Zimmer Biomet Holdings (ZBH) 10-K risk factor changes: FY2018 vs FY2017

Our business, financial condition and results of [added: operations may be impacted by a number of factors.]

In addition to the factors discussed elsewhere in this report, the following risks and uncertainties could materially harm our business, financial condition or results of operations, including causing our actual results to differ materially from those projected in any forward-looking [removed: statements.]

We incurred substantial additional indebtedness in connection with [removed: the Biomet and LDR] [added: previous] mergers and [added: acquisitions and] may not be able to meet all of our debt obligations.

At December 31, [removed: 2017,] [added: 2018,] our total indebtedness was [removed: $10.1] [added: $8.9] billion, as compared to $1.4 billion at December 31, 2014.

As of December 31, [removed: 2017,] [added: 2018,] our debt service obligations, comprised of principal and interest (excluding [removed: capital] leases and equipment notes), during the next 12 months are expected to be [removed: $1,522.4] [added: $776.9] million.

Damage to one or more of our facilities from weather or natural disaster-related events, [removed: such as the recent hurricanes that affected our employees and operations at our Guaynabo, Puerto Rico and Ponce, Puerto Rico manufacturing facilities,] or issues in our manufacturing arising from failure to follow specific internal protocols and procedures, compliance concerns relating to the QSR and Good Manufacturing Practice requirements, equipment breakdown or malfunction or other factors could adversely affect our ability to manufacture our products.

We are subject to [removed: various] [added: costly and complex laws and] governmental regulations relating to the manufacturing, labeling and marketing of our products, non-compliance with which could adversely affect our business, financial condition and results of operations.

The FDA or other regulators may also impose operating restrictions, including a ceasing of [removed: operations, on] [added: operations at] one or more facilities, enjoin and restrain certain violations of applicable law pertaining to our products and assess civil or criminal penalties against our officers, employees or us.

As of [removed: December 31, 2017,] [added: February 20, 2019,] these warning letters remained pending.

Until the violations are corrected, we may become subject to additional regulatory action by the FDA as described above, the FDA may refuse to grant premarket approval applications and/or the FDA may refuse to grant export certificates, any of which could have a material adverse effect on our business, financial condition and results [added: of]

[removed: of] operations.

Additional information regarding these and other FDA regulatory matters can be found in Note 19 to [removed: the] [added: our] consolidated financial statements.

[removed: Certain] [added: In addition, certain] of our affiliates are subject to privacy and security regulations promulgated under HIPAA.

The interpretation and enforcement of the laws and regulations described above are uncertain and subject to [removed: change.][added: change, and may require substantial costs to monitor and implement compliance with any additional requirements.]

Failure to comply with U.S. and international data protection laws and regulations could result in government enforcement actions (which could include [added: substantial] civil and/or criminal penalties), private litigation and/or adverse publicity and could negatively affect our operating results and business.

As a result of technology initiatives, recently enacted regulations, changes in our system platforms and integration of new business acquisitions, [removed: including the Biomet merger,] we have been consolidating and integrating the number of systems we operate and have upgraded and expanded our information systems capabilities.

Many of these agents have developed professional relationships with existing [added: and potential customers because of the agents’ detailed knowledge of products and instruments.]

These third-party payors may deny reimbursement if they determine that a device used in a procedure was not in accordance with [removed: cost-][added: cost-effective treatment methods, as determined by the third-party payor, or was used for an unapproved indication.]

We sell our products in more than 100 countries and derived approximately 40 percent of our net sales in [removed: 2017] [added: 2018] from outside the U.S. We intend to continue to pursue growth opportunities in sales internationally, including in emerging markets, which could expose us to additional risks associated with international sales and operations.

| | • | trade protection [removed: measures and] [added: measures,] import or export requirements [added: and increased tariffs] that may prevent us from shipping products to a particular market and may increase our operating costs; |

We [removed: regularly] are [added: regularly] under audit by tax authorities.

[removed: The] [added: Although the] U.S. Treasury has provided [removed: limited] guidance on aspects of the 2017 Tax Act, [removed: and we anticipate] [added: there still remains] further guidance [removed: will] [added: to] be provided in the future.

[removed: The actual] [added: We finalized our provisional amounts for the] effects of the 2017 Tax Act [removed: and the final amounts recorded may differ materially from our current estimates of provisional amounts included] in [removed: this] [added: our 2018] Annual Report on Form 10-K.

[removed: Further,] [added: However,] our tax expense and cash flow could be [removed: materially] impacted [removed: as we finalize the financial accounting for] [added: in] the [removed: 2017 Tax Act, and incorporate] [added: event of adverse] future regulatory guidance provided by the U.S. [removed: Treasury.][added: Treasury clarifying certain aspects of the 2017 Tax Act.]

As discussed further in Note 19 to [removed: the] [added: our] consolidated financial statements, we are defending product liability lawsuits relating to the Durom® Acetabular Component (“Durom Cup”), certain products within the [removed: NexGen Knee System,] [added: M/L Taper] and [added: M/L Taper with Kinectiv® Technology hip stems and Versys® Femoral Head implants, and] the M2a-MagnumTM hip system.

The majority of the Durom Cup cases are pending in a federal Multidistrict Litigation (“MDL”) in the District of New Jersey (In Re: Zimmer Durom Hip Cup Products Liability Litigation); the majority of the [removed: NexGen Knee System] [added: M/L Taper and M/L Taper with Kinectiv Technology hip stem] cases [added: and Versys Femoral Head implant cases] are pending in a federal MDL in the [removed: Northern] [added: Southern] District of [removed: Illinois] [added: New York] (In Re: Zimmer [removed: NexGen Knee Implant] [added: M/L Taper Hip Prosthesis or M/L Taper Hip Prosthesis with Kinectiv Technology and Versys Femoral Head] Products Liability Litigation); and the majority of the M2a-Magnum hip system cases are pending in a federal MDL in the Northern District of Indiana (In Re: Biomet M2a Magnum Hip Implant Products Liability Litigation).

For example, as discussed further in Note 19 to [removed: the] [added: our] consolidated financial statements, we are defending a purported class action lawsuit, Shah v.

Our assets include intangible assets, [removed: primarily] [added: including] goodwill.

At December 31, [removed: 2017,] [added: 2018,] we had [removed: $10.7] [added: $9.6] billion in goodwill.

The goodwill results from our acquisition [removed: activity, including the Biomet and LDR mergers,] [added: activity] and represents the excess of the consideration transferred over the fair value of the net assets acquired.

As discussed further in Note 9 to [removed: the] [added: our] consolidated financial statements, we recorded goodwill impairment charges of [removed: $304.7] [added: $975.9] million in [removed: 2017.][added: 2018.]

If the operating performance at one or more of our business units falls significantly below current levels, if competing or alternative technologies emerge, or if market conditions or [added: future cash flow estimates for one or more of our businesses decline, we could be required to record additional goodwill impairment charges.]

Any write-off of a material portion of our [added: goodwill or] unamortized intangible assets would negatively affect our results of operations.

Brexit and the perceptions as to its impact [added: have and] may [added: continue to] adversely affect business activity and economic conditions in Europe and globally and could contribute to instability in global financial and foreign exchange markets.

Brexit could also have the effect of disrupting the free movement of goods, services and people between the UK and the [removed: EU; however, the full effects of Brexit are uncertain and will depend on any agreements the UK may make to retain access to EU markets.][added: EU.]

Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, the full extent to which [removed: our business, results of operations and financial condition could] [added: we will] be [removed: adversely] affected by Brexit is uncertain.

statements.

In August 2018, we received a warning letter from the FDA related to observed non-conformities with current good manufacturing practice requirements of the QSR at our Warsaw North Campus manufacturing facility.

Governmental regulations outside the U.S. have and may continue to become increasingly stringent and complex.

In the EU, for example, a new Medical Device Regulation was published in 2017 which, when it enters into full force in 2020, will include significant additional premarket and post-market requirements.

Complying with the requirements of this regulation will require us to incur significant expense.

Additionally, the availability of industry notified body services certified to the new requirements is limited, which may cause delays in our receipt of CE certificate approvals and EU Medical Device Regulation submission approvals.

Any such delays, or any failure to meet the requirements of the new regulation, could adversely impact our business in the EU and other regions that tie their product registrations to the EU requirements.

HIPAA governs the use, disclosure, and security of protected health information by HIPAA “covered entities” and their “business associates.” Covered entities are health care providers that engage in specific types of electronic transactions, health plans, and health care clearinghouses.

A business associate is any person or entity (other than members of a covered entity’s workforce) that performs a service on behalf of a covered entity involving the use or disclosure of protected health information.

HHS (through the Office for Civil Rights) has direct enforcement authority against covered entities and business associates with regard to compliance with HIPAA regulations.

On December 12, 2018, the Office for Civil Rights of HHS issued a request for information seeking input from the public on how the HIPAA regulations could be modified to amend existing obligations relating to the processing of protected health information.

We will monitor this process and assess the impact of changes to the HIPAA regulations to our business.

In addition to the FDA guidance and HIPAA regulations described above, a number of U.S. states have also enacted data privacy and security laws and regulations that govern the confidentiality, security, use and disclosure of sensitive personal information, such as social security numbers, medical and financial information and other personal information.

These laws and regulations may be more restrictive and not preempted by U.S. federal laws.

These state laws include the CCPA, which was signed into law on June 28, 2018 and largely takes effect January 1, 2020.

The CCPA, among other things, contains new disclosure obligations for businesses that collect personal information about California residents and affords those individuals new rights relating to their personal information that may affect our ability to use personal information.

We will continue to monitor and assess the impact of the CCPA, which has substantial penalties for non-compliance and carries significant potential liability, on our business.

Outside of the U.S., data protection laws, including the GDPR, also apply to some of our operations in the countries in which we provide services to our customers.

Legal requirements in these countries relating to the collection, storage, processing and transfer of personal data continue to evolve.

The GDPR imposes, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations

of up to 4% of total company revenue).

Other governmental authorities around the world are considering similar types of legislative and regulatory proposals concerning data protection.

We incurred substantial additional indebtedness in connection with previous mergers and acquisitions.

| | • | changes in foreign regulatory requirements, such as more stringent requirements for regulatory clearance of products; |

If the medical device excise tax is not repealed or further suspended, our business, results of operations 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 or ACA), in January 2013 we began paying a 2.3 percent medical device excise tax on the vast majority of our U.S sales.

A two-year moratorium was placed on the tax effective January 1, 2016, and that moratorium was extended for an additional two years effective January 1, 2018.

Absent further legislative action, the tax will be automatically reinstated for U.S. medical device sales beginning January 1, 2020.

If the medical device excise tax is reinstated, we will again be forced to identify ways to reduce spending in other areas to offset the earnings impact due to the tax.

We do not expect to be able to pass along the cost of the tax to hospitals, which continue to face cuts to their Medicare reimbursement under the Affordable Care Act and other legislation.

Nor do we expect to be able to offset the cost of the tax through higher sales volumes resulting from any further expansion of health insurance coverage through ACA exchanges or Medicaid expansion because of the demographics of the current uninsured population.

Accordingly, reinstatement of the medical device excise tax could have a material adverse effect on our business, results of operations and cash flows.

As discussed further in Note 19 to our consolidated financial statements, in 2015 we paid a compensatory damages award of approximately $90 million and in December 2018 we accrued an estimated loss of approximately $168 million related to an award of treble damages and attorneys’ fees in a patent infringement lawsuit.

In March 2017, the UK formally notified the EU of its intention to withdraw, which commenced a period of up to two years for negotiating the UK’s withdrawal terms.

The UK and the EU have been negotiating the terms of the UK’s exit from the EU, which is scheduled for March 29, 2019.

Although the UK and the EU agreed upon a draft withdrawal agreement in November 2018, the UK Parliament rejected the withdrawal agreement in January 2019, creating significant uncertainty as to the terms under which the UK will leave the EU.

If the UK leaves the EU with no agreement, it will likely have an adverse impact on labor and trade and will create further short-term currency volatility.

The future relationship for medical device products regulation and trade between the UK and the EU is currently uncertain and any adjustments we make to our business and operations as a result of Brexit could result in significant expense and take significant time to complete.

Any of the potential negative effects of Brexit could adversely affect our business, results of operations and financial condition.

operations may be impacted by a number of factors.

We may experience a disruption of our business activities due to the transition to a new Chief Executive Officer.

Effective as of December 19, 2017, our Board of Directors appointed Bryan C.

Hanson as President and Chief Executive Officer and a member of the Board of Directors.

Recently hired executives may view the business differently than prior members of management, and over time may make changes to our strategic focus, operations, business plans, existing personnel and their responsibilities.

We can give no assurances that we will be able to properly manage any such shift in focus, or that any changes to our business would ultimately prove successful.

In addition, leadership transitions and management changes can be inherently difficult to manage and may cause uncertainty or a disruption to our business or may increase the likelihood of turnover in key officers and employees.

Our success depends in part on having a successful leadership team.

If we cannot effectively manage leadership transitions and management changes, it could make it more difficult to successfully operate our business and pursue our business goals.

We can give no assurances that we will be able to retain the services of any of our current executives or other key employees.

If we do not succeed in attracting well-qualified employees, retaining and motivating existing employees or integrating new executives and employees, our business could be materially and adversely affected.

We incurred substantial additional indebtedness in connection with the Biomet merger in 2015 and the LDR Holding Corporation (“LDR”) merger in 2016.

We funded the cash portion of the Biomet merger consideration, the pay-off of certain indebtedness of Biomet and the payment of transaction-related expenses through a combination of available cash-on-hand and proceeds from debt financings, including proceeds from a $7.65 billion issuance of senior unsecured notes in March 2015 and borrowings of $3.0 billion under a five-year term loan (“U.S. Term Loan A”) in June 2015.

In addition, in September 2016, we borrowed $750 million under a three-year unsecured term loan facility and utilized these funds to repay outstanding borrowings under our revolving facility incurred in connection with the acquisition of LDR.

Also, in December 2016, we issued €1.0 billion aggregate principal amount of Euro-denominated senior notes and used the proceeds to repay a portion of the U.S. dollar-denominated senior notes issued in connection with the Biomet merger.

Further, in September 2017, we borrowed 21.3 billion Japanese Yen under a five-year term loan and utilized these funds to pay down a portion of U.S. Term Loan A.

International data protection laws, including the EU Data Protection Directive and member state implementing legislation, may also apply to some of our operations and restrict our ability to collect, analyze and transfer EU personal data.

Moreover, the General Data Protection Regulation, an EU-wide regulation that will be fully enforceable by May 25, 2018, will introduce new data protection requirements in the EU and substantial fines for violations of the data protection rules.

and potential customers because of the agents’ detailed knowledge of products and instruments.

effective treatment methods, as determined by the third-party payor, or was used for an unapproved indication.

| | • | unexpected changes in foreign regulatory requirements; |

future cash flow estimates for one or more of our businesses decline, we could be required to record additional goodwill impairment charges.

We identified a material weakness in our internal control over financial reporting as of December 31, 2016.

While the particular material weakness has been remediated as of December 31, 2017, additional material weaknesses or relapses of this material weakness could result in a material misstatement in our financial statements.

We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

As discussed in Part II, Item 9A of this report, we identified a material weakness in our internal control over financial reporting as of December 31, 2016 related to management’s controls over accounting for income taxes.

A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

During 2017, we executed our remediation plans to address the material weakness.

However, if the remedial measures are not adhered to or if additional material weaknesses or significant deficiencies in internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results.

The effects of Brexit are expected to be far-reaching.

Brexit could also lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate.

Certain amounts in the [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] consolidated financial statements have been reclassified to conform to the [removed: 2017] [added: 2018] presentation.

Our net earnings [removed: increased] [added: (loss) decreased] significantly in [removed: 2017] [added: 2018] compared to [removed: 2016] [added: 2017] primarily due to [added: $979.7 million of goodwill and intangible asset impairments and $186.0 million of litigation-related charges in 2018 compared to] a $1,272.4 million income tax benefit [removed: we recorded] [added: recognized in 2017] related to the [added: Tax Cuts and Jobs Act of] 2017 [added: (“2017] Tax [removed: Act.][added: Act”).]

[added: |] U.S. [removed: Tax Reform][added: tax reform (11) | | | 8.3 | | | | (1,272.4 | ) | | | \- | |]

| | | [removed: 2016] [added: 2018] | | | | [removed: 2015] [added: 2017] | | | | % [removed: Inc] [added: Inc/(Dec)] | | | | Mix | | | | Price | | | | Exchange | | | |

| | | Year Ended December 31, | | | | | | | | | | | | [added: Year Ended December 31,] | | | | | | | | | | | | [added: Year Ended December 31,] | | | [added: | | | | | | | | |]

| Spine & CMF | | | [removed: 759.5] [added: 757.9] | | | | [removed: 662.0] [added: 660.7] | | | | 14.7 | | | | 15.8 | | | | (1.4 | ) | | | 0.3 | | |

| | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2017] [added: 2018] vs. [removed: 2016] [added: 2017] % Inc/(Dec) | | | | [removed: 2016] [added: 2017] vs. [removed: 2015] [added: 2016] % [removed: Inc] [added: Inc/(Dec)] | | | |

| | | Year [removed: Ended] [added: ended] December 31, [removed: | | | | | | | | | | | | | | | |] [added: 2018] | | |

| | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: Pro Forma 2015] [added: 2016] | | | | [removed: 2017] [added: 2018] vs. [removed: 2016 %] [added: 2017] Inc/(Dec) | | | | [removed: 2016] [added: 2017] vs. [removed: 2015 %] [added: 2016] Inc/(Dec) | | | [added: |]

| Knees | | [removed: | | | | | |] [added: $] | [added: 7.9] | | | [added: 2] | [added: %] | | [added: 35] | | [added: %] | | [added: 1] | |

| Hips | | | [removed: | | | | | |] [added: 6.1] | | | [added: 2] | | | [added: 31] | | | | [added: 1] | |

Increased volume and changes in the mix of product sales contributed [removed: 4.3] [added: 3.2] percentage points of year-over-year sales growth during [removed: 2017.][added: 2018.]

Volume/mix growth was driven by [removed: acquisitions in 2016,] recent product introductions, sales in key emerging markets and an aging population.

Global selling prices had a negative effect of [removed: 2.5] [added: 2.4] percentage points on year-over-year sales during [removed: 2017.][added: 2018.]

In [removed: 2017,] [added: 2018,] changes in foreign currency exchange rates had a [removed: minimal] [added: positive] effect [added: of 0.9 percent] on sales.

We address currency risk through regular operating and financing activities and through the use of forward contracts [removed: and foreign currency options] solely to manage foreign currency volatility and risk.

Changes in foreign currency exchange rates affect sales growth, but due to offsetting gains/losses on hedge [removed: contracts and options,] [added: contracts,] which are recorded in cost of products sold, the effect on net earnings in the near term is reduced.

Knee sales volume/mix growth was led by [removed: Persona®] [added: Persona] The Personalized Knee System and the [removed: Oxford®] [added: Oxford] Partial Knee.

[removed: Hips] [added: Hip] sales continued to experience year-over-year sales growth driven [added: primarily] by volume/mix [removed: growth primarily resulting] [added: growth, which principally resulted] from strong performance in our Asia Pacific [added: and Americas] operating [removed: segment.][added: segments.]

Hip sales volume/mix growth was led by our [removed: Taperloc®] [added: Taperloc] Hip System, [removed: Arcos®] [added: Arcos] Modular Hip System and [removed: G7®] [added: G7] Acetabular System.

Dental sales continued to [removed: decline.][added: decline in 2018.]

The following table presents estimated* [removed: 2017] [added: 2018] global market size and market share information (dollars in billions):

| Spine & CMF | | | [removed: 10.1] [added: 10.5] | | | [removed: 1] [added: 2] | | | [removed: 8] [added: 7] | | | | 5 | |

| Cost of products sold, excluding intangible asset amortization | | | [removed: 27.3] [added: 28.6] | % | | | [removed: 31.0] [added: 27.3] | % | | | [removed: 30.0] [added: 31.1] | % | | | [removed: (3.7] [added: 1.3] | [removed: )] | % | | [removed: 1.0] [added: (3.8] | [added: )] | % |

| Intangible asset amortization | | | [removed: 7.7] [added: 7.5] | | | | [removed: 7.4] [added: 7.7] | | | | [removed: 5.6] [added: 7.4] | | | | [removed: 0.3] [added: (0.2] | [added: )] | | | [removed: 1.8] [added: 0.3] | | |

| Research and development | | | [removed: 4.7] [added: 4.9] | | | | [removed: 4.8] [added: 4.7] | | | | [removed: 4.5] [added: 4.8] | | | | [removed: (0.1] [added: 0.2] | [removed: )] | | | [removed: 0.3] [added: (0.1] | [added: )] | |

| Operating Profit | | | [removed: 10.3] [added: 0.4] | | | | [removed: 10.7] [added: 10.2] | | | | [removed: 7.8] [added: 10.7] | | | | [removed: (0.4] [added: (9.8] | ) | | | [removed: 2.9] [added: (0.5] | [added: )] | |

The following table sets forth the factors that contributed to the gross margin changes in each of [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] compared to the prior year:

| | | [added: 2018 | | | |] 2017 | | | | 2016 | | |

| Prior year gross margin | | | [removed: 61.6] [added: 64.9] | % | | | [removed: 64.4] [added: 61.5] | % |

| Average cost per unit | | | [removed: (0.1] [added: 0.8] | [removed: )] | | | [removed: (0.7] [added: (0.1] | ) |

| Excess and obsolete inventory | | | [removed: \-] [added: (1.0] | [added: )] | | | [removed: 0.4] [added: \-] | |

| Discontinued products inventory charges | | | [removed: 1.0] [added: (0.1] | [added: )] | | | [removed: (1.0] [added: 1.0] | [removed: )] |

| Foreign currency hedges | | | [removed: (1.1] [added: (0.4] | ) | | | [removed: (0.9] [added: (1.1] | ) |

| Inventory step-up | | | [removed: 3.8] [added: 0.4] | | | | [removed: 1.2] [added: 3.8] | |

| U.S. medical device excise tax | | | [removed: 0.7] [added: (0.3] | [added: )] | | | [removed: 0.3] [added: 0.7] | |

| Intangible asset amortization | | | [removed: (0.3] [added: 0.2] | [removed: )] | | | [removed: (1.6] [added: (0.3] | ) |

| Current year gross margin | | | [removed: 65.0] [added: 63.9] | % | | | [removed: 61.6] [added: 64.9] | % |

In January 2018, the moratorium on this tax [added: was extended through December 31, 2019.]

The decrease in gross margin percentage in [removed: 2016] [added: 2018] compared to [removed: 2015] [added: 2017] was primarily due to [removed: increased intangible asset amortization from the 2016 acquisitions,] [added: higher] excess and obsolete inventory [removed: charges for certain product lines we intend to discontinue,] [added: charges,] lower average selling prices and [removed: lower hedge gains from] [added: the effect of] our [removed: foreign currency] hedging [removed: program in 2016 compared to 2015.][added: program.]

2018 Results

After evaluating the state of our business, our CEO expects it will be a two-year (consisting of 2018 and 2019) effort to get the Company operating at market level or above in terms of sales growth rates.

One of his first priorities was to improve our supply chain.

Starting in 2016 and continuing into 2017, production delays at our Warsaw North Campus facility directly impacted our ability to fully meet demand in our Knees, Hips and S.E.T. product categories.

We successfully reduced backorders and increased safety stock levels in 2018 and no longer consider supply to be a barrier to delivering our financial commitments.

This resulted in improved sales growth in 2018 in our largest product categories of Knees and Hips.

Knees and Hips sales growth in 2018 was 1.5 percent and 2.6 percent, respectively, compared to a sales decline in Knees of 0.6 percent and sales growth of 0.5 percent in Hips in 2017.

Additionally, this sales growth improved in the second half of 2018 compared to the first half of 2018.

Overall, net sales increased by 1.7 percent in 2018 compared to 2017, primarily due to the improved product supply and completion of key research and development (“R&D”) projects in our Knees product category.

Net earnings (loss) also decreased in 2018 due to increased excess and obsolescence charges and continued investments in R&D and selling, general and administrative (“SG&A”).

2019 Outlook

2019 will mark the second year of our two-year turnaround effort.

In late 2018 and early 2019, we had various product launches in our Knees product category, which we anticipate will drive improving commercial momentum, especially in the second half of 2019.

We estimate the change in sales in 2019 compared to 2018 will be in a range of negative 0.5 percent to positive 0.5 percent.

This range includes estimated negative effects of changes in foreign currency exchange rates of 1.0 percent to 1.5 percent.

We anticipate that most of the negative effects of foreign currency exchange rates will occur in the first half of the year.

Assuming we have no significant goodwill and intangible asset impairments or litigation charges in 2019, we expect our net earnings to increase significantly compared to the net loss recognized in 2018.

We expect our costs of products sold will continue to reflect costs associated with our quality remediation efforts.

We anticipate continuing to make investments in operating expenses to support our new product launches.

However, we expect expenses related to our acquisition and integration activities and quality remediation will decline as we complete these projects during 2019.

We believe that our interest expense, net, will continue to decline throughout the year due to lower anticipated debt levels.

| Americas | | $ | 4,837.2 | | | $ | 4,844.8 | | | | (0.2 | ) | % | | 2.3 | | % | | (2.4 | ) | % | | (0.1 | ) | % |

| EMEA | | | 1,801.9 | | | | 1,745.2 | | | | 3.2 | | | | 1.7 | | | | (1.6 | ) | | | 3.1 | | |

| Asia Pacific | | | 1,293.8 | | | | 1,213.3 | | | | 6.6 | | | | 9.2 | | | | (3.5 | ) | | | 0.9 | | |

| Total | | $ | 7,932.9 | | | $ | 7,803.3 | | | | 1.7 | | | | 3.2 | | | | (2.4 | ) | | | 0.9 | | |

| Americas | | $ | 4,844.8 | | | $ | 4,786.7 | | | | 1.2 | | % | | 3.7 | | % | | (2.6 | ) | % | | 0.1 | | % |

| Total | | $ | 7,803.3 | | | $ | 7,668.4 | | | | 1.8 | | | | 4.2 | | | | (2.5 | ) | | | 0.1 | | |

| | | 2018 | | | | 2017 | | | | % Inc/(Dec) | | | | Mix | | | | Price | | | | Exchange | | | |

| Knees | | $ | 2,773.7 | | | $ | 2,734.0 | | | | 1.5 | | % | | 3.6 | | % | | (2.9 | ) | % | | 0.8 | | % |

| Hips | | | 1,921.4 | | | | 1,871.8 | | | | 2.6 | | | | 4.3 | | | | (2.8 | ) | | | 1.1 | | |

| S.E.T. | | | 1,751.8 | | | | 1,701.8 | | | | 2.9 | | | | 3.9 | | | | (1.8 | ) | | | 0.8 | | |

| Dental | | | 411.2 | | | | 418.6 | | | | (1.8 | ) | | | (1.7 | ) | | | (1.5 | ) | | | 1.4 | | |

| Spine & CMF | | | 763.9 | | | | 757.9 | | | | 0.8 | | | | 2.1 | | | | (1.7 | ) | | | 0.4 | | |

| Other | | | 310.9 | | | | 319.2 | | | | (2.6 | ) | | | (1.7 | ) | | | (1.5 | ) | | | 0.6 | | |

| Total | | $ | 7,932.9 | | | $ | 7,803.3 | | | | 1.7 | | | | 3.2 | | | | (2.4 | ) | | | 0.9 | | |

| Knees | | $ | 2,734.0 | | | $ | 2,751.2 | | | | (0.6 | ) | % | | 2.1 | | % | | (2.8 | ) | % | | 0.1 | | % |

| Hips | | | 1,871.8 | | | | 1,861.8 | | | | 0.5 | | | | 3.5 | | | | (3.0 | ) | | | \- | | |

| S.E.T. | | | 1,701.8 | | | | 1,639.1 | | | | 3.8 | | | | 5.9 | | | | (2.0 | ) | | | (0.1 | ) | |

| Other | | | 319.2 | | | | 327.7 | | | | (2.6 | ) | | | (0.9 | ) | | | (1.8 | ) | | | 0.1 | | |

| Total | | $ | 7,803.3 | | | $ | 7,668.4 | | | | 1.8 | | | | 4.2 | | | | (2.5 | ) | | | 0.1 | | |

On June 24, 2015, we completed our merger with Biomet and its results of operations have been included in our results starting on that date.

The Biomet merger was a transformational event for us and has had significant effects on all aspects of our business.

Accordingly, our sales and expenses have increased significantly since the merger date compared to prior periods.

2017 Results

Net sales increased by 1.8 percent in 2017 compared to 2016 primarily due to the acquisition of LDR Holding Corporation in the third quarter of 2016 and solid performance from our Asia Pacific operating segment.

In 2017, we experienced challenges across our Knees, Hips and S.E.T. product categories as a result of production delays from our Warsaw North Campus facility.

The production shortfall directly impacted our ability to fully meet case demand.

Throughout 2017, we worked to improve our production levels at this facility, but we continued to experience insufficient inventory levels across some brands within our Knee, Hip and S.E.T. product categories which impacted our ability to increase revenue.

Additionally, net earnings increased in 2017 compared to 2016 due to a decrease in inventory step-up expense, lower Biomet integration-related expenses, lower performance-based compensation expense as a result of not achieving our 2017 operating plans and the recognition of $111.3 million of tax benefit as a result of lower tax rates unrelated to the impact of the 2017 Tax Act.

Partially offsetting these favorable items were $304.7 million of goodwill impairment charges on our Spine and Office Based Technologies reporting units and higher spending on quality remediation at our Warsaw North Campus facility.

2018 Outlook

Our new CEO has begun an in-depth review of our business and formulating strategies to improve our performance.

His initial review likely will conclude during the first quarter and the implementation of those strategies will likely have an impact on our results in 2018.

In the meantime, we have identified several immediate opportunities to improve our operational execution and address certain near-term challenges.

We will continue to work toward completing our quality remediation efforts at our Warsaw North Campus facility and continue to invest in best-in-class quality management systems.

We will remain focused on fully restoring the supply of certain key brands within our Knee, Hip and S.E.T. product categories.

We also have several key product launches planned in 2018 that we believe will be a catalyst for our future performance.

There are a few known items that are expected to impact our 2018 results.

Increased manufacturing costs related to quality remediation at our Warsaw North Campus facility in 2017 will be recognized in 2018 as we sell that inventory.

We expect ongoing benefits from the reduction of the U.S. corporate tax rate, but we plan to reinvest those savings into the business to drive sales growth.

Additionally, due to underperformance against our operating plans in 2017, we expect expenses from our performance-based compensation programs to increase if we are able to achieve our plans in 2018.

We also expect our special items expense to decrease as we complete our Biomet integration plans and substantially complete our quality remediation at our Warsaw North Campus facility.

2017 Tax Act: The 2017 Tax Act includes a broad range of provisions, many of which significantly differ from those contained in previous U.S. tax law.

Changes in tax law are accounted for in the period of enactment.

As such, our 2017 consolidated financial statements reflect the immediate tax effect of the 2017 Tax Act.

The 2017 Tax Act contains several key provisions including, among other things:

| | |

| • | a one-time tax on the mandatory deemed repatriation of post-1986 unremitted foreign earnings and profits, referred to as the toll charge; |

| • | a reduction in the corporate income tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017; |

| • | the introduction of a new U.S. tax on certain off-shore earnings referred to as global intangible low-taxed income (“GILTI”) at an effective tax rate of 10.5 percent for tax years beginning after December 31, 2017 (increasing to 13.125 percent for tax years beginning after December 31, 2025), with a partial offset by foreign tax credits; and |

| • | the introduction of a territorial tax system beginning in 2018 by providing a 100 percent dividend received deduction on certain qualified dividends from foreign subsidiaries. |

During the fourth quarter of 2017, we recorded an income tax benefit of $1,272.4 million, which was comprised of the following:

| • | income tax benefit of $715.0 million related to the one-time deemed repatriation of foreign earnings. This is composed of a $1,181.0 million benefit from the removal of a deferred tax liability we had recorded for the repatriation of foreign earnings prior to the 2017 Tax Act offset by $466.0 million for the toll charge recognized under the 2017 Tax Act. In accordance with the 2017 Tax Act, we expect to elect to pay the toll charge in installments over eight years. As of December 31, 2017, we have recorded current and non-current income tax liabilities related to the toll charge of $82.0 million and $384.0 million, respectively. |

| • | an income tax benefit of $557.4 million, primarily related to the remeasurement of our deferred tax assets and liabilities at the enacted corporate income tax rate of 21 percent. |

The net benefit recorded was based on currently available information and interpretations made in applying the provisions of the 2017 Tax Act as of the time of filing this Annual Report on Form 10-K.

We further refined our estimates related to the impact of the 2017 Tax Act subsequent to the issuance of our earnings release for the fourth quarter of 2017.

In accordance with authoritative guidance issued by the SEC, the income tax effect for certain aspects of the 2017 Tax Act represent provisional amounts for which our accounting is incomplete, but with respect to which a reasonable estimate could be determined and recorded during the fourth quarter of 2017.

The actual effects of the 2017 Tax Act and final amounts recorded may differ materially from our current estimate of provisional amounts due to, among other things, further interpretive guidance that may be issued by U.S. tax authorities or regulatory bodies, including the SEC and the Financial Accounting Standards Board (“FASB”).

We will continue to analyze the 2017 Tax Act and any additional guidance that may be issued so we can finalize the full effects of applying the new legislation on our financial statements in the measurement period, which ends in the fourth quarter of 2018.

See Note 15 to our consolidated financial statements for additional details related to the 2017 Tax Act.

To reduce the uncertainty of foreign currency exchange rate movements on transactions denominated in foreign currencies, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts [removed: and options] with major financial institutions.

These forward contracts [removed: and options] are designed to hedge anticipated foreign currency transactions, primarily intercompany sale and purchase transactions, for periods consistent with commitments.

Realized and unrealized gains and losses on these contracts [removed: and options] that qualify as cash flow hedges are temporarily recorded in [added: accumulated] other comprehensive income, then recognized in cost of products sold when the hedged item affects net earnings.

For contracts outstanding at December 31, [removed: 2017,] [added: 2018,] 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 purchase Swiss Francs and sell U.S. Dollars at set maturity dates ranging from January [removed: 2018] [added: 2019] through June [removed: 2020.][added: 2021.]

The notional amounts of outstanding forward contracts entered into with third parties to purchase U.S. Dollars at December 31, [removed: 2017] [added: 2018] were [removed: $1,735.9] [added: $1,547.7] million.

The notional amounts of outstanding forward contracts entered into with third parties to purchase Swiss Francs at December 31, [removed: 2017] [added: 2018] were [removed: $291.3] [added: $267.6] million.

[added: The weighted average contract rates outstanding at December 31, 2018 were Euro:USD 1.23, USD:Swiss] Franc [removed: 0.94,] [added: 0.93,] USD:Japanese Yen [removed: 106.74,] [added: 105.55,] British Pound:USD [removed: 1.39,] [added: 1.35,] USD:Canadian Dollar [removed: 1.30,] [added: 1.28,] Australian Dollar:USD [removed: 0.75,] [added: 0.76,] USD:Korean Won [removed: 1,137,] [added: 1,096,] USD:Swedish Krona [removed: 8.36,] [added: 8.26,] USD:Czech Koruna [removed: 23.01,] [added: 21.61,] USD:Thai Baht [removed: 34.82,] [added: 33.21,] USD:Taiwan Dollar [removed: 30.86,] [added: 29.36,] USD:South African Rand [removed: 14.26,] [added: 13.82,] USD:Russian Ruble [removed: 63.05,] [added: 64.53,] USD:Indian Ruppee [removed: 69.12,] [added: 71.64,] USD:Turkish Lira [removed: 3.96,] [added: 5.11,] USD:Polish Zloty [removed: 3.80,] [added: 3.64,] USD:Danish Krone [removed: 6.42,] [added: 6.09,] and USD:Norwegian Krone [removed: 8.19.][added: 7.99.]

On this basis, with respect to cash flow hedges, changes in cash flows attributable to hedged transactions are generally expected to be [removed: completely] offset by changes in the fair value of hedge instruments.

A sensitivity analysis of changes in the fair value of foreign currency exchange forward contracts outstanding at December 31, [removed: 2017] [added: 2018] indicated that, if the U.S. Dollar uniformly changed in value by 10 percent relative to the various currencies, with no change in the interest [removed: differentials, the fair value of those contracts would increase or decrease earnings before income taxes in periods through June 2020, depending on the direction of the change, by the following average approximate amounts (in millions):]

| Swiss Franc | | | [removed: 29.8] [added: 7.8] | |

| Japanese Yen | | | [removed: 47.7] [added: 3.9] | |

| British Pound | | | [removed: 4.7] [added: 1.5] | |

| Canadian Dollar | | | [removed: 16.3] [added: 7.1] | |

| Australian Dollar | | | [removed: 19.3] [added: 10.8] | |

| Korean Won | | | [removed: 3.2] [added: 0.2] | |

| Swedish Krona | | | [removed: 2.4] [added: 0.9] | |

| Czech Koruna | | | [removed: 1.5] [added: 0.4] | |

| Thai Baht | | | [removed: 0.8] [added: 0.2] | |

| Taiwan Dollars | | | [removed: 3.8] [added: 0.7] | |

| South African Rand | | | [removed: 0.9] [added: 0.7] | |

| Russian Rubles | | | [removed: 1.6] [added: 1.7] | |

| Indian Rupees | | | [removed: 1.3] [added: \-] | |

| Turkish Lira | | | [removed: 0.1] [added: \-] | |

| Polish Zloty | | | [removed: 2.9] [added: 0.7] | |

| Danish Krone | | | [removed: 3.9] [added: 1.2] | |

| Norwegian Krone | | | [removed: 2.0] [added: 1.2] | |

We had net assets, excluding [removed: goodwill,] [added: goodwill and intangible assets,] in legal entities with non-U.S. Dollar functional currencies of [removed: $2,839.5] [added: $1,138.5] million at December 31, [removed: 2017,] [added: 2018,] primarily in Euros, Japanese Yen and Australian Dollars.

Based upon our overall interest rate exposure as of December 31, [removed: 2017,] [added: 2018,] a change of 10 percent in interest rates, assuming the principal amount outstanding remains constant, would not have a material effect on [removed: net] interest [removed: expense.][added: expense, net.]

Financial instruments, which potentially subject us to concentrations of credit risk, are primarily cash and cash equivalents, derivative [removed: instruments, counterparty transactions] [added: instruments] and accounts receivable.

We place our [removed: investments in] [added: cash and cash equivalents and enter into derivative transactions with] highly-rated financial institutions [removed: or highly-rated debt securities] and limit the amount of credit exposure to any one entity.

We believe we do not have any significant credit risk on our cash and cash [removed: equivalents.][added: equivalents or derivative instruments.]

differentials, the fair value of those contracts would increase or decrease earnings before income taxes in periods through June 2021, depending on the direction of the change, by the following average approximate amounts (in millions):

| Euro | | $ | 22.3 | |

The majority of our debt is fixed-rate debt and therefore is not exposed to changes in interest rates.

The weighted average contract rates outstanding at December 31, 2017 were Euro:USD 1.17, USD:Swiss

| Euro | | $ | 59.5 | |

For details about these and other financial instruments, including fair value methodologies, see Note 13 to our consolidated financial statements.

We are exposed to interest rate risk on our debt obligations and our cash and cash equivalents.

We have multiple variable-to-fixed interest rate swap agreements that we have designated as cash flow hedges of the variable interest rate obligations on our U.S. Term Loan B.

The total notional amount is $375.0 million.

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 outstanding interest rate swap agreements is approximately 0.82 percent through September 30, 2019.

The interest rate swap agreements are intended to manage our exposure to interest rate movements by converting variable-rate debt into fixed-rate debt.

The objective of the instruments is to limit exposure to interest rate movements.

We are exposed to credit loss if the financial institutions or counterparties issuing the debt security fail to perform.

However, this loss is limited to the amounts, if any, by which the obligations of the counterparty to the financial instrument contract exceed our obligation.

We also minimize exposure to credit risk by dealing with a diversified group of major financial institutions.

We manage credit risk by monitoring the financial condition of our counterparties using standard credit guidelines.

We do not anticipate any nonperformance by any of the counterparties.

We design, manufacture and market [removed: orthopaedic] [added: orthopedic] reconstructive products; sports medicine, biologics, extremities and trauma products; office based technologies; spine, craniomaxillofacial and thoracic products; dental implants; and related surgical products.

In connection with the merger, we changed our name from Zimmer Holdings, Inc. to Zimmer Biomet Holdings, Inc. [removed: “Zimmer” used alone refers to the business or information of us and our subsidiaries on a stand-alone basis without inclusion of the business or information of LVB or any of its subsidiaries.]

Our primary customers include [removed: orthopaedic] [added: orthopedic] surgeons, neurosurgeons, oral surgeons, and other specialists, dentists, hospitals, stocking distributors, healthcare dealers and, in their capacity as agents, healthcare purchasing organizations or buying groups.

With sales to stocking distributors, [added: some] healthcare dealers, dental practices and dental laboratories, title to product passes upon [removed: shipment or upon implantation of the product.][added: shipment.]

[removed: Direct channel accounts] [added: Consignment sales] represented approximately [removed: 75] [added: 80] percent of our net sales in [removed: 2017.][added: 2018.]

No individual direct channel account, stocking distributor, healthcare dealer, dental practice or dental laboratory accounted for more than 1 percent of our net sales for [removed: 2017.][added: 2018.]

Additionally, we keep current with key surgical developments and other issues related to [removed: orthopaedic] [added: orthopedic] surgeons, neurosurgeons, other specialists, dentists and oral surgeons and the medical [added: and dental] procedures they perform.

See Note 17 to [removed: the] [added: our] consolidated financial statements for more information regarding our segments.

Japan is the largest market within this segment, accounting for [removed: 45] [added: 46] percent of the region’s sales.

In Japan and most countries in the Asia Pacific region, we maintain a network of dealers, who act as order agents on behalf of hospitals in the region, and sales associates, who build and maintain relationships with [removed: orthopaedic] [added: orthopedic] surgeons and neurosurgeons in their markets.

However, [removed: the] [added: our] Spine business maintains a separate sales force of employees and independent sales agents.

Our products include [removed: orthopaedic] [added: orthopedic] reconstructive products; sports medicine, biologics, extremities and trauma products; office based technologies; spine and CMF products; dental implants; and related surgical products.

| | • | Vanguard® Knee [removed: System] |

Our dental products division manufactures and/or distributes: 1) dental reconstructive implants – for individuals who are totally without teeth or are missing one or more teeth; 2) dental prosthetic products – aimed at providing a more [added: natural restoration to resemble the original teeth; and 3) dental regenerative products – for soft tissue and bone rehabilitation.]

We are broadening our offerings in [removed: each] [added: certain] of our product categories and exploring new technologies with possible applications in multiple areas.

As of December 31, [removed: 2017,] [added: 2018,] we employed approximately [removed: 1,900] [added: 2,000] research and development employees worldwide.

For information regarding certain warning letters and FDA Form 483 inspectional observations that we are addressing, see Note 19 to [removed: the] [added: our] consolidated financial statements.

[added: Violations of these laws are] punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, within the U.S., exclusion from participation in government healthcare programs, including Medicare, Medicaid and Veterans Administration health programs.

For information regarding the DPA, see Note 19 to [removed: the] [added: our] consolidated financial statements.

[removed: Certain] [added: In addition, certain] of our affiliates are subject to privacy and security regulations promulgated under the Health Insurance Portability and Accountability Act of 1996 and the Health Information Technology for Economic and Clinical Health Act (collectively, “HIPAA”).

The FDA [removed: also] has issued guidance to which we may be subject concerning data security for medical devices.

[removed: International] [added: Outside of the U.S.,] data protection laws, including the EU [added: General] Data Protection [removed: Directive] [added: Regulation] and member state implementing legislation, [removed: may] also apply to some of our [removed: operations.][added: operations in the countries in which we provide services to our customers.]

The [removed: orthopaedics] [added: orthopedics] and broader musculoskeletal care industry is highly competitive.

We own or control through licensing arrangements over [removed: 8,000] [added: 8,500] issued patents and patent applications throughout the world that relate to aspects of the technology incorporated in many of our products.

As of December 31, [removed: 2017,] [added: 2018,] we employed approximately [removed: 18,200] [added: 19,000] employees worldwide, including approximately [removed: 1,900] [added: 2,000] employees dedicated to research and development.

Approximately [removed: 8,500] [added: 9,000] employees are located within the U.S. and approximately [removed: 9,700] [added: 10,000] employees are located outside of the U.S., primarily throughout Europe and in Japan.

We have approximately [removed: 7,900] [added: 8,500] employees dedicated to manufacturing our products worldwide.

The Warsaw, Indiana production facilities employ approximately [removed: 2,700] [added: 3,000] employees in the aggregate.

The following table sets forth certain information with respect to our executive officers as of February [removed: 19, 2018.][added: 25, 2019.]

| Bryan C. Hanson | | [removed: 51] [added: 52] | | President and Chief Executive Officer |

| Aure Bruneau | | [removed: 43] [added: 44] | | Group President, Spine, CMF, Thoracic and Surgery Assisting Technology |

| Daniel P. Florin | | [removed: 53] [added: 54] | | Executive Vice President and Chief Financial Officer |

| [removed: Katarzyna Mazur-Hofsaess, M.D., Ph.D.] [added: Didier Deltort] | | [removed: 54] [added: 52] | | President, Europe, Middle East and Africa |

| Chad F. Phipps | | [removed: 46] [added: 47] | | Senior Vice President, General Counsel and Secretary |

| Sang Yi | | [removed: 55] [added: 56] | | President, Asia Pacific |

[removed: Dr. Mazur-Hofsaess] [added: Mr. Deltort] was appointed President, Europe, Middle East and Africa [removed: (EMEA)] in [removed: April 2013.][added: August 2018.]

[removed: She] [added: He] is responsible for the [removed: sales, marketing] [added: marketing, sales] and distribution of [removed: products] [added: products, services and solutions] in the [removed: EMEA region.][added: European, Middle Eastern and African (EMEA) regions.]

Mr. [removed: Nolan] [added: Yi] was appointed [removed: Group President effective] [added: President, Asia Pacific in] June 2015.

[added: Mr. Phipps] also oversees the Company’s Government [removed: Affairs, Corporate Communication and Public Relations] [added: Affairs] activities.

| | • | Intellicart® System |

HIPAA governs the use, disclosure, and security of protected health information by HIPAA “covered entities” and their “business associates.” Covered entities are health care providers that engage in specific types of electronic transactions, health plans, and health care clearinghouses.

A business associate is any person or entity (other than members of a covered entity’s workforce) that performs a service on behalf of a covered entity involving the use or disclosure of protected health information.

The U.S. Department of Health and Human Services (“HHS”) (through the Office for Civil Rights) has direct enforcement authority against covered entities and business associates with regard to compliance with HIPAA regulations.

On December 12, 2018, the Office for Civil Rights of HHS issued a request for information seeking input from the public on how the HIPAA regulations could be modified to amend existing obligations relating to the processing of protected health information.

We will monitor this process and assess the impact of changes to the HIPAA regulations to our business.

In addition to the FDA guidance and HIPAA regulations described above, a number of U.S. states have also enacted data privacy and security laws and regulations that govern the confidentiality, security, use and disclosure of sensitive personal information, such as social security numbers, medical and financial information and other personal information.

These laws and regulations may be more restrictive and not preempted by U.S. federal laws.

These state laws include the California Consumer Privacy Act (“CCPA”), which was signed into law on June 28, 2018 and largely takes effect January 1, 2020.

The CCPA, among other things, contains new disclosure obligations for businesses that collect personal information about California residents and affords those individuals new rights relating to their personal information that may affect our ability to use personal information.

We will continue to monitor and assess the impact of the CCPA, which has substantial penalties for non-compliance and carries significant potential liability, on our business.

Legal requirements in these countries relating to the collection, storage, processing and transfer of personal data continue to evolve.

The EU General Data Protection Regulation, which became effective on May 25, 2018 (the “GDPR”), imposes, among other things, data protection requirements that include strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data, a requirement for prompt notice of data breaches to data subjects and supervisory authorities in certain circumstances, and possible substantial fines for any violations (including possible fines for certain violations of up to 4% of total company revenue).

| Ivan Tornos | | 43 | | Group President, Orthopedics |

Prior to joining Zimmer Biomet, Mr. Deltort served as Senior Vice President and General Manager, Global Healthcare Solutions and Partnerships of Boston Scientific Corporation, based in France from May 2016 until August 2018.

Before joining Boston Scientific Corporation, he spent 14 years with GE Healthcare in positions of increasing responsibility in Germany, Finland, Dubai and the United States, most recently serving as Global Senior Vice President and General Manager of the global Monitoring Solutions business as well as Managing Director of GE Healthcare Finland.

Prior to GE, Mr. Deltort served at Philips, Hewlett-Packard and Marquette Electronics in various international healthcare executive roles.

From August 1986 until October 1990, Mr. Florin worked in the Audit Practice of Deloitte Haskins & Sells.

Mr. Tornos was appointed Group President, Orthopedics in November 2018.

Prior to joining Zimmer Biomet, Mr. Tornos served as Worldwide President of the Global Urology, Medical and Critical Care Divisions of Becton, Dickinson and Company (“BD”) (and previously, C. R. Bard, Inc. (“Bard”)) from June 2017 until October 2018.

From June 2017 until BD’s acquisition of Bard in December 2017, Mr. Tornos also continued to serve as President, Europe, Middle East and Africa (“EMEA”) of Bard, a position to which he was appointed in September 2013.

Mr. Tornos joined Bard in August 2011 and, prior to his appointment as President, EMEA, served as Vice President and General Manager with leadership responsibility for Bard’s business in Southern Europe, Central Europe and the Emerging Markets Region of the Middle East and Africa.

Before joining Bard, Mr. Tornos served as Vice President and General Manager of the Americas Pharmaceutical and Medical/Imaging Segments of Covidien International from April 2009 to August 2011.

Before that, he served as International Vice President, Business Development and Strategy with Baxter International Inc. from July 2008 to April 2009 and, prior to that, Mr. Tornos spent 11 years with Johnson & Johnson in positions of increasing responsibility.

| --- | --- |

| --- | --- | --- |

| | • | Transposal® and Transposal Ultra® Fluid Waste Management Systems |

| | • | Timberline® Lateral Fusion System |

natural restoration to resemble the original teeth; and 3) dental regenerative products – for soft tissue and bone rehabilitation.

Our significant brands include the following:

| | • | PALACOS®2 Bone Cement |

| | • | SpinalPak® Spinal Fusion Stimulator |

| 2 | Registered trademark of Heraeus Medical GmbH |

Violations of these laws are

The EU Data Protection Directive imposes strict obligations and restrictions on the ability to collect, analyze and transfer EU personal data.

Moreover, the General Data Protection Regulation, an EU-wide regulation that will be fully enforceable by May 25, 2018, will introduce new data protection requirements in the EU and substantial fines for violations of the data protection rules.

| Tony W. Collins | | 49 | | Vice President, Corporate Controller and Chief Accounting Officer |

| Robert D. Delp | | 48 | | President, Americas |

| David A. Nolan Jr. | | 52 | | Group President, Biologics, Extremities, Sports Medicine, Surgical, Trauma, Foot and Ankle, Office Based Technologies and Zimmer Biomet Signature Solutions |

| Daniel E. Williamson | | 52 | | Group President, Joint Reconstruction |

Mr. Collins was appointed Vice President, Corporate Controller and Chief Accounting Officer effective June 2015.

Prior to that, Mr. Collins served as Vice President, Finance for the Global Reconstructive Division and Global Operations organization.

He joined the Company in 2010 as Vice President, Finance for the Global Reconstructive Division and U.S. Commercial organization.

Previously, Mr. Collins held the position of Vice President, Finance and served as the chief financial officer of the Commercial segment of Oshkosh Corporation from 2007 to 2010.

From 1997 to 2007, he was employed at Guidant Corporation and Boston Scientific Corporation, where he held a number of positions of increasing responsibility, including Finance Director and chief financial officer of the Guidant Japan organization, Global Director of Operations Finance and Director of Strategic Planning.

Mr. Delp was appointed President, Americas effective January 2017.

He is responsible for the Company’s sales and management of the direct and indirect sales channels in the Americas region, including the United States, Canada and Latin America.

He served as Vice President, U.S. Sales from June 2015 until assuming his current role.

Mr. Delp previously served in commercial Vice President roles with Biomet from October 2007 until June 2015.

Prior to those appointments, Mr. Delp held numerous positions within the musculoskeletal healthcare field, where he began his career in 1995.

Dr. Mazur-Hofsaess joined the Company in February 2010 as Senior Vice President, EMEA Sales and Marketing and was appointed President, EMEA Reconstructive in February 2012.

She has more than 20 years’ experience within the pharmaceutical, diagnostics and medical device sectors.

Prior to joining the Company, Dr. Mazur-Hofsaess served in various management positions at Abbott Laboratories beginning in 2001, most recently as Vice President, Diagnostics – Europe.

He has responsibility for the Company’s Biologics, Extremities, Sports Medicine, Surgical, Trauma, Foot and Ankle, Office Based Technologies and Zimmer Biomet Signature Solutions businesses.

He joined the Company in November 2012 as Senior Vice President, Sales.

From January 2014 to June 2015, he served as Senior Vice President, Sales and Advanced Solutions.

Prior to joining the Company, Mr. Nolan served as President, Biomet Sports Medicine, Extremities and Trauma from 2011 to 2012 and as President, Biomet Sports Medicine from 2001 to 2011.

He joined Biomet in 1996.

Mr. Phipps

Mr. Williamson was appointed Group President, Joint Reconstruction with responsibility for the Company’s Knee, Hip, Bone Cement, Patient-Matched Implants and Personalized Solutions businesses effective June 2015.

Prior to the Biomet merger, he served as Senior Vice President, Biomet and President, Global Reconstructive Joints from February 2014 to June 2015.

Prior to that, Mr. Williamson served as Biomet’s Vice President and General Manager, Global Bone Cement and Biomaterials Research from September 2011 to February 2014, and as Corporate Vice President, Global Biologics and Biomaterials from May 2006 to September 2011.

Mr. Williamson previously served as Biomet’s Vice President, Business Development from December 2003 to May 2006.

He began his career with Biomet in 1990 as a Product Development Engineer.

Information pertaining to [added: certain] legal proceedings in which we are involved can be found in Note 19 to our consolidated financial statements included in Part II, Item 8 of this report and is incorporated herein by reference.

10-K 1 [removed: zbh-10k_20171231.htm] [added: zbh-10k_20181231.htm] 10-K

For year ended December 31, [removed: 2017][added: 2018]

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: 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 [removed: and post] such files).

| Non-accelerated filer | ☐ | [removed: (Do not check if a smaller reporting company)] | Smaller reporting company | ☐ |

| [added: | | |] Emerging growth company | ☐ | [removed: | | |]

The aggregate market value of shares held by non-affiliates was [removed: $25,893,487,085] [added: $22,648,282,177] (based on the closing price of these shares on the New York Stock Exchange on June [removed: 30, 2017] [added: 29, 2018] and assuming solely for the purpose of this calculation that all directors and executive officers of the registrant are “affiliates”).

As of February 15, [removed: 2018, 203,146,925] [added: 2019, 204,433,342] shares of the registrant’s $.01 par value common stock were outstanding.

| Portions of the Proxy Statement with respect to the [removed: 2018] [added: 2019] Annual Meeting of Stockholders | | Part III |

[removed: 2017] [added: 2018] FORM 10-K ANNUAL REPORT

[removed: A detailed] [added: See also the section titled “Risk Factors” (refer to Part I, Item 1A of this report) for further] discussion of [added: certain] risks and uncertainties that could cause actual results and events to differ materially from [removed: such forward-looking statements is included in] the [removed: section titled “Risk Factors” (refer to Part I, Item 1A of this report).][added: forward-looking statements.]

| Item 8. | [Financial Statements and Supplementary Data](#ITEM_8_FINANCIAL_STATEMENTS_SUPPLEMENTAR) | | [removed: 45] [added: 44] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](#ITEM_9_CHANGES_IN_DISAGREEMENTS_WITH_ACC) | | [removed: 94] [added: 92] |

| Item 9A. | [Controls and Procedures](#ITEM_9A_CONTROLS_PROCEDURES) | | [removed: 94] [added: 92] |

| Item 9B. | [Other Information](#ITEM_9B_OR_INFORMATION) | | [removed: 96] [added: 93] |

| [PART III](#PART_III) | | | [removed: 97] [added: 94] |

| Item 10. | [Directors, Executive Officers and Corporate Governance](#ITEM_10_DIRECTORS_EXECUTIVE_FICERS_CORPO) | | [removed: 97] [added: 94] |

| Item 11. | [Executive Compensation](#ITEM_11_EXECUTIVE_COMPENSATION) | | [removed: 97] [added: 94] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](#ITEM_12_SECURITY_OWNERSHIP_CERTAIN_BENEF) | | [removed: 97] [added: 94] |

| Item 13. | [Certain Relationships and Related Transactions and Director Independence](#ITEM_13_CERTAIN_RELATIONSHIPS_RELATED_TR) | | [removed: 97] [added: 94] |

| Item 14. | [Principal [removed: Accounting] [added: Accountant] Fees and Services](#ITEM_14_PRINCIPAL_ACCOUNTING_FEES_SERVIC) | | [removed: 97] [added: 94] |

| [PART IV](#PART_IV) | | | [removed: 98] [added: 95] |

| Item 15. | [removed: [Exhibits,] [added: [Exhibits and] Financial Statement Schedules](#ITEM_15_EXHIBITS_FINANCIAL_STATEMENT_SCH) | | [removed: 98] [added: 95] |

| Item 16. | [10-K Summary](#ITEM_16_10K_SUMMARY) | | [removed: 102] [added: 100] |

These risks, uncertainties and changes in circumstances include, but are not limited to: the possibility that the anticipated synergies and other benefits from mergers and acquisitions will not be realized, or will not be realized within the expected time periods; the risks and uncertainties related to our ability to successfully integrate the operations, products, employees and distributors of acquired companies; the effect of the potential disruption of management’s attention from ongoing business operations due to integration matters related to mergers and acquisitions; the effect of mergers and acquisitions on our relationships with customers, vendors and lenders and on our operating results and businesses generally; compliance with the Deferred Prosecution Agreement entered into in January 2017; the success of our quality and operational excellence initiatives, including ongoing quality remediation efforts at our Warsaw North Campus facility; challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the U.S. Food and Drug Administration and foreign government regulators, such as more stringent requirements for regulatory clearance of products; the ability to remediate matters identified in any inspectional observations or warning letters issued by the U.S. Food and Drug Administration, while continuing to satisfy the demand for our products; the outcome of government investigations; competition; pricing pressures; changes in customer demand for our products and services caused by demographic changes or other factors; the impact of healthcare reform measures, including the impact of the U.S. excise tax on medical devices if such tax is not further suspended or repealed; reductions in reimbursement levels by third-party payors and cost containment efforts of healthcare purchasing organizations; dependence on new product development, technological advances and innovation; shifts in the product category or regional sales mix of our products and services; supply and prices of raw materials and products; control of costs and expenses; the ability to obtain and maintain adequate intellectual property protection; the ability to form and implement alliances; changes in tax obligations arising from tax reform measures, including European Union rules on state aid, or examinations by tax authorities; product liability and intellectual property litigation losses; the ability to retain the independent agents and distributors who market our products; dependence on a limited number of suppliers for key raw materials and outsourced activities; changes in general industry and market conditions, including domestic and international growth rates; 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 the ability to collect accounts receivable in affected countries.

(Check One):

| | | | | |

| | | | | [removed: |] Owned / | | Square | | |

| Location | | Use | | [removed: |] Leased | | Feet | | |

| Warsaw, Indiana | | Research & Development, Manufacturing, Warehousing, Marketing & Administration | | [removed: |] Owned | | | 1,900,000 | |

| Warsaw, Indiana | | Corporate Headquarters & The Zimmer [removed: Biomet] Institute | | [removed: |] Owned | | | 115,000 | |

| Warsaw, Indiana | | Manufacturing & Warehousing | | [removed: |] Leased | | | 170,000 | |

| Westminster, Colorado | | Spine Business Unit Headquarters | | [removed: |] Leased | | | 105,000 | |

| Jacksonville, Florida | | CMF Business Unit Headquarters & Manufacturing | | [removed: |] Owned | | | 85,000 | |

| Palm Beach Gardens, Florida | | Dental Business Unit Headquarters & Manufacturing | | [removed: |] Owned | | | 190,000 | |

| Palm Beach Gardens, Florida | | Manufacturing | | [removed: |] Leased | | | 45,000 | |

| Southaven, Mississippi | | Distribution Center | | [removed: |] Leased | | | 190,000 | |

| Parsippany, New Jersey | | Office, Research & Development, Manufacturing, Warehousing & The Zimmer [removed: Biomet] Institute | | [removed: |] Leased | | | 235,000 | |

| Dover, Ohio | | [removed: Surgical Business Unit Headquarters &] Manufacturing | | [removed: |] Owned | | | 140,000 | |

| Dover, Ohio | | [removed: Surgical Business Unit Headquarters &] Manufacturing | | [removed: |] Leased | | | 60,000 | |

| Austin, Texas | | Offices & Manufacturing | | [removed: |] Leased | | | 90,000 | |

| Beijing, China | | Manufacturing | | [removed: |] Leased | | | 95,000 | |

| Changzhou, China | | Manufacturing | | [removed: |] Owned | | | [removed: 75,000] [added: 160,000] | |

| Jinhua, China | | Manufacturing | | [removed: |] Owned | | | [removed: 135,000] [added: 125,000] | |

| Valence, France | | Manufacturing | | [removed: |] Owned | | | 120,000 | |

| Berlin, Germany | | Manufacturing | | [removed: |] Owned | | | 50,000 | |

| Eschbach, Germany | | Distribution Center | | [removed: |] Owned | | | 100,000 | |

| Galway, Ireland | | Manufacturing | | [removed: |] Owned | | | 125,000 | |

| Shannon, Ireland | | Offices & Manufacturing | | [removed: |] Owned | | | 125,000 | |

| Hazeldonk, The Netherlands | | Distribution Center | | [removed: |] Leased | | | 295,000 | |

| Ponce, Puerto Rico | | Offices, Manufacturing & Warehousing | | [removed: |] Owned | | | 225,000 | |

| Singapore | | Regional Headquarters | | [removed: |] Leased | | | 30,000 | |

| Bridgend, South Wales | | Manufacturing | | [removed: |] Owned | | | 185,000 | |

| Bridgend, South Wales | | Manufacturing [removed: |] [added: & Warehousing] | | Leased | | | 100,000 | |

| Valencia, Spain | | Manufacturing | | [removed: |] Owned | | | 70,000 | |

| Valencia, Spain | | Manufacturing | | [removed: |] Leased | | | 10,000 | |

| Winterthur, Switzerland | | Regional Headquarters, Offices, Research & Development & Manufacturing | | [removed: |] Leased | | | 420,000 | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Braintree, Massachusetts | | Office, Manufacturing, Warehousing, Laboratory | | Leased | | | 50,000 | |

| Tokyo, Japan | | Distribution Center | | Leased | | | 180,000 | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

As further discussed in Note 11 to [removed: the] [added: our] consolidated financial statements, our debt facilities restrict the payment of dividends [removed: under] [added: in] certain circumstances.

[added: Our common stock is traded on the New York Stock Exchange and the SIX Swiss Exchange under the symbol “ZBH.”] As of February [removed: 16, 2018,] [added: 15, 2019,] there were approximately [removed: 22,000] [added: 20,000] holders of record of our common stock.

Our common stock is traded on the New York Stock Exchange and the SIX Swiss Exchange under the symbol “ZBH.” The high and low sales prices for our common stock on the New York Stock Exchange and the dividends declared for the calendar quarters of fiscal years 2017 and 2016 are as follows:

QUARTERLY HIGH-LOW SHARE PRICES AND DECLARED DIVIDENDS

| | | High | | | | Low | | | | Declared Dividends | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Year Ended December 31, 2017: | | | | | | | | | | | | |

| First Quarter | | $ | 122.11 | | | $ | 103.33 | | | $ | 0.24 | |

| Second Quarter | | $ | 129.39 | | | $ | 116.54 | | | $ | 0.24 | |

| Third Quarter | | $ | 132.61 | | | $ | 110.13 | | | $ | 0.24 | |

| Fourth Quarter | | $ | 124.46 | | | $ | 108.72 | | | $ | 0.24 | |

| | | | | | | | | | | | | |

| Year Ended December 31, 2016: | | | | | | | | | | | | |

| First Quarter | | $ | 107.22 | | | $ | 88.27 | | | $ | 0.24 | |

| Second Quarter | | $ | 123.43 | | | $ | 105.53 | | | $ | 0.24 | |

| Third Quarter | | $ | 133.19 | | | $ | 119.22 | | | $ | 0.24 | |

| Fourth Quarter | | $ | 133.21 | | | $ | 95.63 | | | $ | 0.24 | |

On February 16, 2018, the closing price of our common stock, as reported on the New York Stock Exchange, was $120.48 per share.

| | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015 (1)] [added: 2016] | | | | [removed: 2014] [added: 2015 (1)(2)] | | | | [removed: 2013] [added: 2014 (1)] | | |

| Net sales | | $ | [removed: 7,824.1] [added: 7,932.9] | | | $ | [removed: 7,683.9] [added: 7,803.3] | | | $ | [removed: 5,997.8] [added: 7,668.4] | | | $ | [removed: 4,673.3] [added: 5,997.8] | | | $ | [removed: 4,623.4] [added: 4,673.3] | |

| Net [added: (loss)] earnings of Zimmer Biomet Holdings, Inc. | | | [removed: 1,813.8] [added: (379.2] | [added: )] | | | [removed: 305.9] [added: 1,813.8] | | | | [removed: 147.0] [added: 305.9] | | | | [removed: 720.3] [added: 147.0] | | | | [removed: 780.4] [added: 720.3] | |

| [removed: Earnings] [added: (Loss) earnings] per common share | | | | | | | | | | | | | | | | | | | | |

| Basic | | $ | [removed: 8.98] [added: (1.86] | [added: )] | | $ | [removed: 1.53] [added: 8.98] | | | $ | [removed: 0.78] [added: 1.53] | | | $ | [removed: 4.26] [added: 0.78] | | | $ | [removed: 4.60] [added: 4.26] | |

| Diluted | | | [removed: 8.90] [added: (1.86] | [added: )] | | | [removed: 1.51] [added: 8.90] | | | | [removed: 0.77] [added: 1.51] | | | | [removed: 4.20] [added: 0.77] | | | | [removed: 4.54] [added: 4.20] | |

| Dividends declared per share of common stock | | $ | [removed: 0.96] [added: \-] | | | $ | [removed: 0.96] [added: \-] | | | $ | [removed: 0.88] [added: \-] | | | $ | 0.88 | | | $ | [removed: 0.80] [added: 0.88] | |

| Basic | | | [removed: 201.9] [added: 203.5] | | | | [removed: 200.0] [added: 201.9] | | | | [removed: 187.4] [added: 200.0] | | | | [removed: 169.0] [added: 187.4] | | | | [removed: 169.6] [added: 169.0] | |

| Diluted | | | [removed: 203.7] [added: 203.5] | | | | [removed: 202.4] [added: 203.7] | | | | [removed: 189.8] [added: 202.4] | | | | [removed: 171.7] [added: 189.8] | | | | [removed: 171.8] [added: 171.7] | |

| Total assets | | $ | [removed: 25,964.5] [added: 24,126.8] | | | $ | [removed: 26,684.4] [added: 26,014.0] | | | $ | [removed: 27,160.6] [added: 26,684.4] | | | $ | [removed: 9,658.0] [added: 27,160.6] | | | $ | [removed: 9,595.0] [added: 9,658.0] | |

| Long-term debt | | | [removed: 8,917.5] [added: 8,413.7] | | | | [removed: 10,665.8] [added: 8,917.5] | | | | [removed: 11,497.4] [added: 10,665.8] | | | | [removed: 1,425.5] [added: 11,497.4] | | | | [removed: 1,672.3] [added: 1,425.5] | |

| Other long-term obligations | | | [removed: 2,291.3] [added: 2,015.7] | | | | [removed: 3,967.2] [added: 2,291.3] | | | | [removed: 4,155.9] [added: 3,967.2] | | | | [removed: 656.8] [added: 4,155.9] | | | | [removed: 583.6] [added: 656.8] | |

| Stockholders' equity | | | [removed: 11,735.5] [added: 11,276.1] | | | | [removed: 9,669.9] [added: 11,735.5] | | | | [removed: 9,889.4] [added: 9,669.9] | | | | [removed: 6,551.7] [added: 9,889.4] | | | | [removed: 6,310.6] [added: 6,551.7] | |

| [removed: (1)] [added: (2)] | Includes the results of Biomet starting on June 24, 2015 and Biomet balance sheet data as of December 31, 2015. |

| (1) | Effective January 1, 2018 we adopted Accounting Standards Update 2014-09 – Revenue from Contracts with Customers (Topic 606). We adopted this new standard using the retrospective method, which resulted in us restating the 2017 and 2016 periods. The 2015 and 2014 periods have not been restated. See Note 2 to our consolidated financial statements for additional information. |

| --- | --- |

| [Report of Independent Registered Public Accounting Firm](#REPORT_INDEPENDENT_REGISTERED_PUBLIC_ACC) | | [removed: 46] [added: 45] |

| [Consolidated Statements of Earnings for the Years Ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015](#CONSOLIDATED_STATEMENTS_EARNINGS)] [added: 2016](#CONSOLIDATED_STATEMENTS_EARNINGS)] | | [removed: 48] [added: 47] |

| [Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015](#CONSOLIDATED_STATEMENTS_COMPREHENSIVE_IN)] [added: 2016](#CONSOLIDATED_STATEMENTS_COMPREHENSIVE_IN)] | | [removed: 49] [added: 48] |

| [Consolidated Balance Sheets as of December 31, [removed: 2017] [added: 2018] and [removed: 2016](#CONSOLIDATED_BALANCE_SHEETS)] [added: 2017](#CONSOLIDATED_BALANCE_SHEETS)] | | [removed: 50] [added: 49] |

| [Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015](#CONSOLIDATED_STATEMENTS_STOCKHOLDERS_EQU)] [added: 2016](#CONSOLIDATED_STATEMENTS_STOCKHOLDERS_EQU)] | | [removed: 51] [added: 50] |

| [Consolidated Statements of Cash Flows for the Years Ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] [added: 2016](#CONSOLIDATED_STATEMENTS_CASH_FLOWS)] | | [removed: 52] [added: 51] |

| [Notes to Consolidated Financial Statements](#NOTES_TO_CONSOLIDATED_FINANCIAL_STATEMEN) | | [removed: 53] [added: 52] |

We have audited the accompanying consolidated balance sheets of Zimmer Biomet Holdings, Inc. and its subsidiaries [added: (the “Company”)] as of December 31, [removed: 2017] [added: 2018] and [removed: 2016] [added: 2017] and the related consolidated statements of earnings, comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, [removed: 2017,] [added: 2018,] including the related notes and [removed: the] financial statement schedule of valuation and qualifying accounts for each of the three years in the period ended December 31, [removed: 2017] [added: 2018] appearing under [removed: Item] [added: item] 15(a)(2), (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for each of the three years in the period ended December 31, [removed: 2017] [added: 2018] in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) [removed: ("PCAOB")] [added: (PCAOB)] and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

| | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

| Net Sales | [removed: |] $ | 7,824.1 | | | $ | [removed: 7,683.9] [added: (20.8] | [added: )] | | $ | [removed: 5,997.8] [added: \-] | | [added: | $ | \- | | | $ | 7,803.3 | |]

| Cost of products sold, excluding intangible asset amortization | | | [removed: 2,132.9] [added: 2,271.9] | | | | [removed: 2,381.8] [added: 2,132.9] | | | | [removed: 1,800.6] [added: 2,381.8] | |

| Intangible asset amortization | | | [removed: 603.9] [added: 595.9] | | | | [removed: 565.9] [added: 603.9] | | | | [removed: 337.4] [added: 565.9] | |

| Research and development | | | [removed: 367.4] [added: 391.7] | | | | [removed: 365.6] [added: 369.9] | | | | [removed: 268.8] [added: 365.6] | |

| Selling, general and administrative | | [removed: |] 2,973.9 | | | | [removed: 2,932.9] [added: (20.8] | [added: )] | | | [removed: 2,284.2] [added: 8.9] | | [added: | | 142.7 | | | | 3,104.7 | |]

| Goodwill impairment | | | [removed: 304.7] [added: (75.2] | [added: )] | | | [removed: \-] | [added: 22.5] | | | [added: | |] \- | | [added: |]

| Special items [removed: (Note 2)] | | [removed: |] 633.1 | | | | [removed: 611.8] [added: \-] | | | | [removed: 839.5] [added: \-] | | [added: | | (633.1 | ) | | | \- | |]

| Operating Profit | | [removed: |] 808.2 | | | | [removed: 825.9] [added: \-] | | | | [removed: 467.3] [added: (8.9] | [added: )] | [added: | | \- | | | | 799.3 | |]

| Other expense, net | | [removed: |] (18.3 | ) | | | [removed: (71.3] [added: \-] | [removed: )] | | | [removed: (36.9] [added: 8.9] | [added: | | | \- | | | | (9.4 |] ) |

| [removed: Earnings] [added: (Loss) earnings] before income taxes | | | [removed: 464.6] [added: (271.1] | [added: )] | | | [removed: 399.6] [added: 464.6] | | | | [removed: 153.2] [added: 399.6] | |

| [removed: (Benefit) provision] [added: Provision (benefit)] for income taxes | | | [removed: (1,348.8] [added: 108.2] | [removed: )] | | | [removed: 95.0] [added: (1,348.8] | [added: )] | | | [removed: 7.0] [added: 95.0] | |

| Net [removed: earnings] [added: (Loss) Earnings] | | | [removed: 1,813.4] [added: (379.3] | [added: )] | | | [removed: 304.6] [added: 1,813.4] | | | | [removed: 146.2] [added: 304.6] | |

| Less: Net loss attributable to noncontrolling interest | | | [removed: (0.4] [added: (0.1] | ) | | | [removed: (1.3] [added: (0.4] | ) | | | [removed: (0.8] [added: (1.3] | ) |

| Net [added: (Loss)] Earnings of Zimmer Biomet Holdings, Inc. | | $ | [removed: 1,813.8] [added: (379.2] | [added: )] | | $ | [removed: 305.9] [added: 1,813.8] | | | $ | [removed: 147.0] [added: 305.9] | |

| [added: (Loss)] Earnings Per Common Share - Basic | | $ | [removed: 8.98] [added: (1.86] | [added: )] | | $ | [removed: 1.53] [added: 8.98] | | | $ | [removed: 0.78] [added: 1.53] | |

| [added: (Loss)] Earnings Per Common Share - Diluted | | $ | [removed: 8.90] [added: (1.86] | [added: )] | | $ | [removed: 1.51] [added: 8.90] | | | $ | [removed: 0.77] [added: 1.51] | |

| Basic | | | [removed: 201.9] [added: 203.5] | | | | [removed: 200.0] [added: 201.9] | | | | [removed: 187.4] [added: 200.0] | |

| Diluted | | | [removed: 203.7] [added: 203.5] | | | | [removed: 202.4] [added: 203.7] | | | | [removed: 189.8] [added: 202.4] | |

| Cash [removed: Dividends Declared Per Common Share] [added: dividends declared ($0.96 per share)] | | [removed: $] | [removed: 0.96] [added: \-] | | | [removed: $] | [removed: 0.96] [added: \-] | | | [removed: $] | [removed: 0.88] [added: \-] | | [added: | | (191.9 | ) | | | \- | | | | \- | | | | \- | | | | \- | | | | (191.9 | ) |]

| Net [added: (Loss)] Earnings | | $ | [removed: 1,813.4] [added: (379.3] | [added: )] | | $ | [removed: 304.6] [added: 1,813.4] | | | $ | [removed: 146.2] [added: 304.6] | |

| Other Comprehensive [removed: Income (Loss):] [added: (Loss) Income:] | | | | | | | | | | | | |

| Foreign currency cumulative translation adjustments, net of tax | | | [removed: 445.0] [added: (135.4] | [added: )] | | | [removed: (130.0] [added: 445.0] | [removed: )] | | | [removed: (305.2] [added: (130.0] | ) |

| Unrealized cash flow hedge [removed: (losses)/gains,] [added: gains/(losses),] net of tax | | | [removed: (95.0] [added: 68.2] | [removed: )] | | | [removed: 28.3] [added: (95.0] | [added: )] | | | [removed: 52.7] [added: 28.3] | |

| Reclassification adjustments on cash flow hedges, net of tax | | | [removed: (3.8] [added: 23.6] | [removed: )] | | | [removed: (25.8] [added: (3.8] | ) | | | [removed: (93.0] [added: (25.8] | ) |

| Unrealized [removed: gains/(losses)] [added: gains] on securities, net of tax | | | \- | | | | [removed: 0.5] [added: \-] | | | | [removed: (0.2] [added: 0.5] | [removed: )] |

| Adjustments to prior service cost and unrecognized actuarial assumptions, net of tax | | | [removed: 4.6] [added: (17.7] | [added: )] | | | [removed: 22.0] [added: 4.6] | | | | [removed: (21.4] [added: 22.0] | [removed: )] |

| Total Other Comprehensive [removed: Income] (Loss) [added: Income] | | | [removed: 350.8] [added: (61.3] | [added: )] | | | [removed: (105.0] [added: 350.8] | [removed: )] | | | [removed: (367.1] [added: (105.0] | ) |

February 26, 2019

| Net Sales | | $ | 7,932.9 | | | $ | 7,803.3 | | | $ | 7,668.4 | |

| Selling, general and administrative | | | 3,379.3 | | | | 3,104.7 | | | | 2,944.6 | |

| Goodwill and intangible asset impairment | | | 979.7 | | | | 331.5 | | | | 31.1 | |

| Acquisition, integration and related | | | 133.7 | | | | 279.8 | | | | 504.9 | |

| Quality remediation | | | 146.9 | | | | 181.3 | | | | 53.4 | |

| Operating expenses | | | 7,899.1 | | | | 7,004.0 | | | | 6,847.3 | |

| Operating Profit | | | 33.8 | | | | 799.3 | | | | 821.1 | |

| Other expense, net | | | (15.6 | ) | | | (9.4 | ) | | | (66.5 | ) |

| Interest expense, net | | | (289.3 | ) | | | (325.3 | ) | | | (355.0 | ) |

(in millions, except share amounts)

| | | 2018 | | | | 2017 | | |

| Accounts receivable, less allowance for doubtful accounts | | | 1,275.8 | | | | 1,544.1 | |

| Inventories | | | 2,256.5 | | | | 2,068.3 | |

| Prepaid expenses and other current assets | | | 352.3 | | | | 428.0 | |

| Total Assets | | $ | 24,126.8 | | | $ | 26,014.0 | |

| Other current liabilities | | | 1,391.3 | | | | 1,349.3 | |

| Total Liabilities | | | 12,850.7 | | | | 14,278.5 | |

| Net loss | | | \- | | | | \- | | | | \- | | | | (379.2 | ) | | | \- | | | | \- | | | | \- | | | | (0.1 | ) | | | (379.3 | ) |

| Cash dividends declared ($0.96 per share) | | | \- | | | | \- | | | | \- | | | | (195.5 | ) | | | \- | | | | \- | | | | \- | | | | \- | | | | (195.5 | ) |

| Adoption of new accounting standard | | | \- | | | | \- | | | | \- | | | | 42.9 | | | | (42.9 | ) | | | \- | | | | \- | | | | \- | | | | \- | |

| Sale of shares in a subsidiary without loss of control | | | \- | | | | \- | | | | \- | | | | \- | | | | \- | | | | \- | | | | \- | | | | 5.2 | | | | 5.2 | |

| Stock compensation plans | | | 1.4 | | | | \- | | | | 171.2 | | | | 0.2 | | | | \- | | | | \- | | | | 0.1 | | | | \- | | | | 171.5 | |

| Balance December 31, 2018 | | | 307.9 | | | $ | 3.1 | | | $ | 8,686.1 | | | $ | 9,491.2 | | | $ | (187.4 | ) | | | (103.9 | ) | | $ | (6,721.7 | ) | | $ | 4.8 | | | $ | 11,276.1 | |

| Net (loss) earnings | | $ | (379.3 | ) | | $ | 1,813.4 | | | $ | 304.6 | |

| Goodwill and intangible asset impairment | | | 979.7 | | | | 331.5 | | | | 31.1 | |

| Receivables | | | 213.6 | | | | 161.7 | | | | (141.6 | ) |

| Inventories | | | (199.5 | ) | | | (120.1 | ) | | | 77.9 | |

| Net investment hedge settlements | | | 69.2 | | | | \- | | | | \- | |

| Other financing activities | | | (4.0 | ) | | | (8.6 | ) | | | (16.3 | ) |

We have reclassified expenses that were previously recognized in a financial statement line item labeled “Acquisition, quality remediation and other” (and prior to that, labeled “Special items”) to the financial statement line items of “Research and development,” “Selling, general and administrative,” “Goodwill and intangible asset impairment,” “Acquisition, integration and related” and “Quality remediation”.

Prior periods have been reclassified to conform to the current year presentation.

Please refer to Note 2 for additional details on the reclassified items, “Acquisition, integration and related” and “Quality remediation”.

We made this change to provide additional transparency and better reflect the nature of these expenses.

In 2016, we acquired LDR Holding Corporation (“LDR”) and other individually immaterial companies.

Acquisition, integration and related – We use the financial statement line item, “Acquisition, integration and related” to recognize expenses resulting from the consummation of business mergers and acquisitions and the related integration of those businesses.

Acquisition, integration and related expenses are primarily composed of:

| | • | Consulting and professional fees related to third-party integration consulting performed in a variety of areas, such as tax, compliance, logistics and human resources, and legal fees related to the consummation of mergers and acquisitions. |

| | • | Employee termination benefits related to terminating employees with overlapping responsibilities in various areas of our business. |

| | • | Other various expenses to relocate facilities, integrate information technology, losses incurred on assets resulting from the applicable acquisition, and other various expenses. |

| --- | --- |

| --- | --- | --- |

February 27, 2018

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Operating expenses | | | 7,015.9 | | | | 6,858.0 | | | | 5,530.5 | |

| Interest income | | | 2.2 | | | | 2.9 | | | | 9.4 | |

| Interest expense | | | (327.5 | ) | | | (357.9 | ) | | | (286.6 | ) |

(in millions)

| Total Assets | | $ | 25,964.5 | | | $ | 26,684.4 | |

| Total Liabilities | | | 14,229.0 | | | | 17,014.5 | |

| Balance January 1,2015 | | | 268.4 | | | $ | 2.7 | | | $ | 4,330.7 | | | $ | 8,362.1 | | | $ | 38.1 | | | | (98.7 | ) | | $ | (6,183.7 | ) | | $ | 1.8 | | | $ | 6,551.7 | |

| Net earnings | | | \- | | | | \- | | | | \- | | | | 147.0 | | | | \- | | | | \- | | | | \- | | | | (0.8 | ) | | | 146.2 | |

| Cash dividends declared | | | \- | | | | \- | | | | \- | | | | (164.4 | ) | | | \- | | | | \- | | | | \- | | | | \- | | | | (164.4 | ) |

| Stock compensation plans | | | 1.6 | | | | \- | | | | 142.2 | | | | 3.0 | | | | \- | | | | 0.1 | | | | 4.6 | | | | \- | | | | 149.8 | |

| Share repurchases | | | \- | | | | \- | | | | \- | | | | \- | | | | \- | | | | (1.4 | ) | | | (150.0 | ) | | | \- | | | | (150.0 | ) |

| Biomet merger consideration | | | 32.7 | | | | 0.3 | | | | 3,722.4 | | | | \- | | | | \- | | | | \- | | | | \- | | | | \- | | | | 3,722.7 | |

| Cash dividends declared | | | \- | | | | \- | | | | \- | | | | (191.9 | ) | | | \- | | | | \- | | | | \- | | | | \- | | | | (191.9 | ) |

| Biomet merger consideration compensation expense | | | \- | | | | \- | | | | 90.4 | |

| Excess income tax benefit from stock option exercises | | | \- | | | | \- | | | | (11.8 | ) |

| Gain on divestiture of assets | | | \- | | | | \- | | | | (19.0 | ) |

| Receivables | | | 176.5 | | | | (137.8 | ) | | | (56.1 | ) |

| Inventories | | | (122.8 | ) | | | 76.4 | | | | (205.4 | ) |

| Proceeds from divestiture of assets | | | \- | | | | \- | | | | 69.9 | |

| LDR acquisition, net of acquired cash | | | \- | | | | (1,021.1 | ) | | | \- | |

| Restricted stock withholdings | | | (8.3 | ) | | | (6.3 | ) | | | (11.1 | ) |

| Excess income tax benefit from stock option exercises | | | \- | | | | \- | | | | 11.8 | |

| Debt issuance costs | | | (0.3 | ) | | | (10.0 | ) | | | (58.4 | ) |

“Zimmer” used alone refers to the business or information of us and our subsidiaries on a stand-alone basis without inclusion of the business or information of LVB Acquisition, Inc. (“LVB”) or any of its subsidiaries, including Biomet, Inc. (“Biomet”), all of which we acquired in June 2015 (sometimes hereinafter referred to as the “Biomet merger” or the “merger”).

Certain amounts in the 2015 and 2016 consolidated financial statements have been reclassified to conform to the 2017 presentation.

Sales to stocking distributors, healthcare dealers, dental practices and dental laboratories accounted for approximately 25 percent of our net sales in 2017.

With these types of sales, revenue is recognized when title to product passes, either upon shipment of the product or in some cases upon implantation of the product.

Product is generally sold at contractually fixed prices for specified periods.

Occasionally, products are returned and, accordingly, we maintain

an estimated sales return reserve that is recorded as a reduction in revenue.

Special Items \- We recognize expenses resulting directly from our business combinations, employee termination benefits, certain R&D agreements, certain contract terminations, intangible asset impairment, consulting and professional fees and asset impairment or loss on disposal charges connected with global restructuring, quality enhancement and remediation efforts, operational excellence initiatives, and other items as “Special items” in our consolidated statement of earnings.

| Biomet-related | | | | | | | | | | | | |

| Merger consideration compensation expense | | $ | \- | | | $ | \- | | | $ | 90.4 | |

| Retention plans | | | \- | | | | \- | | | | 73.0 | |

| Consulting and professional fees | | | 81.5 | | | | 220.4 | | | | 167.4 | |

| Employee termination benefits | | | 12.1 | | | | 50.8 | | | | 101.0 | |

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the 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 [removed: specified in the Securities and Exchange Commission’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.]

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, [removed: 2017,] [added: 2018,] the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.

Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the [removed: Securities] Exchange [removed: Act of 1934, as amended,] [added: Act,] as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for [added: external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:]

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2017.][added: 2018.]

Based on their assessment, management has concluded that, as of December 31, [removed: 2017,] [added: 2018,] the Company’s internal control over financial reporting is effective based on those criteria.

The Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2017,] [added: 2018,] as stated in its report which appears in Item 8 of this Annual Report on Form 10-K.

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, [removed: 2017] [added: 2018] that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

specified in the Securities and Exchange Commission’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.

external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

| --- | --- | --- |

Previously Identified Material Weakness in Internal Control Over Financial Reporting

We previously identified and disclosed in our Form 10-K for the year ended December 31, 2016, a material weakness in our internal control over financial reporting related to accounting for income taxes.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

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 have resulted in misstatements of income tax related accounts and disclosures that would have resulted in a material misstatement of the consolidated financial statements that would not be prevented or detected.

Remediation of the Previously Disclosed Material Weakness

Our management, with oversight from our Audit Committee, has implemented the following changes to our internal control over financial reporting to remediate the previously disclosed material weakness described above:

| | • | enhanced and supplemented our tax function by increasing the number of roles, hiring additional individuals, and engaging outside service providers with an appropriate level of knowledge and experience commensurate with the tax accounting complexities of our organization; and |

| | • | restructured our internal reporting procedures to spread execution over the broader resource base to enable enhanced review processes by personnel with the appropriate technical oversight and training. |

During the quarters ended June 30 and September 30, 2017, we substantially completed the assessment of existing controls and restructured these controls in our efforts to remediate the previously identified material weakness.

In conjunction with our third-quarter financial close procedures, the quarterly controls related to accounting for income taxes were tested and evaluated for their operating effectiveness.

In the quarter ended December 31, 2017, we completed the testing and evaluation of the operating effectiveness of all controls related to accounting for income taxes, and based on the results of our testing, the controls were determined to be designed and operating effectively

as of December 31, 2017.

Accordingly, we concluded that the previously reported material weakness described above has been remediated as of December 31, 2017.

During the fourth quarter of [removed: 2017,] [added: 2018,] the Audit Committee of our Board of Directors [removed: approved] [added: was not asked to, and did not, approve] the engagement of PricewaterhouseCoopers LLP, our independent registered public accounting firm, to perform [removed: certain] [added: any] non-audit [removed: services related to certain tax matters.][added: services.]

Because we are filing this Annual Report on Form 10-K within four business days after the triggering event, we are making the following disclosure under this Item 9B instead of filing a Current Report on Form 8-K under Item 1.01, Entry into a Material Definitive Agreement and Item 5.02, Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers:

On February 27, 2018, a subsidiary of the Company entered into an aircraft time sharing agreement with Bryan C.

Hanson, President and Chief Executive Officer of the Company, with respect to Mr. Hanson’s non-business-related use of Company-provided aircraft.

The agreement was entered into in furtherance of the terms of the offer letter between the Company and Mr. Hanson, which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 21, 2017.

The aircraft time sharing agreement requires Mr. Hanson to reimburse the Company for certain costs associated with designated use by him of Company-provided aircraft in accordance with Federal Aviation Administration regulations.

This description of the aircraft time sharing agreement is qualified in its entirety by reference to the full text of the agreement, which is filed as Exhibit 10.40 to this report.

Information required by this item is incorporated by reference from our definitive Proxy Statement for the annual meeting of stockholders to be held on May [removed: 15, 2018] [added: 10, 2019] (the [removed: “2018] [added: “2019] Proxy Statement”).

Information required by this item is incorporated by reference from our [removed: 2018] [added: 2019] Proxy Statement.

Information required by this item is incorporated by reference from our [removed: 2018] [added: 2019] Proxy Statement.

Information required by this item is incorporated by reference from our [removed: 2018] [added: 2019] Proxy Statement.

Information required by this item is incorporated by reference from of our [removed: 2018] [added: 2019] Proxy Statement.

Consolidated Statements of Earnings for the Years Ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015][added: 2016]

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015][added: 2016]

Consolidated Balance Sheets as of December 31, [removed: 2017] [added: 2018] and [removed: 2016][added: 2017]

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015][added: 2016]

Consolidated Statements of Cash Flows for the Years Ended December 31, [removed: 2017, 2016] [added: 2018, 2017] and [removed: 2015][added: 2016]

| | | Balance at | | | | Charged | | | | [added: Deductions /] | | | | Effects of | | | | | | | | Balance at | | |

| | | Beginning | | | | (Credited) | | | | [removed: Deductions] [added: Other Additions] | | | | Foreign | | | | Acquired | | | | End of | | |

| Year Ended December 31, 2016 | | [added: $] | 34.1 | | | [added: $] | 22.3 | | | [added: $] | (4.5 | ) | | [added: $] | (0.3 | ) | | [added: $] | \- | | | [added: $] | 51.6 | |

| Year Ended December 31, 2016 | | [added: $] | 72.7 | | | [added: $] | 24.8 | | | [added: $] | (12.4 | ) | | [added: $] | (1.1 | ) | | [added: $] | 4.3 | | | [added: $] | 88.3 | |

| [removed: 2.1] [added: 10.31*] | | [removed: [Agreement and Plan of Merger, dated as of June 6, 2016, by and among Zimmer] [added: [Zimmer] Biomet Holdings, [removed: Inc., LH Merger Sub,] Inc. [removed: and LDR Holding Corporation] [added: 2009 Stock Incentive Plan (As Amended on May 3, 2016)] (incorporated by reference to Exhibit [removed: 2.1] [added: 10.1] to the Registrant’s Current Report on Form 8-K filed [removed: June 7, 2016)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516615463/d206896dex21.htm)] [added: May 9, 2016)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516583901/d169750dex101.htm)] |

| 4.9 | | [Form of [removed: 2.000%] [added: 2.700%] Notes due [removed: 2018] [added: 2020] (incorporated by reference to Exhibit 4.8 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm) |

| 4.10 | | [Form of [removed: 2.700%] [added: 3.150%] Notes due [removed: 2020] [added: 2022] (incorporated by reference to Exhibit 4.8 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm) |

| 4.11 | | [Form of [removed: 3.150%] [added: 3.550%] Notes due [removed: 2022] [added: 2025] (incorporated by reference to Exhibit 4.8 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm) |

| 4.12 | | [Form of [removed: 3.550%] [added: 4.250%] Notes due [removed: 2025] [added: 2035] (incorporated by reference to Exhibit 4.8 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm) |

| 4.13 | | [Form of [removed: 4.250%] [added: 4.450%] Notes due [removed: 2035] [added: 2045] (incorporated by reference to Exhibit 4.8 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm) |

| [removed: 4.14] [added: 4.15] | | [Form of [removed: 4.450%] [added: 1.414%] Notes due [removed: 2045] [added: 2022] (incorporated by reference to Exhibit [removed: 4.8 above](http://www.sec.gov/Archives/edgar/data/1136869/000119312515098570/d894178dex41.htm))] [added: 4.14 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex42.htm)] |

| [removed: 4.15] [added: 4.14] | | [Fourth Supplemental Indenture, dated as of December 13, 2016, between Zimmer Biomet Holdings, Inc. and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed December 13, 2016)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex42.htm) |

| [removed: 4.16] [added: 4.17] | | [Agency Agreement, dated as of December 13, 2016, by and among Zimmer Biomet Holdings, Inc., as issuer, Elavon Financial Services DAC, UK Branch, as paying agent, Elavon Financial Services DAC, as registrar and transfer agent, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed December 13, 2016)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex43.htm) |

| [removed: 4.17] [added: 4.18] | | [Amendment No. 1, dated as of January 4, 2017, to the Agency Agreement dated as of December 13, 2016, by and among Zimmer Biomet Holdings, Inc., as issuer, Elavon Financial Services DAC, UK Branch, as paying agent, Elavon Financial Services DAC, as original registrar and original transfer agent, U.S. Bank National Association, as successor registrar and successor transfer agent, and Wells Fargo Bank, National Association, as Trustee (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form 8-A filed January 4, 2017)](http://www.sec.gov/Archives/edgar/data/1136869/000119312517001314/d306834dex44.htm) |

| [removed: 4.18] [added: 4.16] | | [Form of [removed: 1.414%] [added: 2.425%] Notes due [removed: 2022] [added: 2026] (incorporated by reference to Exhibit [removed: 4.16 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex43.htm)] [added: 4.14 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex42.htm)] |

| [removed: 4.19] [added: 4.21] | | [Form of [removed: 2.425%] [added: 3.700%] Notes due [removed: 2026] [added: 2023] (incorporated by reference to Exhibit [removed: 4.16 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312516791951/d298678dex43.htm)] [added: 4.19 above)](http://www.sec.gov/Archives/edgar/data/1136869/000119312518087778/d657056dex42.htm)] |

| [removed: 10.9*] [added: 10.7*] | | [Offer Letter, dated as of December 18, 2017, by and between Zimmer Biomet Holdings, Inc. and Bryan C. Hanson (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed December 21, 2017)](http://www.sec.gov/Archives/edgar/data/1136869/000119312517376624/d520208dex101.htm) |

| [removed: 10.10*] [added: 10.8*] | | [Change in Control Severance Agreement with Bryan C. Hanson (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed December 21, 2017)](http://www.sec.gov/Archives/edgar/data/1136869/000119312517376624/d520208dex102.htm) |

| 10.11* | | [Form of Change in Control Severance Agreement with [removed: Aure Bruneau](https://www.sec.gov/Archives/edgar/data/1136869/000156459018003549/zbh-ex1011_151.htm)] [added: Ivan Tornos](https://www.sec.gov/Archives/edgar/data/1136869/000156459019004283/zbh-ex1011_350.htm)] |

| [removed: 10.12*] [added: 10.17*] | | [Form of Change in Control Severance Agreement with [removed: Tony W. Collins,] Daniel P. [removed: Florin, David A. Nolan, Jr. and Daniel E. Williamson] [added: Florin] (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed August 10, 2015)](http://www.sec.gov/Archives/edgar/data/1136869/000119312515285070/d50125dex101.htm) |