Вы находитесь на странице: 1из 43

Zimmer Biomet Holdings, Inc.

3rd Quarter 2017 Earnings Call Presentation

November 1, 2017
Cautionary Note on Forward-Looking Statements and Non-
GAAP Financial Measures
Our discussions during this presentation will include forward-looking statements concerning, among other things, our anticipated future
operating and financial performance, business plans and prospects, product and service offerings, including new product launches and
potential clinical successes, capital allocation plans and priorities, business development plans and priorities and the benefits expected from
our acquisitions and other business development activities. Such statements are based upon the current beliefs and expectations of
management and are subject to significant risks, uncertainties and changes in circumstances that could cause actual outcomes and results to
differ materially. For a list and description of some of such risks and uncertainties, see our Annual Report on Form 10-K for the year ended
December 31, 2016, including in the section thereof captioned Risk Factors, as well as our subsequent reports on Form 8-K and Form 10-
Q, all of which are available at www.sec.gov and www.zimmerbiomet.com. The forward-looking statements in this presentation speak only
as of the original date of this presentation and we undertake no obligation to update or revise any of these statements.

Also, this presentation refers to certain financial measures that differ from financial measures calculated in accordance with U.S. generally
accepted accounting principles (GAAP). Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP
financial measures can be found in the Appendix to this presentation. Investors and other readers should consider non-GAAP financial
measures only as supplements to, and not as substitutes for or superior to, the measures of financial performance prepared in accordance
with GAAP.

2
Table of Contents

2017 Q3 Financial Summary

2017 Guidance and Outlook

Company Overview

Appendix

3
2017 Q3 Financial Summary
3rd Quarter 2017 Net Sales Results
Product Category Performance
Q3 Year to Date
Constant Currency % Constant Currency %
Product (in millions) Net Sales Net Sales
Change (3) Change (3)
Knees $624 -1.7% $2,006 -0.8%
Hips 434 -1.7% 1,380 0.2%
S.E.T. 407 1.1% 1,255 3.7%
Dental 93 -4.4% 311 -3.4%
Spine & CMF 185 0.3% 565 20.1%
Other 75 -5.3% 233 -4.5%
(1)
Total $1,818 -1.2% $5,750 1.8%
(2)
Ex LDR, Billing Day Adjusted -0.2%

Geographic Region Performance


Q3 Year to Date
Constant Currency % Constant Currency %
Region (in millions) Net Sales (3) Net Sales
Change Change (3)
Americas $1,142 -3.0% $3,586 1.4%
Europe 381 -0.4% 1,272 0.4%
Asia Pacific 295 5.2% 892 6.0%
(1)
Total $1,818 -1.2% $5,750 1.8%

(1) Includes approximately 30 basis points of contribution from the LDR acquisition and a negative impact of approximately 130 basis points as a result of having one
less billing day during the quarter.
(2) Excludes approximately 30 basis points of contribution from the LDR acquisition and a negative impact of approximately 130 basis points as a result of having one
less billing day during the quarter.
(3) Non-GAAP financial measure; see reconciliation. 5
Reconstructive Product Category

Persona Q3 Year to Date


Personalized Knee System Constant Currency Constant Currency
USD (millions) Revenue Revenue
% Change (1) % Change (1)

KNEES Americas
EMEA
$ 383
135
-3.9%
0.6%
$ 1,217
463
-2.2%
-0.1%
APAC 106 3.9% 326 3.8%
Total Knees $ 624 -1.7% $ 2,006 -0.8%
Persona
Partial Knee System
Persona Partial Knee System launched in September
Persona The Personalized Knee System continues to drive growth
New products key catalyst in 2018 including Cementless, PSI X-Ray Guides, and Revision
Growth impacted by continued supply constraints from the Warsaw North Campus

Q3 Year to Date
Arcos Modular
Constant Currency Constant Currency
Femoral Revision System USD (millions) Revenue Revenue
% Change (1) % Change (1)

HIPS Americas
EMEA
$ 228
115
-4.7%
-1.5%
$ 720
382
-1.9%
-0.6%
APAC 91 6.1% 278 7.2%
Total Hips $ 434 -1.7% $ 1,380 0.2%
Taperloc Complete
Hip System
Strong demand for G7 Acetabular System
First Clinical Graphics case performed in Q3
OsseoTi Porous Metal Technology continues success in G7 Dual Mobility Construct
Growth impacted by continued supply constraints from the Warsaw North Campus

(1) Non-GAAP financial measure; see reconciliation


6
S.E.T. Product Category
Q3 Year to Date
Constant Currency Constant Currency
S.E.T. GLOBAL REVENUE USD (millions) Revenue
% Change
(1) Revenue
% Change
(1)

S.E.T. $407 1.1% $1,255 3.7%

IntelliCart System DVT product line continues to drive growth


Strong, above market regional performances in Americas and EMEA
SURGICAL IntelliCart System, evaluated in 250+ sites, receiving very positive
feedback

Gel-One Gel-One Cross-Linked Hyaluronate continues to drive growth


SPORTS Cross-Linked Hyaluronate Specialized reps remain focused on driving Sports Medicine growth
MEDICINE Growth impacted by continued supply constraints from the Warsaw
North Campus

Comprehensive Total 2018 product launches of Augmented Baseplate and Stemless


Shoulder System Shoulder growth accelerators
EXTREMITIES Growth impacted by continued supply constraints from the Warsaw
North Campus

A.L.P.S. Total Foot System


Partnership with Nextremity benefits our product portfolio
FOOT & ANKLE Continued buildout of specialized sales force
A.L.P.S. saw steady demand

NCB Periprosthetic Strong growth in APAC and EMEA


Femur Plating System Continued buildout of specialized sales force
TRAUMA Growth impacted by continued supply constraints from the Warsaw
North Campus

(1) Non-GAAP financial measure; see reconciliation


7
Spine, CMF & Dental Product Categories

Q3 Year to Date
SPINE & CMF USD (millions) Revenue
Constant Currency
Revenue
Constant Currency
% Change (1) % Change (1)
GLOBAL REVENUE Spine & CMF $185 0.3% $565 20.1%

Mobi-C Cervical Disc Mobi-C continued to deliver significant growth


SPINE Focused on cross-sell opportunities and mitigating channel dis-synergies
Vitality Spinal System provides steady growth

SternaLock Continued to see steady sales for RibFix Blu Thoracic Fixation System, as
CMF Blu Closure well as our SternaLock Blu and SternaLock 360 Primary Closure
System
systems

Q3 Year to Date
DENTAL USD (millions) Revenue
Constant Currency
(1) Revenue
Constant Currency
(1)
% Change % Change
GLOBAL REVENUE Dental $93 -4.4% $311 -3.4%

Osseotite Realigning portfolio to meet market needs


DENTAL Implant
Global commercial strategy execution underway

(1) Non-GAAP financial measure; see reconciliation


8
Leading in Innovation

Joint
Preservation
Product Pipeline
Persona Partial Knee (September 2017) Persona
Motion Partial Knee System
Fixed bearing partial knee
Preservation Clearance received in major markets across the globe
Persona TM Tibia Knee (2H 2018)
Cementless knee utilizing clinically proven Trabecular Metal
Personalized
Procedures Persona Revision Knee (2H 2018 Limited Launch)
Adds revision offering to Persona portfolio

Diagnostics Medtech ROSA (2H 2018 Limited Launch)


& Infection Fully functional demo complete for Knee application
ROSA cadaver lab held in Warsaw
Key Design Principles: X-Ray based, time net neutral, soft tissue balancing
Stemless Shoulder (2018)
Hip Preservation Portfolio
Innovating to Entire continuum of care for Hip preservation
Minimize Complications Clinical Graphics for hip application received clearance in March 2017
Reduce Surgery Times X-Ray Based Knee PSI Guides (2018)
Improve Efficiencies Received CE mark and pursuing FDA clearance for full launch
Optimize Outcomes
Enhance Patient
Recent Launches & Additions
Experiences
Mobi-C Cervical Disc
VISCO-3
Quattro Link Rotator Cuff Repair
9
Key 3rd Quarter Financials

Metric (in millions) 2017 Q3 2016 Q3 Y/Y Growth


(1)
Net Sales $1,818.1 $1,832.8 -0.8%

Adj. Gross Profit (3) 73.0% 75.1% -

R&D (% of sales) 5.0% 5.2% -


(4)
SG&A (% of sales) 38.2% 39.7% -

Adj. Operating Margin (3) 29.8% 30.2% -

Adj. Net Earnings (2)(3) $349.9 $362.4 -3.4%

Adj. Diluted EPS (2)(3) $1.72 $1.79 -3.9%

Free Cash Flow (3) $344.4 $202.2 -

(1) Includes approximately 30 basis points of contribution from the LDR Key Call-Outs:
acquisition and a negative impact of approximately 130 basis points as a Gross Profit YoY quarterly performance impacted due to the impact of price
result of having one less billing day during the quarter. declines, product mix, additional manufacturing costs and lower gains from our
(2) Excluding the impact of foreign exchange, Adj. Net Earnings (3) and Adj. cash flow hedging program.
Diluted EPS (3) grew 0.2% and (0.6)%, respectively. SG&A Continue to incur higher freight expenses due to expedited product
(3) Non-GAAP financial measure; see reconciliation shipments, partially offset by savings from synergy capture initiatives.
(4) Includes instrument depreciation

10
Free Cash Flow

($ In millions)
YTD 2017 YTD 2016 Inc/(Dec) vs PY

Operating Cash Flow 1,179 1,005 174

CapEx
Instruments (256) (251)
Traditional PP&E (109) (130)
Total CapEx (365) (381)

Free Cash Flow (1) 814 624 190

Beginning Cash Balance (12/31/2016) 634


Ending Cash Balance (09/30/2017) 481

Beginning Debt Balance (12/31/2016) 11,241


Ending Debt Balance (09/30/2017) 10,425

(1) Non-GAAP financial measure; see reconciliation


11
2017 Guidance and Outlook
2017 Revenue Guidance

Q4 2017 FY2017
Metric
Growth Growth
Reported 0.0% to 2.0% 1.0% to 1.5%

FX Impact -180 bps -10 bps

Constant Currency (1) (1.8)% to 0.2% 0.9% to 1.4%

LDR Impact - -120 bps

Constant Currency, Excluding


(1.8)% to 0.2% (0.3)% to 0.2%
LDR (1)
Billing Day - 20 bps 40 bps

Constant Currency, Excluding


(2.0)% to 0.0% 0.1% to 0.6%
LDR, Billing Day Adjusted (1)

(1) Non-GAAP financial measure; see reconciliation


13
2017 Guidance

Metric Q4 2017 FY2017


($ in millions, excluding EPS data)

Constant Currency Revenue Growth (1)(3) (1.8)% to 0.2% 0.9% to 1.4%

Revenue $2,010 to $2,050 $7,760 to $7,800

Free Cash Flow $1,125 to $1,225

GAAP EPS $0.94 to $1.08 $3.80 to $3.93

Adj. Diluted EPS (2)(3) $2.08 to $2.14 $8.01 to $8.07


(1) Q4 2017 includes approximately 20-basis-point positive impact from billing days compared to the prior year. Full Year 2017 includes 120 basis points of acquired
revenue from the LDR transaction as well as approximately 40-basis-point negative impact from billing days.
(2) This EPS range on the full year represents 0.6% to 1.4% growth over the prior year, or 4% to 5% excluding the negative impact of foreign exchange. (3)
(3) Non-GAAP financial measure; see reconciliation

14
Company Overview
Leading Musculoskeletal Portfolio

Products for early intervention, bone preservation and full and


KNEE partial knee replacement surgeries, including primary joint
replacement and revision procedures

Products for primary hip joint replacement, as well as


HIP
revision procedures

Products for biologics, extremities, sports medicine,


S.E.T. surgical, trauma, foot and ankle and Zimmer Biomet
Signature Solutions

SPINE & Products for face and skull reconstruction, back and neck pain
CRANIOMAXILLOFACIAL (CMF) caused by deformities or injuries of the spine, and
& THORACIC stabilization of the chest following open heart surgery

DENTAL Dental reconstructive implants, prosthetic


products and products for soft tissue and bone rehabilitation

16
Broad Portfolio of Solutions
in the Musculoskeletal Market

Spine
$9.0B Market CMF / Thoracic
5%-7% Est. Share $1.1B Market
14%-16% Est. Share

Hip Dental
$6.0B Market $4.2B Market
31%-32% Est. Share 9%-11% Est. Share

Knee S.E.T.*
$7.5B Market $15.0B Market
36%-37% Est. Share 10%-11% Est. Share

*Surgical, Sports Medicine, Foot & Ankle, Extremities and Trauma


Market shares based on internal and sell-side analysts estimates 17
Drivers of Sustainable Market Growth

Favorable global demographics World Population


Increasing percentage of 65 and Older 16.2%
population 65 and older

Source: United Nations Population Division


ShareProcedure
of World Volume 14.2%
Growing global

1,487M
Population 65 and
Supportive utilization trends Older musculoskeletal

1,252M
11.7%

Penetration opportunity in market of ~$50B


9.3%

969M
developed markets
7.6%

714M
Expanding access to healthcare

523M
in emerging markets
Utilization at a fraction of
developed market rates
2010 2020 2030 2040 2050

18
Leading Musculoskeletal Portfolio

Global market share leader


2016 Revenue of $4,620 million, 60% of ZBH business
KNEE & HIP 2016 Estimated Market Share of 33% to 34%
2016 Estimated Market Growth of 3% to 4%

Diverse and fast growing category

S.E.T. 2016 Revenue of $1,645 million, 21% of ZBH business


2016 Estimated Market Share of 10% to 11%
2016 Estimated Market Growth of 4% to 6%

Innovative products and solutions


SPINE & 2016 Revenue of $662 million, 9% of ZBH business
CMF 2016 Estimated Market Share of 5% to 7%
2016 Estimated Market Growth of 1% to 3%

Complete implant and regenerative portfolio

DENTAL 2016 Revenue of $428 million, 6% of ZBH business


2016 Estimated Market Share of 9% to 11%
2016 Estimated Market Growth of 4% to 5%

*S.E.T. = Surgical, Sports Medicine, Foot & Ankle, Extremities and Trauma
19
Broad Portfolio
Mobi-C Osseotite
Quattro
Timberline MPF Link Knotless Anchors
Lateral Fusion System

Comprehensive
Reverse
Persona Shoulder DVR Crosslock Distal
Personalized Knee System System Radius Plating System
& ePAK Delivery System

New

SternaLock
Vanguard ID Blu
Total Knee System

G7 Acetabular System
Gel-One
Cross-Linked Hyaluronate
Arcos Modular
Femoral Revision System

20
Guided by our Value Creation Framework

Opportunity to deliver 4%+ revenue growth by 2020:


Growth Innovative new products
Specialized sales forces
Expanding emerging markets presence

Market Leading Operating Margin:


Operational Leverage scale
Excellence Manufacturing and quality system optimization
Realize net synergies

Disciplined Significant Free Cash Flow rates:


Capital Achievement of deleveraging goals
Value creating M&A
Allocation
Returning value to stockholders

21
Key Strategies

Transforming Revenue Mix Specialized Sales Channel

Strengthening presence in faster- Leveraging scale and


growing product categories specialized reps to
accelerate growth

Differentiated R&D Disciplined Capital


Allocation
60+ new products and solutions Delivering value with
launched in 2016 and 2017 strategic acquisitions
Free Cash Flow generation
dedicated to further debt reduction and
long-term shareholder friendly activities

22
Zimmer + Biomet = Transformative Combination
Revenue (in millions) Adj. Diluted EPS (1)

$10,000 $9.00 Key Strengths


$7.96 $8.01 - $8.07
$9,000
Broad product portfolio

$8,000 $6.90 $7,684


$7,760 - $7,800 Product combination enables key
$6.40
cross-sell & specialized channel
focus
$7,000
$6.00 7.9% Adjusted EPS CAGR
$5,998
$6,000 Innovative new products
Internal and external portfolio
$5,000 $4,673 development
History of strong earnings growth
$4,000
and delivery of deal synergies
$3.00
$3,000
Strong Free Cash Flow
positioning ZBH for future
flexibility
$2,000

$1,000

$- $-
2014 2015 2016 2017E
Revenue Adj. Diluted EPS

(1) Non-GAAP financial measure; see reconciliation


23
M&A Strengthens Portfolio

Musculoskeletal Health
Platform Technologies
Diversification

Hips
25%
Knee
36%

17%

In 2016 Zimmer Biomet invested $1.5B on M&A transactions

24
Global Footprint: Operating Locations

Making a Global Impact In Patients Lives


39 Manufacturing sites globally
Sales in 100+ countries

25
Appendix
Reconciliation of Reported Net Sales % Change to
Constant Currency % Change and % Change Excluding
LDR Holding Corporation (unaudited)

For the Three Months Ended


September30, 2017
Foreign Constant
Exchange Currency
%Change Impact %Change
Geographic Results
Americas (2.9) % 0.1 % (3.0) %
EMEA 3.3 3.7 (0.4)
Asia Pacific 2.4 (2.8) 5.2
Total (0.8) % 0.4 % (1.2) %
Product Categories
Knees
Americas (3.8) % 0.1 % (3.9) %
EMEA 3.7 3.1 0.6
Asia Pacific 2.3 (1.6) 3.9
Total (1.2) 0.5 (1.7)
Hips
Americas (4.5) 0.2 (4.7)
EMEA 2.4 3.9 (1.5)
Asia Pacific 2.1 (4.0) 6.1
Total (1.4) 0.3 (1.7)
S.E.T 1.2 0.1 1.1
Dental (3.2) 1.2 (4.4)
Spine & CMF 0.7 0.4 0.3
Other (4.8) 0.5 (5.3)
Total (0.8) % 0.4 % (1.2) %
Impact of additional LDR Holding Corporation
billing days in the 2017 period (0.3) - (0.3)
% Change excluding LDR Holding Corporation (1.1) % 0.4 % (1.5) %

27
Reconciliation of Reported Net Sales % Change to
Constant Currency % Change and % Change Excluding
LDR Holding Corporation (unaudited)

For the Nine Months Ended


September30, 2017
Foreign Constant
Exchange Currency
%Change Impact %Change
Geographic Results
Americas 1.5 % 0.1 % 1.4 %
EMEA (1.0) (1.4) 0.4
Asia Pacific 4.8 (1.2) 6.0
Total 1.4 % (0.4) % 1.8 %
Product Categories
Knees
Americas (2.2) % - % (2.2) %
EMEA (2.2) (2.1) (0.1)
Asia Pacific 3.5 (0.3) 3.8
Total (1.3) (0.5) (0.8)
Hips
Americas (1.9) - (1.9)
EMEA (1.5) (0.9) (0.6)
Asia Pacific 5.3 (1.9) 7.2
Total (0.4) (0.6) 0.2
S.E.T 3.3 (0.4) 3.7
Dental (3.5) (0.1) (3.4)
Spine & CMF 20.1 - 20.1
Other (4.9) (0.4) (4.5)
Total 1.4 % (0.4) % 1.8 %
Impact of additional LDR Holding Corporation
billing days in the 2017 period (1.6) - (1.6)
% Change excluding LDR Holding Corporation (0.2) % (0.4) % 0.2 %

28
Reconciliation of Cash Flow from Operating Activities to
Free Cash Flow

For the Quarterly and Year-to-Date Periods in Calendar Year Ending December 31, 2017
(in millions, unaudited)

Three Months Ended Three Months Ended Three Months Ended Nine Months Ended
March 31, 2017 June 30, 2017 September 30, 2017 September 30, 2017
Net cash provided by operating activities $ 275.4 $ 440.5 $ 463.5 $ 1,179.4
Additions to instruments (86.4) (86.2) (83.1) (255.7)
Additions to other property, plant and equipment (43.1) (30.7) (36.0) (109.8)
Free cash flow $ 145.9 $ 323.6 $ 344.4 $ 813.9

For the Quarterly and Year-to-Date Periods in Calendar Year Ending December 31, 2016
(in millions, unaudited)

Three Months Ended Three Months Ended Three Months Ended Nine Months Ended
March 31, 2016 June 30, 2016 September 30, 2016 September 30, 2016
Net cash provided by operating activities $ 272.8 $ 379.6 $ 352.6 $ 1,005.0
Additions to instruments (85.1) (72.2) (94.0) (251.3)
Additions to other property, plant and equipment (27.6) (46.1) (56.4) (130.1)
Free cash flow $ 160.1 $ 261.3 $ 202.2 $ 623.6

29
Reconciliation of Gross Profit & Margin to Adjusted Gross
Profit & Margin

For the Quarterly and Year-to-Date Periods in Calendar Year Ending December 31, 2017
(in millions, unaudited)

Three Months Ended Three Months Ended Three Months Ended Nine Months Ended
March 31, 2017 June 30, 2017 September 30, 2017 September 30, 2017

Net Sales $ 1,977.3 $ 1,954.4 $ 1,818.1 $ 5,749.8


Cost of products sold, excluding intangible asset amortization 512.9 527.7 500.9 1,541.5
Intangible asset amortization 152.0 147.7 152.7 452.4
Gross profit $ 1,312.4 $ 1,279.0 $ 1,164.5 $ 3,755.9
Inventory step-up and other inventory
and manufacturing related charges 23.2 24.9 10.4 58.5
Intangible asset amortization 152.0 147.7 152.7 452.4
Adjusted gross profit $ 1,487.6 $ 1,451.6 $ 1,327.6 $ 4,266.8

Gross margin 66.4 % 65.4 % 64.1 % 65.3 %


Inventory step-up and other inventory
and manufacturing related charges 1.1 1.3 0.5 1.0
Intangible asset amortization 7.7 7.6 8.4 7.9
Adjusted gross margin 75.2 % 74.3 % 73.0 % 74.2 %

30
Reconciliation of Gross Profit & Margin to Adjusted Gross
Profit & Margin

For the Quarterly and Year-to-Date Periods in Calendar Year Ending December 31, 2016
(in millions, unaudited)

Three Months Ended Three Months Ended Three Months Ended Three Months Ended Year Ended
March 31, 2016 June 30, 2016 September 30, 2016 December 31, 2016 December 31, 2016

Net Sales $ 1,904.0 $ 1,934.0 $ 1,832.8 $ 2,013.1 $ 7,683.9


Cost of products sold, excluding intangible asset amortization 640.6 640.1 479.3 621.8 2,381.8
Intangible asset amortization 126.6 133.8 164.3 141.2 565.9
Gross profit $ 1,136.8 $ 1,160.1 $ 1,189.2 $ 1,250.1 $ 4,736.2
Inventory step-up and other inventory
and manufacturing related charges 178.3 156.6 22.8 111.4 469.1
Intangible asset amortization 126.6 133.8 164.3 141.2 565.9
Adjusted gross profit $ 1,441.7 $ 1,450.5 $ 1,376.3 $ 1,502.7 $ 5,771.2

Gross margin 59.7 % 60.0 % 64.9 % 62.1 % 61.6 %


Inventory step-up and other inventory
and manufacturing related charges 9.4 8.1 1.2 5.5 6.1
Intangible asset amortization 6.6 6.9 9.0 7.0 7.4
Adjusted gross margin 75.7 % 75.0 % 75.1 % 74.6 % 75.1 %

31
Reconciliation of Operating Profit & Margin to Adjusted Operating
Profit & Margin

For the Quarterly and Year-to-Date Periods in Calendar Year Ending December 31, 2017
(in millions, unaudited)

Three Months Ended Three Months Ended Three Months Ended Nine Months Ended
March 31, 2017 June 30, 2017 September 30, 2017 September 30, 2017

Operating profit $ 350.4 $ 282.3 $ 213.4 $ 846.1


Inventory step-up and other inventory
and manufacturing related charges 23.2 24.9 10.4 58.5
Intangible asset amortization 152.0 147.7 152.7 452.4
Special items 110.1 158.6 165.4 434.1
Adjusted operating profit $ 635.7 $ 613.5 $ 541.9 $ 1,791.1

Operating profit margin 17.7 % 14.4 % 11.7 % 14.7 %


Inventory step-up and other inventory
and manufacturing related charges 1.1 1.3 0.5 1.0
Intangible asset amortization 7.7 7.6 8.4 7.9
Special items 5.6 8.1 9.2 7.5
Adjusted operating profit margin 32.1 % 31.4 % 29.8 % 31.1 %

32
Reconciliation of Operating Profit & Margin to Adjusted Operating
Profit & Margin

For the Quarterly and Year-to-Date Periods in Calendar Year Ending December 31, 2016
(in millions, unaudited)

Three Months Ended Three Months Ended Three Months Ended Three Months Ended Year Ended
March 31, 2016 June 30, 2016 September 30, 2016 December 31, 2016 December 31, 2016

Operating profit (loss) $ 245.5 $ 201.6 $ 195.5 $ 183.3 $ 825.9


Inventory step-up and other inventory
and manufacturing related charges 178.3 156.6 22.8 111.4 469.1
Intangible asset amortization 126.6 133.8 164.3 141.2 565.9
Special items 88.7 137.9 170.4 214.8 611.8
Adjusted operating profit $ 639.1 $ 629.9 $ 553.0 $ 650.7 $ 2,472.7

Operating profit (loss) margin 12.9 % 10.4 % 10.7 % 9.1 % 10.7 %


Inventory step-up and other inventory
and manufacturing related charges 9.4 8.1 1.2 5.5 6.1
Intangible asset amortization 6.6 6.9 9.0 7.0 7.4
Special items 4.7 7.2 9.3 10.7 8.0
Adjusted operating profit margin 33.6 % 32.6 % 30.2 % 32.3 % 32.2 %

33
Reconciliation of Net Earnings to Adjusted Net Earnings

FOR THE THREE MONTHS ENDED SEPTEMBER30, 2017 and 2016


(in millions, unaudited)

Three Months
Ended September30,
2017 2016
Net Earnings of Zimmer Biomet Holdings, Inc. $ 98.8 $ 158.8
Inventory step-up and other inventory and manufacturing-related charges 10.4 22.8
Intangible asset amortization 152.7 164.3
Special items
Biomet merger-related 81.1 113.8
Other special items 84.3 56.6
Merger-related and other (income) expense in other expense, net (0.5) (2.6)
Taxes on above items (1) (79.1) (111.6)
Other certain tax adjustments (2) 2.2 (39.7)
Adjusted Net Earnings $ 349.9 $ 362.4

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

(2)
In 2017, other certain tax adjustments relate to net unfavorable resolutions of various tax matters. The 2016
adjustment primarily relates to a favorable adjustment to certain deferred tax liabilities recognized as part of
acquisition-related accounting.

34
Reconciliation of Net Earnings to Adjusted Net Earnings

FOR THE NINE MONTHS ENDED SEPTEMBER30, 2017 and 2016


(in millions, unaudited)

Nine Months
Ended September30,
2017 2016
Net Earnings of Zimmer Biomet Holdings, Inc. $ 582.4 $ 236.3
Inventory step-up and other inventory and manufacturing-related charges 58.5 357.7
Intangible asset amortization 452.4 424.7
Special items
Biomet merger-related 206.3 313.5
Other special items 227.8 83.5
Merger-related and other (income) expense in other expense, net 0.5 (1.1)
Taxes on above items (1) (264.4) (297.0)
Biomet merger-related measurement period tax adjustments (2) - 52.7
Other certain tax adjustments (3) (55.6) 6.4
Adjusted Net Earnings $ 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 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 2017, 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 the Company access to cash in a tax efficient
manner. The 2016 adjustment primarily relates to a favorable adjustment to certain deferred tax liabilities recognized as
part of acquisition-related accounting offset by internal restructuring transactions that provide the Company access to
cash in a tax efficient manner.

35
Reconciliation of Diluted EPS to Adjusted EPS

FOR THE THREE MONTHS ENDED SEPTEMBER30, 2017 and 2016


(unaudited)

Three Months
Ended September30,
2017 2016
Diluted EPS $ 0.48 $ 0.78

Inventory step-up and other inventory and manufacturing-related charges 0.05 0.11
Intangible asset amortization 0.75 0.81
Special items
Biomet merger-related 0.40 0.56
Other special items 0.41 0.28
Merger-related expense in other expense, net - (0.01)
Taxes on above items (1) (0.38) (0.55)
Other certain tax adjustments (2) 0.01 (0.19)
Adjusted Diluted EPS $ 1.72 $ 1.79

(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)
In 2017, other certain tax adjustments relate to net unfavorable resolutions of various tax matters. The 2016
adjustment primarily relates to a favorable adjustment to certain deferred tax liabilities recognized as part of
acquisition-related accounting.

36
Reconciliation of Diluted EPS to Adjusted EPS

FOR THE NINE MONTHS ENDED SEPTEMBER30, 2017 and 2016


(unaudited)

Nine Months
Ended September30,
2017 2016
Diluted EPS $ 2.86 $ 1.17
Inventory step-up and other inventory and manufacturing-related charges 0.29 1.77
Intangible asset amortization 2.22 2.10
Special items
Biomet merger-related 1.01 1.55
Other special items 1.12 0.41
Merger-related and other expense in other expense, net - (0.01)
Taxes on above items (1) (1.30) (1.47)
Biomet merger-related measurement period tax adjustments (2) - 0.26
Other certain tax adjustments (3) (0.27) 0.04
Adjusted Diluted EPS $ 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 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 2017, 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 the Company access to cash in a tax efficient
manner. The 2016 adjustment primarily relates to a favorable adjustment to certain deferred tax liabilities recognized as
part of acquisition-related accounting offset by internal restructuring transactions that provide the Company access to
cash in a tax efficient manner.

37
Reconciliation of 2017 Projected Revenue % Change to 2017
Projected Constant Currency % Change and Change Excluding LDR
Holding Corporation (unaudited)

Projected Three Months Ended December31, 2017: High Low


Revenue % change 2.0 % - %
Foreign exchange impact (1.8) (1.8)
Constant currency % change 0.2 % (1.8) %

Projected Year Ended December 31, 2017: High Low


Revenue % change 1.5 % 1.0 %
Foreign exchange impact (0.1) (0.1)
Constant currency % change 1.4 % 0.9 %
Impact of LDR Holding Corporation (1.2) (1.2)
Constant currency % change excluding LDR Holding Corporation 0.2 % (0.3) %

38
Reconciliation of 2017 Projected Diluted EPS and Projected Adjusted
Diluted EPS (unaudited)

Projected Three Months Ended December31, 2017: High Low


Diluted EPS $ 1.08 $ 0.94
Inventory step-up and other inventory and manufacturing related charges, intangible
asset amortization, special items and other expense 1.48 1.60
Taxes on above items (1) and other certain tax adjustments (0.42) (0.46)
Adjusted Diluted EPS $ 2.14 $ 2.08

Projected Year Ended December 31, 2017: High Low


Diluted EPS $ 3.93 $ 3.80
Inventory step-up and other inventory and manufacturing related charges, intangible
asset amortization, special items and other expense 6.14 6.24
Taxes on above items (1) and other certain tax adjustments (2.00) (2.03)
Adjusted Diluted EPS $ 8.07 $ 8.01

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

39
Reconciliation of GAAP Net Earnings to non-GAAP Adjusted Net
Earnings (unaudited)

Year ended December 31,


2016 2015 2014

Net Earnings of Zimmer Biomet Holdings, Inc. $ 305.9 $ 147.0 $ 720.3


Inventory step-up and other inventory and manufacturing related charges 469.1 348.8 36.3
Certain claims - 7.7 21.5
Intangible asset amortization 565.9 337.4 92.5
Special items
Biomet merger-related 487.3 619.1 61.9
Other special items 124.5 212.7 279.2
Merger-related and other expense in other (expense) income, net 3.6 1.0 39.6
Debt extinguishment cost 53.3 22.0 -
Interest expense on Biomet merger financing - 70.0 -
(1)
Taxes on above items (449.0) (487.6) (153.3)
(2)
Biomet merger-related measurement period tax adjustments 52.7 - -
Other certain tax adjustments (3) (2.5) 32.4 -
Adjusted Net Earnings $ 1,610.8 $ 1,310.5 $ 1,098.0

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

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

(3)
Other certain tax adjustments primarily include internal restructuring transactions to integrate Biomet operations and facilitate
access to offshore earnings, partially offset by resolution of certain matters with taxing authorities and adjustments to
deferred tax liabilities recognized as part of acquisition-related accounting.

40
Reconciliation of GAAP Diluted Earnings Per Share to non-GAAP
Adjusted Diluted Earnings Per Share (unaudited)

Year ended December 31,


2016 2015 2014

Diluted EPS $ 1.51 $ 0.77 $ 4.20


Inventory step-up and other inventory and manufacturing related charges 2.32 1.84 0.21
Certain claims - 0.04 0.13
Intangible asset amortization 2.80 1.78 0.54
Special items
Biomet merger-related 2.40 3.26 0.36
Other special items 0.62 1.12 1.63
Merger-related and other expense in other (expense) income, net 0.02 - 0.23
Debt extinguishment cost 0.26 0.12 -
Interest expense on Biomet merger financing - 0.37 -
(1)
Taxes on above items (2.22) (2.57) (0.90)
(2)
Biomet merger-related measurement period tax adjustments 0.26 - -
Other certain tax adjustments (3) (0.01) 0.17 -
Adjusted Diluted EPS $ 7.96 $ 6.90 $ 6.40

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

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

(3)
Other certain tax adjustments primarily include internal restructuring transactions to integrate Biomet operations and facilitate
access to offshore earnings, partially offset by resolution of certain matters with taxing authorities and adjustments to
deferred tax liabilities recognized as part of acquisition-related accounting.

41
Reconciliation of Net Earnings and Diluted EPS to Adjusted Net Earnings and
Adjusted Diluted EPS and Adjusted Net Earnings and Adjusted Diluted EPS
Excluding the Estimated Effects of Changes in Foreign Currency Exchange Rates

FOR THE FOR THE YEARS ENDED DECEMBER 31, 2017 and 2016 and THREE MONTHS ENDED SEPTEMBER 30, 2017 and 2016
(unaudited)

EPS NET EARNINGS EPS


Years Ended December 31, Three Months Ended September 30, Three Months Ended September 30,
Projected (High) Projected (Low)
2017 2017 2016 2017 2016 2017 2016
Net Earnings of Zimmer Biomet Holdings, Inc. / Diluted EPS $ 3.93 $ 3.80 $ 1.50 $ 98.8 $ 158.8 $ 0.48 $ 0.78
Inventory step-up and other inventory and manufacturing related
charges, intangible asset amortization, special items and other expense 6.14 6.24 8.41 328.0 354.9 1.61 1.75
(1)
Taxes on above items and other certain tax adjustments (2.00) (2.03) (1.95) (76.9) (151.3) (0.37) (0.74)
Adjusted Diluted EPS $ 8.07 $ 8.01 $ 7.96 $ 349.9 $ 362.4 $ 1.72 $ 1.79

Incremental foreign currency exchange rate forward contract


cash flow hedges(2) 0.32 0.32 17.8 0.08
Effects of changes in foreign currency exchange rates on
functional currency translation (3) (0.05) (0.05) (4.7) (0.02)
Adjusted Diluted EPS excluding the estimated effects of changes in
foreign currency exchange rates (4) $ 8.34 $ 8.28 $ 363.0 $ 1.78

Growth over prior year Adjusted Diluted EPS 5% 4% 0.2% -0.6%

(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 or are projected to be incurred.

(2) We enter into foreign currency exchange rate forward contracts to minimize the effects of foreign currency exchange rate movements on the cash flows from our intercompany sales of inventory. We
designate these contracts as cash flow hedges and defer any gains or losses on these contracts until the inventory is sold to a third party. Based upon actual and estimated foreign currency exchange rates, we
estimate that we will recognize lower hedge gains in the applicable periods when compared to the same prior year period.

(3) Under U.S. GAAP, we consolidate our foreign operations by translating their statement of earnings in their functional currency into U.S. Dollars using average foreign currency exchange rates during the
applicable time period. We have estimated the effects of changes in foreign currency exchange rates on our consolidated statement of earnings by translating the current period functional currency results using
the same exchange rates from the prior year period. This estimate is complex and may not actually reflect the changes in our consolidated statement of earnings had foreign currency exchange rates not
changed. This effect also includes the estimated tax impact on the foreign currency exchange forward contract cash flow hedges.

(4)
Adjusted Diluted EPS excluding the estimated effects of changes in foreign currency exchange rates excludes the effects of incremental changes in foreign currency exchange rate forward contract cash flow
hedges, incremental changes in remeasurement of monetary assets and liabilities denominated in a currency other than its functional currency and the effects of changes in foreign currency exchange rates on
functional currency translation.

42
43

Вам также может понравиться