UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~September 30, ~~2017~~2023

Commission File Number 001-16407

ZIMMER BIOMET HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

13-4151777

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

345 East Main Street, Warsaw, IN46580

(Address of principal executive offices)

Telephone: ~~(574) 267-6131~~(574) 373-3333

Securities registered pursuant to Section 12(b) of the Act:


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

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.


Large accelerated filer	☒	Accelerated filer	☐

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

Emerging growth company	☐

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~~November 2, 2023, 208,980,711 shares of the registrant’s $.01 par value common stock were outstanding.

ZIMMER BIOMET HOLDINGS, INC.

INDEX TO FORM 10-Q

September 30, ~~2017~~2023


		Page

Part I - Financial Information

Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Statements of Earnings for the Three and Nine ~~Month Periods~~Months Ended September 30, ~~2017~~2023 and ~~2016~~2022	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine ~~Month Periods~~Months Ended September 30, ~~2017~~2023 and ~~2016~~2022	4
	Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022	5
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022	67
	Notes to Interim Condensed Consolidated Financial Statements	78

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3837

Item 4.	Controls and Procedures	3837

Part II - Other Information

Item 1.	Legal Proceedings	4038

Item 1A.	Risk Factors	4038

Item 2.	Unregistered Sales of Equity Securities, ~~and~~ Use of Proceeds, and Issuer Purchases of Equity Securities	4038

Item 3.	Defaults Upon Senior Securities	4038

Item 4.	Mine Safety Disclosures	4038

Item 5.	Other Information	4038

Item 6.	Exhibits	4139

Signatures		4240

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						Nine Months Ended
	September 30,						September 30,						September 30,						September 30,
	2017			2016			2017			2016			2023			2022			2023			2022
Net Sales	$	1,818.1		$	1,832.8		$	5,749.8		$	5,670.8		$	1,753.6		$	1,669.8		$	5,454.1		$	5,114.8
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														518.6			488.2			1,545.0			1,499.2
Intangible asset amortization		152.7			164.3			452.4			424.7			145.0			131.5			416.6			395.3
Research and development		91.2			95.6			272.4			269.9			116.9			101.7			345.4			298.0
Selling, general and administrative		694.5			727.7			2,203.3			2,176.6			674.9			654.9			2,116.6			2,034.6
Special items (Note 2)		165.4			170.4			434.1			397.0
Intangible asset impairment														-			-			-			3.0
Restructuring and other cost reduction initiatives														24.3			28.3			90.6			129.2
Quality remediation														-			8.1			-			22.4
Acquisition, integration, divestiture and related														7.3			11.8			16.4			8.5
Operating expenses		1,604.7			1,637.3			4,903.7			5,028.2			1,487.0			1,424.5			4,530.6			4,390.2
Operating Profit		213.4			195.5			846.1			642.6			266.6			245.3			923.5			724.6
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	)
Earnings before income taxes		127.2			103.5			588.8			368.8
Provision (benefit) for income taxes		28.4			(54.4	)		6.6			133.9
Net Earnings		98.8			157.9			582.2			234.9
Less: Net loss attributable to noncontrolling interest		-			(0.9	)		(0.2	)		(1.4	)
Other income (expense), net														3.8			(25.4	)		10.3			(124.1	)
Interest expense, net														(51.1	)		(42.3	)		(150.9	)		(122.2	)
Earnings from continuing operations before income taxes														219.2			177.6			782.8			478.3
Provision (benefit) for income taxes from continuing operations														56.4			(16.6	)		177.4			56.9
Net Earnings from continuing operations														162.8			194.2			605.4			421.4
Less: Net earnings attributable to noncontrolling interest														0.2			0.2			0.6			0.7
Net Earnings from Continuing Operations of Zimmer Biomet Holdings, Inc.														162.7			194.0			604.8			420.7
Loss from discontinued operations, net of taxes														-			-			-			(58.8	)
Net Earnings of Zimmer Biomet Holdings, Inc.	$	98.8		$	158.8		$	582.4		$	236.3		$	162.7		$	194.0		$	604.8		$	361.9
Earnings Per Common Share
Basic	$	0.49		$	0.79		$	2.89		$	1.18
Diluted	$	0.48		$	0.78		$	2.86		$	1.17

Earnings Per Common Share - Basic
Earnings from continuing operations													$	0.78		$	0.92		$	2.89		$	2.01
Loss from discontinued operations														-			-			-			(0.28	)
Net Earnings Per Common Share - Basic													$	0.78		$	0.92		$	2.89		$	1.73
Earnings Per Common Share - Diluted
Earnings from continuing operations													$	0.77		$	0.92		$	2.88		$	2.00
Loss from discontinued operations														-			-			-			(0.28	)
Net Earnings Per Common Share - Diluted													$	0.77		$	0.92		$	2.88		$	1.72
Weighted Average Common Shares Outstanding
Basic		202.3			200.1			201.7			199.9			208.9			209.8			209.0			209.5
Diluted		204.0			202.9			203.6			202.3			210.0			210.3			210.1			210.2
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						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Net Earnings of Zimmer Biomet Holdings, Inc.	$	162.7		$	194.0		$	604.8		$	361.9
Other Comprehensive Income (Loss):
Foreign currency cumulative translation adjustments, net of tax		(22.7	)		(95.6	)		(36.7	)		(186.4	)
Unrealized cash flow hedge gains, net of tax		33.8			53.9			89.7			133.2
Reclassification adjustments on hedges, net of tax		(19.1	)		(14.4	)		(57.4	)		(28.4	)
Adjustments to prior service cost and unrecognized actuarial assumptions, net of tax		(0.7	)		3.7			(2.8	)		7.2
Total Other Comprehensive Loss		(8.7	)		(52.4	)		(7.2	)		(74.4	)
Comprehensive Income Attributable to
Zimmer Biomet Holdings, Inc.	$	154.0		$	141.6		$	597.6		$	287.5

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,			September 30,			December 31,
	2017			2016			2023			2022
ASSETS
Current Assets:
Cash and cash equivalents	$	480.8		$	634.1		$	292.1		$	375.7
Accounts receivable, less allowance for doubtful accounts		1,318.5			1,604.4
Accounts receivable, less allowance for credit losses								1,340.7			1,381.5
Inventories		2,084.2			1,959.4			2,323.3			2,147.2
Prepaid taxes		229.6			214.7
Other prepaid expenses and current assets		320.2			251.0
Prepaid expenses and other current assets								415.8			522.9
Total Current Assets		4,433.3			4,663.6			4,372.0			4,427.3
Property, plant and equipment, net		2,048.6			2,037.9			2,032.2			1,872.5
Goodwill		10,904.9			10,643.9			8,710.4			8,580.2
Intangible assets, net		8,464.9			8,785.4			4,891.7			5,063.8
Other assets		565.8			553.6			1,211.0			1,122.2
Total Assets	$	26,417.5		$	26,684.4		$	21,217.3		$	21,066.0
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	327.1		$	364.5		$	319.7		$	354.1
Income taxes payable		289.6			183.5			97.1			38.5
Other current liabilities								1,299.8			1,421.3
Current portion of long-term debt		1,225.0			575.6			355.0			544.3
Other current liabilities		1,168.5			1,257.9
Total Current Liabilities		3,010.2			2,381.5			2,071.5			2,358.2
Deferred income taxes		2,879.8			3,030.9
Deferred income taxes, net								465.4			474.8
Long-term income tax payable								403.1			421.2
Other long-term liabilities		877.6			936.3			631.9			632.6
Long-term debt		9,199.7			10,665.8			5,127.4			5,152.2
Total Liabilities		15,967.3			17,014.5			8,699.3			9,039.0
Commitments and Contingencies (Note 15)
Commitments and Contingencies (Note 16)
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, 316.0 million shares as of September 30, 2023 (313.8 million as of December 31, 2022) issued								3.2			3.1
Paid-in capital		8,493.9			8,368.5			9,801.4			9,504.4
Retained earnings		8,837.2			8,467.1			10,014.9			9,559.3
Accumulated other comprehensive loss		(159.9	)		(434.0	)		(186.5	)		(179.3	)
Treasury stock, 103.9 million shares in 2017 (104.1 million shares in 2016)		(6,724.4	)		(6,735.8	)
Treasury stock, 107.0 million shares as of September 30, 2023 (104.8 million as of December 31, 2022)								(7,122.2	)		(6,867.2	)
Total Zimmer Biomet Holdings, Inc. stockholders' equity		10,449.8			9,668.9			12,510.8			12,020.3
Noncontrolling interest		0.4			1.0			7.2			6.7
Total Stockholders' Equity		10,450.2			9,669.9			12,518.0			12,027.0
Total Liabilities and Stockholders' Equity	$	26,417.5		$	26,684.4		$	21,217.3		$	21,066.0

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 July 1, 2023		315.8	$	3.2	$	9,766.0		$	9,902.3		$	(177.8	)		(107.0	)	$	(7,122.2	)	$	7.1		12,378.6
Net earnings		-		-		-			162.7			-			-			-			0.2		162.9
Other comprehensive loss		-		-		-			-			(8.7	)		-			-			-		(8.7	)
Cash dividends declared ($0.24 per share)		-		-		-			(50.1	)		-			-			-			-		(50.1	)
Stock compensation plans		0.2		-		35.4			-			-			-			-			-		35.4
Embody, Inc. acquisition consideration		-		-		-			-			-			-			-			-		-
Share repurchases		-		-		-			-			-			-			-			-		-
Balance September 30, 2023		316.0		3.2		9,801.4			10,014.9			(186.5	)		(107.0	)		(7,122.2	)		7.2		12,518.0

Balance July 1, 2022		313.4	$	3.1	$	9,418.8		$	9,606.5		$	(192.5	)		(103.8	)	$	(6,717.5	)	$	6.2	$	12,124.6
Net earnings		-		-		-			194.0			-			-			-			0.2		194.2
Other comprehensive loss		-		-		-			-			(52.4	)		-			-			-		(52.4	)
Cash dividends declared ($0.24 per share)		-		-		-			(50.4	)		-			-			-			-		(50.4	)
Spinoff of ZimVie Inc.		-		-		-			(10.4	)		-			-			-			-		(10.4	)
Stock compensation plans		0.2		-		45.1			0.2			-			-			0.2			-		45.5
Balance September 30, 2022		313.6	$	3.1	$	9,463.9		$	9,739.9		$	(244.9	)		(103.8	)	$	(6,717.3	)	$	6.4	$	12,251.1

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		-		-		-			604.8			-			-			-			0.6		605.4
Other comprehensive loss		-		-		-			-			(7.2	)		-			-			-		(7.2	)
Cash dividends declared ($0.72 per share)		-		-		-			(150.6	)		-			-			-			-		(150.6	)
Stock compensation plans		1.0		-		148.9			1.4			-			-			1.0			-		151.3
Embody, Inc. acquisition consideration		1.2		0.1		150.4			-			-			-			-			-		150.5
Share repurchases		-		-		(2.3	)		-			-			(2.2	)		(256.0	)		-		(258.3	)
Balance September 30, 2023		316.0	$	3.2	$	9,801.4		$	10,014.9		$	(186.5	)		(107.0	)	$	(7,122.2	)	$	7.2		12,518.0

Balance January 1, 2022		312.8	$	3.1	$	9,314.8		$	10,292.2		$	(231.6	)		(103.8	)	$	(6,717.8	)	$	5.7	$	12,666.4
Net earnings		-		-		-			361.9			-			-			-			0.7		362.6
Other comprehensive loss		-		-		-			-			(74.4	)		-			-			-		(74.4	)
Cash dividends declared ($0.72 per share)		-		-		-			(151.1	)		-			-			-			-		(151.1	)
Reclassifications of net investment hedges		-		-		-			-			25.9			-			-			-		25.9
Spinoff of ZimVie Inc.		-		-		-			(763.4	)		35.2			-			-			-		(728.2	)
Stock compensation plans		0.8		-		149.1			0.3			-			-			0.5			-		149.9
Balance September 30, 2022		313.6	$	3.1	$	9,463.9		$	9,739.9		$	(244.9	)		(103.8	)	$	(6,717.3	)	$	6.4	$	12,251.1

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 Nine Months Ended September 30,
	2023			2022
Cash flows provided by (used in) operating activities from continuing operations:
Net earnings from continuing operations	$	605.4		$	421.4
Adjustments to reconcile net earnings from continuing operations to cash provided by operating activities from continuing operations:
Depreciation and amortization		710.5			697.9
Share-based compensation		74.5			78.2
Intangible asset impairment		-			3.0
(Gain) loss on investment in ZimVie Inc.		(2.5	)		114.3
Changes in operating assets and liabilities, net of acquired assets and liabilities
Income taxes		23.4			(12.4	)
Receivables		15.5			(114.5	)
Inventories		(212.2	)		(63.5	)
Accounts payable and accrued liabilities		(219.5	)		(1.6	)
Other assets and liabilities		(2.0	)		(10.8	)
Net cash provided by operating activities from continuing operations		993.2			1,112.0
Cash flows provided by (used in) investing activities from continuing operations:
Additions to instruments		(232.8	)		(192.2	)
Additions to other property, plant and equipment		(228.3	)		(124.5	)
Net investment hedge settlements		27.2			71.2
Acquisition of intellectual property rights		(86.4	)		-
Business combination investments, net of acquired cash		(32.9	)		(99.8	)
Other investing activities		(5.0	)		(64.2	)
Net cash used in investing activities from continuing operations		(558.1	)		(409.5	)
Cash flows provided by (used in) financing activities from continuing operations:
Net payments on revolving facilities		(20.0	)		-
Redemption of senior notes		(86.3	)		(750.0	)
Proceeds from term loan		-			83.0
Payments on term loans		(33.9	)		(242.9	)
Dividends paid to stockholders		(150.7	)		(150.8	)
Proceeds from employee stock compensation plans		81.8			63.2
Distribution from ZimVie Inc.		-			540.6
Business combination contingent consideration payments		(10.3	)		-
Deferred business combination payments		(4.0	)		-
Repurchase of common stock		(281.9	)		-
Other financing activities		(6.8	)		(5.4	)
Net cash used in financing activities from continuing operations		(512.1	)		(462.3	)
Cash flows provided by (used in) discontinued operations:
Net cash used in operating activities		-			(71.5	)
Net cash used in investing activities		-			(7.2	)
Net cash used in financing activities		-			(68.1	)
Net cash used in discontinued operations		-			(146.8	)
Effect of exchange rates on cash and cash equivalents		(6.5	)		(26.5	)
Change in cash and cash equivalents		(83.5	)		66.9
Cash and cash equivalents, beginning of year (includes $100.4 at January 1, 2022 of discontinued operations cash)		375.7			478.5
Cash and cash equivalents, end of period	$	292.1		$	545.4

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, 2022.

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~~2022 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.

Risks and Uncertainties - Our results have been and may continue to be impacted by the COVID-19 global pandemic. The vast majority of our net sales are derived from products used in elective surgical procedures which may get deferred due to precautions in certain markets if there is a surge in infections. Although the effects of the COVID-19 pandemic on our operating results continue to subside, the pandemic could still have an unfavorable effect on our financial position, results of operations and cash flows.

Spinoff - On March 1, 2022, we completed the previously announced separation of our spine and dental businesses into a new public company through the distribution by Zimmer Biomet of 80.3% of the outstanding shares of common stock of ZimVie Inc. (“ZimVie”) to Zimmer Biomet’s stockholders. We disposed of our remaining shares of ZimVie in February 2023. The historical results of our spine and dental businesses that were contributed to ZimVie in the spinoff have been reflected as discontinued operations in our condensed consolidated financial statements through the date of the spinoff in 2022 as the spinoff represented a strategic shift in our business that had a major effect on operations and financial results. The disclosures presented in our notes to the interim condensed consolidated financial statements are presented on a continuing operations basis.

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~~ - 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 orreclassified the loss on ~~disposal charges connected with global restructuring, quality enhancement and remediation efforts, operational excellence initiatives, and other items as “Special items”~~investment in ~~our~~ZimVie in the prior period condensed consolidated statement 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 and professional fees include expenditures related~~cash flows to third-party integration consulting performed in a variety of areas such as tax, compliance, logistics and human resources for our business combinations including our merger with Biomet, Inc. (“Biomet”); legal fees relatedconform to the ~~consummation~~current period presentation.

2. Discontinued Operations and Related ZimVie Matters

On March 1, 2022, we completed the previously announced separation of ~~mergers~~our spine and ~~acquisitions and certain litigation and compliance matters; other consulting and professional fees and contract labor related~~dental businesses through the distribution of 80.3% of the outstanding shares of common stock of ZimVie to our ~~quality enhancement and remediation efforts and operational excellence initiatives; third-party fees related to severance and termination benefits matters; costs~~stockholders at the close 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 workbusiness 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”~~February 15, 2022 (the “Record Date”) ~~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 resulteddistribution was made 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 our integration plans to drive operational synergies. Part of 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):

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~~ ~~– In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04 – Simplifying the Test for Goodwill Impairment.~~ ~~This ASU requires goodwill impairment to be measured as~~ the amount of one share of ZimVie common stock for every ten shares of our common stock owned by ~~which a reporting unit's carrying value exceeds its fair value, not to exceed~~our stockholders at the ~~carrying amount~~close of ~~goodwill.~~ Under previous 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 impact of this ASU is dependentbusiness on the ~~specific facts~~Record Date. Fractional shares of ZimVie common stock were not issued but instead were aggregated and ~~circumstances of future impairments and is applied prospectively on testing that occurs subsequent to adoption. We elected to early adopt this ASU~~sold 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 retrospectivelyopen market with the ~~cumulative effect~~proceeds being distributed pro rata in lieu of ~~initially applying the ASU recognized at the date of initial application.~~such fractional shares.

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,~~2021, ZimVie entered into a credit agreement with a financial institution providing for revolving loans of up to $175.0 million and term loan borrowings of up to $595.0 million. On February 28, 2022, prior to separation, ZimVie borrowed the entire $595.0 million available under the term loan. Approximately $540.6 million of this amount was paid by ZimVie to Zimmer Biomet in the form of a dividend at separation which is included in our cash flows from financing activities in the condensed consolidated statements of cash flows. We used proceeds from the dividend, along with cash on hand and proceeds from a draw on our revolving credit facility, to repay our 3.150% Senior Notes due 2022 which had an outstanding principal balance of $750.0 million.

In connection with the spinoff, we ~~will focus~~entered into definitive agreements with ZimVie that, among other things, set forth the terms and conditions of the separation and distribution. These agreements include a Transition Services Agreement (the “TSA”), a

Transition Manufacturing and Supply Agreement (the “TMA”), a Reverse Transition Manufacturing and Supply Agreement (the “Reverse TMA”), and various other agreements each dated as of March 1, 2022.

Pursuant to the TSA, both we and ZimVie agree to provide certain services to each other, on ~~additional disclosures we may need to make~~an interim, transitional basis from and after the separation and the ~~effect~~distribution. The services include certain regulatory services, commercial services, operational services, tax services, clinical affairs services, information technology services, finance and accounting services and human resource and employee benefits services. The remuneration to be paid for such services is generally intended to allow the company providing the services to recover all of ~~this ASU~~its costs and expenses of providing such services. The TSA will terminate 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,~~expiration of the term of the last service provided thereunder, which will ~~result in us restating prior reporting periods presented. As noted previously,~~generally be no later than March 31, 2025. However, 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~~most TSA services 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~~completed by the ~~beginning~~end of 2023.

Pursuant to 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 leasesTMA and the ~~related impact this ASU~~Reverse TMA, Zimmer Biomet or ZimVie, as the case may be, will ~~have~~manufacture or cause to be manufactured certain products for the other party, on ~~our consolidated financial statements.~~

~~In March 2017,~~an interim, transitional basis. Pursuant to such agreements, Zimmer Biomet or ZimVie, as 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. Wecase may be, will be required to ~~report~~purchase certain minimum amounts of products from the other ~~components~~party. Each of the TMA and the Reverse TMA has a two-year term, with a one-year extension possible upon mutual agreement of the parties.

We recognize any gains or losses from the TSA and the TMA in the Acquisition, integration, divestiture and related line item in our condensed consolidated statements of earnings. Amounts included in the condensed consolidated statements of earnings related to these agreements for the three and nine-month periods ended September 30, 2023 and 2022 were immaterial.

We initially retained approximately 5.1 million common shares of ZimVie in connection with the spinoff, representing approximately 19.7 percent of ZimVie's outstanding common shares on the separation date. Given our inability to exert significant influence over ZimVie, we recognized this investment at fair value in prepaid expenses and other current assets on our condensed consolidated balance sheet. Changes to the fair value of the investment were recognized in non-operating other (expense) income, net, in subsequent periods. We disposed of these shares in February 2023. In the nine-month period ended September 30, 2023, we recognized a gain of $2.5 million related to our investment in ZimVie. In the three and nine-month periods ended September 30, 2022, we recognized losses of $30.0 million and $114.3 million, respectively, related to our investment in ZimVie.

On August 31, 2022, we borrowed an aggregate principal amount of $83.0 million under a short-term credit agreement (the "Short-Term Term Loan”) with a third-party financial institution, the proceeds of which were used to repay certain of our existing indebtedness. On September 1, 2022, we entered into a forward exchange agreement and pledge agreement (collectively the “Forward Exchange Agreement”) with the same financial institution to deliver to them our 5.1 million shares of ZimVie common stock in the first quarter of 2023. We pledged our 5.1 million shares of ZimVie common stock to the financial institution as collateral for our obligations under the Short-Term Term Loan and the Forward Exchange Agreement.

In February 2023, we repaid in full the Short-Term Term Loan by transferring our ZimVie common shares to the financial institution counterparty to settle the Forward Exchange Agreement and by paying $33.9 million in cash, representing an amount determined by the difference between the average daily volume-weighted average price of the ZimVie shares over the outstanding term of the Forward Exchange Agreement and the principal amount of $83.0 million. The transfer of our ZimVie common shares as part of the settlement resulted in a $49.1 million noncash financing activity for the nine-month period ended September 30, 2023.

The Forward Exchange Agreement was accounted for at fair value, with changes in fair value recognized in non-operating other (expense) income, net and was included in the net gain related to our investment in ZimVie for the nine month-period ended September 30, 2023, as discussed above. The most significant input into the valuation of the Forward Exchange Agreement was the market price of the ZimVie shares.The fair value of the Forward Exchange Agreement as of December 31, 2022 was $1.1 million and was included within prepaid expenses and other current assets on our condensed consolidated balance sheet.

As discussed in Note 1, Basis of Presentation, the results of our spine and dental businesses have been reflected as discontinued operations through the date of the spinoff in the prior year period. Details of loss from discontinued operations included in our condensed consolidated statements of earnings are as follows (in millions):


	Nine Months Ended
	September 30,
	2022
Net Sales	$	147.8
Cost of products sold, excluding intangible asset amortization		53.5
Intangible asset amortization		14.0
Research and development		10.5
Selling, general and administrative		89.4
Restructuring and other cost reduction initiatives		0.4
Acquisition, integration, divestiture and related		40.9
Other expense, net		0.3
Loss from discontinued operations before income taxes		(61.2	)
Benefit for income taxes from discontinued operations		(2.4	)
Loss from discontinued operations, net of tax	$	(58.8	)

In a pro rata spinoff of consolidated subsidiaries, the distribution of the assets and liabilities are recognized through equity instead of net ~~benefit costs~~earnings. Accordingly, we recognized the distribution of net assets to ZimVie in ~~Other Income (Expense)~~retained earnings. Additionally, the dividend we received from ZimVie at the separation was also recognized in retained earnings.

3. Significant Accounting Policies

Use of Estimates - The accompanying unaudited condensed consolidated financial statements are prepared in conformity with GAAP, which 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. We have made our best estimates, as appropriate under GAAP, 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 componentsrecognition of our ~~net benefit cost.~~assets and liabilities. Actual results could differ materially from these estimates.

~~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 this ASU will have a significant impact on our financial position, results of operations or cash flows. This ASU will be effective for us January 1, 2019, with early adoption permitted. After adoption, we may explore new hedging opportunities that are eligible for hedge accounting treatment under the new standard.

Pronouncements Not Yet Adopted - There are no ~~other~~ recently issued accounting pronouncements that we have not yet adopted that are expected to have a material effect on our financial position, results of operations or cash flows.

4. Revenue

Net sales by geography are as follows (in millions):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
United States	$	1,031.4	$	973.0	$	3,160.6	$	2,931.8
International		722.2		696.8		2,293.5		2,183.0
Total	$	1,753.6	$	1,669.8	$	5,454.1	$	5,114.8

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Knees	$	706.3	$	657.0	$	2,240.1	$	2,024.7
Hips		465.3		468.0		1,462.5		1,406.2
S.E.T.		423.2		409.4		1,299.3		1,272.6
Other		158.8		135.4		452.2		411.3
Total	$	1,753.6	$	1,669.8	$	5,454.1	$	5,114.8

S.E.T. includes sales from our Sports Medicine, Extremities, Trauma, Craniomaxillofacial and Thoracic ("CMFT") product categories. Other includes sales from our Technology, Surgical and Bone Cement product categories.

This net sales presentation differs from our reportable operating segments, which are based upon our senior management organizational structure and how we allocate resources toward achieving operating profit goals. Each of our reportable operating

~~3. Business Combinations~~

~~LDR Acquisition~~segments sells all the product categories noted above. Accordingly, the only difference from the presentation above and our reportable operating segments are the geographic groupings.

5. Restructuring

In December 2021, our management approved a global restructuring program (the “2021 Restructuring Plan”) intended to further reduce costs and to reorganize our global operations in preparation for the spinoff of ZimVie. The 2021 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $185 million. The pre-tax restructuring charges consist of employee termination benefits; contract terminations for sales agents; and other charges, such as consulting fees and project management expenses. The expenses incurred under our 2021 Restructuring Plan are reported in our “Restructuring and other cost reduction initiatives” financial statement line item. The following table summarizes the liabilities recognized related to the 2021 Restructuring Plan (in millions):


	Employee
	Termination			Contract
	Benefits			Terminations			Other			Total
Expenses incurred in the three months ended September 30, 2023	$	1.0		$	4.5		$	3.5		$	9.0

Balance, December 31, 2022	$	10.5		$	25.0		$	3.1		$	38.6
Expenses incurred in the nine months ended September 30, 2023		4.9			20.7			7.6			33.2
Cash payments		(9.5	)		(23.4	)		(6.3	)		(39.2	)
Foreign currency exchange rate changes		(0.1	)		(0.1	)		-			(0.2	)
Balance, September 30, 2023	$	5.8		$	22.2		$	4.4		$	32.4

Expense incurred since the start of the 2021 Restructuring Plan	$	58.0		$	72.5		$	34.5		$	165.0

Expense estimated to be recognized for the 2021 Restructuring Plan	$	70.0		$	80.0		$	35.0		$	185.0

In December 2019, our Board of Directors approved, and we initiated, a global restructuring program (the “2019 Restructuring Plan”) with an objective of reducing structural costs to allow us to further invest in higher priority growth opportunities. The 2019 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $370 million. The pre-tax restructuring charges consist of employee termination benefits; contract terminations for facilities and sales agents; and other charges, such as consulting fees, project management expenses and relocation costs, including costs to close a manufacturing facility.

The following table summarizes the location on our condensed consolidated statement of earnings and type of cost for our 2019 Restructuring Plan (in millions):


	Three Months Ended September 30, 2023
	Employee
	Termination		Contract
	Benefits		Terminations		Other		Total
Cost of products sold, excluding intangible asset amortization	$	-	$	-	$	3.0	$	3.0
Restructuring and other cost reduction initiatives		3.2		-		1.9		5.1
	$	3.2	$	-	$	4.9	$	8.1

	Nine Months Ended September 30, 2023
	Employee
	Termination		Contract
	Benefits		Terminations		Other		Total
Cost of products sold, excluding intangible asset amortization	$	-	$	-	$	3.0	$	3.0
Restructuring and other cost reduction initiatives		2.1		-		17.4		19.5
	$	2.1	$	-	$	20.4	$	22.5

The following table summarizes the liabilities recognized related to the 2019 Restructuring Plan (in millions):


	Employee
	Termination			Contract
	Benefits			Terminations			Other			Total
Balance, December 31, 2022	$	28.9		$	9.0		$	6.4		$	44.3
Expenses incurred in the nine months ended September 30, 2023		2.1			-			20.4			22.5
Cash payments		(2.9	)		(2.5	)		(22.8	)		(28.2	)
Foreign currency exchange rate changes		0.9			-			-			0.9
Balance, September 30, 2023	$	29.0		$	6.5		$	4.0		$	39.5

Expense incurred since the start of the 2019 Restructuring Plan	$	110.4		$	35.0		$	155.0		$	300.4

Expense estimated to be recognized for the 2019 Restructuring Plan	$	155.0		$	35.0		$	180.0		$	370.0

We do not include restructuring charges in the operating profit of our reportable segments. We report the expenses for other cost reduction and optimization initiatives in our “Restructuring and other cost reduction initiatives” financial statement line item because these activities also have the goal of reducing costs across the organization. However, since the cost reduction initiative expenses are not considered restructuring, they have been excluded from the amounts presented in this note.

6.Inventories


	September 30,		December 31,
	2023		2022
	(in millions)
Finished goods	$	1,769.9	$	1,655.0
Work in progress		251.9		230.9
Raw materials		301.5		261.3
Inventories	$	2,323.3	$	2,147.2

7. Property, Plant and Equipment


	September 30,			December 31,
	2023			2022
	(in millions)
Land	$	17.5		$	19.2
Buildings and equipment		2,158.8			2,093.4
Capitalized software costs		556.9			518.2
Instruments		3,670.6			3,683.5
Construction in progress		242.8			144.1
		6,646.6			6,458.4
Accumulated depreciation		(4,614.4	)		(4,585.9	)
Property, plant and equipment, net	$	2,032.2		$	1,872.5

We had $24.2 million and $17.0 million of property, plant and equipment included in accounts payable as of September 30, 2023 and December 31, 2022, respectively.

8. Acquisitions

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. 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 consideration utilized~~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. To minimize dilution from issuing shares for the Embody acquisition, ~~method~~we repurchased 1.9 million shares of ~~accounting, as reduced by the merger consideration paid to holders of unvested LDR~~our common 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~~ in the ~~growing cervical disc replacement (“CDR”) market.~~three-month period ended March 31, 2023. The ~~combination positioned us~~Embody acquisition includes additional consideration of up to ~~accelerate the growth~~$120.0 million in fair value of our ~~Spine business through~~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 ~~incremental revenues associated with entry into~~acquisition date. The estimated fair value of the ~~CDR~~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 of all the outstanding shares of a privately held orthopedics medical device company that expands our portfolio in the orthopedics market ("April acquisition"). The initial consideration consisted of $15.0 million of cash and ~~cross-portfolio selling opportunities~~includes consideration of up to ~~both Zimmer Biomet~~$8.0 million in cash, subject to achieving future regulatory milestones.

These acquisitions are collectively referred to in this report as the “2023 acquisitions”. Refer to Note 11 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 of~~ the technologies acquired. The goodwill related to the 2023 acquisitions is not expected to be deductible for tax purposes. The goodwill related to the Embody acquisition is included in the Americas operating segment and the Americas Orthopedics reporting unit. The goodwill related to the April acquisition is included in the Asia Pacific operating segment and reporting unit. The goodwill related to the 2023 acquisitions was the only significant activity related to our consolidated goodwill balance in the three and nine-month periods ended September 30, 2023, other than changes related to foreign currency exchange rate translation adjustments.

The purchase price allocations for the 2023 acquisitions are preliminary as of September 30, 2023. We need additional time to evaluate the tax attributes of the transactions, which may change the recognized tax assets and liabilities. We are also evaluating certain contingent liabilities as of the respective acquisition dates. 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~~preliminary estimates of fair value of the assets acquired and liabilities assumed related to the 2023 acquisitions (in millions):


Current assets	$	4.9
Intangible assets subject to amortization:
Technology		98.8
Customer relationships		9.4
Intangible assets not subject to amortization:
In-process research and development (IPR&D)		36.3
Goodwill		149.3
Other assets		4.5
Total assets acquired		303.3
Current liabilities		1.2
Deferred income taxes		30.6
Total liabilities assumed		31.8
Net assets acquired	$	271.5

The amortization periods selected for technology and customer relationships were 15 years and 5 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 and nine-month periods ended September 30, 2023, there were no material adjustments to the preliminary values of the 2023 acquisitions.

On April 18, 2022, we completed the acquisition of all the outstanding shares of a privately held sternal closure company. The acquisition was completed primarily to expand our product offerings in the ~~LDR~~CMFT market. The total aggregate cash consideration paid at closing was $100.0 million, with an additional $11.0 million of deferred payments to be made over the following two years of which $4.0 million was paid in the nine-month period ended September 30, 2023.

The goodwill related to this acquisition represents the excess of the consideration transferred over the fair value of the net assets acquired. The goodwill is related to the operational synergies we expect to achieve from combining the companies and the cash flows

from future, undefined, development projects. The goodwill is included in the Americas operating segment and the Americas CMFT reporting unit. A portion of the goodwill is expected to be deductible for U.S. income tax purposes.

The following table summarizes the aggregate final estimates of fair value of the assets acquired and liabilities assumed related to this acquisition (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

Intangible assets not subject to amortization:

In-process research and development (IPR&D)

2.0

Intangible assets subject to amortization:

Technology

447.0

Customer relationships

122.0

Trademarks and trade names

74.0

Other assets

73.8

Goodwill

507.2

Total assets acquired

1,476.6

Current liabilities

122.5

Long-term debt

0.5

Deferred taxes

236.7

Other long-term liabilities

3.0

Total liabilities assumed

362.7

Net assets acquired
$
1,113.9


Current assets	$	3.8
Intangible assets subject to amortization:
Technology		42.8
Customer relationships		12.3
Goodwill		48.3
Other assets		4.9
Total assets acquired		112.1
Current liabilities		1.1
Total liabilities assumed		1.1
Net assets acquired	$	111.0

The amortization periods selected for technology and customer relationships were 10 years and 4 years, respectively.

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.

~~Goodwill~~

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

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

~~During the three and nine month periods~~nine-month period ended September 30, ~~2017,~~2023, we entered into agreements to acquire intellectual property through the buyout of certain licensing arrangements. These new agreements and the related payments replace the variable royalty payments that otherwise would have been due under the terms of previous licensing arrangements through 2030. These new agreements benefit us by expanding our ownership of intellectual property that we may use in the future. We recognized ~~a $32.7~~intangible assets of $80.5 million ~~goodwill impairment charge on our Office Based Technologies reporting unit. See Note 9 for additional details.~~

~~4. Inventories~~

September 30,

December 31,

2017

2016

(in millions)

Finished goods

$
1,674.2

$
1,556.9

Work in progress

189.6

141.7

Raw materials

220.4

260.8

Inventories

$
2,084.2

$
1,959.4

~~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.~~these agreements which will be amortized through 2030. 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 withfixed, contractual payments under 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~~agreements are ~~recorded as an increase to~~reflected in investing 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, 2017.9. Debt

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


	September 30,			December 31,
	2023			2022
Current portion of long-term debt
Short-Term Term Loan	$	-		$	83.0
Uncommitted Credit Facility		300.0			-
Five-Year Credit Agreement		55.0			375.0
3.700% Senior Notes due 2023		-			86.3
Total current portion of long-term debt	$	355.0		$	544.3
Long-term debt
1.450% Senior Notes due 2024		850.0			850.0
3.550% Senior Notes due 2025		863.0			863.0
3.050% Senior Notes due 2026		600.0			600.0
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		529.4			533.6
1.164% Euro Notes due 2027		529.4			533.6
Debt discount and issuance costs		(25.8	)		(30.1	)
Adjustment related to interest rate swaps		(192.7	)		(172.0	)
Total long-term debt	$	5,127.4		$	5,152.2

At September 30, ~~2017,~~2023, our total current and non-current debt ~~balance~~of $5.5 billion consisted of ~~$8.3~~$5.3 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~~$55.0 million of outstanding

borrowings under ~~a U.S. term loan (“U.S. Term Loan A”) that will mature on June 24, 2020, $675.0~~the 2023 Five-Year Revolving Facility (defined below), and $300.0 million of outstanding borrowings 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~~$25.8 million and fair value adjustments related to interest rate swaps totaling$192.7 million.

In the nine-month period ended September 30, 2023, we redeemed the $83.0 million outstanding principal amount of our Short-Term Term Loan and the $86.3 million outstanding principal amount of our 3.700% Senior Notes due 2023.

On 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 September ~~22, 2017,~~30, 2023. As of September 30, 2023, there were outstanding borrowings of $300.0 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 secured overnight financing rate (“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.~~2023. As of September 30, ~~2017,~~2023, there were outstanding borrowings of $55.0 million 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 in outstanding borrowings2023 364-Day Revolving Credit Agreement as of September 30, ~~2017.~~

~~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~~2023. As of September 30, ~~2019. We~~2023, there were no outstanding borrowings under the 2023 364-Day Revolving Credit Agreement.

Borrowings under our revolving credit facilities have ~~paid $75.0 million~~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 net cash inflows or outflows due to their short-term nature. The gross borrowings and repayments in ~~principal under U.S. Term Loan B, resulting in $675.0 million outstanding on~~ the ~~U.S. Term Loan B as~~prior year condensed consolidated statement of ~~September 30, 2017.~~ cash flows have been reclassified to a net amount to conform to the current period presentation.

The estimated fair value of our senior notes, which includes our Euro notes, as of September 30, ~~2017,~~2023, 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$4,804.7 million. The carrying ~~values~~value of ~~U.S. Term Loan A~~the outstanding $55.0 million and ~~U.S. Term Loan B~~$300.0 million principal balances of the 2023 Five-Year Credit Agreement and Uncommitted Credit Facility, respectively, approximate their fair ~~values~~value as they bear interest at short-term ~~variable~~ market rates.

10. Accumulated Other Comprehensive Income

Accumulated other comprehensive income (loss) (“AOCI”) refers to certain gains and losses that under GAAP are included in comprehensive income but are excluded from net earnings as these amounts are initially recorded as an adjustment to stockholders’ equity. Amounts in AOCI may be reclassified to net earnings upon the occurrence of certain events.

Our AOCI is comprised of foreign currency translation adjustments, unrealized gains and losses on cash flow hedges ~~unrealized gains~~ and ~~losses on available-for-sale securities, and amortization of~~unrecognized prior service costs and ~~unrecognized~~ gains and losses in actuarial assumptions onrelated to our defined benefit plans. Foreign currency translation adjustments are reclassified to net earnings upon sale or upon a complete or substantially complete liquidation of an investment in a foreign entity. In the nine-month period ended September 30, 2022, due to the spinoff of ZimVie, certain foreign entities were completely liquidated. In a pro rata spinoff of consolidated subsidiaries’ assets and liabilities, the distribution of these net assets is recognized through equity instead of net earnings. Therefore, the foreign currency translation adjustments of those entities that were completely liquidated were reclassified to retained earnings. Similarly, we had entered into instruments designated as net investment hedges against certain of these same foreign entities. We reclassified the portion of the net investment hedge gains (losses) deferred in foreign currency translation adjustments related to those entities to retained earnings. Unrealized gains and losses on cash flow hedges are reclassified to net earnings when the hedged item affects net earnings. Unrealized gains and losses on available-for-sale securities are reclassified to net earnings if we sell the security before maturity or if the unrealized loss is considered to be other-than-temporary. Amounts related to defined benefit plans that are in AOCI are reclassified over the service periods of employees in the plan. The reclassification amounts are allocated to all employees in the plans and, therefore, the reclassified amounts may become part of inventory to the extent they are considered direct labor costs. See Note 12 for more information on our defined benefit plans.

The following table shows the changes in the components of AOCI gains (losses), net of tax (in millions):


	Foreign			Cash			Defined
	Currency			Flow			Benefit			Total
	Translation			Hedges			Plan Items			AOCI
Balance at December 31, 2022	$	(169.3	)	$	69.6		$	(79.6	)	$	(179.3	)
AOCI before reclassifications		(36.7	)		89.7			-			53.0
Reclassifications to statements of earnings		-			(57.4	)		(2.8	)		(60.2	)
Balance at September 30, 2023	$	(206.0	)	$	101.9		$	(82.4	)	$	(186.5	)

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
)

��

The following table shows the reclassification adjustments from AOCI (in millions):


	Amount of Gain (Loss)
	Reclassified from AOCI
	Three Months Ended						Nine Months Ended
	September 30,						September 30,						Location on
Component of AOCI	2023			2022			2023			2022			Statements of Earnings
Cash flow hedges
Foreign exchange forward contracts	$	23.3		$	17.0		$	69.9		$	33.6		Cost of products sold
Forward starting interest rate swaps		(0.1	)		(0.2	)		(0.5	)		(0.6	)	Interest expense, net
		23.2			16.8			69.4			33.0		Total before tax
		4.1			2.4			12.0			4.6		Provision for income taxes
	$	19.1		$	14.4		$	57.4		$	28.4		Net of tax
Defined benefit plans
Prior service cost and unrecognized actuarial loss	$	0.8		$	(4.7	)	$	3.1		$	(9.4	)	Other income (expense), net
		0.1			(1.0	)		0.3			(2.2	)	Provision for income taxes
	$	0.7		$	(3.7	)	$	2.8		$	(7.2	)	Net of tax
Total reclassifications	$	19.8		$	10.7		$	60.2		$	21.2		Net of tax

Amount of Gain (Loss)

Reclassified from AOCI

Three Months Ended

Nine Months Ended

September 30,

September 30,

Location on
Component of AOCI

2017

2016

2017

2016

Statement of Earnings
Cash flow hedges

Foreign exchange forward contracts

$
(5.1
)

$
18.1

$
12.0

$
76.5

Cost of products sold
Forward starting interest rate swaps

(0.1
)

(0.4
)

(0.4
)

(1.3
)

Interest expense

(5.2
)

17.7

11.6

75.2

Total before tax

(1.1
)

3.8

2.2

17.2

Provision for income taxes

$
(4.1
)

$
13.9

$
9.4

$
58.0

Net of tax
Defined benefit plans

Prior service cost

$
2.6

$
1.9

$
7.7

$
5.8

*
Unrecognized actuarial (loss)

(5.4
)

(5.1
)

(16.2
)

(15.1
)

*

(2.8
)

(3.2
)

(8.5
)

(9.3
)

Total before tax

(1.1
)

(1.0
)

(3.4
)

(3.3
)

Benefit for income taxes

$
(1.7
)

$
(2.2
)

$
(5.1
)

$
(6.0
)

Net of tax
Total reclassifications

$
(5.8
)

$
11.7

$
4.3

$
52.0

Net of tax

*	~~These AOCI components are included in the computation of net periodic pension expense (see Note 12).~~

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

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 September 30, 2023									Nine Months Ended September 30, 2023
	Before Tax			Tax			Net of Tax			Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	(7.3	)		15.4		$	(22.7	)	$	(26.2	)		10.5		$	(36.7	)
Unrealized cash flow hedge gains		40.5			6.7			33.8			108.3			18.6			89.7
Reclassification adjustments on cash flow hedges		(23.2	)		(4.1	)		(19.1	)		(69.4	)		(12.0	)		(57.4	)
Adjustments to prior service cost and unrecognized actuarial assumptions		(0.8	)		(0.1	)		(0.7	)		(3.1	)		(0.3	)		(2.8	)
Total Other Comprehensive Income (Loss)	$	9.2		$	17.9		$	(8.7	)	$	9.6		$	16.8		$	(7.2	)


	Three Months Ended September 30, 2022									Nine Months Ended September 30, 2022
	Before Tax			Tax			Net of Tax			Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	(71.0	)	$	24.6		$	(95.6	)	$	(109.9	)	$	76.5		$	(186.4	)
Unrealized cash flow hedge gains		64.2			10.3			53.9			164.4			31.2			133.2
Reclassification adjustments on cash flow hedges		(16.8	)		(2.4	)		(14.4	)		(33.0	)		(4.6	)		(28.4	)
Adjustments to prior service cost and unrecognized actuarial assumptions		4.7			1.0			3.7			9.4			2.2			7.2
Total Other Comprehensive Income (Loss)	$	(18.9	)	$	33.5		$	(52.4	)	$	30.9		$	105.3		$	(74.4	)

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

9.11. Fair Value Measurement of Assets and Liabilities

The following financial assets and liabilities are recorded at fair value on a recurring basis (in millions):


	As of September 30, 2023
			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	$	101.9	$	-	$	101.9	$	-
Cross-currency interest rate swaps		13.7		-		13.7		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts		0.3		-		0.3		-
Total Assets	$	115.9	$	-	$	115.9	$	-

Liabilities
Derivatives designated as hedges, current and long-term
Cross-currency interest rate swaps	$	23.3	$	-	$	23.3	$	-
Interest rate swaps		192.7		-		192.7		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts		0.1		-		0.1		-
Contingent consideration related to acquisitions		104.3		-		-		104.3
Total Liabilities	$	320.4	$	-	$	216.1	$	104.3


	As of September 30, 2017								As of December 31, 2022
			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	$	3.9	$	-	$	3.9	$	-	$	72.8	$	-	$	72.8	$	-
Cross-currency interest rate swaps										6.8		-		6.8		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts										1.8		-		1.8		-
Forward Exchange Agreement										1.1		-		1.1		-
Investment in ZimVie										45.5		45.5		-		-
Total Assets									$	128.0	$	45.5	$	82.5	$	-

Liabilities
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts									$	5.5	$	-	$	5.5	$	-
Cross-currency interest rate swaps										49.6		-		49.6		-
Interest rate swaps		3.8		-		3.8		-		172.0		-		172.0		-
Total Assets	$	7.7	$	-	$	7.7	$	-
Liabilities
Derivatives, current and long-term
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts	$	39.5	$	-	$	39.5	$	-		3.3		-		3.3		-
Contingent payments related to acquisitions		44.0		-		-		44.0
Contingent consideration related to acquisitions										17.4		-		-		17.4
Total Liabilities	$	83.5	$	-	$	39.5	$	44.0	$	247.8	$	-	$	230.4	$	17.4

As of December 31, 2016

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

$
65.3

$
-

$
65.3

$
-

Interest rate swaps

4.0

-

4.0

-

Total Assets

$
69.3

$
-

$
69.3

$
-

Liabilities

Derivatives, current and long-term

Foreign currency forward contracts

$
0.3

$
-

$
0.3

$
-

Contingent payments related to acquisitions

62.8

-

-

62.8

Total Liabilities

$
63.1

$
-

$
0.3

$
62.8

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.

In connection with the spinoff, we retained approximately 5.1 million unregistered common shares of ZimVie, representing 19.7 percent of ZimVie's common stock on the separation date. At December 31, 2022, we valued these shares based upon the market share price of ZimVie less a discount to reflect that the shares were not registered. We disposed of these shares in February 2023.

The value of the Forward Exchange Agreement as of December 31, 2022, was based upon the historical volume-weighted average price of ZimVie stock since the inception of the agreement with simulations of how the ZimVie stock might perform until the scheduled settlement date.

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 probability-weighted future ~~cost savings and~~ revenue estimates and simulating the numerous potential outcomes, and increases as ~~cost savings and~~ revenue estimates ~~increase,~~increase. The fair value of the regulatory milestones is based on the probability ~~weighting~~ of ~~higher cost savings and revenue scenarios increase or expectation of timing of payment is accelerated. In~~success in obtaining the ~~three and nine month periods ended September 30, 2017, we recognized $1.7 million of loss and $1.5 million of income, respectively,~~specified regulatory approval.

Contingent payments related to ~~contingent payments due~~the Embody acquisition are to ~~changes~~be settled by issuance of our common stock and cash payments. The Embody acquisition is discussed in ~~estimates. In~~Note 8. During the ~~nine month~~nine-month period ended September 30, ~~2017,~~2023, we ~~also~~issued 0.1 million shares of our common stock valued at $15.5 million and paid ~~$13.7~~$0.7 million ~~in contingent payments and made a fair value adjustment~~ of ~~$3.6 million~~cash as the regulatory milestone related 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.Embody acquisition was achieved. 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 common stock was determined to be $143.84 per share, which represented the ~~Office Based Technologies reporting unit using~~average of our high and low stock prices on the settlement date. To minimize dilution from issuing shares for the milestone settlement, we repurchased 0.1 million shares of our common stock in June of 2023.

The following table provides a ~~market approach. GAAP defines~~reconciliation of the beginning and ending balances of items measured at fair value ~~as “the price~~on a recurring basis in the tables above that ~~would be received~~used significant unobservable inputs (Level 3) (in millions):


	Level 3 - Liabilities
Contingent payments related to acquisitions
Beginning balance December 31, 2022	$	17.4
New contingent consideration related to the 2023 acquisitions		102.0
Change in estimates		13.7
Settlements		(28.8	)
Ending balance September 30, 2023	$	104.3

Changes in estimates for contingent payments related to ~~sell an asset or paid to transfer a liability~~acquisitions are recognized in ~~an orderly transaction between market participants at~~ the ~~measurement date.” We used market indicators based upon the reporting unit’s operating performance to estimate what price would be paid for the assets in an orderly transaction.~~

~~We have six other reporting units with goodwill assigned to them. We did not perform goodwill impairment tests~~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.

~~10.~~

12. 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 under GAAP. Changes in the fair value of ~~a portion of our 4.625% Senior Notes due 2019~~the derivative instrument are recorded in current earnings and ~~all of our 3.375% Senior Notes due 2021. In August 2016, we received cash for these interest rate swap assets~~are offset by ~~terminating~~gains or losses on the ~~hedging instruments with the counterparties. The remaining unamortized balance as~~underlying debt instrument.

As of September 30, ~~2017 was $25.1 million, which will be recognized using~~2023 and December 31, 2022, the ~~effective interest rate method over the remaining maturity period of the hedged notes.~~ 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	September 30, 2023		December 31, 2022		September 30, 2023			December 31, 2022
Long-term debt	$	803.3	$	823.9	$	(192.7	)	$	(172.0	)

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~~2023 was ~~$27.8~~$24.1 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, 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.

At September 30, 2023, 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 Swiss Franc 125 million. These transactions further hedge our net investment 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 hedge are recorded as a component of AOCI in the 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 and nine month periods~~nine-month period ended September 30, ~~2017, we recognized foreign exchange losses of $41.7~~2023, Euro 100 million and ~~$127.5~~Swiss Franc 50 million ~~respectively,~~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 ~~in foreign currency translation adjustments~~ on our condensed consolidated balance sheet until the hedged net investment ~~hedges. We recognized no ineffectiveness from our net investment hedges for the three and nine month periods ended September 30, 2017.~~is sold or substantially liquidated.

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,~~2023, 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~~2023 through March ~~2020.~~2026. As of September 30, ~~2017,~~2023, the notional amounts of outstanding forward contracts and options entered into with third parties to purchase U.S. Dollars were ~~$1,683.9~~$1,494.9 million. As of September 30, ~~2017,~~2023, the notional amounts of outstanding forward contracts and options entered into with third parties to purchase Swiss Francs were ~~$285.0~~$439.4 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.

As discussed in Note 2, we entered into the Forward Exchange Agreement as part of our pledge to transfer our ZimVie shares to a third-party financial institution, which occurred in February 2023.

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 (Loss)													Amount of Gain (Loss)												Amount of Gain (Loss)									Amount of Gain (Loss)
	Recognized in AOCI													Reclassified from AOCI												Recognized in AOCI									Reclassified from AOCI
	Three Months Ended						Nine Months Ended							Three Months Ended						Nine Months Ended						Three Months Ended				Nine Months Ended					Three Months Ended						Nine Months Ended
	September 30,						September 30,						Location on	September 30,						September 30,						September 30,				September 30,				Location on	September 30,						September 30,
Derivative Instrument	2017			2016			2017			2016			Statement of Earnings	2017			2016			2017			2016			2023		2022		2023		2022		Statements of Earnings	2023			2022			2023			2022
Foreign exchange forward contracts	$	(35.6	)	$	(16.1	)	$	(98.7	)	$	(80.9	)	Cost of products sold	$	(5.1	)	$	18.1		$	12.0		$	76.5		$	40.5	$	64.2	$	108.3	$	164.4	Cost of products sold	$	23.3		$	17.0		$	69.9		$	33.6
Interest rate swaps		(0.3	)		-			(0.3	)		-		Interest expense		-			-			-			-
Forward starting interest rate swaps		-			-			-			-		Interest expense		(0.1	)		(0.4	)		(0.4	)		(1.3	)		-		-		-		-	Interest expense, net		(0.1	)		(0.2	)		(0.5	)		(0.6	)
	$	(35.9	)	$	(16.1	)	$	(99.0	)	$	(80.9	)		$	(5.2	)	$	17.7		$	11.6		$	75.2		$	40.5	$	64.2	$	108.3	$	164.4		$	23.2		$	16.8		$	69.4		$	33.0

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,~~2023, together with settled derivatives where the hedged item has not yet affected earnings, was a net unrealized ~~loss~~gain of ~~$74.3~~$119.2 million, or ~~$56.6~~$101.9 million after taxes, which is deferred in AOCI. A ~~loss~~gain of ~~$29.3~~$88.0 million, or ~~$24.1~~$72.9 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					Nine Months Ended					Nine Months Ended
	September 30, 2023					September 30, 2022					September 30, 2023					September 30, 2022
	Cost of		Interest			Cost of		Interest			Cost of		Interest			Cost of		Interest
	Products		Expense,			Products		Expense,			Products		Expense,			Products		Expense,
	Sold		Net			Sold		Net			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	$	518.6	$	(51.1	)	$	488.2	$	(42.3	)	$	1,545.0	$	(150.9	)	$	1,499.2	$	(122.2	)
The effects of fair value, cash flow and net investment hedging:
Gain (loss) on fair value hedging relationships
Interest rate swaps		-		(10.5	)		-		(2.0	)		-		(28.1	)		-		2.0
Gain (loss) on cash flow hedging relationships
Foreign exchange forward contracts		23.3		-			17.0		-			69.9		-			33.6		-
Forward starting interest rate swaps		-		(0.1	)		-		(0.2	)		-		(0.5	)		-		(0.6	)
Gain on net investment hedging relationships
Cross-currency interest rate swaps		-		8.2			-		3.4			-		25.4			-		15.3

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					Nine Months Ended
	Location on	September 30,						September 30,						Location on	September 30,					September 30,
Derivative Instrument	Statement of Earnings	2017			2016			2017			2016			Statements of Earnings	2023		2022			2023		2022
Foreign exchange forward contracts	Other expense, net	$	(16.3	)	$	(5.1	)	$	(54.9	)	$	(42.3	)	Other income (expense), net	$	7.8	$	(10.0	)	$	8.0	$	(25.2	)
Forward Exchange Agreement														Other income (expense), net		-		3.0			-		3.0

These ~~losses~~gains / (losses) do not reflect offsetting ~~gains~~losses of ~~$11.1 million and $1.3~~$9.3 million in the ~~three month periods~~three-month period ended September 30, ~~2017 and 2016, respectively,~~2023, offsetting gains of $5.4 million in the three-month period ended September 30, 2022, offsetting losses of $23.1 million in the nine-month period ended September 30, 2023, and offsetting gains of ~~$43.0 million and $33.6~~$13.9 million in the ~~nine month periods~~nine-month period ended September 30, ~~2017 and 2016, respectively,~~2022, 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.

Balance Sheet Presentation

As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, 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, 2023			As of December 31, 2022
	Balance			Balance
	Sheet	Fair		Sheet	Fair
	Location	Value		Location	Value
Asset Derivatives Designated as Hedges
Foreign exchange forward contracts	Other current assets	$	82.1	Other current assets	$	73.2
Cross-currency interest rate swaps	Other current assets		-	Other current assets		6.8
Foreign exchange forward contracts	Other assets		29.7	Other assets		16.6
Cross-currency interest rate swaps	Other assets		13.7	Other assets		-
Total asset derivatives		$	125.5		$	96.6

Asset Derivatives Not Designated as Hedges
Foreign exchange forward contracts	Other current assets	$	0.3	Other current assets	$	3.1
Forward Exchange Agreement	Other current assets		-	Other current assets		1.1
Total asset derivatives not designated as hedges		$	0.3		$	4.2

Liability Derivatives Designated as Hedges
Foreign exchange forward contracts	Other current liabilities	$	5.8	Other current liabilities	$	8.0
Cross-currency interest rate swaps	Other current liabilities		5.0	Other current liabilities		3.3
Foreign exchange forward contracts	Other long-term liabilities		4.1	Other long-term liabilities		14.5
Cross-currency interest rate swaps	Other long-term liabilities		18.3	Other long-term liabilities		46.3
Interest rate swaps	Other long-term liabilities		192.7	Other long-term liabilities		172.0
Total liability derivatives		$	225.9		$	244.1

Liability Derivatives Not Designated as Hedges
Foreign exchange forward contracts	Other current liabilities	$	0.1	Other current liabilities	$	4.6

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

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


		As of September 30, 2023						As of December 31, 2022
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	$	82.1	$	5.8	$	76.3	$	73.2	$	7.1	$	66.1
Cash flow hedges	Other assets		29.7		4.1		25.6		16.6		9.9		6.7
Derivatives Not Designated as Hedges	Other current assets		0.3		-		0.3		3.1		1.3		1.8

Liability Derivatives
Cash flow hedges	Other current liabilities		5.8		5.8		-		8.0		7.1		0.9
Cash flow hedges	Other long-term liabilities		4.1		4.1		-		14.5		9.9		4.6
Derivatives Not Designated as Hedges	Other current liabilities		0.1		-		0.1		4.6		1.3		3.3

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
	Recognized in AOCI
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Derivative Instrument	2023		2022		2023		2022
Euro Notes	$	32.2	$	98.7	$	8.4	$	236.4
Cross-currency interest rate swaps		32.5		24.3		36.2		76.0
	$	64.7	$	123.0	$	44.6	$	312.4

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
)

$
-

~~11.~~13. Income Taxes

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~~$400 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~~2015 and are currently under audit for years ~~2010-2015.~~ 2016-2019.

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 relating to transfer pricing involving our cost sharing agreement between the U.S. and Switzerland affiliated companies and reallocating 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 related to our cost sharing agreement. 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, we~~2013-2015, a number of years will likely elapse before such matters are ~~pursuing resolution through~~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.

In the ~~IRS Administrative Appeals Process.~~

~~Our~~three and nine-month periods ended September 30, 2023, our effective tax rate (“ETR”) ~~has been affected by the significant expenses associated with the Biomet merger~~was 25.7 percent and ~~other acquisitions which have generally been recognized~~22.7 percent, respectively, compared to negative 9.3 percent and positive 11.9 percent 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 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~~nine-month periods ended September 30, ~~2017, we recognized tax benefits of $39.8 million~~2022, respectively. The 25.7 percent and ~~$128.6 million, respectively, related to resolution of certain tax matters. In~~22.7 percent ETR in the three and ~~nine month~~nine-month periods ended September 30, ~~2017, we recognized net income~~2023, respectively, was primarily driven by discrete tax ~~expense~~effects of ~~$7.7 million and $11.8 million, respectively, that related to previous periods for resolution~~the filing of certain tax ~~matters,~~returns and reorganizing the ownership structure of certain ~~tax restructurings~~wholly-owned subsidiaries in the second quarter of 2023. The negative 9.3 percent and ~~product liability matters. We have evaluated the effect of these out-of-period corrections on~~positive 11.9 percent ETR in the three and ~~nine month~~nine-month periods ended September 30, ~~2017, as well as on the previous interim~~2022, respectively, was primarily driven by a favorable tax audit settlement 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~~finalization of the ~~periods affected. Further,~~Swiss Federal Act on Tax Reform and AHV Financing ("TRAF") step-up, which was partially offset by the loss on our investment in ZimVie which was not deductible for tax purposes. Absent discrete tax events, we ~~do not believe these adjustments~~expect our future ETR will be ~~material~~lower than the U.S. corporate income tax rate of 21.0 percent due to our ~~estimated net~~mix of earnings ~~for the full year ended December 31, 2017.~~

~~12. Retirement Benefit Plans~~

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):~~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; the outcome of various federal, state and foreign audits; and the expiration of certain statutes of limitations. Currently, we cannot reasonably estimate the impact of these items on our financial results. The European Union member states enacted the OECD Pillar Two Directive that generally provides for a 15% minimum tax rate. The first European Directive effective date for certain aspects of Pillar Two is January 1, 2024 and the Undertaxed Profits Rule aspect of Pillar Two will be effective on January 1, 2025. The implementation of the OECD Pillar Two rules may increase our ETR in future periods.

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Service cost

$
7.1

$
7.6

$
21.0

$
22.8

Interest cost

4.6

4.7

13.9

19.3

Expected return on plan assets

(10.1
)

(10.2
)

(30.3
)

(35.6
)
Curtailment gain (loss)

0.2

(0.4
)

0.4

(1.0
)
Amortization of prior service cost

(2.6
)

(1.9
)

(7.7
)

(5.8
)
Amortization of unrecognized actuarial loss

5.4

5.1

16.2

15.1

Net periodic pension expense

$
4.6

$
4.9

$
13.5

$
14.8

We expect that we will have minimal legally required funding obligations in 2017 for our U.S. and Puerto Rico defined benefit pension plans, and therefore we have not made, nor do we voluntarily expect to make, any material contributions to these plans during 2017. We contributed $13.2 million to 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.

~~13.~~14. 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				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Weighted average shares outstanding for basic net earnings per share		208.9		209.8		209.0		209.5
Effect of dilutive stock options and other equity awards		1.1		0.5		1.1		0.7
Weighted average shares outstanding for diluted net earnings per share		210.0		210.3		210.1		210.2

During the three and ~~nine month~~nine-month periods ended September 30, ~~2017,~~2023, an average of ~~0.9~~2.2 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

~~exercise prices of these options were greater than the average market price of our common stock. In~~ effect would have been antidilutive. During the three and ~~nine month~~nine-month periods ended September 30, ~~2016,~~2022, an average of ~~0.1~~6.4 million and 4.4 million options, ~~and 0.5 million options,~~ respectively, to purchase shares of common stock were not included for the same reason.

~~14.~~15. 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, goodwill and intangible asset impairment, restructuring and other cost reduction initiatives, quality remediation, acquisition, integration, divestiture and related, litigation, certain European Union Medical Device Regulation (“EU MDR”) expenses, certain research and development ("R&D") agreements, 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 and regulatory assurance 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. This segment also includes research, development engineering, medical education, and brand management for our product category headquarter locations. 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 ~~product category operating segments are Spine less~~EMEA and Asia Pacific ~~Office Based Technologies, CMF and Dental. The geographic~~ operating segments include ~~results from all of our product categories except~~the commercial operations as well as regional headquarter expenses to operate in those inmarkets. Since the Americas segment includes additional costs related to centralized product category headquarter expenses, profitability metrics in this operating ~~segments. The Office Based Technologies, CMF~~segment are not comparable to the EMEA 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.~~ segments.

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 costs included in the product category operating segments, profitability metrics among the geographic operating segments and product category operating segments are not comparable. Intercompany transactions have been eliminated from segment operating profit.24

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

~~These seven~~In the three-month period ended June 30, 2023, the segment operating profit measures our CODM reviews were revised. Certain support function costs from our operating segments are now included in Corporate items. We have reclassified these support function expenses in 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, these product category operating segments have been aggregated. In 2017, due to a change 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. Prior period reportable segment financial information has been restatedprior periods 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
	September 30,				September 30,
	2023		2022		2023			2022
Americas	$	1,113.6	$	1,045.1	$	450.0		$	432.3
EMEA		337.9		319.3		97.7			85.8
Asia Pacific		302.1		305.4		109.9			103.6
Total	$	1,753.6	$	1,669.8
Corporate items						(246.0	)		(244.9	)
Intangible asset amortization						(145.0	)		(131.5	)
Operating profit					$	266.6		$	245.3


	Net Sales				Operating Profit
	Nine Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023			2022
Americas	$	3,411.0	$	3,142.1	$	1,413.3		$	1,313.8
EMEA		1,166.4		1,079.1		372.6			301.0
Asia Pacific		876.7		893.6		310.5			310.2
Total	$	5,454.1	$	5,114.8
Corporate items						(756.3	)		(802.1	)
Intangible asset amortization						(416.6	)		(395.3	)
Intangible asset impairment						-			(3.0	)
Operating profit					$	923.5		$	724.6

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.~~16. 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. We recognize litigation-related charges and gains in Selling, general and administrative expense on our condensed consolidated statement of earnings. 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~~When determining the estimated loss or range of loss, significant judgment is required. Estimates of probable losses resulting from litigation and other contingences 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.

During the three and nine-month periods ended September 30, 2023, we recognized $2.7 million and $3.8 million, respectively, of net litigation-related charges. During the three and nine-month periods ended September 30, 2022, we recognized an insignificant amount and a loss of $34.7 million, respectively, of net litigation-related accrual adjustments. At September 30, 2023 and December

31, 2022, accrued litigation liabilities were $241.4 million and $349.2 million, respectively. These litigation-related charges and accrued liabilities reflect all of our litigation-related contingencies and not just the matters discussed below.

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, ~~we may incur may change in the future. Although we are vigorously defending these lawsuits, their ultimate resolution is uncertain.~~as discussed above.

~~Stryker patent infringement lawsuit~~: On December 10, 2010, Stryker Corporation and related entities (“Stryker”) filed suit against us in 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 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 rulings on our post-trial motions. Oral argument before the Court 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 and vacating and remanding the attorneys’ fees award. We accrued an estimated loss 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.

~~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~~letter: In ~~September 2012, Zimmer~~August 2018, we 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~~ Food and Drug Administration ("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 legacy Biomet manufacturing facility in ~~Montreal, Quebec, Canada.~~ Warsaw, Indiana (this facility is sometimes referred to in this report as the “Warsaw North Campus”). 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.~~Warsaw. As of September 30, ~~2017, these~~2023, the Warsaw warning ~~letters~~letter remained pending. Until the violations cited in the pending warning ~~letters~~letter 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~~letter described above, we are in the process of addressing various FDA Form 483 inspectional observations at certain of our manufacturing facilities, including ~~at both~~observations issued by the ~~legacy Zimmer and~~FDA following an inspection of the ~~legacy Biomet manufacturing facilities~~Warsaw North Campus in ~~Warsaw, Indiana.~~January 2020, which inspection the FDA has classified as Voluntary Action Indicated (“VAI”). 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~~products, seizure of products and assessing civil or criminal penalties against our officers, employees or us. The FDA could also issue a corporate warning letter or a recidivist warning letter or negotiate the entry of a consent decree of permanent ~~injunction.~~injunction with us. The FDA may also recommend prosecution by the U.S. Department of ~~Justice (“DOJ”).~~Justice. 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.~~Other Contingencies

Indemnifications: As part of the ~~settlement, Biomet resolved~~ZimVie spinoff, we agreed to indemnify ZimVie for certain legal and tax matters. Our responsibilities for legal indemnification are for specifically identified matters ~~with~~and are subject to a maximum amount, which is not significant for us. We have made an accrual based on an estimate of the ~~U.S. Securities~~probable loss for any legal indemnification. For tax matters, our indemnification is related to tax periods prior to the spinoff and ~~Exchange Commission (“SEC”) through~~any tax liabilities that may be incurred as part of the spinoff. We have maintained accruals based upon an ~~administrative cease-and-desist order (the “Order”); (ii) we~~estimate of any possible tax indemnifications.

Contractual obligations: 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 ~~DPA with~~product. Since there is uncertainty on the ~~DOJ; and (iii) JERDS Luxembourg Holding S.à r.l. (“JERDS”), the direct parent company of Biomet 3i Mexico SA de CV and~~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 $9 million to approximately $485 million.

17. Subsequent Event

Subsequent to September 30, 2023, we closed 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~~a privately held company and signed an asset purchase agreement with another privately held company that is also expected 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 penaltyclose in the ~~amount~~fourth quarter of ~~$6.5~~2023. The initial cash consideration for these acquisitions is approximately $102 million ~~(collectively, the “Civil Settlement Payments”). We also agreed to pay a criminal penalty~~with additional contingent consideration 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~~$53 million if certain revenue milestones are achieved. These acquisitions provide us new surgical technology and data solutions that can be used in procedures across multiple product categories to better serve our customers. Additional information on ~~January 13, 2017~~these acquisitions have not been provided because they are not expected 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,~~position, results of operations ~~and~~or cash flows.

~~OIG subpoena: In June 2017, we received a subpoena from the OIG. The subpoena requests that we produce a variety~~Item 2. Management’s Discussion and Analysis of ~~records primarily related to our healthcare professional consulting arrangements (including in the areas~~ Financial Condition and Results 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. Operations

~~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~~unrounded amounts.

On March 1, 2022, we completed the spinoff of our spine and ~~therefore, may not recalculate from the rounded numbers used for disclosure purposes. In addition, certain amounts~~dental businesses into ZimVie. The historical results of our spine and dental businesses have been reflected as discontinued operations in ~~the 2016~~our condensed consolidated financial statements ~~have been reclassified~~through the date of the spinoff in 2022. See Note 2 to ~~conform to~~our interim condensed consolidated financial statements included in Part I, Item 1 of this report for additional information. The discussions in the ~~2017 presentation.~~following discussion and analysis are presented on a continuing operations basis unless otherwise noted.

Executive Level Overview

Results for the Three and ~~Nine Month~~Nine-Month Periods ended September 30, ~~2017~~2023

~~Net~~We continue to recover from the effects of the COVID-19 global pandemic. In the three and nine-month periods ended September 30, 2023, we experienced fewer disruptions to elective surgical procedures from the pandemic as compared to the three and nine-month periods ended September 30, 2022 when the Omicron variant and staffing shortages caused widespread deferrals of procedures. In addition, improvements in our supply chain, recovery from patients who deferred surgical procedures during the pandemic, new product introductions and commercial execution have contributed to our net sales ~~declined~~growth. As a result, our net sales increased by ~~0.8~~5.0 percent and 6.6 percent in the three ~~month period~~and nine-month periods ended September 30, ~~2017 and increased by 1.4 percent in the nine month period ended September 30, 2017, in each case~~2023, respectively, when compared to the same prior year ~~period. The~~periods. Our year-over-year net sales ~~decline~~growth in the three-month period was aided by a positive 0.3 percent from changes in foreign currency exchange rates while the nine-month period experienced a negative 1.3 percent impact from changes in foreign currency exchange rates. Our year-over-year net sales growth in the first quarter of 2023 was higher than in the second and third quarters, as the disruptions to elective surgical procedures were more pronounced in the first quarter of 2022 than the second and third quarters of 2022. In addition, the third quarter of 2023 included fewer weekdays for surgical procedures to occur when compared to the number of weekdays in the third quarter of 2022.

Our net earnings were $162.7 million and $604.8 million in the three ~~month period was driven primarily by a decrease in sales~~and nine-month periods ended September 30, 2023, respectively, compared to $194.0 million and $361.9 million 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 salessame prior year periods, respectively. The decline 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 portfolioearnings in the ~~first half of 2018.~~

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

~~Our net earnings in the three month period ended September 30, 2017 decreased~~2023 when compared to the same prior year period ~~but increased~~was primarily due to investments in research and development ("R&D") and commercial initiatives in the ~~nine month~~2023 period to drive future growth as well as the fact that the prior year period included a tax benefit of approximately $81 million from a final agreement with Swiss authorities for certain tax years. The increase in net earnings in the nine-month period ended September 30, ~~2017~~2023 when compared to the same prior year ~~period. The 37.8 percent decline in the three month~~ period was driven ~~primarily~~ by ~~a $32.7 million goodwill impairment charge in~~ the ~~2017 period and tax benefits 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 period ended September 30, 2017 was driven primarily by a decrease in inventory step-up expense, a $69.7 million tax benefit recognized resulting from a tax restructuring that lowered the tax rate on certain deferred tax liabilities, favorable resolution of various tax matters, net tax-related charges insales combined with lower litigation-related, restructuring-related and quality remediation-related charges. In addition, the prior year ~~related~~nine-month period included an unrealized investment loss of $114.3 million on our investment in ZimVie. These benefits were partially offset by increased investment in R&D and commercial initiatives to ~~business combination purchase accounting and operational leverage from increased sales.~~ drive future growth.

~~2017~~2023 Outlook

We ~~estimate our sales~~expect revenue growth in ~~2017 over 2016 will~~2023 to be indriven by a ~~range~~combination of ~~1.0 to 1.5 percent. This estimate assumes~~market growth, procedure volume recovery from COVID-19, new product introductions and commercial execution. Based on recent foreign currency exchange rates we expect foreign currency to negatively affect net sales growth in 2023, but at a lower level than experienced in 2022. We expect that supply chain and inflation pressures will continue in 2023, but with supply chain pressure easing at the end of the year and with inflation stable to the level experienced at the end of 2022. We estimate our operating expenses in 2023 will be impacted by the expected non-reoccurrence of goodwill impairment charges and lower quality remediation expenses due to the completion of our remediation milestones. We expect our interest expense, net, will increase ~~sales~~primarily due to higher interest rates. We also expect our non-operating other (expense) income, net, will be more favorable in 2023 since the 2022 expense was primarily driven 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 will increase sales by approximately 1.2 percent. We acquired LDR near the beginning of the third quarter of 2016. Therefore,an investment loss in the ~~second half~~shares of ~~2017,~~ZimVie that we held following the ~~inclusion~~spinoff, which we disposed 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.~~ February 2023.

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 2017 when compared to 2016, incremental manufacturing costs to maximize production flow and regional and product sales mix.

As it relates to other expenses, our intangible asset amortization expense is expected 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 from our acquisitions and leverage sales growth. We estimate special items expense will be significant as we continue our integration activities and quality enhancement and remediation efforts. We expect interest expense will decrease in 2017 compared to 2016 due to lower debt levels from planned debt repayments.

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 our net sales by geography and the ~~components of the~~ percentage changes (dollars in millions):

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


	Three Months Ended
	September 30,
	2023		2022		% Inc
United States	$	1,031.4	$	973.0		6.0	%
International		722.2		696.8		3.6
Total	$	1,753.6	$	1,669.8		5.0


	Nine Months Ended
	September 30,
	2023		2022		% Inc
United States	$	3,160.6	$	2,931.8		7.8	%
International		2,293.5		2,183.0		5.1
Total	$	5,454.1	$	5,114.8		6.6

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 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			September 30,
	2017		2016		(Dec)				Mix				Price				Exchange			2023		2022		% Inc / (Dec)
Knees	$	623.7	$	631.5		(1.2	)	%		0.8		%		(2.5	)	%		0.5	%	$	706.3	$	657.0		7.5		%
Hips		434.5		440.6		(1.4	)			0.8				(2.5	)			0.3			465.3		468.0		(0.6	)
S.E.T.		406.6		401.8		1.2				3.0				(1.9	)			0.1			423.2		409.4		3.3
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			158.8		135.4		17.2
Total	$	1,818.1	$	1,832.8		(0.8	)			0.9				(2.1	)			0.4		$	1,753.6	$	1,669.8		5.0



																				Nine Months Ended
																				September 30,
																				2023		2022		% Inc
Knees																				$	2,240.1	$	2,024.7		10.6		%
Hips																					1,462.5		1,406.2		4.0
S.E.T.																					1,299.3		1,272.6		2.1
Other																					452.2		411.3		10.0
Total																				$	5,454.1	$	5,114.8		6.6

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 September 30,								Nine Months Ended September 30,
	2023		2022		% Inc / (Dec)				2023		2022		% Inc
Knees
United States	$	413.3	$	389.7		6.1		%	$	1,299.1	$	1,167.6		11.3	%
International		293.0		267.3		9.7				941.0		857.1		9.8
Total	$	706.3	$	657.0		7.5			$	2,240.1	$	2,024.7		10.6
Hips
United States	$	242.5	$	235.6		3.0		%	$	749.2	$	707.7		5.9	%
International		222.8		232.4		(4.1	)			713.3		698.5		2.1
Total	$	465.3	$	468.0		(0.6	)		$	1,462.5	$	1,406.2		4.0

Demand (Volume and Mix) Trends

~~Increased~~

Changes in volume and ~~changes in the~~ mix of product sales had a positive ~~effect~~effects of ~~0.9~~4.7 percent and ~~4.1~~8.7 percent on year-over-year sales during the three and ~~nine month~~nine-month periods ended September 30, ~~2017,~~2023, respectively. ~~Volume/mix growth was driven by acquisitions in the prior year, recent~~We saw recovery of elective surgical procedures across most of our major markets driving volume growth. In addition, 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 minimal effect and a negative effect of ~~2.1 percent and 2.3~~0.8 percent on year-over-year sales during the three and ~~nine month~~nine-month periods ended September 30, ~~2017,~~2023, respectively. 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 some success in reducing the negative effects of pricing 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~~nine-month periods ended September 30, ~~2017,~~2023, changes in foreign currency exchange rates had a positive effect of ~~0.4~~0.3 percent and a negative effect of ~~0.4~~1.3 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~~1.0 percent on ~~our year-over-year~~full-year 2023 sales.

Geography

The 6.0 percent and 7.8 percent net sales growth in ~~2017.~~

~~Sales by Product Category~~

~~Knees~~

~~Knee sales declined~~the U.S. in the three and ~~nine month~~nine-month periods ended September 30, ~~2017~~2023, respectively, were driven by recovery in surgical procedures as COVID-19 cases caused fewer disruptions, especially in the Knees and Hips categories. Internationally, net sales increased by 3.6 percent and 5.1 percent during the three and nine-month periods ended September 30, 2023, respectively, when compared to the same prior year ~~periods due primarily to the previously mentioned supply issues, the price reduction mandate~~periods. These increases were similarly driven by recovery in ~~India~~surgical procedures as COVID-19 cases caused fewer disruptions across most of our major markets. Our International sales were positively affected by 0.7 percent and ~~continued pricing pressure. Knee sales volume/mix growth was led~~negatively affected by ~~Persona~~^®~~The Personalized Knee System and the Oxford~~^® ~~Partial Knee.~~

~~Hips~~

~~Hip sales declined~~3.0 percent in the three and ~~nine month~~nine-month periods ended September 30, ~~2017~~2023, respectively, due to changes in foreign currency exchange rates.

Product Categories

Knees net sales grew 7.5 percent and 10.6 percent in the three and nine-month periods ended September 30, 2023, respectively, when compared to the same prior year periods. Hips net sales declined 0.6 percent and increased 4.0 percent in the three and nine-month periods ended September 30, 2023, respectively, when compared to the same prior year periods. The ~~declines were due primarily to~~net sales of Knees and Hips benefited from the ~~previously mentioned~~recovery in elective surgical procedures, improvements in our supply ~~issues~~chain and ~~continued pricing pressure. Hip~~new product introductions. However, Hips net sales ~~volume/mix growth was led by our Taperloc~~^® ~~Hip System, Arcos~~^® ~~Modular Hip System and G7~~^® ~~Acetabular System.~~

~~S.E.T.~~

~~Our S.E.T. product category sales increased~~declined in the ~~three and nine month periods~~three-month period ended September 30, ~~2017~~2023 when compared to the same prior year ~~periods, driven~~period primarily due to certain bulk sales that were made internationally in the prior year period. Knees net sales were positively affected by ~~a growing emphasis on sales force specialization, strong performance~~0.2 percent and negatively affected by ~~key brands and 2016 acquisitions, partially offset by the previously mentioned supply issues and continued pricing pressure.~~

~~Dental~~

~~Dental sales declined~~1.4 percent in the three and ~~nine month~~nine-month periods ended September 30, ~~2017 when compared to the same prior year periods, primarily~~2023, respectively, due to ~~restructuring of our dental organization~~changes in ~~certain European markets.~~

~~Spine~~foreign currency exchange rates. Hips net sales were minimally affected and ~~CMF~~

~~Spine and CMF sales increased~~negatively affected by 1.6 percent in the three and ~~nine month~~nine-month periods ended September 30, ~~2017 when compared to the same prior year periods, primarily~~2023, respectively, due to changes in foreign currency exchange rates. The 3.3 percent and 2.1 percent increases in S.E.T. net sales for the ~~LDR acquisition~~three and ~~continuing strong~~nine-month periods ended September 30, 2023, respectively, was the

result of growth in our sports medicine, upper extremities, and craniomaxillofacial and thoracic products, partially offset by lower volumes in other S.E.T. products and unfavorable changes in reimbursement for certain restorative therapy products. Other net sales ofgrew 17.2 percent and 10.0 percent in the three and nine-month periods ended September 30, 2023, respectively, driven by net sales for our ~~Thoracic products.~~ROSA® robot.

Expenses as a Percentage of Net Sales


	Three Months Ended										Nine Months Ended
	September 30,						% Inc /				September 30,						% Inc /
	2023			2022			(Dec)				2023			2022			(Dec)
Cost of products sold, excluding intangible asset amortization		29.6	%		29.2	%		0.4		%		28.3	%		29.3	%		(1.0	)	%
Intangible asset amortization		8.3			7.9			0.4				7.6			7.7			(0.1	)
Research and development		6.7			6.1			0.6				6.3			5.8			0.5
Selling, general and administrative		38.5			39.2			(0.7	)			38.8			39.8			(1.0	)
Intangible asset impairment		-			-			-				-			0.1			(0.1	)
Restructuring and other cost reduction initiatives		1.4			1.7			(0.3	)			1.7			2.5			(0.8	)
Quality remediation		-			0.5			(0.5	)			-			0.4			(0.4	)
Acquisition, integration, divestiture and related		0.4			0.7			(0.3	)			0.3			0.2			0.1
Operating profit		15.2			14.7			0.5				16.9			14.2			2.7

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~~Cost of products sold as a percentage of net sales ~~for~~increased in the ~~three month~~three-month period ended September 30, ~~2017~~2023 when compared to the same prior year period, ~~was~~ primarily due to higher excess and obsolete inventory charges. These inventory charges were partially offset by higher hedge ~~losses of $5.1 million~~gains recognized in the ~~2017~~current year period ~~compared~~as part of our hedging program, a mix shift to ~~hedge gains~~higher margin products and markets, and lower royalty expense. The reduction in royalty expense was partially the result of ~~$18.1 million recognized~~agreements we entered into to acquire intellectual property through the buyout of certain licensing arrangements.

The decline 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 period when compared to the same prior year period included lower average selling prices, increased manufacturing costs at our legacy Biomet Warsaw facility and a mix of sales in regions and product categories that have lower gross margins. These unfavorable items were partially offset by lower inventory step-up charges in the 2017 period. Inventory step-up charges represent the difference in 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~~nine-month period ended September 30, ~~2017~~2023 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~~higher hedge gains 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~~current year period as part of ~~inventory~~our hedging program, a mix shift to higher margin products and ~~recognized expense through the fourth quarter of 2016.~~markets and lower royalty expense. 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~~higher excess and ~~the effect of~~obsolete inventory charges, inflationary cost pressures and lower average selling ~~prices and sales mix.~~ prices.

Intangible asset amortization expense ~~and intangible asset amortization as a percentage of net sales decreased~~increased in the three ~~month period~~and nine-month periods ended September 30, ~~2017~~2023 compared to the same prior year ~~period~~periods due to the ~~finalization~~2023 acquisitions and additional amortization from the buyout of business combination accounting for 2016 acquisitions that resulted in lower intangible asset balances than estimated in the prior year period. Intangible asset amortization expense and intangible asset amortization as a percentage of net salescertain licensing agreements.

R&D expenses increased in the nine 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 when compared to the same prior year period. The primary drivers 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 were partially offset by continued savings in various SG&A expense categories stemming from our synergies initiatives.

~~“Special items” expenses decreased slightly in dollars~~amount and as a percentage of net sales in the three ~~month period~~and nine-month periods ended September 30, ~~2017 compared to the same prior year period, but increased in the nine month period ended September 30, 2017~~2023 when compared to the same prior year ~~period.~~periods. The ~~decrease~~increases were driven by higher personnel-related costs, higher spending on our initial compliance with the European Union Medical Device Regulation and other R&D investments.

Selling, general and administrative (“SG&A”) expenses increased in amount, but decreased as a percentage of net sales in the three ~~month~~and nine-month periods ended September 30, 2023 when compared to the same prior year periods. The increases in expenses were due to selling and distribution costs that are variable expenses which increase as net sales increase. Additionally, personnel-related costs were higher due to additional headcount investments and annual merit increases, and travel and entertainment costs were higher as we have increased these activities from lower pandemic levels. These higher costs were partially offset by lower share-based compensation expense in the 2023 periods due to the forfeiture of awards related to employee departures, and lower bad debt charges in the 2023 periods as we recognized higher bad debt charges in the 2022 periods that were partially related to the Russia/Ukraine conflict. Also, in the nine-month period ended September 30, ~~2017 was primarily due~~2023, litigation-related charges decreased to ~~expenses recognized~~$3.8 million compared to $34.7 million in the ~~2016 period~~same prior year period.

In December of 2021 and 2019, we initiated restructuring programs. The 2021 Restructuring Plan is intended to further reduce costs and to reorganize our global operations in preparation for the spinoff of ZimVie. The 2019 Restructuring Plan has an objective of reducing structural costs to allow us to invest in higher priority growth opportunities. We recognized expenses of $24.3 million and $28.3 million in the three-month periods ended September 30, 2023 and 2022, respectively, and $90.6 million and $129.2 million in the nine-month periods ended September 30, 2023 and 2022, respectively, primarily related to ~~consummating the LDR acquisition~~employee termination benefits, sales agent contract terminations, and ~~other significant, ongoing integration~~consulting fees and project management expenses associated with ~~the Biomet merger.~~these programs. The ~~increases~~expenses were lower in the ~~nine month period ended September 30, 2017 were primarily~~2023 periods due to ~~expenses~~charges in the 2022 periods related to ~~our quality enhancement and remediation efforts. See~~the restructuring program that had been initiated in

December 2021. For more information regarding these charges, see Note 25 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 and Income Taxes~~

In the three and ~~nine month~~nine-month periods ended September 30, ~~2017~~2023, we did not recognize any significant quality remediation expenses as we completed our remediation milestones in late 2022 that addressed inspectional observations on Form 483 and ~~2016,~~a Warning Letter issued by the FDA at our Warsaw North Campus facility, among other ~~expense, net, was primarily~~matters.

Acquisition, integration, divestiture and 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~~ decreased in the ~~three and nine month periods~~three-month period ended September 30, ~~2017,~~2023 when compared to the same prior year ~~periods,~~period and increased in the nine-month period ended September 30, 2023 when compared to the same prior year period. The decrease in the three-month period was primarily due to ~~our issuance~~the fact that the 2022 period included an impairment of ~~the Euro Notes~~a leased asset that was historically utilized by ZimVie, but was assigned back to us post-separation. The increase in the ~~fourth quarter of 2016 and lower average outstanding debt balances~~nine-month period was due to increases in the fair value of contingent consideration.

Other Income (Expense), Net, Interest Expense, Net, and Income Taxes

In the three-month period ended September 30, 2023, we recognized a gain of $3.8 million in our other income (expense), net financial statement line item compared to a loss of $25.4 million in the same prior year period. The year-over-year change was primarily due to a loss of $30.0 million recognized in the prior year related to our investment in ZimVie, while in the current year we disposed of our shares in February 2023 so there was no impact from this investment in the three-month period ended September 30, 2023. In the nine-month period ended September 30, 2023, we recognized a gain of $10.3 million in our other income (expense), net financial statement line item compared to a loss of $124.1 million in the same prior year period. In the nine-month period ended September 30, 2023, we recognized a gain of $2.5 million on our investment in ZimVie prior to our disposition of those shares compared to a loss of $114.3 million in the same prior year period.

Interest expense, net, increased in the three and nine-month periods ended September 30, 2023 when compared to the same prior year periods. The increases were primarily from higher debt ~~repayments. We used~~borrowings in the ~~proceeds of~~current year periods to fund share repurchases and make other investments. In addition, in the ~~Euro Notes, which have a lower~~current year periods we incurred losses on our fixed-to-variable interest rate ~~than most of our other debt,~~swaps compared to ~~repay certain senior notes with higher interest rates.~~ gains in the prior year periods.

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~~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 the2023, our effective tax rate ~~on certain deferred tax liabilities recorded on intangible assets recognized~~(“ETR”) was 25.7 percent and 22.7 percent, respectively, compared to negative 9.3 percent and positive 11.9 percent in ~~the Biomet merger acquisition-related accounting. In~~ the three and ~~nine month~~nine-month periods ended September 30, ~~2017, we recognized net income tax expense of $7.7 million~~2022, respectively. The 25.7 percent and ~~$11.8 million, respectively, that related to previous periods for resolution of certain tax matters, certain tax restructurings and product liability matters. In~~22.7 percent ETR in the three and ~~nine month~~nine-month periods ended September 30, ~~2016,~~2023, respectively, was primarily driven by discrete tax effects of the filing of certain tax returns and reorganizing the ownership structure of certain wholly-owned subsidiaries in the second quarter of 2023. The negative 9.3 percent and positive 11.9 percent ETR in the three and nine-month periods ended September 30, 2022, respectively, was primarily driven by a favorable tax audit settlement and finalization of the Swiss TRAF step-up, which was partially offset by the loss on our investment in ZimVie which was not deductible for tax purposes. 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;~~interpretation; the outcome of various federal, state and foreign audits; and the expiration of certain statutes of limitations. Currently, we cannot reasonably estimate the impact of these items on our financial results. The European Union member states enacted the OECD Pillar Two Directive that generally provides for a 15% minimum tax rate. The first European Directive effective date for certain aspects of Pillar Two is January 1, 2024 and the Undertaxed Profits Rule aspect of Pillar Two will be effective on January 1, 2025. The implementation of the OECD Pillar Two rules may increase our ETR in future periods.

Segment Operating Profit


									Operating Profit as a
	Net Sales				Operating Profit				Percentage of Net Sales
	Three Months Ended				Three Months Ended				Three Months Ended
	September 30,				September 30,				September 30,
(dollars in millions)	2023		2022		2023		2022		2023			2022
Americas	$	1,113.6	$	1,045.1	$	450.0	$	432.3		40.4	%		41.4	%
EMEA		337.9		319.3		97.7		85.8		28.9			26.9
Asia Pacific		302.1		305.4		109.9		103.6		36.4			33.9


									Operating Profit as a
	Net Sales				Operating Profit				Percentage of Net Sales
	Nine Months Ended				Nine Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,
(dollars in millions)	2023		2022		2023		2022		2023			2022
Americas	$	3,411.0	$	3,142.1	$	1,413.3	$	1,313.8		41.4	%		41.8	%
EMEA		1,166.4		1,079.1		372.6		301.0		31.9			27.9
Asia Pacific		876.7		893.6		310.5		310.2		35.4			34.7

Americas

In the Americas, operating profit increased, but operating profit as a percentage of net sales ~~has remained similar between~~decreased, in both the three and ~~nine month~~nine-month periods ended September 30, ~~2017~~2023 when compared to the same prior year periods. The ~~Americas has experienced~~increase in operating profit in both current year periods was primarily due to higher net sales driven by continued recovery of elective surgical procedures and new product introductions. However, operating profit as a percentage of net sales decreased in both current year periods due to higher carrying expenses from inventory at consigned locations, and continued investments in R&D, including personnel-related costs, which were partially offset by lower royalty expenses as a result of agreements we entered into to acquire intellectual property through the buyout of certain licensing arrangements. The decline in operating ~~margins~~profit as a percentage of net sales was more pronounced in the ~~2017~~three-month period compared to the nine-month period primarily due to higher carrying expenses from inventory at consigned locations in the third quarter of 2023 compared to the first two quarters of 2023.

EMEA

In EMEA, operating profit and operating profit as a percentage of net sales increased in both the three and nine-month periods ended September 30, 2023 when compared to the same prior year periods. The increases were due to higher net sales driven by continued recovery of elective surgical procedures and improved pricing, lower bad debt charges and operating profit leverage from certain costs that do not increase as net sales increase.

Asia Pacific

In Asia Pacific, operating profit and operating profit as a percentage of net sales increased in the three and nine-month periods ended September 30, 2023 when compared to the same prior year periods. 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 and nine-month periods ended September 30, 2023 when compared to the same prior year periods due to ~~price declines, higher contribution of~~changes in foreign currency exchange rates, the negative net sales ~~from products with lower gross profit margins and higher freight costs. These unfavorable impacts were~~impact was partially offset by ~~lower U.S. medical device excise tax expense and continued savings~~higher hedge gains recognized in the current year periods from our ~~SG&A synergies initiatives.~~

~~In EMEA,~~hedging program. As a result, net sales volume growth and operating leverage from certain costs that do not increase as net sales increase resulted in operating profit and operating profit as a percentage of sales ~~decreased~~increasing 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.2023 periods.

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 September 30, 2023, we had $292.1 million in cash and cash equivalents. In addition, we had $1.0 billion available to borrow under our 2023 364-Day Credit Agreement, and $1.4 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 159 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 from continuing operations were $993.2 million in the nine-month period ended September 30, 2023, compared to $1,112.0 million in the same prior year period. The decrease in the 2023 period was driven by higher investments in inventory when compared to the 2022 period as well as higher litigation, income tax and bonus payments in the 2023 period. These unfavorable items were partially offset by higher earnings and lower restructuring-related payments.

Cash flows used in investing activities from continuing operations were ~~$382.6~~$558.1 million in the ~~nine month~~nine-month period ended September 30, ~~2017,~~2023, compared to ~~$1,544.7~~$409.5 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, investments in enterprise resource planning software and a new corporate jet. In addition, in the nine-month period ~~included cash outflows for LDR~~ended September 30, 2023 we paid $86.4 million to acquire intellectual property through the buyout of certain licensing arrangements and ~~other business acquisitions, compared~~$32.9 million related 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.~~2023 acquisitions.

Cash flows used in financing activities from continuing operations were ~~$977.6~~$512.1 million in the ~~nine month~~nine-month period ended September 30, ~~2017,~~2023, compared to ~~$434.1~~$462.3 million in the same prior year period. ~~Our primary use~~We used cash on hand to repurchase $281.9 million of ~~available cash~~our common stock. We also repaid a net $20.0 million on our various revolving credit facilities and $120.2 million of other debt obligations that were due in the first ~~nine months~~quarter of ~~2017 was~~2023. In the 2022 period, at the ZimVie spinoff date, we received $540.6 million as partial consideration for ~~debt repayment. We borrowed amounts under a new Japan Term Loan B and used~~ the ~~borrowings to pay down a portion~~contribution of ~~U.S. Term Loan A. We also paid $500.0 million~~assets in connection with the ~~redemption at maturity~~separation. We used these proceeds, together with borrowings on our five-year revolving facility and cash on hand, to redeem the full $750.0 million of ~~our 1.450%~~ senior notes that were due April 1, ~~2017.~~

~~In February, May and July 2017,~~2022. We also repaid $242.9 million outstanding on 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~~Japanese term loans 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.~~third quarter of 2022 when they became due.

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~~2023, $250.7 million of our cash and cash equivalents were held in jurisdictions outside of the U.S. Of this amount, ~~$101.5~~$36.2 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.

We generally intend to limit distributions from foreign subsidiaries to earnings previously taxed in the U.S., primarily as a result of the transition tax or tax on Global Intangible Low-Taxed Income (“GILTI”), as we would not be subject to further U.S. federal tax. In ~~light of our commitments under various credit facilities, as well as our expectation for continued business development,~~addition to the previously taxed earnings, we have ~~plans~~intercompany notes available to repatriate a significant portion of our offshore earnings to the U.S. We have unremitted foreign earnings of $3,648.1 million, which we plan to repatriate to the 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.repatriate.

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 of the hospital~~Material Cash Requirements from Known Contractual and healthcare sectors and the respective countries’ national economic and healthcare systems. Most notably, in Europe healthcare is typically sponsored by the government. Since we sell products 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 ofOther Obligations

At 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 accounts2023, we had outstanding debt 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$5,482.4 million, of ~~that net amount. We are actively monitoring the situations in these countries~~which $355.0 million was classified as current debt. The $355.0 million of current debt is outstanding under our revolving credit facilities, and we ~~maintain contact with customers in these countries on a regular basis.~~expect to repay such debt over the next twelve months. 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.

For additional information on our debt, ~~expenses in the future.~~

~~Management believes that cash flows from operations~~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 9 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 March, May and August 2023, 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 new $1.0 billion share repurchase program effective March 1, 2016, with no expiration date. As of September 30, 2023, $591.7 million remained authorized under this program.

As discussed in Note 5 to our interim condensed consolidated financial statements in Part I, Item 1 of this report, we have a 2021 Restructuring Plan and a 2019 Restructuring Plan. The 2021 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $185 million, of which approximately $165 million was incurred through September 30, 2023. 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, of which approximately $300 million was incurred through September 30, 2023. 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 program benefits under the 2019 Restructuring Plan are realized. Our latest estimates indicate that we will be near the low end of that range.

As discussed in Note 13 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, as well as proposed adjustments for years 2013 through 2015, reallocating profits between certain of our U.S. and foreign subsidiaries. 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 16 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 $241.4 million as of September 30, 2023. 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 $9 million to approximately $485 million.

As discussed in Note 17 to our interim condensed consolidated financial statements included in Part I, Item 1 of this report, we have entered into agreements to pay initial cash consideration of approximately $102 million in the fourth quarter of 2023 to acquire two privately held companies.

Recent Accounting Pronouncements

Information pertaining to recent accounting pronouncements can be found in Note 3 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~~2023 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.~~ 2022.

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

•

the effects of business disruptions, either alone or in combination with other risks on our business and operations, such as those business disruptions associated with the COVID-19 pandemic;

~~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;~~

•

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;

•

supply and prices of raw materials and 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 foreign government regulators, such as more stringent requirements for regulatory clearance of products;

•

the ~~success~~outcome of government investigations in any jurisdiction;

•

dependence on new product development, technological advances and innovation;

•

shifts in the product category or regional sales mix of our ~~quality~~products and ~~operational excellence initiatives,~~services;

•

competition;

•

pricing pressures;

•

changes in customer demand for our products and services caused by demographic changes or other factors;

•

the impact of healthcare reform and cost containment measures, including ~~our ongoing quality enhancement~~efforts sponsored by government agencies, legislative bodies, the private sector and ~~remediation efforts at the legacy Biomet Warsaw facility;~~

healthcare purchasing organizations, through reductions in reimbursement levels 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 those expected to occur as a result of the “base erosion and profit shifting” project ("Pillar Two") 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 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~~2022 and this Quarterly Report on Form 10-Q contain 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 obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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.~~2022.

~~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~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3937

Part II – ~~Oth~~erOther Information

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings

Information pertaining to legal proceedings can be found in Note 1516 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 and our Quarterly Report on~~2022 (“2022 Form ~~10-Q for the quarter ended June 30, 2017.~~

~~The following risk factor is added:~~

~~If the medical device excise tax is not repealed or further suspended,~~10-K”), which could materially affect our business, financial condition and results of ~~operations~~operations. The risks described in our 2022 Form 10-K are not the only risks we face. Additional risks and ~~cash flows may be adversely affected.~~

~~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~~uncertainties not currently known to us or ~~ACA), in January 2013~~that 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.

~~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~~currently deem 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 onimmaterial may also materially adversely affect our business, financial condition or results of ~~operations~~operations.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and ~~cash flows.~~Issuer Purchases of Equity Securities

~~Item 2.~~

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

None

~~Item 3.~~

~~Defaults Upon Senior Securities~~

Item 3. Defaults Upon Senior Securities

None

~~Item 4.~~

~~Mine Safety Disclosures~~

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,~~2023, 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~~certain non-audit 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 September 30, 2023, 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 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.~~

E~~xhibits~~

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~~Five-Year Revolving Credit Agreement, ~~¥21,300,000,000,~~ dated as of ~~September 22, 2017, between~~July 7, 2023, among Zimmer Biomet ~~G.K.~~Holdings, Inc., the lenders party thereto and ~~Sumitomo Mitsui Banking Corporation~~JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the ~~Registrant’s~~Registrant's Current Report on Form 8-K filed ~~September 28, 2017)~~July 10, 2023)

10.2		~~Amended and Restated Term Loan~~364-Day Revolving Credit Agreement, ~~¥11,700,000,000,~~ dated as of ~~September 22, 2017, between~~July 7, 2023, among Zimmer Biomet ~~G.K.~~Holdings, Inc., the lenders party thereto and ~~Sumitomo Mitsui Banking Corporation~~JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the ~~Registrant’s~~Registrant's Current Report on Form 8-K filed ~~September 28, 2017)~~July 10, 2023)

10.3		~~Amended and Restated~~Offer Letter, ~~of Guarantee,~~ dated as of ~~September 22, 2017, made~~August 21, 2023, by and between Zimmer Biomet Holdings, Inc. and Ivan Tornos (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed August 22, 2023)

10.4		Change in ~~favor~~Control Severance Agreement, dated as of ~~Sumitomo Mitsui Banking Corporation~~August 21, 2023, by and between Zimmer Biomet Holdings, Inc. and Ivan Tornos (incorporated by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed August 22, 2023)

10.5		Chief Executive Officer Confidentiality, Non-Competition and Non-Solicitation Agreement, dated as of August 21, 2023, by and between Zimmer Biomet Holdings, Inc. and Ivan Tornos (incorporated by reference to Exhibit 10.3 to the ~~Registrant’s~~Registrant's Current Report on Form 8-K filed ~~September 28, 2017)~~August 22, 2023)

10.4*10.6		~~Form of Restricted Stock Unit Award Agreement (two-year vesting) under the~~ Zimmer Biomet Holdings, Inc. ~~2009 Stock Incentive~~Deferred Compensation Plan ~~(incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed July 11, 2017)~~ for Non-Employee Directors, as amended August 25, 2023

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		Inline XBRL Taxonomy Extension Calculation Linkbase Document

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

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

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


* Management contract or compensatory plan or arrangement

4139

SI~~GNATURES~~

SIGNATURES

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: November 7, 2023	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: November 7, 2023	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)

4240

	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




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

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			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 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 December 31, 2016
			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	$	65.3	$	-	$	65.3	$	-
Interest rate swaps		4.0		-		4.0		-
Total Assets	$	69.3	$	-	$	69.3	$	-

Liabilities
Derivatives, current and long-term
Foreign currency forward contracts	$	0.3	$	-	$	0.3	$	-
Contingent payments related to acquisitions		62.8		-		-		62.8
Total Liabilities	$	63.1	$	-	$	0.3	$	62.8

		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	)	$	-

			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