ability to fully meet case demand. During the third quarter, we continued to experience low inventory levels across some brands within our Knee, Hip and S.E.T. categories. We achieved healthy supply of certain other brands. However, some customers remain hesitant to fully return until we have restored supply of all products. Given our overall progress to date, we now expect to achieve full recovery of safety stock across our entire portfolio in the first half of 2018. foreign currency exchange rates.

~~These product supply issues have existed throughout the nine month period ended September 30, 2017, but we experienced sales growth primarily due to the LDR acquisition.~~

Our net earnings were $172.4 million in the ~~three month~~three-month period ended ~~September 30, 2017 decreased~~March 31, 2024 compared to ~~the same prior year period, but increased~~$232.5 million in ~~the nine month period ended September 30, 2017 compared to~~ the same prior year period. The ~~37.8 percent~~ decline in earnings was primarily related to charges from our 2023 Restructuring Plan which was instituted at the ~~three month period was driven primarily by a $32.7~~end of 2023 and continued into 2024, including $71.0 million ~~goodwill impairment charge~~ in ~~the 2017 period and tax benefits~~employee termination benefits-related charges recognized in the ~~2016 period from the finalization of tax accounts from business combination purchase accounting. The 146.5 percent increase in net earnings in the nine month~~three-month period ended ~~September 30, 2017 was~~March 31, 2024.

2024 Outlook

We expect year-over-year revenue growth of mid-single digits in 2024 to be driven ~~primarily~~ by a ~~decrease~~combination of market growth, new product introductions, commercial execution and continued improvements in ~~inventory step-up expense, a $69.7 million tax benefit recognized resulting from a tax restructuring that lowered the tax rate~~product supply. Based on certain deferred tax liabilities, favorable resolution of various tax matters, net tax-related charges in the prior year related to business combination purchase accounting and operational leverage from increased sales.

~~2017 Outlook~~

~~We estimate our sales growth in 2017 over 2016 will be in a range of 1.0 to 1.5 percent. This estimate assumes~~recent foreign currency exchange rates, ~~will increase~~we expect foreign currency to negatively affect year-over-year net sales by approximately ~~0.1 percent, continued pricing pressure will decrease sales by approximately 2 percent and the inclusion of LDR sales for the full year~~0.5 percent. We estimate operating profit will increase ~~sales by approximately 1.2 percent. We acquired LDR near the beginning of the third quarter of 2016. Therefore,~~ in the second half of 2017, the inclusion of LDR sales will not have as significant of an impact on our year-over-year sales growth as it did in the first half of 2017. We expect to make additional progress in remediating supply constraints as we progress through the remainder of 2017.

We estimate cost of products sold will be lower in 2017 compared to the prior year due to lower inventory step-up expenses, lower excess and obsolete inventory charges from our decision to discontinue certain products in 2016 and lower U.S. medical device excise taxes. However, we believe we will experience unfavorable effects on costs of products sold as a percentage of sales from declining selling prices, lower hedge gains expected to be recognized in 20172024 when compared to ~~2016, incremental manufacturing costs~~2023 due to ~~maximize production flow~~higher net sales, leverage from fixed operating expenses and ~~regional and product sales mix.~~

~~As it relates to other expenses,~~savings from our restructuring plans. However, we estimate these favorable items may be partially offset by higher intangible asset amortization ~~expense is expected~~and increased restructuring-related costs to increase as we recognize a full year of intangible asset amortization from the LDR and other 2016 acquisitions. We expect research and development (“R&D”) expense for the year to be approximately 4.5 percent of sales. Selling, general and administrative (“SG&A”) expense is expected to approximate 37.5 percent of sales, which is an improvement from 2016 as we expect to realize synergies fromimplement our ~~acquisitions and leverage sales growth.~~plans. We estimate ~~special items expense will be significant as we continue~~ our ~~integration activities and quality enhancement and remediation efforts. We expect~~net interest expense will ~~decrease~~increase slightly due to higher interest rates. We expect our provision for income taxes will increase in ~~2017~~2024 when compared to ~~2016~~2023 due to ~~lower debt levels from planned debt repayments.~~the non-reoccurrence of favorable tax settlements.

Results of Operations

We ~~analyze~~review sales by ~~three~~two geographies, the ~~Americas, EMEA~~United States and ~~Asia Pacific,~~International, and by the following product categories: ~~Knees, Hips,~~Knees; Hips; S.E.T.~~, Dental, Spine & CMF~~ (Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic); and Other. This sales analysis differs from our reportable operating segments, which are based upon our senior management organizational structure and how we allocate resources ~~towards~~toward achieving operating profit goals. We ~~analyze~~review sales by ~~geography~~these geographies because the underlying market trends in any particular geography tend to be similar across product categories, ~~and~~ because we primarily sell the same products in all ~~geographies.~~geographies and many of our competitors publicly report in this manner. Our business is seasonal in nature to some extent, as many of our products are used in elective surgical procedures, which typically decline during the summer months and can increase at the end of the year once annual deductibles have been met on health insurance plans.

Net Sales by Geography

The following ~~tables present~~table presents our net sales by geography and the ~~components of the~~ percentage changes (dollars in millions):


	Three Months Ended
	March 31,
	2024		2023		% Inc
United States	$	1,099.2	$	1,060.4		3.7	%
International		790.0		770.6		2.5
Total	$	1,889.2	$	1,831.0		3.2

Three Months Ended

September 30,

% Inc /

Volume /

Foreign

2017

2016

(Dec)

Mix

Price

Exchange

Americas

$
1,142.0

$
1,175.9

(2.9
)
%

(0.8
)
%

(2.2
)
%

0.1

%
EMEA

381.1

368.8

3.3

1.0

(1.4
)

3.7

Asia Pacific

295.0

288.1

2.4

7.5

(2.3
)

(2.8
)

Total

$
1,818.1

$
1,832.8

(0.8
)

0.9

(2.1
)

0.4

Nine Months Ended

September 30,

% Inc /

Volume /

Foreign

2017

2016

(Dec)

Mix

Price

Exchange

Americas

$
3,585.6

$
3,534.1

1.5

%

3.8

%

(2.4
)
%

0.1

%
EMEA

1,272.5

1,286.0

(1.0
)

1.9

(1.5
)

(1.4
)

Asia Pacific

891.7

850.7

4.8

9.0

(3.0
)

(1.2
)

Total

$
5,749.8

$
5,670.8

1.4

4.1

(2.3
)

(0.4
)

~~“Foreign Exchange,” as used in the tables in this report, represents the effect of changes in foreign currency exchange rates on sales.~~

Net Sales by Product Category

The following ~~tables present~~table presents our net sales by product category and the ~~components of the~~ percentage changes (dollars in millions):


	Three Months Ended																			Three Months Ended
	September 30,				% Inc /				Volume /								Foreign			March 31,
	2017		2016		(Dec)				Mix				Price				Exchange			2024		2023		% Inc / (Dec)
Knees	$	623.7	$	631.5		(1.2	)	%		0.8		%		(2.5	)	%		0.5	%	$	788.1	$	762.5		3.4		%
Hips		434.5		440.6		(1.4	)			0.8				(2.5	)			0.3			491.2		492.8		(0.3	)
S.E.T.		406.6		401.8		1.2				3.0				(1.9	)			0.1			452.6		433.4		4.4
Dental		92.9		95.9		(3.2	)			(3.2	)			(1.2	)			1.2
Spine & CMF		184.9		183.7		0.7				0.8				(0.5	)			0.4
Other		75.5		79.3		(4.8	)			(3.6	)			(1.7	)			0.5			157.3		142.3		10.6
Total	$	1,818.1	$	1,832.8		(0.8	)			0.9				(2.1	)			0.4		$	1,889.2	$	1,831.0		3.2

Nine Months Ended

September 30,

% Inc /

Volume /

Foreign

2017

2016

(Dec)

Mix

Price

Exchange

Knees

$
2,005.9

$
2,031.7

(1.3
)
%

1.8

%

(2.6
)
%

(0.5
)
%
Hips

1,380.0

1,385.7

(0.4
)

3.0

(2.8
)

(0.6
)

S.E.T.

1,254.5

1,215.0

3.3

5.7

(2.0
)

(0.4
)

Dental

311.1

322.5

(3.5
)

(1.3
)

(2.1
)

(0.1
)

Spine & CMF

565.2

470.7

20.1

21.2

(1.1
)

-

Other

233.1

245.2

(4.9
)

(2.8
)

(1.7
)

(0.4
)

Total

$
5,749.8

$
5,670.8

1.4

4.1

(2.3
)

(0.4
)

The following table presents our net sales by geography for our Knees and Hips product categories, which represent our most significant product categories (dollars in millions):

Three Months Ended September 30,

% Inc /

Nine Months Ended September 30,

% Inc /

2017

2016

(Dec)

2017

2016

(Dec)

Knees

Americas

$
382.4

$
397.5

(3.8
)
%

$
1,217.5

$
1,244.3

(2.2
)
%
EMEA

135.1

130.2

3.7

462.7

472.8

(2.2
)

Asia Pacific

106.2

103.8

2.3

325.7

314.6

3.5

Total

$
623.7

$
631.5

(1.2
)

$
2,005.9

$
2,031.7

(1.3
)

Hips

Americas

$
228.2

$
239.0

(4.5
)
%

$
719.5

$
733.4

(1.9
)
%
EMEA

115.1

112.2

2.4

382.1

387.8

(1.5
)

Asia Pacific

91.2

89.4

2.1

278.4

264.5

5.3

Total

$
434.5

$
440.6

(1.4
)

$
1,380.0

$
1,385.7

(0.4
)


	Three Months Ended March 31,
	2024		2023		% Inc / (Dec)
Knees
United States	$	458.0	$	448.2		2.2		%
International		330.1		314.3		5.0
Total	$	788.1	$	762.5		3.4
Hips
United States	$	254.9	$	252.3		1.0		%
International		236.3		240.5		(1.7	)
Total	$	491.2	$	492.8		(0.3	)

Demand (Volume and Mix) Trends

~~Increased~~

Changes in volume and ~~changes in the~~ mix of product sales had a positive effect of ~~0.9 percent and 4.1~~4.2 percent on year-over-year sales during the ~~three~~three-month period ended March 31, 2024. Market growth and ~~nine month periods ended September 30, 2017, respectively. Volume/mix growth was driven by acquisitions in the prior year, recent~~new product introductions ~~sales in key emerging markets~~contributed positively to volume and ~~an aging population. The year-over-year volume/~~mix ~~growth in the three month period was lower than in the nine month period primarily because LDR was acquired in the third quarter of 2016.~~trends.

We believe long-term indicators point toward sustained growth driven by an aging global population, growth in emerging markets, obesity, proven clinical benefits, new material technologies, advances in surgical techniques and more active lifestyles, among other factors. In addition, demand for clinically proven premium products and patient specific devices are expected to continue to positively affect sales growth in markets that recognize the value of these advanced technologies.

Pricing Trends

Global selling prices had a ~~negative~~positive effect of ~~2.1 percent and 2.3~~0.2 percent on year-over-year sales during the ~~three and nine month periods~~three-month period ended ~~September 30, 2017, respectively.~~March 31, 2024. The majority of countries in which we operate continue to experience pricing pressure from local hospitals, health systems, and governmental healthcare cost containment ~~efforts~~efforts. However, we have had success in offsetting negative effects of pricing pressure due to internal initiatives and ~~from local hospitals and health systems.~~ being able to pass some inflationary impacts on to customers.

Foreign Currency Exchange Rates

For the ~~three and nine month periods~~three-month period ended ~~September 30, 2017,~~March 31, 2024, changes in foreign currency exchange rates had a ~~positive effect of 0.4 percent and a~~ negative effect of ~~0.4~~1.2 percent ~~respectively,~~ on year-over-year sales. If foreign currency exchange rates remain at levels consistent with recent rates, we estimate ~~foreign currency exchange rates~~there will ~~have~~be a ~~positive effect~~negative impact of approximately ~~0.1~~0.5 percent on ~~our year-over-year~~full-year 2024 sales.

Geography

The 3.7 percent net sales ~~in 2017.~~

~~Sales by Product Category~~

~~Knees~~

~~Knee sales declined~~growth in the ~~three~~U.S. in the three-month period ended March 31, 2024 was driven by market growth and ~~nine month periods~~sales of our ROSA® Robot. Internationally, net sales increased by 2.5 percent during the three-month period ended ~~September 30, 2017~~March 31, 2024 when compared to the same prior year ~~periods~~period. This increase was similarly driven by market growth in most of our international markets. Our International sales were negatively affected by 2.9 percent due ~~primarily~~ to ~~the previously mentioned supply issues, the price reduction mandate~~changes in ~~India and continued pricing pressure. Knee sales volume/mix growth was led by Persona~~^®~~The Personalized Knee System and the Oxford~~^® ~~Partial Knee.~~

~~Hips~~

~~Hip sales declined~~foreign currency exchange rates in the ~~three~~three-month period ended March 31, 2024.

Product Categories

Knees and ~~nine month periods~~Hips net sales grew 3.4 percent and declined 0.3 percent, respectively, in the three-month period ended ~~September 30, 2017~~March 31, 2024, when compared to the same prior year ~~periods.~~period. The ~~declines were due primarily to the previously mentioned supply issues~~net sales of Knees and ~~continued pricing pressure. Hip sales volume/mix~~Hips benefited from market growth ~~was led by our Taperloc~~^® ~~Hip System, Arcos~~^® ~~Modular Hip System~~ and G7^® ~~Acetabular System.~~ new product

~~S.E.T.~~27

Our S.E.T. product category sales increased in the three and nine month periods ended September 30, 2017 when compared to the same prior year periods, driven primarily by a growing emphasis on sales force specialization, strong performance by key brands and 2016 acquisitions, partially offset by the previously mentioned supply issues and continued pricing pressure.

~~Dental~~

~~Dental~~introductions. However, overall Hips net sales declined in the ~~three and nine month periods ended September 30, 2017 when compared to the same prior year periods, primarily due to restructuring of our dental organization in certain European markets.~~

~~Spine and CMF~~

Spine and CMF sales increased in the three and nine month periods ended September 30, 2017 when compared to the same prior year periods, primarily due to the LDR acquisition and continuing strong sales of our Thoracic products.

~~Expenses as a Percentage of Net Sales~~

Three Months Ended

Nine Months Ended

September 30,

% Inc /

September 30,

% Inc /

2017

2016

(Dec)

2017

2016

(Dec)

Cost of products sold, excluding intangible
asset amortization

27.5

%

26.2

%

1.3

%

26.8

%

31.0

%

(4.2
)
%
Intangible asset amortization

8.4

9.0

(0.6
)

7.9

7.5

0.4

Research and development

5.0

5.2

(0.2
)

4.7

4.8

(0.1
)

Selling, general and administrative

38.2

39.7

(1.5
)

38.3

38.4

(0.1
)

Special items

9.2

9.3

(0.1
)

7.5

7.0

0.5

Operating profit

11.7

10.7

1.0

14.7

11.3

3.4

~~The increase in cost of products sold as a percentage of net sales for the three month~~three-month period ended September 30, 2017 compared to the same prior year period was primarily due to hedge losses of $5.1 million recognized in the 2017 period compared to hedge gains of $18.1 million recognized in the 2016 period. For derivatives which qualify as hedges of future cash flows, the effective portion of changes in fair value is temporarily recorded in other comprehensive income and then recognized in cost of products sold when the hedged items affect earnings. Additional unfavorable factors that increased cost of products sold as a percentage of net sales in the three month 2017 periodMarch 31, 2024 when compared to the same prior year period ~~included lower average selling prices, increased manufacturing costs at~~primarily due to the negative effects of foreign currency. Knees and Hips net sales were negatively affected by 0.9 percent and 1.8 percent, respectively, in the three-month period ended March 31, 2024 due to changes in foreign currency exchange rates. The 4.4 percent increase in S.E.T. net sales for the three-month period ended March 31, 2024 was the result of growth in our ~~legacy Biomet Warsaw facility~~sports medicine, upper extremities, and ~~a mix of sales in regions~~craniomaxillofacial and ~~product categories that have lower gross margins. These unfavorable items were~~thoracic products, partially offset by lower ~~inventory step-up charges~~volumes in other S.E.T. products. Other net sales grew 10.6 percent in the ~~2017 period. Inventory step-up charges represent the difference in cost~~three-month period ended March 31, 2024 driven by net sales for our ROSA Robot.

Expenses as a Percentage of Net Sales


	Three Months Ended
	March 31,						% Inc /
	2024			2023			(Dec)
Cost of products sold, excluding intangible asset amortization		27.1	%		27.4	%		(0.3	)	%
Intangible asset amortization		7.5			7.3			0.2
Research and development		5.7			6.0			(0.3	)
Selling, general and administrative		39.0			39.1			(0.1	)
Restructuring and other cost reduction initiatives		6.6			2.3			4.3
Acquisition, integration, divestiture and related		-			0.1			(0.1	)
Operating profit		14.1			17.9			(3.8	)

Cost of products sold, between inventory expensed at fair value after business combination accounting is applied versus what cost of products sold would have been had inventory been recognized at historical cost. The reduction in inventory step-up charges resulted from the LDR inventory that was stepped-up to fair value having been fully recognized by September 30, 2017.

The decrease in cost of products sold as a percentage of net sales for the nine month period ended September 30, 2017 compared to the same prior year period was primarily due to a decrease in inventory step-up charges. The reduction in inventory step-up charges resulted from the Biomet inventory that was stepped-up to fair value having been fully recognized by June 30, 2016 and LDR

inventory step-up that was fully recognized by September 30, 2017. Additional favorability was driven by lower medical device excise tax expense due to the two year moratorium on the U.S. medical device excise tax and a favorable resolution on past excise taxes that were paid. Under the applicable accounting rules that we apply to the U.S. medical device excise tax, we had a portion of the tax paid prior to the moratorium included in the cost of inventory and recognized expense through the fourth quarter of 2016. These favorable items were partially offset by lower hedge gains of $12.0 million in the 2017 period compared to $76.5 million in the 2016 period and the effect of lower average selling prices and sales mix.

~~Intangible asset amortization expense and~~excluding intangible asset amortization as a percentage of net sales decreased in the ~~three month~~three-month period ended ~~September 30, 2017~~March 31, 2024 when compared to the same prior year period, primarily due to lower royalty expense. The reduction in royalty expense was partially the result of agreements we entered into in 2023 to acquire intellectual property through the buyout of certain licensing arrangements, which are recognized as intangible assets and result in additional intangible asset amortization expense instead of royalty expense. The lower royalty expense was partially offset by higher manufacturing costs.

Intangible asset amortization expense increased in the three-month period ended March 31, 2024 compared to the same prior year period due to the ~~finalization~~2023 acquisitions and the buyout of ~~business combination accounting for 2016 acquisitions that resulted~~certain royalty-related licensing agreements as described above.

R&D expenses decreased in ~~lower intangible asset balances than estimated in the prior year period. Intangible asset amortization expense~~amount and ~~intangible asset amortization~~ as a percentage of net sales ~~increased~~ in the ~~nine month~~three-month period ended September 30, 2017 compared to the same prior year period due to amortization expense associated with the intangible assets acquired as a result of the LDR acquisition as well as the other acquisitions that occurred in 2016.

R&D expenses remained generally consistent in the three and nine month periods ended September 30, 2017 compared to the same prior year periods. We expect R&D spending in 2017 to be approximately 4.5 percent of sales.

~~SG&A expenses and SG&A as a percentage of net sales decreased in the three month period ended September 30, 2017~~March 31, 2024 when compared to the same prior year period. The ~~primary drivers~~decreases were driven by lower spending on our initial compliance with the European Union Medical Device Regulation as we continue to make progress on the approvals of the decreased expense were lower sales as well as synergies realized from the LDR and other 2016 acquisitions. In the nine month period ended September 30, 2017, SG&A expenses increased while SG&A as a percentage of net sales slightly decreased. The increase in expenses was due to higher sales, the LDR acquisition and the other 2016 acquisitions for which we have incurred expenses for the entire nine month period in 2017, increased freight costs due to expedited product shipments and increased investments in our ~~specialized sales force and medical training and education. These increases~~products, but were partially offset by ~~continued savings~~higher personnel-related costs.

Selling, general and administrative (“SG&A”) expenses increased in ~~various SG&A expense categories stemming from our synergies initiatives.~~

~~“Special items” expenses~~amount, but slightly decreased ~~slightly in dollars and~~ as a percentage of net sales in the ~~three month~~three-month period ended ~~September 30, 2017 compared to the same prior year period, but increased in the nine month period ended September 30, 2017~~March 31, 2024 when compared to the same prior year period. The ~~decrease~~increase in expenses was due to selling and distribution costs that are variable expenses which increase as net sales increase. Additionally, instrument-related costs were higher due to new product introductions, share-based compensation was higher due to timing of awards, and we recognized higher charges on various strategic initiatives. These higher costs were partially offset by savings from our 2023 Restructuring Plan.

In December of 2023, 2021 and 2019, we initiated global restructuring programs. We also have other cost reduction and optimization initiatives that have the goal of reducing costs across the organization. We recognized expenses of $124.4 million and $41.8 million in the ~~three month~~three-month periods ended March 31, 2024 and 2023, respectively, primarily related to employee termination benefits, sales agent contract terminations, and consulting and project management expenses associated with these programs. The expenses were higher in the 2024 period ~~ended September 30, 2017 was~~when compared to the 2023 period primarily due to expenses recognized in the 2016 period related to consummating the LDR acquisition and other significant, ongoing integration expenses associated with the Biomet merger. The increases in the nine month period ended September 30, 2017 were primarily due toadditional expenses related to ~~our quality enhancement and remediation efforts. See~~the 2023 Restructuring Plan that had just been initiated at the end of 2023. For more information regarding these expenses, see Note 24 to ~~the~~our interim condensed consolidated financial statements included in Part I, Item 1 of this ~~report for more information regarding “Special items” charges.~~report.

~~Other Expense, Net, Interest Income, Interest Expense~~Acquisition, integration, divestiture and ~~Income Taxes~~

~~In the three and nine month periods ended September 30, 2017 and 2016, other expense, net, was primarily~~ related to remeasuring monetary assets and liabilities denominated in a foreign currency other than an entity’s functional currency, offset by foreign currency forward exchange contracts we entered into to mitigate any gain or loss.

~~Net interest expense~~expenses decreased in amount and as a percentage of net sales in the ~~three and nine month periods~~three-month period ended ~~September 30, 2017,~~March 31, 2024 when compared to the same prior year ~~periods,~~period, primarily due to ~~our issuance of the Euro Notes~~gains recognized from changes in the ~~fourth quarter~~fair value of ~~2016~~contingent consideration.

Other (Expense) Income, Net, Interest Expense, Net, and ~~lower average outstanding debt balances due to debt repayments. We used~~Income Taxes

In the ~~proceeds~~three-month period ended March 31, 2024, we recognized expense of ~~the Euro Notes, which have a lower interest rate than most of~~$0.1 million in our other ~~debt,~~(expense) income, net financial statement line item compared to ~~repay certain senior notes with higher interest rates.~~

Our ETR on earnings before income taxes has been significantly influenced by the Biomet merger and other acquisitions and special items charges. We have incurred significant expenses associated with the Biomet merger and other acquisitions and special items charges which have generally been recognized in higher income tax jurisdictions. Accordingly, this has reduced our ETR as our earnings have been lower in these higher income tax jurisdictions. In the three and nine month periods ended September 30, 2017, we recognized tax benefits of $39.8 million and $128.6 million, respectively, related to resolution of certain tax matters. Additionally, in the nine month period ended September 30, 2017, we recognized a tax benefit of $69.7 million resulting from a tax restructuring that lowered the tax rate on certain deferred tax liabilities recorded on intangible assets recognized in the Biomet merger acquisition-related accounting. In the three and nine month periods ended September 30, 2017, we recognized net income tax expensegain of $7.7 million ~~and $11.8 million, respectively, that related~~in the same prior year period. The year-over-year change was primarily due to ~~previous periods for resolution of certain tax matters, certain tax restructurings and product liability matters.~~ declines in fair value in our equity investments.

Interest expense, net, increased in the three-month period ended March 31, 2024 when compared to the same prior year period, primarily from increased losses incurred on our fixed-to-variable interest rate swaps in the current year period.

In the ~~three~~three-month period ended March 31, 2024, our effective tax rate (“ETR”) was 19.7 percent compared to 18.9 percent for the three-month period ended March 31, 2023. The 19.7 percent and ~~nine month~~18.9 percent ETR in the three-month periods ended ~~September 30, 2016,~~March 31, 2024 and 2023, respectively, were primarily driven by our mix of earnings between U.S. and foreign locations. Absent discrete tax events, we ~~recognized~~expect our future ETR will be lower than the U.S. corporate income tax ~~benefits~~rate of ~~$25.1 million~~21.0 percent due to our mix of earnings between U.S. and foreign locations, which generally have lower corporate income tax ~~provisions of $27.6 million, respectively, related to the finalization of tax accounts for the Biomet merger. We are subject to taxation in the U.S. and numerous foreign jurisdictions.~~rates. Our ETR in future ~~quarters~~periods could also potentially be impacted byby: changes in our mix of pre-tax earnings; changes in tax rates, tax laws or their interpretation, including the European Union ~~rules on state aid;~~adoption of Pillar Two proposals which began to take effect in 2024; the outcome of various federal, state and foreign ~~audits;~~audits, appeals, and litigation; and the expiration of certain statutes of limitations. Currently, we cannot reasonably estimate the impact of these items on our financial results.

Segment Operating Profit


									Operating Profit as a
	Net Sales				Operating Profit				Percentage of Net Sales
	Three Months Ended				Three Months Ended				Three Months Ended
	March 31,				March 31,				March 31,
(dollars in millions)	2024		2023		2024		2023		2024			2023
Americas	$	1,186.5	$	1,141.3	$	639.3	$	608.9		53.9	%		53.4	%
EMEA		444.8		425.6		153.0		149.5		34.4			35.1
Asia Pacific		258.0		264.1		93.3		90.2		36.2			34.2

Americas

In the Americas, operating profit and operating profit as a percentage of net sales increased in the three-month period ended March 31, 2024 when compared to the same prior year period. The increases were primarily due to higher net sales driven by market growth and new product introductions, coupled with lower royalty expense as a result of agreements we entered into in 2023 to acquire intellectual property through the buyout of certain licensing arrangements.

EMEA

In EMEA, operating profit increased, but operating profit as a percentage of net sales decreased, in the three-month period ended March 31, 2024 when compared to the same prior year period. The increase in operating profit was due to higher net sales driven by market growth and improved pricing. However, operating profit as a percentage of net sales decreased due to higher manufacturing costs and a higher mix of profits from countries with lower operating profit margins.

Asia Pacific

In Asia Pacific, operating profit and operating profit as a percentage of net sales increased in the three-month period ended March 31, 2024 when compared to the same prior year period. In Asia Pacific, changes in foreign currency exchange rates have had a larger impact on our results than in our other operating segments. While net sales declined in the three-month period ended March 31, 2024 when compared to the same prior year period due to changes in foreign currency exchange rates, the negative net sales impact was partially offset by higher hedge gains recognized in the current year period from our hedging program. As a result, net sales volume growth, lower royalty expense as a result of agreements we entered into in 2023 to acquire intellectual property through the buyout of certain licensing arrangements, and savings from our restructuring programs resulted in higher operating profit and operating profit as a percentage of sales ~~has remained similar between the three and nine month periods ended September 30, 2017 when compared to the same prior year periods. The Americas has experienced lower operating margins~~in Asia Pacific in the 2017 periods compared to the same prior year periods due to price declines, higher contribution of sales from products with lower gross profit margins and higher freight costs. These unfavorable impacts were offset by lower U.S. medical device excise tax expense and continued savings from our SG&A synergies initiatives. 2024 period.

In EMEA, operating profit as a percentage of sales decreased in the nine month period ended September 30, 2017 compared to the same prior year period primarily due to price declines and a reduced impact of hedge gains. In the three month period ended September 30, 2017, operating profit as a percentage of sales increased slightly as SG&A synergies offset the negative effects from price declines and lower hedge gains.

In Asia Pacific, operating profit as a percentage of sales decreased in the three and nine month periods ended September 30, 2017 compared to the same prior year periods due to a reduced impact of hedge gains and price declines.

~~Non-GAAP Operating Performance Measures~~

We use financial measures that differ from financial measures determined in accordance with GAAP to evaluate our operating performance. These non-GAAP financial measures exclude the impact of inventory step-up; certain inventory and manufacturing-related charges connected to discontinuing certain product lines, quality enhancement and remediation efforts; intangible asset amortization; “Special items;” other expenses related to acquisitions; any related effects on our income tax provision associated with these items; and other certain tax adjustments. Other certain tax adjustments include a tax restructuring that lowered the tax rate on deferred tax liabilities recorded on intangible assets recognized in merger-related accounting, net favorable resolutions of various tax matters, and charges from internal restructuring transactions that provide us access to cash in a tax efficient manner. 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 our performance. 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.

The following are reconciliations from our GAAP net earnings and diluted earnings per share to our non-GAAP adjusted net earnings and non-GAAP adjusted diluted earnings per share used for internal management purposes (in millions, except per share amounts):

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Net Earnings of Zimmer Biomet Holdings, Inc.

$
98.8

$
158.8

$
582.4

$
236.3

Inventory step-up and other inventory and
manufacturing-related charges

10.4

22.8

58.5

357.7

Intangible asset amortization

152.7

164.3

452.4

424.7

Special items

Biomet merger-related

81.1

113.8

206.3

313.5

Other special items

84.3

56.6

227.8

83.5

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

(0.5
)

(2.6
)

0.5

(1.1
)
Taxes on above items ⁽¹⁾

(79.1
)

(111.6
)

(264.4
)

(297.0
)
Biomet merger-related measurement period tax adjustments ⁽²⁾

-

-

-

52.7

Other certain tax adjustments⁽³⁾

2.2

(39.7
)

(55.6
)

6.4

Adjusted Net Earnings

$
349.9

$
362.4

$
1,207.9

$
1,176.7

⁽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 nine month 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⁾

In the 2017 periods, other certain tax adjustments relate to a tax restructuring that lowered the tax rate on deferred tax liabilities recorded on intangible assets recognized in acquisition-related accounting, net favorable resolutions of various tax matters, and charges from internal restructuring transactions that provide us access to cash in a tax efficient manner. The adjustments in the 2016 periods relate to internal restructuring transactions that provide us access to cash in a tax efficient manner.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Diluted Earnings Per Share

$
0.48

$
0.78

$
2.86

$
1.17

Inventory step-up and other inventory and
manufacturing-related charges

0.05

0.11

0.29

1.77

Intangible asset amortization

0.75

0.81

2.22

2.10

Special items

Biomet merger-related

0.40

0.56

1.01

1.55

Other special items

0.41

0.28

1.12

0.41

Merger-related and other expense in other expense, net

-

(0.01
)

-

(0.01
)
Taxes on above items ⁽¹⁾

(0.38
)

(0.55
)

(1.30
)

(1.47
)
Biomet merger-related measurement period tax adjustments ⁽²⁾

-

-

-

0.26

Other certain tax adjustments⁽³⁾

0.01

(0.19
)

(0.27
)

0.04

Adjusted Diluted Earnings Per Share

$
1.72

$
1.79

$
5.93

$
5.82

⁽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 nine month 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⁾

Liquidity and Capital Resources

~~Cash flows provided by operating activities were $1,179.4~~

As of March 31, 2024, we had $393.0 million in cash and cash equivalents. In addition, we had $1.0 billion available to borrow under our 2023 364-Day Credit Agreement, and $1.5 billion available under our 2023 Five-Year Revolving Facility. The terms of the ~~nine month period ended September 30, 2017, compared to $1,005.0 million in~~2023 364-Day Credit Agreement and the same prior year period. The increase was driven by our sale of accounts receivable in certain countries in the 2017 period which we estimated provided an incremental $273 million of additional cash, partially offset by product liability payments related to the U.S. Durom Cup Settlement Program and $30.5 million in penalties paid to resolve previously-disclosed FCPA matters involving Biomet and certain of its subsidiaries as discussed2023 Five-Year Revolving Facility are described further in Note 158 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report.

We believe that cash flows from operations, our cash and cash equivalents on hand, and available borrowings under our revolving credit facilities will be sufficient to meet our ongoing liquidity requirements for at least the next twelve months. However, it is possible our needs may change. Further, there can be no assurance that, if needed, we will be able to secure additional financing on terms favorable to us, if at all.

Sources of Liquidity

Cash flows provided by operating activities were $228.0 million in the three-month period ended March 31, 2024, compared to $307.7 million in the same prior year period. The decrease in the 2024 period was driven by higher bonus, income tax and restructuring-related payments in the 2024 period. In addition, the timing of accounts payable payments made in the 2024 period compared to the 2023 period also resulted in a decline in operating cash flows.

Cash flows used in investing activities were ~~$382.6~~$195.0 million in the ~~nine month~~three-month period ended ~~September 30, 2017,~~March 31, 2024, compared to ~~$1,544.7~~$149.4 million in the same prior year period. Instrument and property, plant and equipment additions reflected ongoing investments in our product portfolio, ~~and~~including new product introductions, optimization of our manufacturing and logistics ~~network. The 2016~~networks, and investments in enterprise resource planning software. In addition, in the three-month period ~~included cash outflows for LDR and~~ended March 31, 2024 we invested in a debt security as well as other business acquisitions, compared to the same period in 2017. Additionally, the 2017 period reflects no investing activity related to available-for-sale debt securities because as investments matured we used the cash to pay off debt.intangible assets.

Cash flows used in financing activities were ~~$977.6~~$50.1 million in the ~~nine month~~three-month period ended ~~September 30, 2017,~~March 31, 2024, compared to ~~$434.1~~$206.7 million in the same prior year period. ~~Our primary use~~In the 2024 period, we borrowed a net $70.0 million under our Uncommitted Credit Facility and used those proceeds, along with cash on hand, to repurchase $113.6 million of ~~available~~our common stock. In the 2023 period, we borrowed a net $210.0 million under our revolving credit facilities and used those proceeds, along with cash on hand, to repurchase $267.6 million of our common stock. We also repaid $120.2 million of other debt obligations that were due in the first ~~nine months~~quarter of 2017 was for debt repayment. We borrowed amounts under a new Japan Term Loan B and used the borrowings to pay down a portion of U.S. Term Loan A. We also paid $500.0 million in connection with the redemption at maturity of our 1.450% senior notes due April 1, 2017.2023.

In February, May and July 2017, our Board of Directors declared a quarterly cash dividend of $0.24 per share. We expect to continue paying cash dividends on a quarterly basis; however, future dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change. Additionally, our debt facilities restrict the payment of dividends in certain circumstances.

In February 2016, our Board of Directors authorized a new $1.0 billion share repurchase program effective March 1, 2016, with no expiration date. The previous program expired on February 29, 2016. As of September 30, 2017, all $1.0 billion remained authorized.

We will continue to exercise disciplined capital allocation designed to drive stockholder value creation. We intend to use available cash for reinvestment in the business, debt repayment, dividends and opportunistic share repurchases. If the right opportunities arise, we may also use available cash to pursue business development opportunities.

In order to achieve operational synergies, we expect ongoing cash outlays related to our Biomet integration plans through mid-2018. These cash outlays are necessary to achieve our integration goals, including net annual pre-tax operating profit synergies of $350.0 million. Additionally, we will continue to incur cash outlays for our ongoing quality enhancement and remediation efforts at the legacy Biomet Warsaw facility throughout 2017 and 2018.

As discussed in Note 11 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report, the IRS has issued proposed adjustments for years 2005 through 2012 reallocating profits between certain of our U.S. and foreign subsidiaries. We have disputed these proposed adjustments and continue to pursue resolution with the IRS. Although the ultimate timing for resolution of the disputed tax issues is uncertain, future payments may be significant to our operating cash flows.

Also, as discussed in Note 15 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report, as of September 30, 2017, a short-term liability of $75.0 million and long-term liability of $143.3 million related to Durom Cup product liability claims were recorded on our condensed consolidated balance sheet. We expect to continue paying these claims over the next few years. We expect to be reimbursed a portion of these payments for product liability claims from insurance carriers. As of September 30, 2017, we have received a portion of the insurance proceeds we estimate we will recover. We have a long-term receivable of $95.3 million remaining for future expected reimbursements from our insurance carriers. As of September 30, 2017, we also had a short-term liability of $39.7 million related to Biomet metal-on-metal hip implant claims.

~~At September 30, 2017, we had eleven tranches of senior notes outstanding as follows (dollars in millions):~~

Interest

Principal

Rate

Maturity Date
$
1,150.0

2.000
%

April 1, 2018

500.0

4.625

November 30, 2019

1,500.0

2.700

April 1, 2020

300.0

3.375

November 30, 2021

750.0

3.150

April 1, 2022

591.1

*

1.414

December 13, 2022

2,000.0

3.550

April 1, 2025

591.1

*

2.425

December 13, 2026

253.4

4.250

August 15, 2035

317.8

5.750

November 30, 2039

395.4

4.450

August 15, 2045

*	~~Euro denominated debt securities~~

~~We also had four term loans with total principal of $2,103.0 million outstanding as of September 30, 2017.~~

We have a $1.5 billion Multicurrency Revolving Facility that will mature on September 30, 2021. There were no outstanding borrowings under this facility as of September 30, 2017. We also have other available uncommitted credit facilities totaling $57.8 million as of September 30, 2017.

~~For additional information on our debt, see Note 7 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report.~~

We place our cash and cash equivalents in highly-rated financial institutions and limit the amount of credit exposure to any one entity. We invest only in high-quality financial instruments in accordance with our internal investment policy.

As of ~~September 30, 2017, $375.2~~March 31, 2024, $350.6 million of our cash and cash equivalents were held in jurisdictions outside of the U.S. Of this amount, ~~$101.5~~$31.5 million is denominated in U.S. Dollars and, therefore, bears no foreign currency translation risk. The ~~balance of these assets~~remaining amount is denominated in currencies of the various countries where we operate.

~~In light of our commitments under various credit facilities, as well as our expectation for continued business development, we have plans~~ We generally intend to ~~repatriate a significant portion of our offshore~~limit distributions from foreign subsidiaries earnings tothat were previously taxed in the U.S. ~~We have unremitted foreign~~, as a result of the transition tax or tax on Global Intangible Low-Taxed Income (“GILTI”). These previously taxed earnings ~~of $3,648.1 million, which we plan~~would not be subject to ~~repatriate to the~~further U.S. ~~in future periods. We have estimated a long-term deferred tax liability of $1,205.8 million for the estimated tax impact of this repatriation.~~federal tax.

Our concentrations of credit risks with respect to trade accounts receivable isare limited due to the large number of customers and their dispersion across a number of geographic areas and by frequent monitoring of the creditworthiness of the customers to whom credit is granted in the normal course of business. 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 and, accordingly, are exposed to their respective business, economic and country-specific variables.

~~Our ability to collect accounts receivable in some countries depends in part upon the financial stability~~Material Cash Requirements from Known Contractual and Other Obligations

At March 31, 2024, we had outstanding debt of ~~the hospital and healthcare sectors~~$5,796.2 million, of which $970.0 million was classified as current debt. Of our current debt, $850.0 million of senior notes mature on November 22, 2024, and the ~~respective countries’ national economic and healthcare systems. Most notably, in Europe healthcare is typically sponsored by the government. Since~~remaining $120.0 million was outstanding under our Uncommitted Credit Facility which we ~~sell products~~expect to public hospitals in those countries, we are indirectly exposed to government budget constraints. The ongoing financial uncertainties in the Euro zone impact the indirect credit exposure we have to those governments through their public hospitals. As of September 30, 2017, in Greece, Italy, Portugal and Spain, countries that have been widely recognized as presenting the highest risk, our gross short-term and long-term trade accounts receivable combined were $226.7 million. With allowances for doubtful accounts of $19.5 million recorded in those countries, the net balance was $207.2 million, representing 17 percent of our total consolidated short-term and long-term trade accounts receivable balance, net. Italy and Spain accounted for $187.2 million of that net amount. We are actively monitoring the situations in these countries and we maintain contact with customers in these countries on a regular basis.repay during 2024. We believe we can satisfy these debt obligations with cash generated from our allowance for doubtful accounts is adequate in these countries, as ultimately we believe the governments in these countries will be able to pay. To the extent the respective governments’ ability to fund their public hospital programs deteriorates, we may have to record significant badoperations, by issuing new debt ~~expenses in the future.~~and/or by borrowing on our committed revolving credit facilities.

~~Management believes that cash flows from operations~~For additional information on our debt, including types of debt, maturity dates, interest rates, debt covenants and available ~~borrowings under the Multicurrency Revolving Facility are sufficient~~revolving credit facilities, see Note 8 to ~~meet~~ our working capital, capital expenditure and debt service needs, as well as return cash to stockholders in the form of dividends and share repurchases. Should additional investment opportunities arise, we believe that our earnings, balance sheet and cash flows will allow us to obtain additional capital, if necessary.

~~Recent Accounting Pronouncements~~

~~Information pertaining to recent accounting pronouncements can be found in Note 2 to the~~ interim condensed consolidated financial statements included in Part I, Item 1 of this report.

In February 2024, our Board of Directors declared a quarterly cash dividend of $0.24 per share. We expect to continue paying cash dividends on a quarterly basis; however, future dividends are subject to approval of the Board of Directors and may be adjusted as business needs or market conditions change.

In February 2016, our Board of Directors authorized a $1.0 billion share repurchase program effective March 1, 2016, with no expiration date. In the three-month period ended March 31, 2024, we repurchased approximately 0.7 million shares for $88.0 million. As of March 31, 2024, $67.8 million remained authorized under this program.

As discussed in Note 4 to our interim condensed consolidated financial statements in Part I, Item 1 of this report, we are executing on a 2023 Restructuring Plan, a 2021 Restructuring Plan and a 2019 Restructuring Plan. The 2023 Restructuring Plan along with other related initiatives is expected to result in total pre-tax charges of $120 million to $135 million by the end of 2025, of which approximately $92 million was incurred through March 31, 2024. We expect to reduce gross annual pre-tax operating expenses by $175 million to $200 million relative to the 2023 baseline expenses by the end of 2025 as program benefits under the 2023 Restructuring Plan are realized. The 2021 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $180 million by the end of 2024, of which approximately $170 million was incurred through March 31, 2024. We expect to reduce gross annual pre-tax operating expenses by approximately $190 million relative to the 2021 baseline expenses by the end of 2024 as program benefits under the 2021 Restructuring Plan are realized. The 2019 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $370 million by the end of 2025, of which approximately $336 million was incurred through March 31, 2024. In our original estimates, we expected to reduce gross annual pre-tax operating expenses by approximately $180 million to $280 million relative to the 2019 baseline expenses by the end of 2023 as benefits under the 2019 Restructuring Plan were realized. Our latest estimates indicate that we will be near the low end of that range, and the full benefits will not be realized until we complete the closure of a manufacturing facility, which is expected to occur in 2025.

As discussed in Note 12 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report, the IRS has issued proposed adjustments for years 2010 through 2012, for years 2013 through 2015, and for years 2016 through 2019. We have disputed these proposed adjustments and intend to continue to vigorously defend our positions. Although the ultimate timing for resolution of the disputed tax issues is uncertain, future payments may be significant to our operating cash flows.

As discussed in Note 15 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report, we are involved in various litigation matters. We estimate the total liabilities for all litigation matters was $226.5 million as of March 31, 2024. However, litigation is inherently uncertain, and upon resolution of any of these uncertainties, we may incur charges in excess of these estimates, and may in the future incur other material judgments or enter into other material settlements of claims. We expect to pay these liabilities over the next few years. Additionally, we have entered into development, distribution and other contractual arrangements that may result in future payments dependent upon various events such as the achievement of certain product R&D milestones, sales milestones, or, at our discretion, maintenance of exclusive rights to distribute a product. Since there is uncertainty on the timing or whether such payments will have to be made, they have not been recognized on our condensed consolidated balance sheets. These estimated payments could range from $0 to approximately $405 million.

Recent Accounting Pronouncements

Information pertaining to recent accounting pronouncements can be found in Note 2 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report.

Critical Accounting Estimates

~~Our~~The preparation of our financial ~~results are~~statements is affected by the selection and application of accounting policies and ~~methods.~~methods, and also requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting estimates are those that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations. There were no changes in the ~~three or nine month periods~~three-month period ended ~~September 30, 2017~~March 31, 2024 to ~~the application of~~our critical accounting ~~policies~~estimates as described in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~ 2023.

Cautionary Note Regarding Forward-Looking Statements and Factors That May Affect Future Results

This quarterly report contains certain statements that are forward-looking statements within the meaning of federal securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this report, the words “may,” “will,” “can,” “should,” “would,” “could,” “anticipate,” “expect,” “plan,” “seek,” “believe,” “are confident that,” “look forward to,” “predict,” “estimate,” “potential,” “project,” “target,” “forecast,” “see,” “intend,” “design,” “strive,” “strategy,” “future,” “opportunity,” “assume,” “guide,” ~~“position”~~“position,” “continue” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on current beliefs, expectations and assumptions ~~that~~of management and are subject to significant risks, uncertainties and changes in circumstances that could cause actual results to differ materially from such ~~forward-looki~~ngforward-looking statements. These risks, uncertainties and changes in circumstances include, but are not limited to:

•

our chief executive officer transition, including disruptions and uncertainties related thereto, our ability to appoint a permanent successor with the desired level of experience and expertise in a timely manner, the potential impact on our

•

competition;

~~business and future strategic direction resulting from our transition to a new chief executive officer and our ability to retain other key members of senior management;~~

•

pricing pressures;

•

dependence on new product development, technological advances and innovation;

•

changes in customer demand for our products and services caused by demographic changes, obsolescence, development of different therapies or other factors;

•

shifts in the product category or regional sales mix of our products and services;

•

the effects of business disruptions, either alone or in combination with other risks on our business and operations;

•

the risks and uncertainties related to our ability to successfully execute our restructuring plans;

•

control of costs and expenses;

•

our ability to attract, retain and develop the highly skilled employees, senior management, independent agents and distributors 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, ~~vendors~~suppliers and lenders and on our operating results and ~~business~~businesses generally;

•

the ability to form and implement alliances;

•

dependence on a limited number of suppliers for key raw materials and other inputs and for outsourced activities;

•

the risk of disruptions in the supply of materials and components used in manufacturing or sterilizing our products;

•

breaches or failures of our information technology systems or products, including by cyberattack, unauthorized access or theft;

•

challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the ~~Deferred Prosecution Agreement entered into in January 2017;~~

U.S. Food and Drug Administration (“FDA”) and other government regulators, such as more stringent requirements for regulatory clearance of products;

•

the ~~success~~outcome of ~~our quality and operational excellence initiatives, including our ongoing quality enhancement and remediation efforts at the legacy Biomet Warsaw facility;~~

government investigations;

•

the impact of healthcare reform and cost containment measures, including efforts sponsored by government agencies, legislative bodies, the private sector and healthcare purchasing organizations, through reductions in reimbursement levels, repayment demands and otherwise;

•

the impact of substantial indebtedness on our ability to ~~remediate matters identified~~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 ~~any inspectional observations or warning letters issued~~tax obligations arising from examinations by tax authorities and from changes in tax laws in jurisdictions where we do business, including as a result of the “base erosion and profit shifting” project undertaken by the ~~FDA, while continuing~~Organisation for Economic Co-operation and Development and otherwise;

•

challenges to ~~satisfy~~ the ~~demand for~~tax-free nature of the ZimVie spinoff transaction and the subsequent liquidation of our ~~products;~~

retained interest in ZimVie;

•

the risk of additional tax liability due to the recategorization of our independent agents and distributors to employees;

•

the risk that material impairment of the carrying value of our intangible assets, including goodwill, could negatively affect our operating results;

•

changes in general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations;

•

changes in general industry and market conditions, including domestic and international growth, inflation and currency exchange rates;

•

the domestic and international business impact of political, social and economic instability, tariffs, trade restrictions and embargoes, sanctions, wars, disputes and other conflicts, including on our ability to operate in, export from or collect accounts receivable in affected countries;

•

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~~other government regulators ~~such as more stringent requirements for regulatory clearance~~relating to medical products, healthcare fraud and abuse laws and data privacy and security laws;

•

the success of our ~~products;~~

quality and operational excellence initiatives;

•

the ~~outcome of government investigations;~~

~~competition;~~

~~pricing pressures;~~

~~changes~~ability to remediate matters identified in ~~customer~~inspectional observations or warning letters issued by the FDA and other regulators, while continuing to satisfy the demand for our ~~products~~products;

•

product liability, intellectual property and ~~services caused by demographic changes or other factors;~~

commercial litigation losses; and

•

the ~~impact of healthcare reform measures, including the possible reinstatement of the medical device excise tax beginning January 1, 2018;~~

~~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 the regional sales mix of our products and services;~~

~~supply and prices of raw materials and products;~~

~~control of costs and expenses;~~

~~our~~ ability to obtain and maintain adequate intellectual property ~~protection;~~

~~our ability to form and implement alliances;~~

~~changes in tax obligations arising from tax reform measures, including the European Union rules on state aid, or examinations by tax authorities;~~

~~product liability and intellectual property litigation losses;~~

~~our ability to retain the independent agents and distributors who market our products;~~

~~our 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;~~

~~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 our ability to collect accounts receivable in affected countries.~~

protection.

Our Annual Report on Form 10-K for the year ended December 31, ~~2016, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 and this Quarterly Report on Form 10-Q contain~~2023 contains detailed discussions of these and other important factors under the heading “Risk Factors.” You should understand that it is not possible to predict or identify all factors that could cause actual results to differ materially from forward-looking statements. Consequently, you should not consider any list or discussion of such factors to be a complete set of all potential risks or uncertainties.

Forward-looking statements speak only as of the date they are made and we expressly disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 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.

Readers of this report are cautioned not to rely on these forward-looking statements since 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 report.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures About Market Risk~~

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes from the information provided in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2023.

~~Item 4.~~

~~Controls and Procedures~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures (as defined in ~~Rule~~Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Because of inherent limitations, disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of disclosure controls and procedures are met.

Our management, with the participation of our ~~Interim~~ Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, ~~and in light of the previously identified material weakness in internal control over financial reporting as of December 31, 2016, described in~~ our ~~2016 Annual Report on Form 10-K, our Interim~~ Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were ~~not~~ effective ~~as of September 30, 2017.~~

~~A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is~~at a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness we identified in 2016 relates to management’s controls over accounting for income taxes. Specifically, we did not maintain the appropriate complement of resources in our tax department commensurate with the increased volume and complexity of accounting for income taxes subsequent to the Biomet merger. This material weakness did not result in a material misstatement to our financial statements or disclosures, but did result in out-of-period adjustments in our provision for income taxes and deferred tax liabilities that were individually and in aggregate immaterial. Additionally, this control deficiency could result in misstatements of income tax related accounts and disclosures that would result in a material misstatement of the consolidated financial statements that would not be prevented or detected.assurance level.

~~Remediation Plan~~. Our management believes that progress has been made as of the date of this report in remediating the underlying causes of the material weakness. We have taken, and will continue to take, steps to remediate the control deficiencies that led to the material weakness. These steps include adding resources to enhance our tax and intercompany accounting expertise and establishing additional controls within the income tax review processes. In the nine month period ended September 30, 2017, we added senior level employees responsible for income tax reporting and intercompany accounting, developed a formal plan for remediation, reevaluated financial reporting risks within the income tax accounting process, and completed an internal review of our controls, with the assistance of a third party professional services firm. During the remainder of 2017, we intend to add additional resources and execute our remediation plan.

The material weakness will not be considered remediated until the applicable measures have been implemented for a sufficient period of time and management has concluded, through testing, the enhanced controls are operating effectively. As we continue to evaluate and improve our internal control over financial reporting, we may decide to take additional measures to address this material weakness, which may require additional implementation time. Further, we cannot provide any assurance that our remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts.

Notwithstanding the identified material weakness and the conclusion above that our disclosure controls and procedures were not effective as of September 30, 2017, our management believes that the unaudited condensed consolidated financial statements contained in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States of America.

Changes in Internal Control Over Financial Reporting.T~~here~~There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~September 30, 2017~~March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3933

Part II – ~~Oth~~erOther Information

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings

Information pertaining to legal proceedings can be found in Note 15 to ~~the~~our interim condensed consolidated financial statements included in Part I, Item 1 of this report and is incorporated herein by reference.

~~Item 1A.~~

~~Risk Factors~~

~~Except as set forth below, there have been no material changes~~Item 1A. Risk Factors

You should carefully consider the factors discussed in ~~our risk factors from those disclosed in~~Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2023 (“2023 Form 10-K”), which could materially affect our business, financial condition and results of operations. The risks described in our ~~Quarterly Report on~~2023 Form ~~10-Q~~10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

During the three-month period ended March 31, 2024, we issued 0.2 million shares of our common stock valued at $23.4 million upon the achievement of a commercial milestone related to the Embody acquisition. The shares were issued to the former Embody shareholders whom we reasonably believed to be accredited investors in a private transaction exempt from registration under Section 4(a)(2) and Regulation D under the Securities Act. To minimize dilution from issuing shares for the ~~quarter ended June 30, 2017.~~milestone settlement, we repurchased 0.2 million shares of our common stock in February 2024.

Issuer Purchases of Equity Securities

The following ~~risk factor is added:~~table summarizes repurchases of common stock settled during the three-month period ended March 31, 2024:

~~If the medical device excise tax is not repealed or further suspended,~~


Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as a Part of Publicly Announced Program(1)		Maximum Approximate Dollar Value of Shares that may yet be Purchased Under the Program(1)
January 2024		530,017	$	120.94		530,017	$	91,702,916
February 2024		192,737		123.87		192,737		67,828,222
March 2024		-		-		-		67,828,222
Total		722,754	$	121.72		722,754	$	67,828,222

(1) In February 2016, our ~~business, results~~Board of ~~operations and cash flows may be adversely affected.~~Directors authorized a $1.0 billion share repurchase program effective March 1, 2016, with no expiration date.

As part of the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the Affordable Care Act or ACA), in January 2013 we began paying a 2.3 percent medical device excise tax on the vast majority of our U.S sales. A two-year moratorium was placed on the tax effective January 1, 2016. Absent further legislative action, the tax will be automatically reinstated for U.S. medical device sales beginning January 1, 2018.Item 3. Defaults Upon Senior Securities

If the medical device excise tax is reinstated, we will again be forced to identify ways to reduce spending in other areas to offset the earnings impact due to the tax. We do not expect to be able to pass along the cost of the tax to hospitals, which continue to face cuts to their Medicare reimbursement under the Affordable Care Act and other legislation. Nor do we expect to be able to offset the cost of the tax through higher sales volumes resulting from any further expansion of health insurance coverage through ACA exchanges or Medicaid expansion because of the demographics of the current uninsured population. Accordingly, reinstatement of the medical device excise tax could have a material adverse effect on our business, results of operations and cash flows.None

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~None~~Item 4. Mine Safety Disclosures

~~Item 3.~~

~~Defaults Upon Senior Securities~~

~~None~~

~~Item 4.~~

~~Mine Safety Disclosures~~

Not applicable

~~Item 5.~~

~~Other Information~~

Item 5. Other Information

During the ~~three month~~three-month period ended ~~September 30, 2017,~~March 31, 2024, the Audit Committee of our Board of Directors ~~was not asked to, and did not,~~ ~~approve~~approved the engagement of PricewaterhouseCoopers LLP, our independent registered public accounting firm, to perform ~~any non-audit~~certain audit-related and tax services. This disclosure is made pursuant to Section 10A(i)(2) of the Exchange Act, as added by Section 202 of the Sarbanes-Oxley Act of 2002.

40During the three-month period ended March 31, 2024, no members of our Board of Directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, amended or terminated any contract, instruction or written plan for the purchase or sale of our

~~Item 6.~~

E~~xhibits~~

securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) of the Exchange Act or any non-Rule 10b5-1 trading arrangement, as defined in rules of the Securities and Exchange Commission.

Item 6. Exhibits

The following exhibits are filed or furnished as part of this report:


3.1		Restated Certificate of Incorporation of Zimmer Biomet Holdings, Inc., dated ~~June 24, 2015~~May 17, 2021 (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed ~~June 26, 2015)~~May 20, 2021)

3.2		Restated ~~By-Laws~~Bylaws of Zimmer Biomet Holdings, Inc., effective ~~June 24, 2015~~December 14, 2022 (incorporated by reference to Exhibit ~~3.3~~3.2 to the Registrant’s ~~Current~~Annual Report on Form ~~8-K~~10-K filed ~~June 26, 2015)~~February 24, 2023)

10.1		~~Term Loan~~Form of Amendment to Change in Control Severance Agreement ~~¥21,300,000,000, dated as of September 22, 2017, between Zimmer Biomet G.K.~~with Ivan Tornos, Suketu Upadhyay, Rachel Ellingson, Lori Winkler and ~~Sumitomo Mitsui Banking Corporation~~Paul Stellato (incorporated by reference to Exhibit ~~10.1~~10.51 to the ~~Registrant’s Current~~Registrant's Annual Report on Form ~~8-K~~10-K filed ~~September 28, 2017)~~February 23, 2024)

10.2		~~Amended and Restated Term Loan~~Amendment to Change in Control Severance Agreement ~~¥11,700,000,000,~~ dated ~~as of September 22, 2017,~~February 19, 2024 between Zimmer ~~Biomet G.K.~~GmbH and ~~Sumitomo Mitsui Banking Corporation~~Wilfred van Zuilen (incorporated by reference to Exhibit ~~10.2~~10.52 to the ~~Registrant’s Current~~Registrant's Annual Report on Form ~~8-K~~10-K filed ~~September 28, 2017)~~February 23, 2024)

10.3		~~Amended~~Deed of Amendment dated February 19, 2024 between Zimmer Asia (HK) Limited and ~~Restated Letter of Guarantee, dated as of September 22, 2017, made by Zimmer Biomet Holdings, Inc. in favor of Sumitomo Mitsui Banking Corporation~~Sang-Uk Yi (incorporated by reference to Exhibit ~~10.3~~10.53 to the ~~Registrant’s Current~~Registrant's Annual Report on Form ~~8-K~~10-K filed ~~September 28, 2017)~~February 23, 2024)

10.4*10.4		Form of ~~Restricted Stock Unit Award~~Change in Control Severance Agreement ~~(two-year vesting) under the Zimmer Biomet Holdings, Inc. 2009 Stock Incentive Plan~~with Mark Bezjak (incorporated by reference to Exhibit ~~10.1~~10.54 to the ~~Registrant’s Current~~Registrant's Annual Report on Form ~~8-K~~10-K filed ~~July 11, 2017)~~February 23, 2024)

10.5* 21		~~Form of Confidentiality, Non-Competition and Non-Solicitation Agreement with Daniel P. Florin~~

21		List of Subsidiaries of Zimmer Biomet Holdings, Inc.

31 31.1		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the ~~Interim~~ Chief Executive Officer, ~~and~~as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~101.INS~~101		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

~~101.CAL~~104		Cover Page Interactive Data File (formatted as Inline XBRL ~~Taxonomy Extension Calculation Linkbase Document~~and contained in Exhibit 101)

~~101.LAB~~		~~XBRL Taxonomy Extension Label Linkbase Document~~

~~101.PRE~~		~~XBRL Taxonomy Extension Presentation Linkbase Document~~

~~101.DEF~~		~~XBRL Taxonomy Extension Definition Linkbase Document~~


* Management contract or compensatory plan or arrangement

SIGNATURES

SI~~GNATURES~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	ZIMMER BIOMET HOLDINGS, INC.
			(Registrant)
	~~(Registrant)~~
Date: May 2, 2024	By:	/s/ Suketu Upadhyay
~~Date: November 6, 2017~~	~~By:~~	~~/s/ Daniel P. Florin~~Suketu Upadhyay
		~~Daniel P. Florin~~Chief Financial Officer and Executive Vice President - Finance, Operations and Supply Chain
		~~Interim Chief Executive Officer,~~(Principal Financial Officer)
		~~Senior Vice President and~~
Date: May 2, 2024	By:	~~Chief Financial Officer~~

~~Date: November 6, 2017~~	~~By:~~	/s/ ~~Tony W. Collins~~Paul Stellato
		~~Tony W. Collins~~Paul Stellato
		Vice President, ~~Corporate~~ Controller
		and Chief Accounting Officer
		(Principal Accounting Officer)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	ZBH	New York Stock Exchange
2.425% Notes due 2026	ZBH 26	New York Stock Exchange
1.164% Notes due 2027	ZBH 27	New York Stock Exchange


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐

Emerging growth company	☐

	Americas		EMEA			Asia Pacific		Product Category Operating Segments			Total
Balance at December 31, 2016
Goodwill	$	7,634.5	$	1,263.7		$	487.3	$	1,631.4		$	11,016.9
Accumulated impairment loss		-		-			-		(373.0	)		(373.0	)
		7,634.5		1,263.7			487.3		1,258.4			10,643.9
LDR purchase accounting		-		-			-		24.8			24.8
Other acquisitions		13.2		(24.1	)		-		27.6			16.7
Currency translation		82.5		110.0			10.0		49.7			252.2
Impairment		-		-			-		(32.7	)		(32.7	)
Balance at September 30, 2017
Goodwill		7,730.2		1,349.6			497.3		1,733.5			11,310.6
Accumulated impairment loss		-		-			-		(405.7	)		(405.7	)
	$	7,730.2	$	1,349.6		$	497.3	$	1,327.8		$	10,904.9


	As of March 31, 2024
			Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	74.4	$	-	$	74.4	$	-
Cross-currency interest rate swaps		27.3		-		27.3		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts		2.4		-		2.4		-
Total Assets	$	104.1	$	-	$	104.1	$	-

Liabilities
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	1.7	$	-	$	1.7	$	-
Cross-currency interest rate swaps		43.8		-		43.8		-
Interest rate swaps		163.8		-		163.8		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts		1.5		-		1.5		-
Contingent consideration related to acquisitions		115.2		-		-		115.2
Total Liabilities	$	326.0	$	-	$	210.8	$	115.2


	As of December 31, 2016								As of December 31, 2023
			Fair Value Measurements at Reporting Date Using:								Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Derivatives, current and long-term
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	65.3	$	-	$	65.3	$	-	$	54.4	$	-	$	54.4	$	-
Interest rate swaps		4.0		-		4.0		-
Cross-currency interest rate swaps										5.4		-		5.4		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts										0.4		-		0.4		-
Total Assets	$	69.3	$	-	$	69.3	$	-	$	60.2	$	-	$	60.2	$	-

Liabilities
Derivatives, current and long-term
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	0.3	$	-	$	0.3	$	-	$	3.7	$	-	$	3.7	$	-
Contingent payments related to acquisitions		62.8		-		-		62.8
Cross-currency interest rate swaps										68.1		-		68.1		-
Interest rate swaps										144.7		-		144.7		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts										1.6		-		1.6		-
Contingent consideration related to acquisitions										141.7		-		-		141.7
Total Liabilities	$	63.1	$	-	$	0.3	$	62.8	$	359.8	$	-	$	218.1	$	141.7

	For the Nine Months Ended
	September 30,
	2017			2016
Cash flows provided by (used in) operating activities:
Net earnings	$	582.2		$	234.9
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization		798.2			787.3
Share-based compensation		40.1			45.9
Goodwill and intangible asset impairment		59.5			28.0
Inventory step-up		32.2			300.9
Changes in operating assets and liabilities, net of effect of acquisitions:
Income taxes		(245.4	)		(125.4	)
Receivables		349.7			(80.3	)
Inventories		(123.2	)		44.2
Accounts payable and accrued expenses		(173.6	)		(76.0	)
Other assets and liabilities		(140.3	)		(154.5	)
Net cash provided by operating activities		1,179.4			1,005.0
Cash flows provided by (used in) investing activities:
Additions to instruments		(255.7	)		(251.3	)
Additions to other property, plant and equipment		(109.8	)		(130.1	)
Purchases of investments		-			(1.4	)
Sales of investments		-			273.3
LDR acquisition, net of acquired cash		-			(1,021.1	)
Other business combination investments, net of acquired cash		(4.0	)		(421.9	)
Other investing activities		(13.1	)		7.8
Net cash used in investing activities		(382.6	)		(1,544.7	)
Cash flows provided by (used in) financing activities:
Proceeds from multicurrency revolving facility		400.0			-
Payments on multicurrency revolving facility		(400.0	)		-
Redemption of senior notes		(500.0	)		-
Proceeds from term loan		192.7			750.0
Payments on term loan		(640.0	)		(700.0	)
Net payments on other debt		(0.9	)		(33.1	)
Dividends paid to stockholders		(145.0	)		(140.3	)
Proceeds from employee stock compensation plans		132.6			113.5
Business combination contingent consideration payments		(9.1	)		-
Restricted stock withholdings		(7.6	)		(5.3	)
Debt issuance costs		(0.3	)		(3.4	)
Repurchase of common stock		-			(415.5	)
Net cash used in financing activities		(977.6	)		(434.1	)
Effect of exchange rates on cash and cash equivalents		27.5			(10.2	)
Decrease in cash and cash equivalents		(153.3	)		(984.0	)
Cash and cash equivalents, beginning of year		634.1			1,459.3
Cash and cash equivalents, end of period	$	480.8		$	475.3

	Employee
	Termination			Contract
	Benefits			Terminations			Total
Balance at December 31, 2016	$	38.1		$	35.1		$	73.2
Additions		12.0			-			12.0
Cash payments		(33.1	)		(9.4	)		(42.5	)
Foreign currency exchange rate changes		1.2			0.4			1.6
Balance at September 30, 2017	$	18.2		$	26.1		$	44.3


	Three Months Ended March 31, 2024
	Employee
	Termination		Contract
	Benefits		Terminations		Other		Total
Cost of products sold, excluding intangible asset amortization	$	-	$	-	$	0.5	$	0.5
Restructuring and other cost reduction initiatives		14.7		-		1.8		16.5
	$	14.7	$	-	$	2.3	$	17.0

Current assets	$	66.4
Property, plant and equipment		4.5
Intangible assets		172.9
Goodwill		337.1
Other assets		38.2
Total assets acquired		619.1
Current liabilities		20.0
Long-term liabilities		99.4
Total liabilities assumed		119.4
Net assets acquired	$	499.7


	Foreign			Cash			Defined
	Currency			Flow			Benefit			Total
	Translation			Hedges			Plan Items			AOCI
Balance at December 31, 2023	$	(159.4	)	$	63.3		$	(94.9	)	$	(191.0	)
AOCI before reclassifications		(35.8	)		34.7			-			(1.1	)
Reclassifications to statements of earnings		-			(18.0	)		(1.1	)		(19.1	)
Balance at March 31, 2024	$	(195.2	)	$	80.0		$	(96.0	)	$	(211.2	)

	Foreign			Cash			Unrealized			Defined
	Currency			Flow			(Losses) Gains on			Benefit
	Translation			Hedges			Securities			Plan Items
Balance at December 31, 2016	$	(323.4	)	$	32.3		$	(0.1	)	$	(142.8	)
AOCI before reclassifications		367.9			(79.4	)		-			(10.1	)
Reclassifications		-			(9.4	)		-			5.1
Balance at September 30, 2017	$	44.5		$	(56.5	)	$	(0.1	)	$	(147.8	)

	Three Months Ended September 30, 2017									Nine Months Ended September 30, 2017
	Before Tax			Tax			Net of Tax			Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	145.0		$	15.3		$	129.7		$	414.6		$	46.7		$	367.9
Unrealized cash flow hedge (losses)		(35.9	)		(7.6	)		(28.3	)		(99.0	)		(19.6	)		(79.4	)
Reclassification adjustments on cash flow hedges		5.2			1.1			4.1			(11.6	)		(2.2	)		(9.4	)
Adjustments to prior service cost and unrecognized actuarial assumptions		0.5			1.5			(1.0	)		(2.9	)		2.1			(5.0	)
Total Other Comprehensive Income	$	114.8		$	10.3		$	104.5		$	301.1		$	27.0		$	274.1


	Three Months Ended March 31, 2023
	Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	7.5		$	(4.9	)	$	12.4
Unrealized cash flow hedge gains		11.1			2.3			8.8
Reclassification adjustments on cash flow hedges		(22.9	)		(3.9	)		(19.0	)
Adjustments to prior service cost and unrecognized actuarial assumptions		(1.0	)		(0.1	)		(0.9	)
Total Other Comprehensive Income (Loss)	$	(5.3	)	$	(6.6	)	$	1.3

	Three Months Ended September 30, 2016									Nine Months Ended September 30, 2016
	Before Tax			Tax			Net of Tax			Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	58.3		$	-		$	58.3		$	113.9		$	-		$	113.9
Unrealized cash flow hedge (losses) gains		(16.1	)		(6.4	)		(9.7	)		(80.9	)		(27.9	)		(53.0	)
Reclassification adjustments on cash flow hedges		(17.7	)		(3.8	)		(13.9	)		(75.2	)		(17.2	)		(58.0	)
Unrealized gains on securities		-			-			-			0.4			-			0.4
Adjustments to prior service cost and unrecognized actuarial assumptions		2.2			1.0			1.2			25.6			3.3			22.3
Total Other Comprehensive Loss	$	26.7		$	(9.2	)	$	35.9		$	(16.2	)	$	(41.8	)	$	25.6

	As of September 30, 2017
			Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Derivatives, current and long-term
Foreign currency forward contracts	$	3.9	$	-	$	3.9	$	-
Interest rate swaps		3.8		-		3.8		-
Total Assets	$	7.7	$	-	$	7.7	$	-
Liabilities
Derivatives, current and long-term
Foreign currency forward contracts	$	39.5	$	-	$	39.5	$	-
Contingent payments related to acquisitions		44.0		-		-		44.0
Total Liabilities	$	83.5	$	-	$	39.5	$	44.0


	Level 3 - Liabilities
Contingent payments related to acquisitions
Beginning balance December 31, 2023	$	141.7
Change in estimates		(1.6	)
Settlements		(24.9	)
Ending balance March 31, 2024	$	115.2

		Gain (Loss) on									Gain (Loss) on
		Instrument									Hedged Item
		Three Months Ended					Nine Months Ended				Three Months Ended				Nine Months Ended
	Location on	September 30,					September 30,				September 30,				September 30,
Derivative Instrument	Statement of Earnings	2017		2016			2017		2016		2017		2016		2017		2016
Interest rate swaps	Interest expense	$	-	$	(3.8	)	$	-	$	10.1	$	-	$	3.8	$	-	$	(10.1	)

	Amount of Loss
	Recognized in OCI
	Three Months Ended					Nine Months Ended
	September 30,					September 30,
Derivative Instrument	2017			2016		2017			2016
Euro Notes	$	(41.7	)	$	-	$	(127.5	)	$	-

	Three Months Ended September 30,				% Inc /				Nine Months Ended September 30,				% Inc /
	2017		2016		(Dec)				2017		2016		(Dec)
Knees
Americas	$	382.4	$	397.5		(3.8	)	%	$	1,217.5	$	1,244.3		(2.2	)	%
EMEA		135.1		130.2		3.7				462.7		472.8		(2.2	)
Asia Pacific		106.2		103.8		2.3				325.7		314.6		3.5
Total	$	623.7	$	631.5		(1.2	)		$	2,005.9	$	2,031.7		(1.3	)
Hips
Americas	$	228.2	$	239.0		(4.5	)	%	$	719.5	$	733.4		(1.9	)	%
EMEA		115.1		112.2		2.4				382.1		387.8		(1.5	)
Asia Pacific		91.2		89.4		2.1				278.4		264.5		5.3
Total	$	434.5	$	440.6		(1.4	)		$	1,380.0	$	1,385.7		(0.4	)

			Interest
Principal			Rate			Maturity Date
$	1,150.0			2.000	%	April 1, 2018
	500.0			4.625		November 30, 2019
	1,500.0			2.700		April 1, 2020
	300.0			3.375		November 30, 2021
	750.0			3.150		April 1, 2022
	591.1	*		1.414		December 13, 2022
	2,000.0			3.550		April 1, 2025
	591.1	*		2.425		December 13, 2026
	253.4			4.250		August 15, 2035
	317.8			5.750		November 30, 2039
	395.4			4.450		August 15, 2045