Item 1. Financial Statements

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Item 1. Financial Statements

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(in millions, except per share amounts, unaudited)


	Three Months Ended
	March 31,
	2025			2024
Net Sales	$	1,909.1		$	1,889.2
Cost of products sold, excluding intangible asset amortization		549.8			512.3
Intangible asset amortization		151.0			142.1
Research and development		110.6			107.9
Selling, general and administrative		758.8			736.2
Restructuring and other cost reduction initiatives		36.0			124.4
Acquisition, integration, divestiture and related		10.6			0.4
Operating expenses		1,616.8			1,623.3
Operating Profit		292.3			265.9
Other income (expense), net		2.9			(0.1	)
Interest expense, net		(66.2	)		(50.7	)
Earnings before income taxes		229.0			215.1
Provision for income taxes		46.5			42.3
Net Earnings		182.6			172.8
Less: Net earnings attributable to noncontrolling interest		0.6			0.4
Net Earnings of Zimmer Biomet Holdings, Inc.	$	182.0		$	172.4

Earnings Per Common Share
Basic	$	0.92		$	0.84
Diluted	$	0.91		$	0.84
Weighted Average Common Shares Outstanding
Basic		198.9			205.2
Diluted		199.7			206.2

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

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEM****ENTS OF COMPREHENSIVE INCOME

(in millions, unaudited)


	Three Months Ended
	March 31,
	2025			2024
Net Earnings of Zimmer Biomet Holdings, Inc.	$	182.0		$	172.4
Other Comprehensive Income (Loss):
Foreign currency cumulative translation adjustments, net of tax		24.8			(35.8	)
Unrealized cash flow hedge (losses) gains, net of tax		(32.1	)		34.7
Reclassification adjustments on hedges, net of tax		(17.3	)		(18.0	)
Adjustments to prior service cost and unrecognized actuarial assumptions, net of tax		0.1			(1.1	)
Total Other Comprehensive Loss		(24.5	)		(20.2	)
Comprehensive Income Attributable to
Zimmer Biomet Holdings, Inc.	$	157.5		$	152.2

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

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDA****TED BALANCE SHEETS

(in millions, except share amounts, unaudited)


	March 31,			December 31,
	2025			2024
ASSETS
Current Assets:
Cash and cash equivalents	$	1,384.5		$	525.5
Accounts receivable, less allowance for credit losses		1,533.4			1,480.7
Inventories		2,244.2			2,235.3
Prepaid expenses and other current assets		428.2			430.1
Total Current Assets		5,590.2			4,671.5
Property, plant and equipment, net		2,064.9			2,048.8
Goodwill		8,988.6			8,951.1
Intangible assets, net		4,468.0			4,598.4
Other assets		1,072.1			1,095.5
Total Assets	$	22,183.9		$	21,365.3
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	301.3		$	194.6
Other current liabilities		1,393.7			1,393.3
Current portion of long-term debt		600.0			863.0
Total Current Liabilities		2,294.9			2,450.9
Other long-term liabilities		908.9			1,096.6
Long-term debt		6,576.3			5,341.6
Total Liabilities		9,780.0			8,889.1
Commitments and Contingencies (Note 15)
Stockholders' Equity:
Zimmer Biomet Holdings, Inc. Stockholders' Equity:
Common stock, $0.01 par value, one billion shares authorized, 318.4 million shares as of March 31, 2025 (317.5 million as of December 31, 2024) issued		3.2			3.2
Paid-in capital		10,086.6			10,038.1
Retained earnings		11,229.7			11,095.3
Accumulated other comprehensive loss		(287.3	)		(262.8	)
Treasury stock, 120.5 million shares as of March 31, 2025 (118.4 million as of December 31, 2024)		(8,637.1	)		(8,405.7	)
Total Zimmer Biomet Holdings, Inc. stockholders' equity		12,395.1			12,468.1
Noncontrolling interest		8.7			8.1
Total Stockholders' Equity		12,403.8			12,476.2
Total Liabilities and Stockholders' Equity	$	22,183.9		$	21,365.3

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

ZIMMER BIOMET HOLD****INGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions, except per share amounts, unaudited)


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


Balance January 1, 2025		317.5	$	3.2	$	10,038.1	$	11,095.3		$	(262.8	)		(118.4	)	$	(8,405.7	)	$	8.1	$	12,476.2
Net earnings		-		-		-		182.0			-			-			-			0.6		182.6
Other comprehensive loss		-		-		-		-			(24.5	)		-			-			-		(24.5	)
Cash dividends declared ($0.24 per share)		-		-		-		(47.4	)		-			-			-			-		(47.4	)
Stock compensation plans		0.6		-		20.7		(0.2	)		-			-			0.5			-		21.0
Embody, Inc. acquisition consideration		0.3		-		27.8		-			-			-			-			-		27.8
Share repurchases		-		-		-		-			-			(2.1	)		(231.9	)		-		(231.9	)
Balance March 31, 2025		318.4	$	3.2	$	10,086.6	$	11,229.7		$	(287.3	)		(120.5	)	$	(8,637.1	)	$	8.7		12,403.8

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

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

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED S****TATEMENTS OF CASH FLOWS

(in millions, unaudited)



	For the Three Months Ended March 31,
	2025			2024
Cash flows provided by (used in) operating activities:
Net earnings	$	182.6		$	172.8
Adjustments to reconcile net earnings to cash provided by operating activities:
Depreciation and amortization		254.4			238.6
Share-based compensation		19.6			29.0
Changes in operating assets and liabilities, net of acquired assets and liabilities
Income taxes		(15.6	)		(8.6	)
Receivables		(18.8	)		(22.7	)
Inventories		(3.0	)		(55.3	)
Accounts payable and accrued liabilities		(36.4	)		(119.4	)
Other assets and liabilities		(0.1	)		(6.4	)
Net cash provided by operating activities		382.8			228.0
Cash flows provided by (used in) investing activities:
Additions to instruments		(59.7	)		(82.0	)
Additions to other property, plant and equipment		(44.6	)		(55.1	)
Net investment hedge settlements		1.0			10.2
Acquisition of intangible assets		(2.4	)		(43.3	)
Other investing activities		(0.3	)		(24.8	)
Net cash used in investing activities		(106.0	)		(195.0	)
Cash flows provided by (used in) financing activities:
Net proceeds from revolving facilities		-			70.0
Proceeds from senior notes		1,748.1			-
Redemption of senior notes		(863.0	)		-
Dividends paid to stockholders		(47.8	)		(49.4	)
Proceeds from employee stock compensation plans		16.7			56.4
Business combination contingent consideration payments		(17.4	)		(1.5	)
Debt issuance costs		(16.1	)		-
Deferred business combination payments		-			(1.5	)
Repurchase of common stock		(229.8	)		(113.6	)
Other financing activities		(15.2	)		(10.5	)
Net cash provided by (used in) financing activities		575.4			(50.1	)
Effect of exchange rates on cash and cash equivalents		7.0			(5.7	)
Change in cash and cash equivalents		859.1			(22.7	)
Cash and cash equivalents, beginning of year		525.5			415.8
Cash and cash equivalents, end of period	$	1,384.5		$	393.0

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

ZIMMER BIOMET HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONDENSED CON****SOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The financial data presented herein is unaudited and should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2024.

In our opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the financial position, results of operations and cash flows for the interim periods presented. The December 31, 2024 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). Results for interim periods should not be considered indicative of results for the full year.

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

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

We reclassified certain prior period amounts to conform to the current period presentation.

2. Significant Accounting Policies

Use of Estimates - The accompanying unaudited condensed consolidated financial statements are prepared in conformity with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have made our best estimates, as appropriate under GAAP, in the recognition of our assets and liabilities. Actual results could differ materially from these estimates.

Accounting Pronouncements Not Yet Adopted - In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which is an amendment to ASC Topic 740 - Income Taxes. The ASU improves the transparency of income tax disclosures by requiring greater disaggregated information about an entity’s effective tax rate reconciliation and requiring additional disclosures and disaggregation of income taxes, among other amendments to improve the effectiveness of income tax disclosures. The ASU is effective for fiscal years beginning after December 15, 2024. The guidance can be applied prospectively with an option to apply the guidance retrospectively. We will adopt this ASU for the fiscal year ending December 31, 2025. We are currently evaluating the impact this ASU will have on our financial statements and disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which is an amendment to ASC Topic 220 - Comprehensive Income. The ASU improves financial reporting by requiring disclosure of additional information about specific expense categories included in the expense captions presented on the income statement as well as disclosures about selling expenses. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods for fiscal years beginning after December 15, 2027. The guidance will be applied prospectively with an option to apply the guidance retrospectively. Early adoption of this ASU is permitted. We are currently evaluating the impact this ASU will have on our financial statements and disclosures.

3. Revenue

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


	Three Months Ended
	March 31,
	2025		2024
United States	$	1,113.6	$	1,099.2
International		795.5		790.0
Total	$	1,909.1	$	1,889.2

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


	Three Months Ended
	March 31,
	2025		2024
Knees	$	792.9	$	788.1
Hips		495.8		491.2
S.E.T.		470.5		452.6
Technology & Data, Bone Cement and Surgical		149.9		157.3
Total	$	1,909.1	$	1,889.2

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

This net sales presentation differs from our reportable operating segments, which are based upon our senior management organizational structure and how we allocate resources toward achieving operating profit goals. Each of our reportable operating segments sells all the product categories noted above. Accordingly, the only difference from the presentation above and our reportable operating segments are the geographic groupings.

4. Restructuring

In February 2025, our management approved a new global restructuring program (the "2025 Restructuring Plan") intended to reduce costs and transform the way we operate. The 2025 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $85 million. The pre-tax restructuring charges consist of employee termination benefits and other charges. The expenses incurred under our 2025 Restructuring Plan are reported in our “Restructuring and other cost reduction initiatives” financial statement line item. The following table summarizes the liabilities recognized related to the 2025 Restructuring Plan (in millions):


	Employee
	Termination			Contract
	Benefits			Terminations		Other		Total
Balance, December 31, 2024	$	-		$	-	$	-	$	-
Expenses incurred in the three months ended March 31, 2025		23.2			-		0.1		23.3
Cash payments		(10.2	)		-		-		(10.2	)
Balance, March 31, 2025	$	13.0		$	-	$	0.1	$	13.1

Expense incurred since the start of the 2025 Restructuring Plan	$	23.2		$	-	$	0.1	$	23.3

Expense estimated to be recognized for the 2025 Restructuring Plan	$	75.0		$	2.0	$	8.0	$	85.0

In December 2023, our management approved a global restructuring program (the “2023 Restructuring Plan”) intended to optimize our cost structure and drive greater efficiencies throughout the company. The 2023 Restructuring Plan concluded in the first quarter of 2025 and resulted in total pre-tax restructuring charges of approximately $117 million. The pre-tax restructuring charges consisted of employee termination benefits; contract terminations for sales agents; and other charges, such as consulting fees. The

expenses incurred under our 2023 Restructuring Plan are reported in our “Restructuring and other cost reduction initiatives” financial statement line item. The following table summarizes the liabilities recognized related to the 2023 Restructuring Plan (in millions):


	Employee
	Termination			Contract
	Benefits			Terminations			Other			Total
Balance, December 31, 2024	$	18.8		$	1.4		$	6.9		$	27.1
Expenses incurred in the three months ended March 31, 2025		(0.7	)		2.5			1.9			3.7
Cash payments		(7.9	)		(2.7	)		(5.7	)		(16.3	)
Foreign currency exchange rate changes		0.6			-			0.1			0.7
Balance, March 31, 2025	$	10.8		$	1.2		$	3.2		$	15.2

Expense incurred since the start of the 2023 Restructuring Plan	$	93.1		$	5.6		$	18.5		$	117.2

In December 2019, our Board of Directors approved, and we initiated, a global restructuring program (the “2019 Restructuring Plan”) with an objective of reducing structural costs to allow us to further invest in higher priority growth opportunities. The 2019 Restructuring Plan is expected to result in total pre-tax restructuring charges of approximately $400 million. The pre-tax restructuring charges consist of employee termination benefits; contract terminations for facilities and sales agents; and other charges, such as consulting fees, project management expenses and relocation costs, including costs to close a manufacturing facility. The remaining costs relate to the closure of a manufacturing facility, which is expected to be completed in 2025.

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


	Three Months Ended March 31, 2025
	Employee
	Termination		Contract
	Benefits		Terminations		Other		Total
Cost of products sold, excluding intangible asset amortization	$	-	$	-	$	1.9	$	1.9
Restructuring and other cost reduction initiatives		4.1		-		2.9		7.0
	$	4.1	$	-	$	4.8	$	8.9

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


	Employee
	Termination			Contract
	Benefits			Terminations			Other			Total
Balance, December 31, 2024	$	38.0		$	3.8		$	1.3		$	43.1
Expenses incurred in the three months ended March 31, 2025		4.1			-			4.8			8.9
Cash payments		(0.1	)		(0.5	)		(5.0	)		(5.6	)
Foreign currency exchange rate changes		1.2			-			-			1.2
Balance, March 31, 2025	$	43.2		$	3.3		$	1.1		$	47.6

Expense incurred since the start of the 2019 Restructuring Plan	$	156.2		$	35.0		$	185.2		$	376.4

Expense estimated to be recognized for the 2019 Restructuring Plan	$	160.0		$	35.0		$	205.0		$	400.0

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

5. Inventories


	March 31,		December 31,
	2025		2024
	(in millions)
Finished goods	$	1,756.8	$	1,771.7
Work in progress		215.1		175.1
Raw materials		272.3		288.5
Inventories	$	2,244.2	$	2,235.3

6. Property, Plant and Equipment


	March 31,			December 31,
	2025			2024
	(in millions)
Land	$	18.6		$	18.5
Buildings and equipment		2,302.6			2,273.1
Capitalized software costs		578.2			575.1
Instruments		3,664.8			3,589.6
Construction in progress		259.2			233.9
		6,823.4			6,690.2
Accumulated depreciation		(4,758.5	)		(4,641.4	)
Property, plant and equipment, net	$	2,064.9		$	2,048.8

We had $17.1 million and $10.4 million of property, plant and equipment included in accounts payable as of March 31, 2025 and December 31, 2024, respectively.

7. Acquisitions

On April 2, 2024, we completed the acquisition of all the outstanding shares of a third party orthopedics distributor in the Europe, Middle East and Africa ("EMEA") market. Prior to the acquisition, the distributor sold our products to its customers. The acquisition is expected to improve our margins and allow us to better serve the end customers.

On April 29, 2024, we completed the acquisition of all the outstanding shares of V.I.M.S. Vidéo Interventionnelle Médicale Scientifique, a privately-held medical device company based in France, which expands our portfolio in the sports medicine market.

On August 16, 2024, we completed the acquisition of all the outstanding shares of a privately-held medical device company based in the United States, which expands our portfolio in the CMFT market.

On October 11, 2024, we completed the acquisition of all the outstanding shares of OrthoGrid Systems, Inc. (“OrthoGrid”), a privately-held medical device technology company focused on artificial intelligence-driven surgical guidance for total hip replacement, which expands our portfolio in the hips market.

These four acquisitions are collectively referred to in this report as the “2024 acquisitions”. Initial consideration related to the 2024 acquisitions was $294.8 million, with additional consideration up to $111.6 million, subject to the achievement of future regulatory milestones and commercial milestones. We determined the fair value of the additional consideration to be $61.0 million as of the acquisition dates.

The goodwill related to the 2024 acquisitions represents the excess of the consideration transferred over the fair value of the net assets acquired. The goodwill related to these acquisitions is generated from the operational synergies, cross-selling opportunities and future development we expect to achieve from the technologies acquired. No goodwill is expected to be deductible for income tax purposes. The goodwill related to the two acquisitions that occurred in April of 2024 is included in the EMEA operating segment and reporting unit. The goodwill related to the acquisition that occurred in August of 2024 is included in the Americas operating segment and the Americas CMFT reporting unit. The goodwill related to the OrthoGrid acquisition is included in the Americas operating segment and the Americas Orthopedics reporting unit. In the three-month period ended March 31, 2025, there were no material adjustments to the preliminary values of the goodwill in any of the acquisitions. Changes related to foreign currency exchange rate

translation adjustments were the only significant activity related to our consolidated goodwill balance in the three-month period ended March 31, 2025.

The purchase price allocations for the acquisitions which occurred in April of 2024 were final as of March 31, 2025. The purchase price allocations for the August acquisition and the OrthoGrid acquisition are preliminary as of March 31, 2025. We need additional time to evaluate the tax attributes of those transactions, which may change the recognized tax assets and liabilities. There may be differences between the preliminary estimates of fair value and the final acquisition accounting. The final estimates of fair value are expected to be completed as soon as possible, but no later than one year after the respective acquisition dates.

The following table summarizes the estimates of fair value of the assets acquired and liabilities assumed related to the 2024 acquisitions (in millions):


Current assets	$	24.9
Intangible assets subject to amortization:
Technology		112.5
Trademarks and trade names		5.0
Customer relationships		40.8
Intangible assets not subject to amortization:
In-process research and development (IPR&D)		7.0
Goodwill		201.6
Other assets		4.7
Total assets acquired		396.4
Current liabilities		6.1
Deferred income taxes		33.9
Other long-term liabilities		0.5
Total liabilities assumed		40.6
Net assets acquired	$	355.8

The weighted average amortization periods selected for technology, customer relationships and trademarks and trade names were 14 years, 9 years and 14 years, respectively. Upon receiving regulatory approval subsequent to the applicable acquisition date, the $7.0 million of IPR&D was reclassified to a definite-lived intangible asset and began amortizing over the applicable estimated useful life.

We have not included pro forma information and certain other information under GAAP for any of the acquisitions described in this Note because they did not have a material impact on our financial position or results of operations.

In the three-month period ended March 31, 2024, we recognized intangible assets of $33.0 million related to agreements we entered into in order to acquire the ownership rights or gain access to various technologies. The weighted average amortization period selected for these intangible assets was 10 years. The contractual payments under these agreements are included in "Acquisition of intangible assets" in our condensed consolidated statements of cash flows. There were no material agreements of a similar nature entered into during the three-month period ended March 31, 2025.

8. Debt

Our debt consisted of the following (in millions):


	March 31,			December 31,
	2025			2024
Current portion of long-term debt
3.550% Senior Notes due 2025	$	-		$	863.0
3.050% Senior Notes due 2026		600.0			-
Total current portion of long-term debt	$	600.0		$	863.0
Long-term debt
3.050% Senior Notes due 2026	$	-		$	600.0
4.700% Senior Notes due 2027		600.0			-
5.350% Senior Notes due 2028		500.0			500.0
5.050% Senior Notes due 2030		550.0			-
3.550% Senior Notes due 2030		257.5			257.5
2.600% Senior Notes due 2031		750.0			750.0
5.200% Senior Notes due 2034		700.0			700.0
5.500% Senior Notes due 2035		600.0			-
4.250% Senior Notes due 2035		253.4			253.4
5.750% Senior Notes due 2039		317.8			317.8
4.450% Senior Notes due 2045		395.4			395.4
2.425% Euro Notes due 2026		540.0			517.7
1.164% Euro Notes due 2027		540.0			517.7
3.518% Euro Notes due 2032		756.0			724.8
Debt discount and issuance costs		(47.5	)		(34.1	)
Adjustment related to interest rate swaps		(136.3	)		(158.6	)
Total long-term debt	$	6,576.3		$	5,341.6

In the three-month period ended March 31, 2025, we redeemed the $863.0 million outstanding principal amount of our 3.550% Senior Notes due 2025.

On February 19, 2025, we completed the offering of $600.0 million aggregate principal amount of our 4.700% notes due February 19, 2027 (the “2027 Notes”), $550.0 million aggregate principal amount of our 5.050% notes due February 19, 2030 (the “2030 Notes”) and $600.0 million aggregate principal amount our 5.500% notes due February 19, 2035 (the “2035 Notes”). Interest for these notes is payable semi-annually in arrears on February 19 and August 19 of each year, commencing on August 19, 2025. We received proceeds of $1,748.1 million from the 2027 Notes, 2030 Notes, and 2035 Notes.

On June 28, 2024, we entered into a new five-year revolving credit agreement (the “2024 Five-Year Credit Agreement”) and a new 364-day revolving credit agreement (the “2024 364-Day Revolving Credit Agreement”), as described below. Borrowings under these credit agreements will be used for general corporate purposes.

The 2024 Five-Year Credit Agreement contains a five-year unsecured revolving facility of $1.5 billion (the “2024 Five-Year Revolving Facility”). The 2024 Five-Year Credit Agreement replaced the previous revolving credit agreement entered into on July 7, 2023 (the “2023 Five-Year Credit Agreement”), which contained a five-year unsecured revolving facility of $1.5 billion (the “2023 Five-Year Revolving Facility”). There were no outstanding borrowings under the 2023 Five-Year Credit Agreement at the time it was terminated.

The 2024 Five-Year Credit Agreement will mature on June 28, 2029, with two one-year extensions exercisable at our discretion and subject to required lender consent. The 2024 Five-Year Credit Agreement also includes an uncommitted incremental feature allowing us to request an increase of the facility by an aggregate amount of up to $500.0 million.

Borrowings under the 2024 Five-Year Credit Agreement bear interest at floating rates, based upon either an adjusted term secured overnight financing rate (“Term SOFR”) for the applicable interest period or an alternate base rate, in each case, plus an applicable margin determined by reference to our senior unsecured long-term debt credit rating. We pay a facility fee on the aggregate amount of the 2024 Five-Year Revolving Facility at a rate determined by reference to our senior unsecured long-term debt credit rating.

The 2024 Five-Year Credit Agreement contains customary affirmative and negative covenants and events of default for unsecured financing arrangements, including, among other things, limitations on consolidations, mergers, and sales of assets. The 2024 Five-Year Credit Agreement also requires us to maintain a consolidated indebtedness to consolidated EBITDA ratio of no greater than 4.5 to 1.0 as of the last day of any period of four consecutive fiscal quarters (with such ratio subject to increase to 5.0 to 1.0 for a period of time in connection with a qualified material acquisition and certain other restrictions). We were in compliance with all covenants under the 2024 Five-Year Credit Agreement as of March 31, 2025. As of March 31, 2025, there were no outstanding borrowings under the 2024 Five-Year Credit Agreement.

The 2024 364-Day Revolving Credit Agreement is an unsecured revolving credit facility in the principal amount of $1.0 billion (the “2024 364-Day Revolving Facility”). The 2024 364-Day Revolving Credit Agreement replaced a credit agreement entered into on July 7, 2023, which was also a 364-day unsecured revolving credit facility of $1.0 billion (the “2023 364-Day Revolving Facility”). There were no borrowings outstanding under the 2023 364-Day Revolving Facility when it was terminated.

The 2024 364-Day Revolving Facility will mature on June 27, 2025. Borrowings under the 2024 364-Day Revolving Credit Agreement bear interest at floating rates based upon either an adjusted Term SOFR for the applicable interest period or an alternate base rate, in each case, plus an applicable margin determined by reference to our senior unsecured long-term debt credit rating. We pay a facility fee on the aggregate amount of the 2024 364-Day Revolving Facility at a rate determined by reference to our senior unsecured long-term debt credit rating.

The 2024 364-Day Revolving Credit Agreement contains customary affirmative and negative covenants and events of default for an unsecured financing arrangement including, among other things, limitations on consolidations, mergers, and sales of assets. The 2024 364-Day Revolving Credit Agreement also requires us to maintain a consolidated indebtedness to consolidated EBITDA ratio of no greater than 4.5 to 1.0 as of the last day of any period of four consecutive fiscal quarters (with such ratio subject to increase to 5.0 to 1.0 in connection with a qualified material acquisition and certain other restrictions). We were in compliance with all covenants under the 2024 364-Day Revolving Credit Agreement as of March 31, 2025. As of March 31, 2025, there were no outstanding borrowings under the 2024 364-Day Revolving Credit Agreement.

On August 28, 2023, we entered into an uncommitted facility letter (the "Uncommitted Credit Facility"), which provides that from time to time, we may request, and the lender in its absolute and sole discretion may provide, short-term loans. Borrowings under the Uncommitted Credit Facility may be used only for general corporate and working capital purposes. The Uncommitted Credit Facility provides that the aggregate principal amount of outstanding borrowings at any time shall not exceed $300.0 million. Each borrowing under the Uncommitted Credit Facility will mature on the maturity date specified by the lender at the time of the advance, which will be no more than 90 days following the date of the advance. The Uncommitted Credit Facility and borrowings thereunder are unsecured. Borrowings under the Uncommitted Credit Facility bear interest at floating rates, based upon either Term SOFR for the applicable interest period, the prime rate, or lender’s cost of funds, in each case, plus an applicable margin determined at the time of each borrowing. The Uncommitted Credit Facility includes customary affirmative and negative covenants and events of default for unsecured uncommitted financing arrangements. We were in compliance with all covenants under the Uncommitted Credit Facility as of March 31, 2025. As of March 31, 2025, there were no outstanding borrowings under the Uncommitted Credit Facility.

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

The estimated fair value of our senior notes, which includes our Euro notes, as of March 31, 2025, based on quoted prices for the specific securities from transactions in over-the-counter markets (Level 2), was $7,159.9 million.

9. Accumulated Other Comprehensive Income

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

Our AOCI is comprised of foreign currency translation adjustments, unrealized gains and losses on cash flow hedges and unrecognized prior service costs and gains and losses in actuarial assumptions related to our defined benefit plans. Foreign currency translation adjustments are reclassified to net earnings upon sale or upon a complete or substantially complete liquidation of an investment in a foreign entity. Unrealized gains and losses on cash flow hedges are reclassified to net earnings when the hedged item

affects net earnings. Amounts related to defined benefit plans that are in AOCI are reclassified over the service periods of employees in the plan.

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


	Foreign			Cash			Defined
	Currency			Flow			Benefit			Total
	Translation			Hedges			Plan Items			AOCI
Balance at December 31, 2024	$	(239.0	)	$	88.2		$	(112.0	)	$	(262.8	)
AOCI before reclassifications		24.8			(32.1	)		-			(7.3	)
Reclassifications to statements of earnings		-			(17.3	)		0.1			(17.2	)
Balance at March 31, 2025	$	(214.2	)	$	38.8		$	(111.9	)	$	(287.3	)

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


	Amount of Gain (Loss)
	Reclassified from AOCI
	Three Months Ended
	March 31,						Location on
Component of AOCI	2025			2024			Statements of Earnings
Cash flow hedges
Foreign exchange forward contracts	$	21.0		$	22.0		Cost of products sold
Forward starting interest rate swaps		(0.2	)		(0.2	)	Interest expense, net
		20.8			21.8		Total before tax
		3.5			3.8		Provision for income taxes
	$	17.3		$	18.0		Net of tax
Defined benefit plans
Prior service cost and unrecognized actuarial loss	$	(0.2	)	$	0.8		Other income (expense), net
		(0.1	)		(0.3	)	Provision for income taxes
	$	(0.1	)	$	1.1		Net of tax
Total reclassifications	$	17.2		$	19.1		Net of tax

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


	Three Months Ended March 31, 2025
	Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	1.5			(23.3	)	$	24.8
Unrealized cash flow hedge gains		(32.8	)		(0.7	)		(32.1	)
Reclassification adjustments on cash flow hedges		(20.8	)		(3.5	)		(17.3	)
Adjustments to prior service cost and unrecognized actuarial assumptions		0.2			0.1			0.1
Total Other Comprehensive Income (Loss)	$	(51.9	)	$	(27.4	)	$	(24.5	)


	Three Months Ended March 31, 2024
	Before Tax			Tax			Net of Tax
Foreign currency cumulative translation adjustments	$	(19.2	)	$	16.6		$	(35.8	)
Unrealized cash flow hedge gains		43.4			8.7			34.7
Reclassification adjustments on cash flow hedges		(21.8	)		(3.8	)		(18.0	)
Adjustments to prior service cost and unrecognized actuarial assumptions		(0.8	)		0.3			(1.1	)
Total Other Comprehensive Income (Loss)	$	1.6		$	21.8		$	(20.2	)

10. Fair Value Measurement of Assets and Liabilities

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


	As of March 31, 2025
			Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	41.3	$	-	$	41.3	$	-
Cross-currency interest rate swaps		34.3		-		34.3		-
Total Assets	$	75.6	$	-	$	75.6	$	-

Liabilities
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	4.6	$	-	$	4.6	$	-
Cross-currency interest rate swaps		12.8		-		12.8		-
Interest rate swaps		136.3		-		136.3		-
Contingent payments related to acquisitions		137.7		-		-		137.7
Total Liabilities	$	291.4	$	-	$	153.7	$	137.7


	As of December 31, 2024
			Fair Value Measurements at Reporting Date Using:
Description	Recorded Balance		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	89.5	$	-	$	89.5	$	-
Cross-currency interest rate swaps		50.3		-		50.3		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts		1.8		-		1.8		-
Total Assets	$	141.6	$	-	$	141.6	$	-

Liabilities
Derivatives designated as hedges, current and long-term
Foreign currency forward contracts	$	1.8	$	-	$	1.8	$	-
Cross-currency interest rate swaps		14.2		-		14.2		-
Interest rate swaps		158.6		-		158.6		-
Derivatives not designated as hedges, current and long-term
Foreign currency forward contracts		0.8		-		0.8		-
Contingent payments related to acquisitions		180.7		-		-		180.7
Total Liabilities	$	356.1	$	-	$	175.4	$	180.7

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

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

Contingent payments related to acquisitions consist of sales-based payments and regulatory milestones, and are valued using discounted cash flow techniques. The fair value of sales-based payments is based upon significant unobservable inputs such as probability-weighted future revenue estimates and simulating the numerous potential outcomes, and changes as revenue estimates increase or decrease. The fair value of the regulatory milestones is based on the probability of success in obtaining the specified regulatory approval. The fair value of sales-based payments and regulatory milestones utilize significant unobservable inputs, which could reasonably change in future periods resulting in significantly higher or lower fair value measurements. If our estimates of future revenue or probability of achievement increase, the fair value measurements for these contingent payments will increase. Vice versa, if our estimates of future revenue or probability of achievement decrease, the fair value measurements for these contingent payments will decline.

Contingent payments related to our acquisition of Embody, Inc. ("Embody") are to be settled by issuance of our common stock and cash payments. During the three-month period ended March 31, 2025, we issued 0.3 million shares of our common stock valued at $27.8 million and paid $4.4 million of cash for a commercial milestone related to the Embody acquisition. The fair value of common stock was determined to be $101.02 per share, which represented the average of our high and low stock prices on the settlement date.

The following table provides a reconciliation of the beginning and ending balances of items measured at fair value on a recurring basis in the tables above that used significant unobservable inputs (Level 3) (in millions):


	Level 3 - Liabilities
Contingent payments related to acquisitions
Beginning balance December 31, 2024	$	180.7
Change in estimates		1.7
Settlements		(45.2	)
Foreign currency impact		0.6
Ending balance March 31, 2025	$	137.7

Changes in estimates for contingent payments related to acquisitions are recognized in the "Acquisition, integration, divestiture and related" line item on our condensed consolidated statements of earnings.

11. Derivative Instruments and Hedging Activities

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

Interest Rate Risk

Derivatives Designated as Fair Value Hedges

We currently use fixed-to-variable interest rate swaps to manage our exposure to interest rate risk from our cash investments and debt portfolio. These derivative instruments are designated as fair value hedges under GAAP. Changes in the fair value of the derivative instrument are recorded in current earnings and are offset by gains or losses on the underlying debt instrument.

As of March 31, 2025 and December 31, 2024, the following amounts were recorded on our condensed consolidated balance sheets related to cumulative basis adjustments for fair value hedges (in millions):


	Carrying Amount of the Hedged Liabilities				Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Liabilities
Balance Sheet Line Item	March 31, 2025		December 31, 2024		March 31, 2025			December 31, 2024
Long-term debt	$	860.0	$	837.6	$	(136.3	)	$	(158.6	)

Derivatives Designated as Cash Flow Hedges

In 2014, we entered into forward starting interest rate swaps that were designated as cash flow hedges of our thirty-year tranche of senior notes due 2045 we expected to issue in 2015. The forward starting interest rate swaps mitigated the risk of changes in interest rates prior to the completion of the notes offering. The interest rate swaps were settled, and the remaining loss to be recognized at March 31, 2025 was $23.0 million, which will be recognized using the effective interest rate method over the remaining maturity period of the hedged notes.

Foreign Currency Exchange Rate Risk

We operate on a global basis and are exposed to the risk that our financial condition, results of operations and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. We also designated our Euro notes as net investment hedges of investments in foreign subsidiaries. We are primarily exposed to foreign currency exchange rate risk with respect to transactions and net assets denominated in Euros, Swiss Francs, Japanese Yen, British Pounds, Chinese Renminbi, Canadian Dollars, Australian Dollars, Korean Won, Swedish Krona, Czech Koruna, Thai Baht, Taiwan Dollars, South African Rand, Russian Rubles, Indian Rupees, Turkish Lira, Polish Zloty, Danish Krone, and Norwegian Krone. We do not use derivative financial instruments for trading or speculative purposes.

Derivatives Designated as Net Investment Hedges

We are exposed to the impact of foreign exchange rate fluctuations in the investments in our wholly-owned foreign subsidiaries that are denominated in currencies other than the U.S. Dollar. In order to mitigate the volatility in foreign exchange rates, we issued Euro notes in December 2016, November 2019 and November 2024 and designated 100 percent of the Euro notes to hedge our net investment in certain wholly-owned foreign subsidiaries that have a functional currency of the Euro. All changes in the fair value of a hedging instrument designated as a net investment hedge are recorded as a component of AOCI in the condensed consolidated balance sheets.

At March 31, 2025, we had receive-fixed-rate, pay-fixed-rate cross-currency interest swaps with notional amounts outstanding of Japanese Yen 54.1 billion and Swiss Franc 125 million. These transactions further hedge our net investment in certain wholly-owned foreign subsidiaries that have a functional currency of Japanese Yen and Swiss Franc. All changes in the fair value of a derivative instrument designated as a net investment hedge are recorded as a component of AOCI in the condensed consolidated balance sheets. The portion of this change related to the excluded component will be amortized into earnings over the life of the derivative while the remainder will be recorded in AOCI until the hedged net investment is sold or substantially liquidated. We recognize the excluded component in interest expense, net on our condensed consolidated statements of earnings. The net cash received or paid related to the receive-fixed-rate, pay-fixed-rate component of the cross-currency interest rate swaps is reflected in investing cash flows in our condensed consolidated statements of cash flows. In the three-month period ended March 31, 2025, Euro 225 million of our cross-currency interest rate swaps matured at a loss of $8.0 million. The settlement of this loss with the counterparties is reflected in investing cash flows in our condensed consolidated statements of cash flows and will remain in AOCI on our condensed consolidated balance sheet until the hedged net investment is sold or substantially liquidated.

Derivatives Designated as Cash Flow Hedges

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

We perform quarterly assessments of hedge effectiveness by verifying and documenting the critical terms of the hedge instrument and confirming that forecasted transactions have not changed significantly. We also assess on a quarterly basis whether there have been adverse developments regarding the risk of a counterparty default. For derivatives which qualify as hedges of future cash flows, the gains and losses are temporarily recorded in AOCI and then recognized in cost of products sold when the hedged item affects net earnings. On our condensed consolidated statements of cash flows, the settlements of these cash flow hedges are recognized in operating cash flows.

For foreign currency exchange forward contracts and options outstanding at March 31, 2025, 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, Indian Rupees, Polish Zloty, Danish Krone, and Norwegian Krone and obligations to purchase Swiss Francs and sell U.S. Dollars. These derivatives mature at dates ranging from April 2025 through September 2027. As of March 31, 2025, the notional amounts of outstanding forward contracts and options entered into with third

parties to purchase U.S. Dollars were $1,479.2 million. As of March 31, 2025, the notional amounts of outstanding forward contracts and options entered into with third parties to purchase Swiss Francs were $411.8 million.

Derivatives Not Designated as Hedging Instruments

We enter into foreign currency forward exchange contracts with terms of one to three months to manage currency exposures for monetary assets and liabilities denominated in a currency other than an entity’s functional currency. As a result, any foreign currency remeasurement gains/losses recognized in earnings are generally offset with gains/losses on the foreign currency forward exchange contracts in the same reporting period. The net amount of these offsetting gains/losses is recorded in other income (expense), net. Any outstanding contracts are recorded on the balance sheet at fair value as of the end of the reporting period. The notional amounts of these contracts are generally in a range of $1.25 billion to $1.75 billion per quarter.

Income Statement Presentation

Derivatives Designated as Cash Flow Hedges

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


	Amount of Gain (Loss)						Amount of Gain (Loss)
	Recognized in AOCI						Reclassified from AOCI
	Three Months Ended						Three Months Ended
	March 31,					Location on	March 31,
Derivative Instrument	2025			2024		Statements of Earnings	2025			2024
Foreign exchange forward contracts	$	(32.8	)	$	43.4	Cost of products sold	$	21.0		$	22.0
Forward starting interest rate swaps		-			-	Interest expense, net		(0.2	)		(0.2	)
	$	(32.8	)	$	43.4		$	20.8		$	21.8

The fair value of outstanding derivative instruments designated as cash flow hedges and recorded on our condensed consolidated balance sheet at March 31, 2025, together with settled derivatives where the hedged item has not yet affected earnings, was a net unrealized gain of $49.4 million, or $38.8 million after taxes, which is deferred in AOCI. A gain of $57.2 million, or $46.8 million after taxes, is expected to be reclassified to earnings in cost of products sold, and a loss of $0.8 million, or $0.6 million after taxes, is expected to be reclassified to earnings in interest expense, net over the next twelve months.

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


	Location and Amount of Gain/(Loss) Recognized in Income on Fair Value, Cash Flow and Net Investment Hedging Relationships
	Three Months Ended					Three Months Ended
	March 31, 2025					March 31, 2024
	Cost of		Interest			Cost of		Interest
	Products		Expense,			Products		Expense,
	Sold		Net			Sold		Net
Total amounts of income and expense line items presented in the statements of earnings in which the effects of fair value, cash flow and net investment hedges are recorded	$	549.8	$	(66.2	)	$	512.3	$	(50.7	)
The effects of fair value, cash flow and net investment hedging:
Loss on fair value hedging relationships
Interest rate swaps		-		(8.0	)		-		(10.6	)
Gain (loss) on cash flow hedging relationships
Foreign exchange forward contracts		21.0		-			22.0		-
Forward starting interest rate swaps		-		(0.2	)		-		(0.2	)
Gain on net investment hedging relationships
Cross-currency interest rate swaps		-		5.3			-		8.2

Derivatives Not Designated as Hedging Instruments

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


		Three Months Ended
	Location on	March 31,
Derivative Instrument	Statements of Earnings	2025			2024
Foreign exchange forward contracts	Other income (expense), net	$	(2.6	)	$	8.4

These gains (losses) do not reflect offsetting gains of $1.4 million and losses of $12.2 million in the three-month periods ended March 31, 2025, and 2024, respectively, recognized in other income (expense), net as a result of foreign currency remeasurement of monetary assets and liabilities denominated in a currency other than an entity’s functional currency.

Balance Sheet Presentation

As of March 31, 2025 and December 31, 2024, all derivatives designated as fair value hedges, cash flow hedges and net investment hedges are recorded at fair value on our condensed consolidated balance sheets. On our condensed consolidated balance sheets, we recognize individual forward contracts with the same counterparty on a net asset/liability basis if we have a master netting agreement with the counterparty. Under these master netting agreements, we are able to settle derivative instrument assets and liabilities with the same counterparty in a single transaction, instead of settling each derivative instrument separately. We have master netting agreements with substantially all of our counterparties. The fair value of derivative instruments on a gross basis is as follows (in millions):


	As of March 31, 2025			As of December 31, 2024
	Balance			Balance
	Sheet	Fair		Sheet	Fair
	Location	Value		Location	Value
Asset Derivatives Designated as Hedges
Foreign exchange forward contracts	Other current assets	$	47.0	Other current assets	$	82.3
Cross-currency interest rate swaps	Other current assets		-	Other current assets		1.6
Foreign exchange forward contracts	Other assets		8.8	Other assets		24.5
Cross-currency interest rate swaps	Other assets		34.3	Other assets		48.7
Total asset derivatives		$	90.1		$	157.1

Asset Derivatives Not Designated as Hedges
Foreign exchange forward contracts	Other current assets	$	-	Other current assets	$	7.1

Liability Derivatives Designated as Hedges
Foreign exchange forward contracts	Other current liabilities	$	13.3	Other current liabilities	$	13.8
Cross-currency interest rate swaps	Other current liabilities		12.8	Other current liabilities		12.0
Foreign exchange forward contracts	Other long-term liabilities		5.8	Other long-term liabilities		5.3
Cross-currency interest rate swaps	Other long-term liabilities		-	Other long-term liabilities		2.2
Interest rate swaps	Other long-term liabilities		136.3	Other long-term liabilities		158.6
Total liability derivatives		$	168.2		$	191.9

Liability Derivatives Not Designated as Hedges
Foreign exchange forward contracts	Other current liabilities	$	-	Other current liabilities	$	6.1

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


		As of March 31, 2025						As of December 31, 2024
Description	Location	Gross Amount		Offset		Net Amount in Balance Sheet		Gross Amount		Offset		Net Amount in Balance Sheet
Asset Derivatives
Cash flow hedges	Other current assets	$	47.0	$	10.7	$	36.3	$	82.3	$	12.6	$	69.7
Cash flow hedges	Other assets		8.8		3.8		5.0		24.5		4.7		19.8
Derivatives Not Designated as Hedges	Other current assets		-		-		-		7.1		5.3		1.8

Liability Derivatives
Cash flow hedges	Other current liabilities		13.3		10.7		2.6		13.8		12.6		1.2
Cash flow hedges	Other long-term liabilities		5.8		3.8		2.0		5.3		4.7		0.6
Derivatives Not Designated as Hedges	Other current liabilities		-		-		-		6.1		5.3		0.8

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


	Amount of Gain (Loss)
	Recognized in AOCI
	Three Months Ended
	March 31,
Derivative Instrument	2025			2024
Euro Notes	$	(75.7	)	$	24.4
Cross-currency interest rate swaps		(22.6	)		46.1
	$	(98.3	)	$	70.5

12. Income Taxes

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

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

The IRS has proposed adjustments for tax years 2013-2015, primarily related to transfer pricing involving our cost sharing agreement between the U.S. and Switzerland affiliated companies and the reallocation of profits between certain of our U.S. and foreign subsidiaries. We intend to continue to vigorously contest the adjustment, and we will pursue all available administrative and, if necessary, judicial remedies. If we pursue judicial remedies in the U.S. Tax Court for years 2013-2015, a number of years will likely elapse before such matters are finally resolved. No payment of any amount related to this matter is required to be made, if at all, until all applicable proceedings have been completed.

The IRS has proposed adjustments for tax years 2016-2019, primarily related to the U.S. taxation of foreign earnings and profits, which could result in additional material tax expense if we are unsuccessful in defending our position. This includes a proposed increase to our U.S. federal taxable income, which would result in additional tax expense of approximately $312 million, subject to interest. We strongly believe that the position of the IRS, with regard to this matter, is inconsistent with the applicable U.S. Treasury

Regulations. We intend to continue to vigorously contest the adjustment, and we will pursue all available administrative and, if necessary, judicial remedies. If we pursue judicial remedies in the U.S. Tax Court for years 2016-2019, a number of years will likely elapse before such matters are finally resolved. No payment of any amount related to this matter is required to be made, if at all, until all applicable proceedings have been completed.

In the three-month period ended March 31, 2025, our effective tax rate (“ETR”) was 20.3 percent compared to 19.7 percent for the three-month period ended March 31, 2024. The 20.3 percent and the 19.7 percent ETR in the three-month periods ended March 31, 2025 and 2024, respectively, were primarily driven by our mix of earnings between U.S. and foreign locations. Absent discrete tax events, we expect our future ETR will be lower than the U.S. corporate income tax rate of 21.0 percent due to our mix of earnings between U.S. and foreign locations, which generally have lower corporate income tax rates. Our ETR in future periods could also potentially be impacted by: changes in our mix of pre-tax earnings; changes in tax rates, tax laws or their interpretation; the outcome of various federal, state and foreign audits, appeals, and litigation; and the expiration of certain statutes of limitations. Currently, we cannot reasonably estimate the impact of these items on our financial results.

13. Earnings Per Share

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


	Three Months Ended
	March 31,
	2025		2024
Weighted average shares outstanding for basic net earnings per share		198.9		205.2
Effect of dilutive stock options and other equity awards		0.8		1.0
Weighted average shares outstanding for diluted net earnings per share		199.7		206.2

During the three-month periods ended March 31, 2025 and 2024, an average of 4.7 million options and 1.6 million options, respectively, to purchase shares of common stock were not included in the computation of diluted earnings per share because the effect would have been antidilutive.

14. Segment Information

We design, manufacture and market orthopedic reconstructive products; sports medicine, biologics, extremities and trauma products; CMFT; surgical products; and a suite of integrated digital and robotic technologies that leverage data, data analytics and artificial intelligence. Our chief operating decision maker (“CODM”) is our President and Chief Executive Officer. Our CODM allocates resources to achieve our operating profit goals through three operating segments. These operating segments, which also constitute our reportable segments, are Americas; EMEA; and Asia Pacific.

Our CODM evaluates performance based upon segment operating profit exclusive of operating expenses and income pertaining to certain inventory and manufacturing-related charges, intangible asset amortization, goodwill and intangible asset impairment, restructuring and other cost reduction initiatives, acquisition, integration, divestiture and related, certain litigation, certain European Union Medical Device Regulation ("EU MDR") expenses, other charges and corporate functions (collectively referred to as “Corporate items”). Corporate functions include corporate legal, finance, information technology, human resources and other corporate departments as well as stock-based compensation and certain operations, distribution, quality assurance, regulatory expenses, research and development and marketing expenses. Intercompany transactions have been eliminated from segment operating profit. In addition to evaluating performance on a monthly basis, the CODM uses sales and operating profit information to manage the business, including identifying areas of focus and growth, reviewing operating trends and allocating resources. Our CODM reviews accounts receivables and inventory assets (“Segment Assets”) as part of operating segment performance.

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

We reclassified certain insignificant prior period expenses to conform to the current period presentation.

Segment operating profit measures by segment are as follows (in millions):


	Americas				EMEA				Asia Pacific				Total
	Three Months Ended March 31,				Three Months Ended March 31,				Three Months Ended March 31,				Three Months Ended March 31,
	2025		2024		2025		2024		2025		2024		2025			2024


Net Sales	$	1,204.3	$	1,186.5	$	443.1	$	444.8	$	261.7	$	258.0	$	1,909.1		$	1,889.2
Cost of products sold, excluding intangible asset amortization		266.3		237.0		167.7		154.8		83.8		75.1
Selling, general and administrative		313.4		309.1		124.0		133.2		85.4		85.2
Research and development		1.0		1.2		2.8		2.0		3.3		3.3
Segment profit	$	623.6	$	639.2	$	148.6	$	154.8	$	89.2	$	94.4	$	861.4		$	888.4
Corporate items														418.1			480.4
Intangible asset amortization														151.0			142.1
Other (income) expense, net														(2.9	)		0.1
Interest expense, net														66.2			50.7
Earnings before income taxes													$	229.0		$	215.1

Other segment information is as follows (in millions):


	Depreciation and Amortization				Segment Assets
	Three Months Ended March 31,				As of
	2025		2024		March 31, 2025		December 31, 2024


Americas	$	37.5	$	36.5	$	1,352.0	$	1,344.0
EMEA		15.8		16.8		705.0		655.0
Asia Pacific		15.3		15.4		316.0		311.0
Corporate items		34.8		27.8		1,404.6		1,406.0
Intangible asset amortization		151.0		142.1		-		-
Total	$	254.4	$	238.6	$	3,777.6	$	3,716.0

15. Commitments and Contingencies

Litigation

From time to time, we are involved in various legal proceedings, including product liability, intellectual property, stockholder matters, tax disputes, commercial disputes, employment matters, whistleblower and qui tam claims and investigations, governmental proceedings and investigations, and other legal matters that arise in the normal course of our business. These include, among others, product liability claims relating to the Durom Cup, Zimmer M/L Taper, M/L Taper with Kinectiv Technology, Versys Femoral Head and the M2a-Magnum hip system. On a quarterly and annual basis, we review relevant information with respect to loss contingencies and update our accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews. We establish liabilities for loss contingencies on an undiscounted basis when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. For matters where a loss is believed to be reasonably possible, but not probable, or if no reasonable estimate of known or probable loss is available, no accrual has been made.

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

We recognize litigation-related charges and gains in Selling, general and administrative expense on our condensed consolidated statement of earnings. During the three-month periods ended March 31, 2025 and 2024, we recognized $2.1 million and $1.0 million, respectively, of net litigation-related charges. At March 31, 2025 and December 31, 2024, accrued litigation liabilities were $135.4 million and $156.4 million, respectively. These litigation-related charges and accrued liabilities reflect all of our litigation-related contingencies. The ultimate cost of litigation could be materially different than the amount of the current estimates and accruals and could have a material adverse impact on our financial condition and results of operations.

Other Contingencies

Contractual obligations: We have entered into development, distribution and other contractual arrangements that may result in future payments dependent upon various events such as the achievement of certain product R&D milestones, sales milestones, or, at our discretion, maintenance of exclusive rights to distribute a product. Since there is uncertainty on the timing or whether such payments will have to be made, they have not been recognized on our condensed consolidated balance sheets. These estimated payments could range from $0 to approximately $325 million.

16. Subsequent Event

On April 21, 2025, (the "Closing Date") we completed the acquisition of all outstanding shares of Paragon 28, Inc. ("Paragon 28"). At the effective time of the acquisition, each outstanding common share of Paragon 28 was automatically cancelled and retired and converted into the right to receive (i) $13.00 in cash and (ii) a non-tradeable contingent value right (“CVR”) entitling the holder to receive up to $1.00 per share in cash if certain revenue milestones are achieved. Upon completion of the acquisition, Paragon 28 became a wholly-owned subsidiary of Zimmer Biomet.

Paragon 28 is a leading medical device company focused exclusively on the foot and ankle orthopedic segment. The acquisition increases our market share in the foot and ankle space, which has been growing faster than some of the other spaces in which we compete. We paid approximately $1.4 billion in initial consideration and acquisition-related costs to complete the transaction utilizing cash on hand and by borrowing $400.0 million on our 2024 Five-Year Credit Agreement and $150.0 million on our Uncommitted Credit Facility. The CVRs issued to former Paragon 28 shareholders may result in up to approximately $90 million in additional consideration if certain revenue milestones are achieved. Additional information related to the acquisition of Paragon 28, such as the fair value of assets and liabilities acquired, has not been provided due to insufficient time to complete the procedures necessary to determine such amounts.

Paragon 28-Related Contingencies

Paragon 28 Securities Class Action Litigation. In September 2024, a putative class action lawsuit was filed against Paragon 28, Inc. (“Paragon 28”), its former CEO Albert DaCosta, its former CFO Stephen M. Deitsch, and its former interim CFO Kristina Wright, in the U.S. District Court for the District of Colorado (the “District of Colorado”), captioned Ellington v. Paragon 28, Inc. et al., (the “Ellington Action”). In October 2024, a second putative class action lawsuit was filed against the same parties also in the District of Colorado, captioned Tiedt v. Paragon 28, Inc., (the “Tiedt Action” and, together with the Ellington Action, the “Paragon Actions”). The Paragon Actions generally allege that the defendants made false and misleading statements in violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder related to Paragon 28’s financial statements and the effectiveness of Paragon 28’s internal financial controls. On April 4, 2025, the District of Colorado consolidated the Paragon Actions and appointed Nicholas Tiedt as lead plaintiff under the Private Securities Litigation Reform Act of 1995.

SEC Subpoena to Paragon 28. In September 2024, Paragon 28 received a subpoena from the U.S. Securities and Exchange Commission (“SEC”) for documents related to Paragon 28’s SEC Form 8-K, published on July 30, 2024, which stated that certain previously issued financial statements should no longer be relied upon due to errors in such financial statements and that a restatement of those prior financial statements was required. Paragon 28 was, and now Zimmer Biomet is, cooperating with the SEC's investigation, which is ongoing.

We are in the process of evaluating these contingencies as part of the Paragon 28 purchase price allocation as of the Closing Date.

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