# Table	of	Contents

# UNITED	STATES	SECURITIES	AND	EXCHANGE	COMMISSION

ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)

OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934

# ZIMMER	BIOMET	HOLDINGS,	INC.

(Exact	name	of	registrant	as	specified	in	its	charter)

Delaware

(State	of	Incorporation)

345	East	Main	Street	Warsaw,	Indiana

(Address	of	principal	executive	offices)

(IRS	Employer	Identification	No.)

(Zip	Code)

Registrant's	telephone	number,	including	area	code: (574)	267-6131

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

Securities	registered	pursuant	to	Section	12(g)	of	the	Act:	None

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.		Yes		þ								No		¨

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.		Yes		¨								No		þ

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

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

Indicate	by	check	mark	if	disclosure	of	delinquent	filers	pursuant	to	Item	405	of	Regulation	S-K	is	not	contained	herein,	and	will	not	be	contained,	to	the	best	of	the registrant's	knowledge,	in	definitive	proxy	or	information	statements	incorporated	by	reference	in	Part	III	of	this	Form	10-K	or	any	amendment	to	this	Form	10-K.		þ Indicate	by	checkmark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer	or	a	smaller	reporting	company.	See	the	definitions of	"large	accelerated	filer",	"accelerated	filer"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act.	(Check	One):

Large	accelerated	filer		þ

Accelerated	filer		¨

Non-accelerated	filer		¨

Smaller	reporting	company		¨

(Do	not	check	if	a	smaller	reporting	company)

Indicate	by	checkmark	whether	the	registrant	is	a	shell	company	(as	defined	Exchange	Act	Rule	12b-2).		Yes		¨								No		þ

The	aggregate	market	value	of	shares	held	by	non-affiliates	was	$18,873,280,711	(based	on	the	closing	price	of	these	shares	on	the	New	York	Stock	Exchange	on	June 30,	2015	and	assuming	solely	for	the	purpose	of	this	calculation	that	all	directors	and	executive	officers	of	the	registrant	are	"affiliates").	As	of	February	24,	2016, 198,834,321	shares	of	the	registrant's	$.01	par	value	common	stock	were	outstanding.

Documents	Incorporated	by	Reference

Document

Portions	of	the	Proxy	Statement	with	respect	to	the	2016	Annual	Meeting	of	Stockholders

Part	III

# Cautionary	Note	About	Forward-Looking	Statements

This	Annual	Report	on	Form	10-K	includes	"forward-looking"	statements	within	the	meaning	of	federal	securities	laws.	Forward-looking	statements	may	be identified	by	the	fact	that	they	do	not	relate	strictly	to	historical	or	current	facts.	They	often	include	words	such	as	"may,"	"will,"	"can,"	"should,"	"would,"	"could," "anticipate,"	"expect,"	"plan,"	"seek,"	"believe,"	"predict,"	"estimate,"	"potential,"	"project,"	"assume,"	"guide,"	"target,"	"forecast,"	"intend,"	"strategy,"	"is	confident that,"	"future,"	"opportunity,"	and	similar	expressions.	Forward-looking	statements	are	based	on	current	expectations	and	assumptions	that	are	subject	to	risks	and uncertainties	which	may	cause	actual	results	to	differ	materially	from	the	forward-looking	statements.	A	detailed	discussion	of	risks	and	uncertainties	that	could	cause actual	results	and	events	to	differ	materially	from	such	forward-looking	statements	is	included	in	the	section	titled	"Risk	Factors"	(refer	to	Part	I,	Item	1A	of	this	report). Readers	of	this	report	are	cautioned	not	to	place	undue	reliance	on	these	forward-looking	statements.	While	we	believe	the	assumptions	on	which	the	forward-looking statements	are	based	are	reasonable,	there	can	be	no	assurance	that	these	forward-looking	statements	will	prove	to	be	accurate.	We	expressly	disclaim	any	obligation	to update	or	revise	any	forward-looking	statements,	whether	as	a	result	of	new	information,	future	events	or	otherwise.	You	are	advised,	however,	to	consult	any	further disclosures	we	make	on	related	subjects	in	our	Quarterly	Reports	on	Form	10-Q	and	Current	Reports	on	Form	8-K.

| disclosures	we	make	on	related	subjects	in	our	Quarterly	Reports	on	Form	10-Q	and	Current	Reports	on	Form	8-K. |  |  |
| :--- | :--- | :--- |
| TABLE\tOF\tCONTENTS | TABLE\tOF\tCONTENTS | Page |
| PART\tI |  | 3 |
| Item\t1. | Business | 3 |
| Item\t1A. | Risk\tFactors | \t 10 |
| Item\t1B. | Unresolved\tStaff\tComments | \t 18 |
| Item\t2. | Properties | \t 19 |
| Item\t3. | Legal\tProceedings | \t 19 |
| Item\t4. | Mine\tSafety\tDisclosures | \t 19 |
| PART\tII |  | \t 20 |
| Item\t5. | Market\tfor\tthe\tRegistrant's\tCommon\tEquity,\tRelated\tStockholder\tMatters\tand\tIssuer\tPurchases\tof\tEquity\tSecurities | \t 20 |
| Item\t6. | Selected\tFinancial\tData | \t 21 |
| Item\t7. | Management's\tDiscussion\tand\tAnalysis\tof\tFinancial\tCondition\tand\tResults\tof\tOperations | \t 22 |
| Item\t7A. | Quantitative\tand\tQualitative\tDisclosures\tAbout\tMarket\tRisk | \t 31 |
| Item\t8. | Financial\tStatements\tand\tSupplementary\tData | \t 35 |
| Item\t9. | Changes\tin\tand\tDisagreements\twith\tAccountants\ton\tAccounting\tand\tFinancial\tDisclosure | \t 76 |
| Item\t9A. | Controls\tand\tProcedures | \t 76 |
| Item\t9B. | Other\tInformation | \t 77 |
| PART\tIII |  | \t 78 |
| Item\t10. | Directors,\tExecutive\tOfficers\tand\tCorporate\tGovernance | \t 78 |
| Item\t11. | Executive\tCompensation | \t 78 |
| Item\t12. | Security\tOwnership\tof\tCertain\tBeneficial\tOwners\tand\tManagement\tand\tRelated\tStockholder\tMatters | \t 78 |
| Item\t13. | Certain\tRelationships\tand\tRelated\tTransactions\tand\tDirector\tIndependence | \t 78 |
| Item\t14. | Principal\tAccounting\tFees\tand\tServices | \t 78 |
| PART\tIV |  | \t 79 |
| Item\t15. | Exhibits,\tFinancial\tStatement\tSchedules | \t 79 |

# PART	I

# Item	1. Business

# Overview

Zimmer	Biomet	is	a	global	leader	in	musculoskeletal	healthcare.	We	design, manufacture	and	market	orthopaedic	reconstructive	products;	sports	medicine, biologics,	extremities	and	trauma	products;	spine,	bone	healing, craniomaxillofacial	and	thoracic	products;	dental	implants;	and	related	surgical products.	We	collaborate	with	healthcare	professionals	around	the	globe	to advance	the	pace	of	innovation.	Our	products	and	solutions	help	treat	patients suffering	from	disorders	of,	or	injuries	to,	bones,	joints	or	supporting	soft tissues.	Together	with	healthcare	professionals,	we	help	millions	of	people	live better	lives.	In	this	report,	"Zimmer	Biomet,"	"we,"	"us,"	"our,"	"the	Company" and	similar	words	refer	collectively	to	Zimmer	Biomet	Holdings,	Inc.	and	its subsidiaries.	"Zimmer	Biomet	Holdings"	refers	to	the	parent	company	only. Zimmer	Biomet	Holdings	was	incorporated	in	Delaware	in	2001.	Our	history dates	to	1927,	when	Zimmer	Manufacturing	Company,	a	predecessor,	was founded	in	Warsaw,	Indiana.	On	August	6,	2001,	we	were	spun	off	from	our former	parent	and	became	an	independent	public	company. On	June	24,	2015	(the	"Closing	Date"),	we	acquired	LVB	Acquisition,	Inc. ("LVB"),	the	parent	company	of	Biomet,	Inc.	("Biomet"),	and	LVB	and	Biomet became	our	wholly-owned	subsidiaries	(sometimes	hereinafter	referred	to	as	the "Biomet	merger"	or	the	"merger").	In	connection	with	the	merger,	we	changed our	name	from	Zimmer	Holdings,	Inc.	to	Zimmer	Biomet	Holdings,	Inc.	The Biomet	merger	is	expected	to	be	a	transformational	event	for	us	and	have significant	effects	on	all	aspects	of	our	business.	Throughout	2015	and	entering 2016,	a	key	focus	of	ours	has	been,	and	will	continue	to	be,	the	successful integration	of	Biomet.

"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.

# Customers,	Sales	and	Marketing

Our	primary	customers	include	orthopaedic	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.	These	customers	range	from	large	multinational enterprises	to	independent	clinicians	and	dentists.

We	have	operations	throughout	the	world.	We	manage	our	operations	through three	major	geographic	operating	segments	and	four	product	category	operating segments.	Our	three	major	geographic	operating	segments	are	the	Americas, which	is	comprised	principally	of	the	U.S.	and	includes	other	North,	Central	and South	American	markets;	EMEA,	which	is	comprised	principally	of	Europe	and includes	the	Middle	East	and	African	markets;	and	Asia	Pacific,	which	is comprised	primarily	of	Japan	and	includes	other	Asian	and	Pacific

markets.	Our	four	product	category	operating	segments,	which	are	individually not	as	significant	as	our	geographic	operating	segments,	are	as	follows:	1) Americas	Spine;	2)	Bone	Healing;	3)	Craniomaxillofacial	and	Thoracic ("CMF");	and	4)	Dental.

We	market	and	sell	products	through	three	principal	channels:	1)	direct	to healthcare	institutions,	such	as	hospitals,	referred	to	as	direct	channel	accounts; 2)	through	stocking	distributors	and	healthcare	dealers;	and	3)	directly	to	dental practices	and	dental	laboratories.	With	direct	channel	accounts,	inventory	is generally	consigned	to	sales	agents	or	customers.	With	sales	to	stocking distributors,	healthcare	dealers,	dental	practices	and	dental	laboratories,	title	to product	passes	upon	shipment	or	upon	implantation	of	the	product.	Direct channel	accounts	represented	approximately	80	percent	of	our	net	sales	in 2015.	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	2015.

We	stock	inventory	in	our	warehouse	facilities	and	retain	title	to	consigned inventory	in	sufficient	quantities	so	that	products	are	available	when	needed	for surgical	procedures.	Safety	stock	levels	are	determined	based	on	a	number	of factors,	including	demand,	manufacturing	lead	times	and	quantities	required	to maintain	service	levels.	We	also	carry	trade	accounts	receivable	balances	based on	credit	terms	that	are	generally	consistent	with	local	market	practices. We	utilize	a	network	of	sales	associates,	sales	managers	and	support personnel,	some	of	whom	are	employed	or	contracted	by	independent distributors	and	sales	agencies.	We	invest	a	significant	amount	of	time	and expense	in	training	sales	associates	in	how	to	use	specific	products	and	how	to best	inform	surgeons	of	product	features	and	uses.	Sales	force	representatives must	have	strong	technical	selling	skills	and	medical	education	to	provide technical	support	for	surgeons.

In	response	to	the	different	healthcare	systems	throughout	the	world,	our	sales and	marketing	strategies	and	organizational	structures	differ	by	region.	We utilize	a	global	approach	to	sales	force	training,	marketing	and	medical	education to	provide	consistent,	high	quality	service.	Additionally,	we	keep	current	with key	surgical	developments	and	other	issues	related	to	orthopaedic	surgeons, neurosurgeons,	other	specialists,	dentists	and	oral	surgeons	and	the	medical procedures	they	perform.

Due	to	the	Biomet	merger,	we	changed	our	senior	management	organizational structure	which	has	resulted	in	a	change	to	our	operating	segments.	We	now allocate	resources	to	achieve	our	operating	profit	goals	through	seven	operating segments.	Our	operating	segments	are	comprised	of	both	geographic	and	product category	business	units.	We	are	organized	through	a	combination	of	geographic and	product	category	operating	segments	for	various	reasons,	including	the distribution	channels	through	which	products	are	sold.	Our	product	category operating	segments	generally	have	distribution	channels	focused	specifically	on those	product

categories,	whereas	our	geographic	operating	segments	have	distribution channels	that	sell	multiple	product	categories.	The	following	is	a	summary	of our	seven	operating	segments.	See	Note	18	to	the	consolidated	financial statements	for	more	information	regarding	our	segments.

Americas.	The	Americas	geographic	operating	segment	is	our	largest operating	segment.	The	U.S.	accounts	for	94	percent	of	net	sales	in	this region.	The	U.S.	sales	force	consists	of	a	combination	of	employees	and independent	sales	agents,	most	of	whom	sell	products	exclusively	for	Zimmer Biomet.	The	sales	force	in	the	U.S.	receives	a	commission	on	product	sales	and is	responsible	for	many	operating	decisions	and	costs.

In	this	region,	we	contract	with	group	purchasing	organizations	and	managed care	accounts	and	have	promoted	unit	growth	by	offering	volume	discounts	to customer	healthcare	institutions	within	a	specified	group.	Generally,	we	are designated	as	one	of	several	preferred	purchasing	sources	for	specified	products, although	members	are	not	obligated	to	purchase	our	products.	Contracts	with group	purchasing	organizations	generally	have	a	term	of	three	years,	with extensions	as	warranted.

In	the	Americas,	we	monitor	and	rank	independent	sales	agents	and	our	direct sales	force	across	a	range	of	performance	metrics,	including	the	achievement	of sales	targets	and	maintenance	of	efficient	levels	of	working	capital. EMEA.	The	EMEA	geographic	operating	segment	is	our	second	largest operating	segment.	France,	Germany,	Italy,	Spain	and	the	United	Kingdom collectively	account	for	62	percent	of	net	sales	in	the	region.	This	segment	also includes	other	key	markets,	including	Switzerland,	Benelux,	Nordic,	Central	and Eastern	Europe,	the	Middle	East	and	Africa.	Our	sales	force	in	this	segment	is comprised	of	direct	sales	associates,	commissioned	agents,	independent distributors	and	sales	support	personnel.	We	emphasize	the	advantages	of	our clinically	proven,	established	designs	and	innovative	solutions	and	new	and enhanced	materials	and	surfaces.	In	most	European	countries,	healthcare	is sponsored	by	the	government	and	therefore	government	budgets	impact healthcare	spending,	which	can	affect	our	sales	in	this	segment.

Asia	Pacific.	The	Asia	Pacific	geographic	operating	segment	includes	key markets	such	as	Japan,	Australia,	New	Zealand,	Korea,	China,	Taiwan,	India, Thailand,	Singapore,	Hong	Kong	and	Malaysia.	Japan	is	the	largest	market within	this	segment,	accounting	for	40	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	orthopaedic	surgeons	and	neurosurgeons	in their	markets.	The	knowledge	and	skills	of	these	sales	associates	play	a	critical role	in	providing	service,	product	information	and	support	to	surgeons.	We	have a	research	and	development	center	in	Beijing,	China,	which	focuses	on	products and	technologies	designed	to	meet	the	unique	needs	of	Asian	patients	and	their healthcare	providers.

Americas	Spine.	The	Americas	Spine	product	category	operating	segment	is comprised	of	our	spine	products	division	in	the	Americas,	primarily	in	the	U.S. market,	but	also	in	other	North,	Central	and	South	American	markets.	The market	dynamics	of	the	Americas	Spine	business	are	similar	to	those	described in	the	Americas	geographic	operating	segment.	However,	the	Americas	Spine business	maintains	a	separate	sales	force	of	employees	and	independent	sales agents.

Bone	Healing.				Our	Bone	Healing	product	category	operating	segment	only sells	to	U.S.	customers.	In	this	product	category,	we	market	our	products	to doctors	who	prescribe	them	for	use	by	patients.	The	products	are	mostly provided	directly	by	Zimmer	Biomet	to	patients	and	are	paid	for	through patients'	insurance	or	by	patients	themselves.	Products	are	also	sold	through wholesale	channels	on	a	limited	basis.

CMF.				Our	CMF	product	category	operating	segment	competes	across	the world	through	a	combination	of	direct	and	independent	sales	agents.	The	U.S. sales	force	consists	of	a	combination	of	employees	and	independent	sales agents.	Internationally,	our	primary	customers	are	independent	stocking distributors	who	market	our	products	to	their	customers.

Dental.				Our	Dental	product	category	operating	segment	competes	across	the world.	Our	sales	force	is	primarily	composed	of	employees	who	market	our products	to	customers.	We	sell	directly	to	dental	practices	or	dental	laboratories, or	to	independent	stocking	distributors	depending	on	the	market.

# Seasonality

Our	business	is	seasonal	in	nature	to	some	extent,	as	many	of	our	products	are used	in	elective	procedures,	which	typically	decline	during	the	summer	months and	can	increase	at	the	end	of	the	year	once	annual	deductibles	have	been	met	on health	insurance	plans.

# Distribution

We	distribute	our	products	both	through	large,	centralized	warehouses	and through	smaller,	market	specific	facilities,	depending	on	the	needs	of	the market.	We	maintain	large,	centralized	warehouses	in	the	U.S.	and	Europe	to	be able	to	efficiently	distribute	our	products	to	customers	in	those	regions.	In addition	to	these	centralized	warehouses,	we	maintain	smaller	distribution facilities	within	each	of	the	countries	where	we	have	a	direct	sales	presence.	In many	locations,	our	inventory	is	consigned	to	the	healthcare	institution.

We	generally	ship	our	orders	via	expedited	courier.	We	do	not	consider	our backlog	of	firm	orders	to	be	material	to	an	understanding	of	our	business.

# Products

Our	products	include	orthopaedic	reconstructive	products;	sports	medicine, biologics,	extremities	and	trauma	products;	spine,	bone	healing	and	CMF products;	dental	implants;	and	related	surgical	products.

# KNEES

Total	knee	replacement	surgeries	typically	include	a	femoral	component,	a patella	(knee	cap),	a	tibial	tray	and	an	articular	surface	(placed	on	the	tibial tray).	Knee	replacement	surgeries	include	first-time,	or	primary,	joint replacement	procedures	and	revision	procedures	for	the	replacement,	repair	or enhancement	of	an	implant	or	component	from	a	previous	procedure.	There	are also	procedures	for	partial	reconstruction	of	the	knee,	which	treat	limited	knee degeneration	and	involve	the	replacement	of	only	one	side,	or	compartment,	of the	knee	with	a	unicompartmental	knee	prosthesis.	Our	knee	portfolio	also includes	early	intervention	and	joint	preservation	products,	which	seek	to preserve	the	joint	by	repairing	or	regenerating	damaged	tissues	and	by	treating osteoarthritis.

Our	significant	knee	brands	include	the	following: •	Persona ®	The	Personalized	Knee	System

•	NexGen ®	Complete	Knee	Solution

•	Vanguard ®	Knee	System

•	Oxford ®	Partial	Knee

Total	hip	replacement	surgeries	replace	both	the	head	of	the	femur	and	the socket	portion	of	the	pelvis	(acetabulum)	of	the	natural	hip.	Hip	procedures include	first-time,	or	primary,	joint	replacement	as	well	as	revision procedures.	Hip	implant	procedures	involve	the	use	of	bone	cement	to	attach	or affix	the	prosthetic	components	to	the	surrounding	bone,	or	are	press-fit	into bone,	which	means	that	they	have	a	surface	that	bone	affixes	to	through	either ongrowth	or	ingrowth	technologies.

Our	significant	hip	brands	include	the	following:

•	Zimmer ®	M/L	Taper	Hip	Prosthesis

•	Taperloc ®	Hip	System

•	Arcos ®	Modular	Hip	System

•	Continuum 	Acetabular	System ®

•	G7 ®	Acetabular	System

Our	S.E.T.	product	category	includes	surgical,	sports	medicine,	biologics,	foot and	ankle,	extremities	and	trauma	products.	Our	surgical	products	are	used	to support	various	surgical	procedures.	Our	sports	medicine	products	are	primarily for	the	repair	of	soft	tissue	injuries,	most	commonly	used	in	the	knee	and shoulder.	Our	biologics	products	are	used	as	early	intervention	for	joint preservation	or	to	support	surgical	procedures.	Our	foot	and	ankle	and extremities	products	are	designed	to	treat	arthritic	conditions	and	fractures	in	the foot,	ankle,	shoulder,	elbow	and	wrist.	Our	trauma	products	are	used	to	stabilize damaged	or	broken	bones	and	their	surrounding	tissues	to	support	the	body's natural	healing	process.

Our	significant	S.E.T.	brands	include	the	following: •	Transposal ®	and	Transposal	Ultra ®	Fluid	Waste	Management	Systems

•	A.T.S. ®	Automatic	Tourniquet	Systems

•	JuggerKnot ®	Soft	Anchor	System •	Gel-One Cross-linked	Hyaluronate ®1

•	Trabecular	Metal 	Reverse	Shoulder	System •	Comprehensive ®	Shoulder TM

•	Zimmer ®	Natural	Nail ®	System

•	DVR ®	Plating	System

# DENTAL

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

Our	significant	dental	brands	include	the	following:

•	Tapered	Screw-Vent ®	Implant	System

•	Puros ®	Allograft	Products

# SPINE	and	CMF

Our	spine	products	division	designs,	manufactures	and	distributes	medical devices	and	surgical	instruments	to	deliver	comprehensive	solutions	for individuals	with	back	or	neck	pain	caused	by	degenerative	conditions, deformities	or	traumatic	injury	of	the	spine.	Our	CMF	division	includes	face	and skull	reconstruction	products	as	well	as	products	that	fixate	and	stabilize	the bones	of	the	chest	in	order	to	facilitate	healing	or	reconstruction	after	open	heart surgery,	trauma	or	for	deformities	of	the	chest.

Our	significant	spine	and	CMF	brands	include	the	following:

•	Polaris™	Spinal	System

•	Timberline ®	Lateral	Fusion	System

•	PathFinder	NXT ®	Minimally	Invasive	Pedicle	Screw	System

•	TraumaOne™	Plating	System

# OTHER

Our	other	product	category	primarily	includes	our	bone	cement	and	bone healing	products.	Our	significant	brands	include	the	following: •	PALACOS Bone	Cement •	SpinalPak ®	Spinal	Fusion	Stimulator ®2

# Research	and	Development

We	have	extensive	research	and	development	activities	to	develop	new surgical	techniques,	materials,	biologics	and	product	designs.	The	research	and development	teams	work	closely	with	our	strategic	brand	marketing function.	The	rapid	commercialization	of	innovative	new	materials,	biologics products,	implant	and	instrument	designs	and	surgical	techniques	remains	one	of our	core	strategies	and	continues	to	be	an	important	driver	of	sales	growth.

1	Registered	trademark	of	Seikagaku	Corporation

2	Registered	trademark	of	Heraeus	Medical	GmbH

We	are	broadening	our	offerings	in	each	of	our	product	categories	and exploring	new	technologies	with	possible	applications	in	multiple	areas.	Our primary	research	and	development	facility	is	located	in	Warsaw,	Indiana.	We have	other	research	and	development	personnel	based	in,	among	other	places, Canada,	China,	France,	Switzerland	and	other	U.S.	locations.	As	of	December 31,	2015,	we	employed	approximately	1,700	research	and	development employees	worldwide.

We	expect	to	continue	to	identify	innovative	technologies,	which	may	include acquiring	complementary	products	or	businesses,	establishing	technology licensing	arrangements	or	strategic	alliances.

# Government	Regulation	and	Compliance

We	are	subject	to	government	regulation	in	the	countries	in	which	we	conduct business.	In	the	U.S.,	numerous	laws	and	regulations	govern	all	the	processes	by which	medical	devices	are	brought	to	market.	These	include,	among	others,	the Federal	Food,	Drug	and	Cosmetic	Act	and	regulations	issued	or	promulgated thereunder.	The	U.S.	Food	and	Drug	Administration	("FDA")	has	enacted regulations	that	control	all	aspects	of	the	development,	manufacture,	advertising, promotion	and	postmarket	surveillance	of	medical	products,	including	medical devices.	In	addition,	the	FDA	controls	the	access	of	products	to	market	through processes	designed	to	ensure	that	only	products	that	are	safe	and	effective	are made	available	to	the	public.

Most	of	our	new	products	fall	into	an	FDA	classification	that	requires	the submission	of	a	Premarket	Notification	(510(k))	to	the	FDA.	This	process requires	us	to	demonstrate	that	the	device	to	be	marketed	is	at	least	as	safe	and effective	as,	that	is,	substantially	equivalent	to,	a	legally	marketed	device.	We must	submit	information	that	supports	our	substantial	equivalency claims.	Before	we	can	market	the	new	device,	we	must	receive	an	order	from	the FDA	finding	substantial	equivalence	and	clearing	the	new	device	for	commercial distribution	in	the	U.S.

Other	devices	we	develop	and	market	are	in	a	category	(class)	for	which	the FDA	has	implemented	stringent	clinical	investigation	and	Premarket	Approval ("PMA")	requirements.	The	PMA	process	requires	us	to	provide	clinical	and laboratory	data	that	establishes	that	the	new	medical	device	is	safe	and	effective. The	FDA	will	approve	the	new	device	for	commercial	distribution	if	it determines	that	the	data	and	information	in	the	PMA	application	constitute	valid scientific	evidence	and	that	there	is	reasonable	assurance	that	the	device	is	safe and	effective	for	its	intended	use(s).

All	of	our	devices	marketed	in	the	U.S.	have	been	cleared	or	approved	by	the FDA,	with	the	exception	of	some	devices	which	are	exempt	or	were	in commercial	distribution	prior	to	May	28,	1976.	The	FDA	has	grandfathered these	devices,	so	new	FDA	submissions	are	not	required.

Both	before	and	after	a	product	is	commercially	released,	we	have	ongoing responsibilities	under	FDA	regulations.	The	FDA	reviews	design	and manufacturing	practices,	labeling	and	record	keeping,	and	manufacturers' required	reports	of

adverse	experiences	and	other	information	to	identify	potential	problems	with marketed	medical	devices.	We	are	also	subject	to	periodic	inspection	by	the	FDA for	compliance	with	the	FDA's	Quality	System	regulations	among	other	FDA requirements,	such	as	restrictions	on	advertising	and	promotion.	The	Quality System	regulations	govern	the	methods	used	in,	and	the	facilities	and	controls used	for,	the	design,	manufacture,	packaging	and	servicing	of	all	finished medical	devices	intended	for	human	use.	If	the	FDA	were	to	conclude	that	we are	not	in	compliance	with	applicable	laws	or	regulations,	or	that	any	of	our medical	devices	are	ineffective	or	pose	an	unreasonable	health	risk,	the	FDA could	require	us	to	notify	healthcare	professionals	and	others	that	the	devices present	unreasonable	risks	of	substantial	harm	to	the	public	health,	order	a	recall, repair,	replacement,	or	refund	payment	of	such	devices,	detain	or	seize adulterated	or	misbranded	medical	devices,	or	ban	such	medical	devices.

The	FDA	may	also	impose	operating	restrictions,	enjoin	and/or	restrain	certain conduct	resulting	in	violations	of	applicable	law	pertaining	to	medical	devices, and	assess	civil	or	criminal	penalties	against	our	officers,	employees	or	us.	The FDA	may	also	recommend	prosecution	to	the	U.S.	Department	of	Justice ("DOJ").

The	FDA,	in	cooperation	with	U.S.	Customs	and	Border	Protection	("CBP"), administers	controls	over	the	import	of	medical	devices	into	the	U.S.	The	CBP imposes	its	own	regulatory	requirements	on	the	import	of	our	products, including	inspection	and	possible	sanctions	for	noncompliance.	We	are	also subject	to	foreign	trade	controls	administered	by	certain	U.S.	government agencies,	including	the	Bureau	of	Industry	and	Security	within	the	Commerce Department	and	the	Office	of	Foreign	Assets	Control	within	the	Treasury Department.

There	are	also	requirements	of	state,	local	and	foreign	governments	that	we must	comply	with	in	the	manufacture	and	marketing	of	our	products.

In	many	of	the	foreign	countries	in	which	we	market	our	products,	we	are subject	to	local	regulations	affecting,	among	other	things,	design	and	product standards,	packaging	requirements	and	labeling	requirements.	Many	of	the regulations	applicable	to	our	devices	and	products	in	these	countries	are	similar to	those	of	the	FDA.	The	member	countries	of	the	European	Union	have	adopted the	European	Medical	Device	Directive,	which	creates	a	single	set	of	medical device	regulations	for	products	marketed	in	all	member	countries.	Compliance with	the	Medical	Device	Directive	and	certification	to	a	quality	system	enable the	manufacturer	to	place	a	CE	mark	on	its	products.	To	obtain	authorization	to affix	the	CE	mark	to	a	product,	a	recognized	European	Notified	Body	must assess	a	manufacturer's	quality	systems	and	the	product's	conformity	to	the requirements	of	the	Medical	Device	Directive.	We	are	subject	to	inspection	by the	Notified	Bodies	for	compliance	with	these	requirements.

Further,	we	are	subject	to	various	federal,	state	and	foreign	laws	concerning healthcare	fraud	and	abuse,	including	false	claims	and	anti-kickback	laws,	as well	as	the	U.S.	Physician	Payments	Sunshine	Act	and	similar	state	and	foreign healthcare	professional	payment	transparency	laws.	These

laws	are	administered	by,	among	others,	the	U.S.	Department	of	Justice,	the Office	of	Inspector	General	of	the	Department	of	Health	and	Human	Services, state	attorneys	general	and	various	foreign	government	agencies.	Many	of	these agencies	have	increased	their	enforcement	activities	with	respect	to	medical device	manufacturers	in	recent	years.	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	("VA") health	programs.

Our	operations	in	foreign	countries	are	subject	to	the	extraterritorial application	of	the	U.S.	Foreign	Corrupt	Practices	Act.	Our	global	operations	are also	subject	to	foreign	anti-corruption	laws,	such	as	the	UK	Bribery	Act,	among others.	As	part	of	our	global	compliance	program,	we	seek	to	address	anti- corruption	risks	proactively.

Our	facilities	and	operations	are	also	subject	to	complex	federal,	state,	local and	foreign	environmental	and	occupational	safety	laws	and	regulations, including	those	relating	to	discharges	of	substances	in	the	air,	water	and	land,	the handling,	storage	and	disposal	of	wastes	and	the	clean-up	of	properties	by pollutants.	We	do	not	expect	that	the	ongoing	costs	of	compliance	with	these environmental	requirements	will	have	a	material	impact	on	our	consolidated earnings,	capital	expenditures	or	competitive	position.

# Competition

The	orthopaedics	and	broader	musculoskeletal	care	industry	is	highly competitive.	In	the	global	markets	for	our	knees,	hips,	and	S.E.T.	products,	our major	competitors	include:	the	DePuy	Synthes	Companies	of	Johnson	& Johnson;	Stryker	Corporation;	and	Smith	&	Nephew	plc.	There	are	smaller competitors	in	these	product	categories	as	well	who	have	success	by	focusing	on smaller	subsegments	of	the	industry.

In	the	spine	and	CMF	categories,	we	compete	globally	primarily	with	the spinal	and	biologic	business	of	Medtronic,	Inc.,	the	DePuy	Synthes	Companies, Stryker	Corporation,	NuVasive,	Inc.	and	Globus	Medical,	Inc. In	the	dental	implant	category,	we	compete	primarily	with	Nobel	Biocare Holding	AG	(part	of	the	Danaher	Corporation),	Straumann	Holding	AG	and Dentsply	International.

Competition	within	the	industry	is	primarily	based	on	pricing,	technology, innovation,	quality,	reputation	and	customer	service.	A	key	factor	in	our continuing	success	in	the	future	will	be	our	ability	to	develop	new	products	and improve	existing	products	and	technologies.

# Manufacturing	and	Raw	Materials

We	manufacture	our	products	at	various	sites.	We	also	strategically	outsource some	manufacturing	to	qualified	suppliers	who	are	highly	capable	of	producing components.

The	manufacturing	operations	at	our	facilities	are	designed	to	incorporate	the cellular	concept	for	production	and	to	implement	tenets	of	a	manufacturing philosophy

focused	on	continuous	improvement	efforts	in	product	quality,	lead	time reduction	and	capacity	optimization.	Our	continuous	improvement	efforts	are driven	by	Lean	and	Six	Sigma	methodologies.	In	addition,	at	certain	of	our manufacturing	facilities,	many	of	the	employees	are	cross-trained	to	perform	a broad	array	of	operations.

We	generally	target	operating	our	manufacturing	facilities	at	optimal	levels	of total	capacity.	We	continually	evaluate	the	potential	to	in-source	and	outsource production	as	part	of	our	manufacturing	strategy	to	provide	value	to	our stakeholders.

We	have	improved	our	manufacturing	processes	to	protect	our	profitability	and offset	the	impact	of	inflationary	costs.	We	have,	for	example,	employed computer-assisted	robots	and	multi-axis	grinders	to	precision	polish	medical devices;	automated	certain	manufacturing	and	inspection	processes,	including on-machine	inspection	and	process	controls;	purchased	state-of-the-art equipment;	in-sourced	core	products	and	processes;	and	negotiated	cost reductions	from	third-party	suppliers.

We	use	a	diverse	and	broad	range	of	raw	materials	in	the	manufacturing	of	our products.	We	purchase	all	of	our	raw	materials	and	select	components	used	in manufacturing	our	products	from	external	suppliers.	In	addition,	we	purchase some	supplies	from	single	sources	for	reasons	of	quality	assurance,	sole	source availability,	cost	effectiveness	or	constraints	resulting	from	regulatory requirements.	We	work	closely	with	our	suppliers	to	assure	continuity	of	supply while	maintaining	high	quality	and	reliability.	To	date,	we	have	not	experienced any	significant	difficulty	in	locating	and	obtaining	the	materials	necessary	to fulfill	our	production	schedules.

# Intellectual	Property

Patents	and	other	proprietary	rights	are	important	to	the	continued	success	of our	business.	We	also	rely	upon	trade	secrets,	know-how,	continuing technological	innovation	and	licensing	opportunities	to	develop	and	maintain	our competitive	position.	We	protect	our	proprietary	rights	through	a	variety	of methods,	including	confidentiality	agreements	and	proprietary	information agreements	with	vendors,	employees,	consultants	and	others	who	may	have access	to	proprietary	information.	We	own	or	control	through	licensing arrangements	approximately	7,000	issued	patents	and	patent	applications throughout	the	world	that	relate	to	aspects	of	the	technology	incorporated	in many	of	our	products.

# Employees

As	of	December	31,	2015,	we	employed	approximately	17,500	employees worldwide,	including	approximately	1,700	employees	dedicated	to	research	and development.	Approximately	8,400	employees	are	located	within	the	U.S.	and approximately	9,100	employees	are	located	outside	of	the	U.S.,	primarily throughout	Europe	and	in	Japan.	We	have	approximately	7,700	employees dedicated	to	manufacturing	our	products	worldwide.	The	Warsaw,	Indiana production	facilities	employ	approximately	2,800	employees	in	the	aggregate.

We	have	production	employees	represented	by	a	labor	union	in	Dover,	Ohio	and Bridgend,	South	Wales.	We	have	other

employees	in	Europe	who	are	represented	by	Works	Councils.	We	believe	that our	relationship	with	our	employees	is	satisfactory.

# EXECUTIVE	OFFICERS

The	following	table	sets	forth	certain	information	with	respect	to	our	executive	officers	as	of	February	19,	2016.

Mr.	Dvorak	was	appointed	President,	Chief	Executive	Officer	and	a	member	of the	Board	of	Directors	in	May	2007.	He	championed	Zimmer's	acquisition	of Biomet,	positioning	the	combined	Zimmer	Biomet	as	a	global	leader	in musculoskeletal	healthcare.	Prior	to	his	appointment	as	President	and	Chief Executive	Officer,	Mr.	Dvorak	served	as	Group	President,	Global	Businesses and	Chief	Legal	Officer	from	December	2005.	From	October	2003	to	December 2005,	he	served	as	Executive	Vice	President,	Corporate	Services,	Chief	Counsel and	Secretary,	as	well	as	Chief	Compliance	Officer.	Mr.	Dvorak	joined	the Company	(then	Zimmer)	as	Senior	Vice	President,	Corporate	Affairs	and General	Counsel	in	December	2001,	shortly	following	the	Company's	spin-off from	Bristol-Myers	Squibb.

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	(then	Zimmer)	in	2010	as	Vice	President, Finance	for	the	Global	Reconstructive	Division	and	U.S.	Commercial organization.	Before	joining	Zimmer,	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.	Florin	was	appointed	Senior	Vice	President	and	Chief	Financial	Officer effective	June	2015.	He	served	as	Senior	Vice	President	and	Chief	Financial Officer	of	Biomet	from	June	2007	to	June	2015.	Prior	to	joining	Biomet,	Mr. Florin	served	as	Vice	President	and	Corporate	Controller	of	Boston	Scientific Corporation	from	2001	until	2007.	Before	being	appointed	Corporate	Controller in	2001,	Mr.	Florin	served	in	financial	leadership	positions	within	Boston Scientific	Corporation	and	its	various	business	units.	Prior	to	joining	Boston Scientific	Corporation,	Mr.	Florin	worked	for	C.R.	Bard	from	October	1990 through	June	1995.

Mr.	Johnson	was	appointed	Group	President	with	responsibility	for	the Company's	Spine,	Dental,	Craniomaxillofacial	and	Thoracic	businesses	effective June	2015.	He	served	as	Senior	Vice	President,	Biomet,	and	President,	Biomet Microfixation,	Bone	Healing	and	Spine	from	June	2012	to	June	2015.	Before that,	he	served	as	President,	Biomet	Microfixation	from	2007	to	2012	and	Vice President,	Global	Marketing,	Biomet	Microfixation	from	2006	to	2007.	Prior	to that,	Mr.	Johnson	served	as	Director	of	Global	Marketing	for	Regeneration Technologies,	Inc.	(now	known	as	RTI	Surgical,	Inc.).	He	also	worked	for Biomet	for	five	years	previously,	starting	his	career	with	Biomet	in	1999.

Mr.	Kleopfer	was	appointed	President,	Americas	effective	June	2015.	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.	Mr.	Kleopfer	served	as	President,	Biomet	U.S.	from	May	2011	to June	2015.	Before	that,	he	served	as	President,	Biomet	Biologics	from December	2005	to	May	2011.

Prior	to	those	appointments,	Mr.	Kleopfer	held	numerous	positions	of	increasing responsibility	within	Biomet,	where	he	began	his	career	in	1988.

Dr.	Mazur-Hofsaess	was	appointed	President,	EMEA	in	April	2013.	Dr.	Mazur- Hofsaess	joined	the	Company	(then	Zimmer)	in	February	2010	as	Senior	Vice President,	EMEA	Reconstructive.	She	has	more	than	20	years'	experience within	the	pharmaceutical,	diagnostics	and	medical	device	sectors.	Prior	to joining	Zimmer,	Dr.	Mazur-Hofsaess	served	in	various	management	positions	at Abbott	Laboratories	beginning	in	2001,	most	recently	as	Vice	President, Diagnostics	–	Europe.

Mr.	Nolan	was	appointed	Group	President	with	responsibility	for	the	Company's Biologics,	Extremities,	Sports	Medicine,	Surgical,	Trauma,	Foot	and	Ankle	and Bone	Healing	businesses	effective	June	2015.	He	joined	the	Company	(then Zimmer)	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	Zimmer,	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	was	appointed	Senior	Vice	President,	General	Counsel	and	Secretary in	May	2007.	He	has	global	responsibility	for	the	Company's	Legal	Affairs	and he	serves	as	Secretary	to	the	Board	of	Directors.	Mr.	Phipps	also	oversees	the Company's	Government	Affairs,	Corporate	Communication	and	Public Relations	activities.	Previously,	Mr.	Phipps	served	as	Associate	General	Counsel and	Corporate	Secretary	from	December	2005	to	May	2007.	He	joined	the Company	(then	Zimmer)	in	September	2003	as	Associate	Counsel	and	Assistant Secretary.	Prior	to	joining	Zimmer,	he	served	as	Vice	President	and	General Counsel	of	L&N	Sales	and	Marketing,	Inc.	in	Pennsylvania	and	he	practiced	law with	the	firm	of	Morgan,	Lewis	&	Bockius	in	Philadelphia,	focusing	on corporate	and	securities	law,	mergers	and	acquisitions	and	financial	transactions.

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.	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.

Mr.	Yi	was	appointed	President,	Asia	Pacific	effective	June	2015.	He	is responsible	for	the	sales,	marketing	and	distribution	of	products	in	the	Asia Pacific	region.	Mr.	Yi	joined	the	Company	(then	Zimmer)	in	March	2013	as Senior	Vice	President,	Asia	Pacific.	Before	joining	Zimmer,	he	served	as

Vice	President	and	General	Manager	of	St.	Jude	Medical	for	Asia	Pacific	and Australia	from	2005	to	2013.	Prior	to	that,	Mr.	Yi	held	several	leadership positions	over	a	ten-year	period	with	Boston	Scientific	Corporation,	ultimately serving	as	Vice	President	for	North	Asia.

# AVAILABLE	INFORMATION

Our	Internet	address	is	www.zimmerbiomet.com.	We	routinely	post	important information	for	investors	on	our	website	in	the	"Investor	Relations"	section, which	may	be	accessed	from	our	homepage	at	www.zimmerbiomet.com	or directly	at	http://investor.zimmerbiomet.com.	We	use	this	website	as	a	means	of disclosing	material,	non-public	information	and	for	complying	with	our disclosure	obligations	under	Regulation	FD.	Accordingly,	investors	should monitor	the	Investor	Relations	section	of	our	website,	in	addition	to	following our	press	releases,	Securities	and	Exchange	Commission	("SEC")	filings,	public conference	calls,	presentations	and	webcasts.	Our	goal	is	to	maintain	the Investor	Relations	website	as	a	portal	through	which	investors	can	easily	find	or navigate	to	pertinent	information	about	us,	free	of	charge,	including: •	our	Annual	Reports	on	Form	10-K,	Quarterly	Reports	on	Form	10-Q,	Current Reports	on	Form	8-K	and	amendments	to	those	reports	filed	or	furnished pursuant	to	Section	13(a)	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	as amended	("Exchange	Act"),	as	soon	as	reasonably	practicable	after	we electronically	file	that	material	with	or	furnish	it	to	the	SEC; •	announcements	of	investor	conferences	and	events	at	which	our	executives talk	about	our	products	and	competitive	strategies,	as	well	as	podcasts	and archives	of	these	events;

•	press	releases	on	quarterly	earnings,	product	announcements,	legal developments	and	other	material	news	that	we	may	post	from	time	to	time; •	corporate	governance	information	including	our	Corporate	Governance Guidelines,	Code	of	Business	Conduct	and	Ethics,	Code	of	Ethics	for	Chief Executive	Officer	and	Senior	Financial	Officers,	information	concerning	our Board	of	Directors	and	its	committees,	including	the	charters	of	the	Audit Committee,	Compensation	and	Management	Development	Committee, Corporate	Governance	Committee	and	Research,	Innovation	and	Technology Committee,	and	other	governance-related	policies;

•	stockholder	services	information,	including	ways	to	contact	our	transfer	agent and	information	on	how	to	sign	up	for	direct	deposit	of	dividends	or	enroll	in our	dividend	reinvestment	plan;	and

•	opportunities	to	sign	up	for	email	alerts	and	RSS	feeds	to	have	information provided	in	real	time.

The	information	available	on	our	website	is	not	incorporated	by	reference	in,

or	a	part	of,	this	or	any	other	report	we	file	with	or	furnish	to	the	SEC.

# Item	1A. 	Risk	Factors

Risk	factors	which	could	cause	actual	results	to	differ	from	our	expectations and	which	could	negatively	impact	our	financial	condition	and	results	of operations	are	discussed	below	and	elsewhere	in	this	report.	Additional	risks and	uncertainties	not	presently	known	to	us	or	that	are	currently	not	believed	to be	significant	to	our	business	may	also	affect	our	actual	results	and	could	harm our	business,	financial	condition	and	results	of	operations.	If	any	of	the	risks	or uncertainties	described	below	or	any	additional	risks	and	uncertainties	actually occur,	our	business,	results	of	operations	and	financial	condition	could	be materially	and	adversely	affected.

# Successful	integration	of	Biomet	and	anticipated	benefits	of	the	Biomet merger	are	not	assured	and	integration	matters	could	divert	attention	of management	away	from	operations.	Also,	the	merger	could	have	an	adverse effect	on	our	business	relationships.

Although	Biomet	has	become	an	indirect	wholly	owned	subsidiary	of	ours,	it is	initially	continuing	its	operations	on	a	basis	that	is	separate	from	the	legacy Zimmer	operations.	There	can	be	no	assurance	that	Biomet	will	be	able	to maintain	and	grow	its	business	and	operations.	In	addition,	the	market	segments in	which	Biomet	operates	may	experience	declines	in	demand	and/or	new competitors.	Customers,	suppliers	and	other	third	parties	with	business relationships	with	us	and/or	Biomet	may	decide	not	to	renew	or	may	decide	to seek	to	terminate,	change	and/or	renegotiate	their	relationships	with	us	and/or Biomet	as	a	result	of	the	merger,	whether	pursuant	to	the	terms	of	their	existing agreements	with	us	and/or	Biomet	or	otherwise.

Our	ability	to	realize	the	anticipated	benefits	of	the	Biomet	merger	will depend,	to	a	large	extent,	on	our	ability	to	integrate	the	legacy businesses.	Integrating	and	coordinating	certain	aspects	of	the	operations	and personnel	of	Biomet	with	ours	involves	complex	operational,	technological	and personnel-related	challenges.	This	process	is	time-consuming	and	expensive, disrupts	the	businesses	of	both	companies	and	may	not	result	in	the	full	benefits expected	by	us,	including	cost	synergies	expected	to	arise	from	supply	chain efficiencies	and	overlapping	general	and	administrative	functions.	The	potential difficulties,	and	resulting	costs	and	delays,	include:

•	managing	a	larger	combined	company;

•	consolidating	corporate	and	administrative	infrastructures;

•	issues	in	integrating	manufacturing,	warehouse	and	distribution	facilities,

research	and	development	and	sales	forces;

•	difficulties	attracting	and	retaining	key	personnel;

•	loss	of	customers	and	suppliers	and	inability	to	attract	new	customers	and suppliers;

•	unanticipated	issues	in	integrating	information	technology,	communications and	other	systems;

•	incompatibility	of	purchasing,	logistics,	marketing,	administration	and	other systems	and	processes;	and

•	unforeseen	and	unexpected	liabilities	related	to	the	merger	or	Biomet's business.

Additionally,	the	integration	of	our	and	Biomet's	operations,	products	and personnel	may	place	a	significant	burden	on	management	and	other	internal resources.	The	attention	of	our	management	may	be	directed	towards	integration considerations	and	may	be	diverted	from	our	day-to-day	business	operations, and	matters	related	to	the	integration	may	require	commitments	of	time	and resources	that	could	otherwise	have	been	devoted	to	other	opportunities	that might	have	been	beneficial	to	us.	The	diversion	of	management's	attention,	and any	difficulties	encountered	in	the	transition	and	integration	process,	could	harm our	business,	financial	condition	and	operating	results.

Even	if	our	businesses	are	successfully	integrated,	we	may	not	realize	the	full benefits	of	the	merger,	including	anticipated	synergies,	cost	savings	or	growth opportunities,	within	the	expected	timeframe	or	at	all.	In	addition,	we	expect	to incur	significant	integration	and	restructuring	expenses	to	realize synergies.	However,	many	of	the	expenses	that	will	be	incurred	are,	by	their nature,	difficult	to	estimate	accurately.	These	expenses	could,	particularly	in	the near	term,	exceed	the	savings	that	we	expect	to	achieve	from	elimination	of duplicative	expenses	and	the	realization	of	economies	of	scale	and	cost savings.	Although	we	expect	that	the	realization	of	efficiencies	related	to	the integration	of	the	businesses	may	offset	incremental	transaction,	merger-related and	restructuring	costs	over	time,	we	cannot	give	any	assurance	that	this	net benefit	will	be	achieved	in	the	near	term,	or	at	all.

Any	of	these	matters	could	adversely	affect	our	businesses	or	harm	our financial	condition,	results	of	operations	or	business	prospects.

# We	incurred	substantial	additional	indebtedness	in	connection	with	the Biomet	merger	and	may	not	be	able	to	meet	all	of	our	debt	obligations.

We	incurred	substantial	additional	indebtedness	in	connection	with	the	Biomet merger.	At	December	31,	2015,	our	total	indebtedness	was	$11.6	billion,	as compared	to	$1.4	billion	at	December	31,	2014.	We	funded	the	cash	portion	of the	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	our	$4.35	billion	credit	agreement.	As	of	December	31, 2015,	our	debt	service	obligations,	comprised	of	principal	and	interest	(excluding capital	leases	and	equipment	notes),	during	the	next	12	months	are	expected	to be	$339.8	million.	As	a	result	of	the	increase	in	our	debt,	demands	on	our	cash resources	have	increased.	The	increased	level	of	debt	could,	among	other	things: •	require	us	to	dedicate	a	large	portion	of	our	cash	flow	from	operations	to	the servicing	and	repayment	of	our	debt,	thereby	reducing	funds	available	for working	capital,	capital	expenditures,	research	and	development	expenditures and	other	general	corporate	requirements;

•	limit	our	ability	to	obtain	additional	financing	to	fund	future	working	capital, capital	expenditures,	research	and	development	expenditures	and	other general	corporate	requirements;

•	limit	our	flexibility	in	planning	for,	or	reacting	to,	changes	in	our	business and	the	industry	in	which	we	operate;

•	restrict	our	ability	to	make	strategic	acquisitions	or	dispositions	or	to	exploit business	opportunities;

•	place	us	at	a	competitive	disadvantage	compared	to	our	competitors	that	have less	debt;

•	adversely	affect	our	credit	rating,	with	the	result	that	the	cost	of	servicing	our indebtedness	might	increase	and	our	ability	to	obtain	surety	bonds	could	be impaired;

•	adversely	affect	the	market	price	of	our	common	stock;	and •	limit	our	ability	to	apply	proceeds	from	a	future	offering	or	asset	sale	to purposes	other	than	the	servicing	and	repayment	of	debt.

# If	we	fail	to	comply	with	healthcare	fraud	and	abuse	laws	and	regulations, we	could	face	substantial	penalties	and	our	business,	operations	and financial	condition	could	be	adversely	affected.

Our	industry	is	subject	to	various	federal,	state	and	foreign	laws	and regulations	pertaining	to	healthcare	fraud	and	abuse,	including	the	federal	False Claims	Act,	the	federal	Anti-Kickback	Statute,	the	federal	Stark	law,	the	federal Physician	Payments	Sunshine	Act	and	similar	state	and	foreign	laws.	In	addition, we	are	subject	to	various	federal	and	foreign	laws	concerning	anti-corruption	and anti-bribery	matters,	sales	to	countries	or	persons	subject	to	economic	sanctions and	other	matters	affecting	our	international	operations.	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.	These	laws	are	administered	by,	among	others, the	DOJ,	the	Office	of	Inspector	General	of	the	U.S.	Department	of	Health	and Human	Services	("OIG-HHS"),	the	SEC,	the	Office	of	Foreign	Assets	Control	of the	U.S.	Department	of	the	Treasury	("OFAC"),	the	Bureau	of	Industry	and Security	of	the	U.S.	Department	of	Commerce	and	state	attorneys	general.	The interpretation	and	enforcement	of	these	laws	and	regulations	are	uncertain	and subject	to	change.

Biomet	is	involved	in	ongoing	governmental	investigations,	the	results	of which	may	adversely	impact	our	business	and	results	of operations.	Further,	if	Biomet	fails	to	comply	with	the	terms	of	the	DPA that	it	entered	into	in	March	2012,	it	may	be	subject	to	criminal	prosecution and/or	exclusion	from	federal	healthcare	programs.

On	March	26,	2012,	Biomet	entered	into	a	Deferred	Prosecution	Agreement ("DPA")	with	the	DOJ	and	a	Consent	to	Final	Judgment	("Consent")	with	the SEC	related	to	an	investigation	by	the	DOJ	and	the	SEC	into	possible	violations of	the	Foreign	Corrupt	Practices	Act	("FCPA")	in	the	marketing	and	sale	of medical	devices	in	certain	foreign	countries.	Pursuant	to	the	DPA,	the	DOJ agreed	to	defer	prosecution	of	Biomet	in	connection	with	those	matters,

provided	that	Biomet	satisfies	its	obligations	under	the	DPA	over	the	term	of	the DPA.	The	DPA	had	a	three-year	term	and	provided	that	it	could	be	extended	in the	sole	discretion	of	the	DOJ	for	an	additional	year.

Pursuant	to	the	Consent,	Biomet	consented	to	the	entry	of	a	Final	Judgment which,	among	other	things,	permanently	enjoined	Biomet	from	violating	the provisions	of	the	FCPA.	In	addition,	pursuant	to	the	terms	of	the	DPA,	an independent	external	compliance	monitor	was	appointed	to	review	Biomet's compliance	with	the	DPA,	particularly	in	relation	to	Biomet's	international	sales practices.	The	Consent	that	Biomet	entered	into	with	the	SEC	mirrors	the	DPA's provisions	with	respect	to	the	compliance	monitor.

In	October	2013,	Biomet	became	aware	of	certain	alleged	improprieties regarding	its	operations	in	Brazil	and	Mexico,	including	alleged	improprieties that	predated	the	entry	of	the	DPA.	Biomet	retained	counsel	and	other	experts	to investigate	both	matters.	Based	on	the	results	of	the	ongoing	investigations, Biomet	has	terminated,	suspended	or	otherwise	disciplined	certain	of	the employees	and	executives	involved	in	these	matters,	and	has	taken	certain	other remedial	measures.	Additionally,	pursuant	to	the	terms	of	the	DPA,	in	April	2014 and	thereafter,	Biomet	disclosed	these	matters	to	and	discussed	these	matters with	the	independent	compliance	monitor	and	the	DOJ	and	SEC.	On	July	2,	2014 and	July	13,	2015,	the	SEC	issued	subpoenas	to	Biomet	requiring	that	Biomet produce	certain	documents	relating	to	such	matters.	These	matters	remain	under investigation	by	the	DOJ.

On	March	13,	2015,	the	DOJ	informed	Biomet	that	the	DPA	and	the independent	compliance	monitor's	appointment	have	been	extended	for	an additional	year.	On	April	2,	2015,	at	the	request	of	the	staff	of	the	SEC,	Biomet consented	to	an	amendment	to	the	Final	Judgment	to	extend	the	term	of	the compliance	monitor's	appointment	for	one	year	from	the	date	of	entry	of	the Amended	Final	Judgment.

Pursuant	to	the	DPA,	the	DOJ	has	sole	discretion	to	determine	whether conduct	by	Biomet	constitutes	a	violation	or	breach	of	the	DPA.	The	DOJ	has informed	Biomet	that	it	retains	its	rights	under	the	DPA	to	bring	further	action against	Biomet	relating	to	the	conduct	in	Brazil	and	Mexico	referenced	above	or the	violations	set	forth	in	the	DPA.	The	DOJ	could,	among	other	things,	revoke the	DPA	or	prosecute	Biomet	and/or	the	involved	employees	and	executives. Biomet	continues	to	cooperate	with	the	SEC	and	DOJ	and	expects	that discussions	with	the	SEC	and	the	DOJ	will	continue.

In	June	2013,	Biomet	received	a	subpoena	from	the	U.S.	Attorney's	Office	for the	District	of	New	Jersey	requesting	various	documents	relating	to	the	fitting	of custom-fabricated	or	custom-fitted	orthoses,	or	bracing,	to	patients	in	New Jersey,	Texas	and	Washington.	Biomet	has	produced	responsive	documents	and is	fully	cooperating	with	the	request	of	the	U.S.	Attorney's	Office.	We	may	need to	devote	significant	time	and	resources	to	this	inquiry	and	can	give	no assurances	as	to	its	final	outcome.

In	July	2011,	Biomet	received	an	administrative	subpoena	from	OFAC, requesting	documents	concerning	the	export	of	products	to	Iran.	OFAC	informed Biomet	that	the	subpoena	related	to	allegations	that	Biomet	may	have	been involved	in

unauthorized	sales	of	dental	products	to	Iran.	Biomet	is	fully	cooperating	in	the investigation	and	submitted	its	response	to	the	subpoena	in	October	2011.	We may	need	to	devote	significant	time	and	resources	to	this	inquiry	and	can	give	no assurances	as	to	its	final	outcome.

In	February	2010,	Biomet	received	a	subpoena	from	the	OIG-HHS	requesting various	documents	relating	to	agreements	or	arrangements	between	physicians and	Biomet's	Interpore	Cross	subsidiary	for	the	period	from	1999	through	the date	of	the	subpoena	and	the	marketing	and	sales	activities	associated	with Interpore	Cross'	spinal	products.	Biomet	is	fully	cooperating	in	the investigation.	We	may	need	to	devote	significant	time	and	resources	to	this inquiry	and	can	give	no	assurances	as	to	its	final	outcome.

As	a	result	of	the	merger,	all	obligations	and	liabilities	of	Biomet	related	to	the above	matters	have	been	assumed	by	us	as	the	combined	company.	From	time	to time,	we	are,	and	may	continue	to	be,	the	subject	of	additional	investigations.	If, as	a	result	of	the	investigations	described	above	or	any	additional	investigations, we	are	found	to	have	violated	one	or	more	applicable	laws,	our	business, financial	condition,	results	of	operations	and	cash	flows	could	be	materially adversely	affected.	If	some	of	our	existing	business	practices	are	challenged	as unlawful,	we	may	have	to	modify	those	practices,	which	could	have	a	material adverse	effect	on	our	business,	financial	condition,	results	of	operations	and	cash flows.

# We	are	subject	to	various	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	medical	devices	we	design,	develop,	manufacture	and	market	are	subject to	rigorous	regulation	by	the	FDA	and	numerous	other	federal,	state	and	foreign governmental	authorities.	The	process	of	obtaining	regulatory	approvals	to market	a	medical	device	can	be	costly	and	time	consuming	and	approvals	might not	be	granted	for	future	products	on	a	timely	basis,	if	at	all.	Delays	in	receipt	of, or	failure	to	obtain,	approvals	for	future	products	could	result	in	delayed realization	of	product	revenues	or	in	substantial	additional	costs.

Both	before	and	after	a	product	is	commercially	released,	we	have	ongoing responsibilities	under	FDA	regulations.	Compliance	with	the	FDA's requirements,	including	the	Quality	System	regulation,	recordkeeping regulations,	labeling	and	promotional	requirements	and	adverse	event	reporting regulations,	is	subject	to	continual	review	and	is	monitored	rigorously	through periodic	inspections	by	the	FDA,	which	may	result	in	observations	on	Form	483, and	in	some	cases	warning	letters,	that	require	corrective	action,	or	other	forms of	enforcement.	If	the	FDA	were	to	conclude	that	we	are	not	in	compliance	with applicable	laws	or	regulations,	or	that	any	of	our	medical	devices	are	ineffective or	pose	an	unreasonable	health	risk,	the	FDA	could	ban	such	medical	devices, detain	or	seize	adulterated	or	misbranded	medical	devices,	order	a	recall,	repair, replacement,	or	refund	of	payment	of	such	devices,	refuse	to	grant	pending premarket	approval	applications,	refuse	to	provide	certificates	to	foreign

governments	for	exports,	and/or	require	us	to	notify	healthcare	professionals	and others	that	the	devices	present	unreasonable	risks	of	substantial	harm	to	the public	health.	The	FDA	may	also	impose	operating	restrictions	on	a	company- wide	basis,	enjoin	and	restrain	certain	violations	of	applicable	law	pertaining	to medical	devices	and	assess	civil	or	criminal	penalties	against	our	officers, employees	or	us.	The	FDA	may	also	recommend	prosecution	to	the	DOJ.	Any adverse	regulatory	action,	depending	on	its	magnitude,	may	restrict	us	from effectively	marketing	and	selling	our	products	and	could	have	a	material	adverse effect	on	our	business,	financial	condition	and	results	of	operations.

In	2012,	we	received	a	warning	letter	from	the	FDA	citing	concerns	relating	to certain	processes	pertaining	to	products	manufactured	at	our	Ponce,	Puerto	Rico manufacturing	facility.	In	June	2015,	Biomet	received	a	warning	letter	from	the FDA	that	requested	additional	information	to	allow	the	FDA	to	evaluate	the adequacy	of	Biomet's	responses	to	certain	Form	483	observations	issued following	an	inspection	of	Biomet's	Zhejiang,	China	manufacturing	facility	in January	2015.	As	of	December	31,	2015,	these	warning	letters	remained pending.	Until	the	violations	are	corrected,	we	may	become	subject	to	additional regulatory	action	by	the	FDA,	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	of	operations.	Additional	information	regarding	these	and	other	FDA regulatory	matters	can	be	found	in	Note	20	to	the	consolidated	financial statements.

Our	products	and	operations	are	also	often	subject	to	the	rules	of	industrial standards	bodies,	such	as	the	International	Standards	Organization.	If	we	fail	to adequately	address	any	of	these	regulations,	our	business	could	be	harmed.

# Interruption	of	our	manufacturing	operations	could	adversely	affect	our business,	financial	condition	and	results	of	operations.

We	have	manufacturing	sites	all	over	the	world.	In	some	instances,	however, the	manufacturing	of	certain	of	our	product	lines	is	concentrated	in	one	or	more of	our	plants.	Damage	to	one	or	more	of	our	facilities	from	weather	or	natural disaster-related	events,	or	issues	in	our	manufacturing	arising	from	failure	to follow	specific	internal	protocols	and	procedures,	compliance	concerns	relating to	the	Quality	System	regulation	and	Good	Manufacturing	Practice	requirements, equipment	breakdown	or	malfunction	or	other	factors	could	adversely	affect	our ability	to	manufacture	our	products.	In	the	event	of	an	interruption	in manufacturing,	we	may	be	unable	to	move	quickly	to	alternate	means	of producing	affected	products	or	to	meet	customer	demand.	In	the	event	of	a significant	interruption,	for	example,	as	a	result	of	a	failure	to	follow	regulatory protocols	and	procedures,	we	may	experience	lengthy	delays	in	resuming production	of	affected	products	due	primarily	to	the	need	for	regulatory approvals.	As	a	result,	we	may	experience	loss	of	market	share,	which	we	may be	unable	to	recapture,	and	harm	to	our	reputation,	which	could	adversely	affect our	business,	financial	condition	and	results	of	operations.

# Our	success	depends	on	our	ability	to	effectively	develop	and	market	our products	against	those	of	our	competitors.

We	operate	in	a	highly	competitive	environment.	Our	present	or	future products	could	be	rendered	obsolete	or	uneconomical	by	technological	advances by	one	or	more	of	our	present	or	future	competitors	or	by	other	therapies, including	biological	therapies.	To	remain	competitive,	we	must	continue	to develop	and	acquire	new	products	and	technologies.	Competition	is	primarily	on the	basis	of:

•	technology;

•	innovation;

•	quality;

•	reputation;	and

•	customer	service.

In	markets	outside	of	the	U.S.,	other	factors	influence	competition	as	well, including:

•	local	distribution	systems;

•	complex	regulatory	environments;	and

•	differing	medical	philosophies	and	product	preferences. Our	competitors	may:

•	have	greater	financial,	marketing	and	other	resources	than	us; •	respond	more	quickly	to	new	or	emerging	technologies; •	undertake	more	extensive	marketing	campaigns;

•	adopt	more	aggressive	pricing	policies;	or

•	be	more	successful	in	attracting	potential	customers,	employees	and	strategic partners.

Any	of	these	factors,	alone	or	in	combination,	could	cause	us	to	have	difficulty maintaining	or	increasing	sales	of	our	products.

# If	we	fail	to	retain	the	independent	agents	and	distributors	upon	whom	we rely	heavily	to	market	our	products,	customers	may	not	buy	our	products and	our	revenue	and	profitability	may	decline.

Our	marketing	success	in	the	U.S.	and	abroad	depends	significantly	upon	our agents'	and	distributors'	sales	and	service	expertise	in	the	marketplace.	Many	of these	agents	have	developed	professional	relationships	with	existing	and potential	customers	because	of	the	agents'	detailed	knowledge	of	products	and instruments.	Further,	the	legacy	independent	agents	and	distributors	of	us	or Biomet	may	decide	not	to	renew	or	may	decide	to	seek	to	terminate,	change and/or	renegotiate	their	relationships	with	us	and/or	Biomet	as	a	result	of	the merger.	A	loss	of	a	significant	number	of	the	combined	company's	agents	could have	a	material	adverse	effect	on	our	business	and	results	of	operations.

# If	we	do	not	introduce	new	products	in	a	timely	manner,	our	products may	become	obsolete	over	time,	customers	may	not	buy	our	products	and our	revenue	and	profitability	may	decline.

Demand	for	our	products	may	change,	in	certain	cases,	in	ways	we	may	not anticipate	because	of:

•	evolving	customer	needs;

•	changing	demographics;

•	slowing	industry	growth	rates;

•	declines	in	the	reconstructive	implant	market; •	the	introduction	of	new	products	and	technologies;

•	evolving	surgical	philosophies;	and •	evolving	industry	standards.

Without	the	timely	introduction	of	new	products	and	enhancements,	our products	may	become	obsolete	over	time.	If	that	happens,	our	revenue	and operating	results	would	suffer.	The	success	of	our	new	product	offerings	will depend	on	several	factors,	including	our	ability	to:

•	properly	identify	and	anticipate	customer	needs;

•	commercialize	new	products	in	a	timely	manner;

•	manufacture	and	deliver	instruments	and	products	in	sufficient	volumes	on time;

•	differentiate	our	offerings	from	competitors'	offerings;

•	achieve	positive	clinical	outcomes	for	new	products;

•	satisfy	the	increased	demands	by	healthcare	payors,	providers	and	patients	for shorter	hospital	stays,	faster	post-operative	recovery	and	lower-cost procedures;

•	innovate	and	develop	new	materials,	product	designs	and	surgical	techniques; and

•	provide	adequate	medical	education	relating	to	new	products.

In	addition,	new	materials,	product	designs	and	surgical	techniques	that	we develop	may	not	be	accepted	quickly,	in	some	or	all	markets,	because	of,	among other	factors:

•	entrenched	patterns	of	clinical	practice;

•	the	need	for	regulatory	clearance;	and

•	uncertainty	with	respect	to	third-party	reimbursement.

Moreover,	innovations	generally	require	a	substantial	investment	in	research and	development	before	we	can	determine	their	commercial	viability	and	we may	not	have	the	financial	resources	necessary	to	fund	the	production.	In addition,	even	if	we	are	able	to	successfully	develop	enhancements	or	new generations	of	our	products,	these	enhancements	or	new	generations	of	products may	not	produce	revenue	in	excess	of	the	costs	of	development	and	they	may	be quickly	rendered	obsolete	by	changing	customer	preferences	or	the	introduction by	our	competitors	of	products	embodying	new	technologies	or	features.

# If	third-party	payors	decline	to	reimburse	our	customers	for	our	products or	reduce	reimbursement	levels,	the	demand	for	our	products	may	decline and	our	ability	to	sell	our	products	profitably	may	be	harmed.

We	sell	our	products	and	services	to	hospitals,	doctors,	dentists	and	other healthcare	providers,	all	of	which	receive	reimbursement	for	the	healthcare services	provided	to	their	patients	from	third-party	payors,	such	as	domestic	and international	government	programs,	private	insurance	plans	and	managed	care programs.	These	third-party	payors	may	deny	reimbursement	if	they	determine that	a	device	used	in	a	procedure	was	not	in	accordance	with	cost-effective treatment	methods,	as	determined	by	the	third-party	payor,	or	was	used	for	an unapproved	indication.	Third-party	payors	may	also	decline	to	reimburse	for experimental	procedures	and	devices.

In	addition,	third-party	payors	are	increasingly	attempting	to	contain healthcare	costs	by	limiting	both	coverage	and	the	level	of	reimbursement	for medical	products	and	services.	If	third-party	payors	reduce	reimbursement	levels to	hospitals	and	other	healthcare	providers	for	our	products,	demand	for	our products	may	decline,	or	we	may	experience	increased

pressure	to	reduce	the	prices	of	our	products,	which	could	have	a	material adverse	effect	on	our	sales	and	results	of	operations.

We	have	also	experienced	downward	pressure	on	product	pricing	and	other effects	of	healthcare	reform	in	our	international	markets.	If	key	participants	in government	healthcare	systems	reduce	the	reimbursement	levels	for	our products,	our	sales	and	results	of	operations	may	be	adversely	affected.

# The	ongoing	cost-containment	efforts	of	healthcare	purchasing organizations	may	have	a	material	adverse	effect	on	our	results	of operations.

Many	customers	for	our	products	have	formed	group	purchasing	organizations in	an	effort	to	contain	costs.	Group	purchasing	organizations	negotiate	pricing arrangements	with	medical	supply	manufacturers	and	distributors,	and	these negotiated	prices	are	made	available	to	a	group	purchasing	organization's affiliated	hospitals	and	other	members.	If	we	are	not	one	of	the	providers selected	by	a	group	purchasing	organization,	affiliated	hospitals	and	other members	may	be	less	likely	to	purchase	our	products,	and,	if	the	group purchasing	organization	has	negotiated	a	strict	compliance	contract	for	another manufacturer's	products,	we	may	be	precluded	from	making	sales	to	members	of the	group	purchasing	organization	for	the	duration	of	the	contractual arrangement.	Our	failure	to	respond	to	the	cost-containment	efforts	of	group purchasing	organizations	may	cause	us	to	lose	market	share	to	our	competitors and	could	have	a	material	adverse	effect	on	our	sales	and	results	of	operations.

# We	conduct	a	significant	amount	of	our	sales	activity	outside	of	the	U.S., which	subjects	us	to	additional	business	risks	and	may	cause	our profitability	to	decline	due	to	increased	costs.

We	sell	our	products	in	more	than	100	countries	and	derived	over	40	percent of	our	net	sales	in	2015	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.	Our	international	operations	are,	and	will	continue	to	be,	subject	to	a number	of	risks	and	potential	costs,	including:

•	changes	in	foreign	medical	reimbursement	policies	and	programs; •	unexpected	changes	in	foreign	regulatory	requirements; •	differing	local	product	preferences	and	product	requirements; •	fluctuations	in	foreign	currency	exchange	rates;

•	diminished	protection	of	intellectual	property	in	some	countries	outside	of	the U.S.;

•	trade	protection	measures	and	import	or	export	requirements	that	may	prevent us	from	shipping	products	to	a	particular	market	and	may	increase	our operating	costs;

•	foreign	exchange	controls	that	might	prevent	us	from	repatriating	cash	earned in	countries	outside	the	U.S.;

•	complex	data	privacy	requirements	and	labor	relations	laws; •	extraterritorial	effects	of	U.S.	laws	such	as	the	FCPA;

•	effects	of	foreign	anti-corruption	laws,	such	as	the	UK	Bribery	Act;

•	difficulty	in	staffing	and	managing	foreign	operations; •	labor	force	instability;

•	potentially	negative	consequences	from	changes	in	tax	laws;	and •	political	and	economic	instability.

Violations	of	foreign	laws	or	regulations	could	result	in	fines,	criminal sanctions	against	us,	our	officers	or	our	employees,	prohibitions	on	the	conduct of	our	business	and	damage	to	our	reputation.

# Disruptions	in	the	supply	of	the	materials	and	components	used	in manufacturing	our	products	could	adversely	affect	our	results	of	operations and	financial	condition.

We	purchase	many	of	the	materials	and	components	used	in	manufacturing our	products	from	third-party	vendors	and	we	outsource	some	key manufacturing	activities.	Certain	of	these	materials	and	components	and outsourced	activities	can	only	be	obtained	from	a	single	source	or	a	limited number	of	sources	due	to	quality	considerations,	expertise,	costs	or	constraints resulting	from	regulatory	requirements.	In	certain	cases	we	may	not	be	able	to establish	additional	or	replacement	vendors	for	such	materials	or	components	or outsourced	activities	in	a	timely	or	cost	effective	manner,	largely	as	a	result	of FDA	regulations	that	require	validation	of	materials	and	components	prior	to their	use	in	our	products	and	the	complex	nature	of	our	and	many	of	our vendors'	manufacturing	processes.	A	reduction	or	interruption	in	the	supply	of materials	or	components	used	in	manufacturing	our	products;	an	inability	to timely	develop	and	validate	alternative	sources	if	required;	or	a	significant increase	in	the	price	of	such	materials	or	components	could	adversely	affect	our financial	condition	and	results	of	operations.

Moreover,	we	are	subject	to	the	SEC's	rule	regarding	disclosure	of	the	use	of certain	minerals,	known	as	"conflict	minerals"	(tantalum,	tin	and	tungsten	(or their	ores)	and	gold),	which	are	mined	from	the	Democratic	Republic	of	the Congo	and	adjoining	countries.	We	filed	reports	on	Form	SD	with	the	SEC regarding	such	matters	in	June	2014	and	2015	and	are	required	to	file	on	an annual	basis	going	forward.	This	rule	could	adversely	affect	the	sourcing, availability	and	pricing	of	materials	used	in	the	manufacture	of	our	products, which	could	adversely	affect	our	manufacturing	operations	and	our	profitability. In	addition,	we	are	incurring	additional	costs	to	comply	with	this	rule,	including costs	related	to	determining	the	source	of	any	relevant	minerals	and	metals	used in	our	products.	We	have	a	complex	supply	chain	and	we	may	not	be	able	to sufficiently	verify	the	origins	of	the	minerals	and	metals	used	in	our	products through	the	due	diligence	procedures	that	we	implement.	As	a	result,	we	may face	reputational	challenges	with	our	customers	and	other	stakeholders.

# We	may	have	additional	tax	liabilities.

We	are	subject	to	income	taxes	in	the	U.S.	and	many	foreign jurisdictions.	Significant	judgment	is	required	in	determining	our	worldwide provision	for	income	taxes.	In	the	ordinary	course	of	our	business,	there	are many	transactions

and	calculations	where	the	ultimate	tax	determination	is	uncertain.	We	regularly are	under	audit	by	tax	authorities.	Although	we	believe	our	tax	estimates	are reasonable,	the	final	determination	of	tax	audits	and	any	related	litigation	could be	materially	different	from	our	historical	income	tax	provisions	and accruals.	The	results	of	an	audit	or	litigation	could	have	a	material	effect	on	our financial	statements	in	the	period	or	periods	for	which	that	determination	is made.

We	earn	a	significant	amount	of	our	operating	income	from	outside	the	U.S., and	any	repatriation	of	funds	representing	earnings	of	foreign	subsidiaries	may significantly	impact	our	effective	tax	rates.	In	addition,	there	have	been proposals	to	change	U.S.	tax	laws	that	would	significantly	impact	how	U.S. multinational	corporations	are	taxed	on	foreign	earnings.	Although	we	cannot predict	whether	or	in	what	form	this	proposed	legislation	will	pass,	if	enacted	it could	have	a	material	adverse	impact	on	our	tax	expense	and	cash	flow.

# We	are	subject	to	risks	arising	from	currency	exchange	rate	fluctuations, which	can	increase	our	costs,	cause	our	profitability	to	decline	and	expose us	to	counterparty	risks.

A	substantial	portion	of	our	foreign	revenues	is	generated	in	Europe	and Japan.	The	U.S.	Dollar	value	of	our	foreign-generated	revenues	varies	with currency	exchange	rate	fluctuations.	Significant	increases	in	the	value	of	the U.S.	Dollar	relative	to	the	Euro	or	the	Japanese	Yen,	as	well	as	other	currencies, could	have	a	material	adverse	effect	on	our	results	of	operations.	Although	we address	currency	risk	management	through	regular	operating	and	financing activities,	and,	on	a	limited	basis,	through	the	use	of	derivative	financial instruments,	those	actions	may	not	prove	to	be	fully	effective.

# Pending	and	future	product	liability	claims	and	litigation	could	adversely impact	our	financial	condition	and	results	of	operations	and	impair	our reputation.

Our	business	exposes	us	to	potential	product	liability	risks	that	are	inherent	in the	design,	manufacture	and	marketing	of	medical	devices.	In	the	ordinary course	of	business,	we	are	the	subject	of	product	liability	lawsuits	alleging	that component	failures,	manufacturing	flaws,	design	defects	or	inadequate disclosure	of	product-related	risks	or	product-related	information	resulted	in	an unsafe	condition	or	injury	to	patients.	As	discussed	further	in	Note	20	to	the consolidated	financial	statements,	we	are	defending	product	liability	lawsuits within	the	NexGen	Knee	System,	and	the	M2a-Magnum ™	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	NexGen	Knee	System	cases are	pending	in	a	federal	MDL	in	the	Northern	District	of	Illinois	(In	Re:	Zimmer NexGen	Knee	Implant	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). We	are	also	currently	defending	a	number	of	other	product	liability	lawsuits	and claims	related	to	various	other	products.	Any	product	liability	claim	brought against	us,	with	or	without	merit,	can	be	costly	to	defend.	Product	liability lawsuits	and	claims,	safety	alerts	or	product	recalls,	regardless	of	their	ultimate outcome,	could	have	a	material	adverse	effect	on	our	business	and	reputation and	on	our	ability	to	attract	and	retain	customers.

Although	we	maintain	third-party	product	liability	insurance	coverage,	we have	substantial	self-insured	retention	amounts	that	we	must	pay	in	full	before obtaining	any	insurance	proceeds	to	satisfy	a	judgment	or	settlement.

Furthermore,	even	if	any	product	liability	loss	is	covered	by	our	insurance,	it	is possible	that	claims	against	us	may	exceed	the	coverage	limits	of	our	insurance policies	and	we	would	have	to	pay	the	amount	of	any	settlement	or	judgment	that is	in	excess	of	our	policy	limits.	Product	liability	claims	in	excess	of	applicable insurance	could	have	a	material	adverse	effect	on	our	business,	financial condition	and	results	of	operations.

# We	are	substantially	dependent	on	patent	and	other	proprietary	rights, and	failing	to	protect	such	rights	or	to	be	successful	in	litigation	related	to our	rights	or	the	rights	of	others	may	result	in	our	payment	of	significant monetary	damages	and/or	royalty	payments,	negatively	impact	our	ability to	sell	current	or	future	products,	or	prohibit	us	from	enforcing	our	patent and	other	proprietary	rights	against	others.

Claims	of	intellectual	property	infringement	and	litigation	regarding	patent and	other	intellectual	property	rights	are	commonplace	in	our	industry	and	are frequently	time	consuming	and	costly.	At	any	given	time,	we	may	be	involved	as either	plaintiff	or	defendant	in	a	number	of	patent	infringement	actions,	the outcomes	of	which	may	not	be	known	for	prolonged	periods	of	time.	While	it	is not	possible	to	predict	the	outcome	of	patent	and	other	intellectual	property litigation,	such	litigation	could	result	in	our	payment	of	significant	monetary damages	and/or	royalty	payments,	negatively	impact	our	ability	to	sell	current	or future	products,	or	prohibit	us	from	enforcing	our	patent	and	proprietary	rights against	others,	which	could	have	a	material	adverse	effect	on	our	business	and results	of	operations.

Patents	and	other	proprietary	rights	are	essential	to	our	business.	We	rely	on	a combination	of	patents,	trade	secrets	and	non-disclosure	and	other	agreements	to protect	our	proprietary	intellectual	property,	and	we	will	continue	to	do so.	While	we	intend	to	defend	against	any	threats	to	our	intellectual	property, these	patents,	trade	secrets	and	other	agreements	may	not	adequately	protect	our intellectual	property.	Further,	our	currently	pending	or	future	patent	applications may	not	result	in	patents	being	issued	to	us,	patents	issued	to	or	licensed	by	us	in the	past	or	in	the	future	may	be	challenged	or	circumvented	by	competitors,	and such	patents	may	be	found	invalid,	unenforceable	or	insufficiently	broad	to protect	our	technology	or	to	provide	us	with	any	competitive	advantage.	Third parties	could	obtain	patents	that

may	require	us	to	negotiate	licenses	to	conduct	our	business,	and	the	required licenses	may	not	be	available	on	reasonable	terms	or	at	all.

In	addition,	intellectual	property	rights	may	be	unavailable	or	of	limited	effect in	some	foreign	countries.	If	we	do	not	obtain	sufficient	international	protection for	our	intellectual	property,	our	competitiveness	in	international	markets	could be	impaired,	which	could	limit	our	growth	and	revenue.

We	also	attempt	to	protect	our	trade	secrets,	proprietary	know-how	and continuing	technological	innovation	with	security	measures,	including	the	use	of non-disclosure	and	other	agreements	with	our	employees,	consultants	and collaborators.	We	cannot	be	certain	that	these	agreements	will	not	be	breached, that	we	will	have	adequate	remedies	for	any	breach,	that	others	will	not independently	develop	substantially	equivalent	proprietary	information,	or	that third	parties	will	not	otherwise	gain	access	to	our	trade	secrets	or	proprietary knowledge.

# We	are	involved	in	legal	proceedings	that	may	result	in	adverse	outcomes.

In	addition	to	intellectual	property	and	product	liability	claims	and	lawsuits, we	are	involved	in	various	commercial	litigation	and	claims	and	other	legal proceedings	that	arise	from	time	to	time	in	the	ordinary	course	of	our	business. Although	we	believe	we	have	substantial	defenses	in	these	matters,	litigation	and other	claims	are	subject	to	inherent	uncertainties	and	management's	view	of these	matters	may	change	in	the	future.	Given	the	uncertain	nature	of	legal proceedings	generally,	we	are	not	able	in	all	cases	to	estimate	the	amount	or range	of	loss	that	could	result	from	an	unfavorable	outcome.	We	could	in	the future	incur	judgments	or	enter	into	settlements	of	claims	that	could	have	a material	adverse	effect	on	our	results	of	operations	in	any	particular	period.

We	are	increasingly	dependent	on	sophisticated	information	technology and	if	we	fail	to	effectively	maintain	or	protect	the	integrity	of	our information	systems	and	data,	our	business	could	be	adversely	affected.

We	are	increasingly	dependent	on	sophisticated	information	technology	for our	products	and	infrastructure.	As	a	result	of	technology	initiatives,	recently enacted	regulations,	changes	in	our	system	platforms	and	integration	of	new business	acquisitions,	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.	Our	information	systems	require an	ongoing	commitment	of	significant	resources	to	maintain,	protect,	and enhance	existing	systems	and	develop	new	systems	to	keep	pace	with	continuing changes	in	information	technology,	evolving	systems	and	regulatory	standards, and	the	increasing	need	to	protect	patient	and	customer	information.	In	addition, third	parties	may	attempt	to	gain	unauthorized	access	to	our	products	or	systems and	may	obtain	data	relating	to	patients	or	our	proprietary	information.	If	we	fail to	maintain	or	protect	our	information	systems	and	data	integrity	effectively,	we could:

•	lose	existing	customers;

•	have	difficulty	attracting	new	customers;

•	have	problems	in	determining	product	cost	estimates	and	establishing appropriate	pricing;

•	have	difficulty	preventing,	detecting,	and	controlling	fraud;

•	have	disputes	with	customers,	physicians,	and	other	healthcare	professionals; •	have	regulatory	sanctions	or	penalties	imposed;

•	incur	increased	operating	expenses;

•	incur	expenses	or	lose	revenues	as	a	result	of	a	data	privacy	breach;	or •	suffer	other	adverse	consequences.

While	we	have	invested	heavily	in	the	protection	of	our	data	and	information technology,	there	can	be	no	assurance	that	our	activities	related	to	consolidating the	number	of	systems	we	operate,	upgrading	and	expanding	our	information systems	capabilities,	protecting	and	enhancing	our	systems	and	implementing new	systems	will	be	successful	or	that	systems	issues	will	not	arise	in	the future.	Any	significant	breakdown,	intrusion,	interruption,	corruption	or destruction	of	these	systems	could	have	a	material	adverse	effect	on	our business.

# Future	material	impairments	in	the	carrying	value	of	our	intangible assets,	including	goodwill,	would	negatively	affect	our	operating	results.

Our	assets	include	intangible	assets,	primarily	goodwill.	At	December	31, 2015,	we	had	$9.9	billion	in	goodwill.	The	goodwill	results	from	our	acquisition activity,	including	the	Biomet	merger,	and	represents	the	excess	of	the consideration	transferred	over	the	fair	value	of	the	net	assets	acquired.	We	assess at	least	annually	whether	events	or	changes	in	circumstances	indicate	that	the carrying	value	of	our	intangible	assets	may	not	be	recoverable.	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	future	cash	flow	estimates	for	one	or	more	of	our	businesses decline,	we	could	be	required,	under	current	U.S.	accounting	rules,	to	record	a non-cash	charge	to	operating	earnings	for	the	amount	of	the	impairment.	Any write-off	of	a	material	portion	of	our	unamortized	intangible	assets	would negatively	affect	our	results	of	operations.

# Certain	investors	continue	to	have	influence	over	us,	including	in connection	with	decisions	that	require	the	approval	of	stockholders,	which could	limit	other	stockholders'	ability	to	influence	the	outcome	of	key transactions,	including	a	change	of	control.

In	connection	with	our	acquisition	of	Biomet,	we	entered	into	a	stockholders agreement	(the	"stockholders	agreement")	with	LVB	Acquisition	Holding,	LLC and	its	owners	party	thereto	(collectively,	the	"Sponsors").	The	Sponsors	and certain	of	their	affiliates	currently	hold	approximately	9.4%	of	our	common stock.	In	addition,	representatives	of	the	Sponsors	currently	have	the	right	to designate	two	members	of	our	board	of	directors.	As	a	result,	the	Sponsors potentially	have	the	ability	to	influence	our	decisions	to	enter	into	any	corporate transaction	(and	the	terms	thereof).

Additionally,	the	Sponsors	are	in	the	business	of	making	investments	in companies	and	may	acquire	and	hold	interests	in	businesses	that	compete directly	or	indirectly	with	us.	One

or	more	of	these	entities	may	also	pursue	acquisition	opportunities	that	may	be complementary	to	our	business	and,	as	a	result,	those	acquisition	opportunities may	not	be	available	to	us.

# Future	sales,	or	the	perception	of	future	sales,	by	us	or	our	existing stockholders	in	the	public	market	could	cause	the	market	price	for	our common	stock	to	decline.

Pursuant	to	the	stockholders'	agreement,	we	have	filed	a	shelf	registration statement	with	the	SEC,	registering	shares	of	our	common	stock	for	resale	by	the Sponsors.	Two	of	the	Sponsors	recently	completed	the	sale	of	approximately 11.0	million	shares	of	our	common	stock	in	an	underwritten	offering.	The Sponsors	own	approximately	18.6	million	additional	shares	that	may	be	offered and	sold	under	the	resale	registration	statement.	The	sale	of	a	substantial	number of	shares	of	our	common	stock	in	the	public	market	by	us	or	our	existing stockholders,	or	the	perception	that	such	sales	could	occur,	could	harm	the prevailing	market	price	of	shares	of	our	common	stock.	These	sales,	or	the possibility	that	these	sales	may	occur,	also	might	make	it	more	difficult	for	us	to sell	equity	securities	in	the	future	at	a	time	and	at	a	price	that	we	deem appropriate.

# Anti-takeover	provisions	in	our	organizational	documents	could	delay	or prevent	a	change	of	control.

Certain	provisions	of	our	Restated	Certificate	of	Incorporation,	our	Restated By-Laws	and	the	Delaware	General	Corporation	Law	may	have	an	anti-takeover effect	and	may	delay,	defer	or	prevent	a	merger,	acquisition,	tender	offer, takeover	attempt	or	other	change	of	control	transaction	that	a	stockholder	might consider	in	its	best	interest,	including	those	attempts	that	might	result	in	a premium	over	the	market	price	for	the	shares	held	by	our	stockholders. These	provisions	provide	for,	among	other	things: •	the	ability	of	our	board	of	directors	to	issue	one	or	more	series	of	preferred stock	without	further	stockholder	action;

•	advance	notice	for	nominations	of	directors	by	stockholders	and	for stockholders	to	include	matters	to	be	considered	at	our	annual	meetings; •	certain	limitations	on	convening	special	stockholder	meetings;	and •	the	prohibition	on	engaging	in	a	"business	combination"	with	an	"interested stockholder"	for	three	years	after	the	time	at	which	a	person	became	an interested	stockholder	unless	certain	conditions	are	met,	as	set	forth	in Section	203	of	the	Delaware	General	Corporation	Law.

These	anti-takeover	provisions	could	make	it	more	difficult	for	a	third	party	to acquire	us,	even	if	the	third	party's	offer	may	be	considered	beneficial	by	many of	our	stockholders.	As	a	result,	our	stockholders	may	be	limited	in	their	ability to	obtain	a	premium	for	their	shares.

# Our	Restated	By-Laws	designate	certain	Delaware	courts	as	the	sole	and exclusive	forum	for	certain	types	of	actions	and	proceedings	that	may	be initiated	by	our	stockholders,	which	could	limit	our	stockholders'	ability	to obtain	a	favorable	judicial	forum	for	disputes	with	us	or	our	directors, officers	or	other	employees.

Our	Restated	By-Laws	provide	that,	unless	we	consent	in	writing	to	the selection	of	an	alternative	forum,	a	state	court	located	within	the	State	of Delaware	(or,	if	no	state	court	located	in	the	State	of	Delaware	has	jurisdiction, the	federal	district	court	for	the	District	of	Delaware)	will	be	the	sole	and exclusive	forum	for	any	stockholder	(including	any	beneficial	owner)	to	bring (i)	any	derivative	action	or	proceeding	brought	on	our	behalf,	(ii)	any	action asserting	a	claim	of	breach	of	fiduciary	duty	owed	by	any	of	our	directors, officers	or	other	employees	to	us	or	our	stockholders,	(iii)	any	action	asserting	a claim	against	us	or	any	of	our	directors,	officers	or	other	employees	arising pursuant	to	any	provision	of	the	Delaware	General	Corporation	Law	or	our Restated	Certificate	of	Incorporation	or	our	Restated	By-Laws,	as	either	may	be amended	from	time	to	time,	or	(iv)	any	action	asserting	a	claim	against	us	or	any of	our	directors,	officers	or	other	employees	governed	by	the	internal	affairs doctrine.	Any	person	or	entity	purchasing	or	otherwise	acquiring	any	interest	in shares	of	our	common	stock	is	deemed	to	have	received	notice	of	and	consented to	the	foregoing	provisions.	This	choice	of	forum	provision	may	limit	a stockholder's	ability	to	bring	a	claim	in	a	judicial	forum	that	it	finds	favorable	for disputes	with	us	or	our	directors,	officers	or	other	employees,	which	may discourage	such	lawsuits	against	us	and	our	directors,	officers	and	employees. Alternatively,	if	a	court	were	to	find	this	choice	of	forum	provision	inapplicable to,	or	unenforceable	in	respect	of,	one	or	more	of	the	specified	types	of	actions	or proceedings,	we	may	incur	additional	costs	associated	with	resolving	such matters	in	other	jurisdictions,	which	could	adversely	affect	our	business, financial	condition	or	results	of	operations.

# We	identified	a	material	weakness	in	our	internal	control	over	financial reporting	in	2015.	While	the	particular	material	weakness	has	been remediated	as	of	December	31,	2015,	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	Rule	13a-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	during	the	three	month period	ended	September	30,	2015	related	to	the	control	over	accounting	for	non- routine,	complex	transactions.	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	the	fourth	quarter	of	2015,	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.

# Item	1B. 	 Unresolved	Staff	Comments

Not	Applicable.

| Location | Use | Owned	/Leased | Square	Feet |
| :--- | :--- | :--- | :--- |
| Warsaw,\tIndiana | Business\tUnit\tHeadquarters,\tManufacturing,\tWarehousing,\tMarketing\t&\tAdministration | Owned | \t1,900,000 |
| Warsaw,\tIndiana | Corporate\tHeadquarters | Owned | 115,000 |
| Warsaw,\tIndiana | Manufacturing\t&\tWarehousing | Leased | 145,000 |
| Broomfield,\tColorado | Business\tUnit\tHeadquarters | Leased | 65,000 |
| Jacksonville,\tFlorida | Business\tUnit\tHeadquarters\t&\tManufacturing | Owned | 85,000 |
| Palm\tBeach\tGardens,\tFlorida | Business\tUnit\tHeadquarters\t&\tManufacturing | Owned | 190,000 |
|  |  | Leased | 30,000 |
| Southaven,\tMississippi | Distribution\tCenter | Leased | 190,000 |
| Parsippany,\tNew\tJersey | Business\tUnit\tHeadquarters\t&\tManufacturing | Leased | 245,000 |
| Dover,\tOhio | Business\tUnit\tHeadquarters\t&\tManufacturing | Owned | 140,000 |
|  |  | Leased | 65,000 |
| Beijing,\tChina | Manufacturing | Leased | 95,000 |
| Changzhou,\tChina | Manufacturing | Owned | 75,000 |
| Jinhua,\tChina | Manufacturing | Owned | 135,000 |
| Valence,\tFrance | Manufacturing | Owned | 120,000 |
| Berlin,\tGermany | Manufacturing | Owned | 50,000 |
| Eschbach,\tGermany | Distribution\tCenter | Owned | 95,000 |
| Galway,\tIreland | Manufacturing | Leased | 115,000 |
| Shannon,\tIreland | Manufacturing | Owned | 125,000 |
| Hazeldonk,\tThe\tNetherlands | Distribution\tCenter | Leased | 195,000 |
| Ponce,\tPuerto\tRico | Manufacturing | Owned | 225,000 |
| Singapore | Regional\tHeadquarters | Leased | 20,000 |
| Bridgend,\tSouth\tWales | Manufacturing | Owned | 185,000 |
|  |  | Leased | 100,000 |
| Valencia,\tSpain | Manufacturing | Owned | 70,000 |
|  |  | Leased | 20,000 |
| Winterthur,\tSwitzerland | Regional\tHeadquarters,\tResearch\t&\tDevelopment\t&\tManufacturing | Leased | 485,000 |

In	addition	to	the	above,	we	maintain	sales	and	administrative	offices	and	warehouse	and	distribution	facilities	in	more	than	40	countries	around	the	world.	We believe	that	all	of	the	facilities	and	equipment	are	in	good	condition,	well	maintained	and	able	to	operate	at	present	levels.	We	believe	the	current	facilities,	including manufacturing,	warehousing,	research	and	development	and	office	space,	provide	sufficient	capacity	to	meet	ongoing	demands.

# Item	3. Legal	Proceedings

Information	pertaining	to	legal	proceedings	in	which	we	are	involved	can	be	found	in	Note	20	to	our	consolidated	financial	statements	included	in	Part	II,	Item	8	of this	report	and	is	incorporated	herein	by	reference.

# Item	4. 	 Mine	Safety	Disclosures

# PART	II

# Item	5. 	 Market	for	the	Registrant's	Common	Equity,	Related	Stockholder	Matters	and	Issuer	Purchases	of	Equity	Securities

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	2015	and	2014	are	as	follows:

| QUARTERLY	HIGH-LOW	SHARE	PRICES	AND	DECLARED	DIVIDENDS | High | Low | Dividends |
| :--- | :--- | :--- | :--- |
| Year\tEnded\tDecember\t31,\t2015: |  |  |  |
| First\tQuarter | $121.84 | $111.06 | $0.22 |
| Second\tQuarter | $119.10 | $97.48 | $0.22 |
| Third\tQuarter | $111.35 | $90.92 | $0.22 |
| Fourth\tQuarter | $108.99 | $88.77 | $0.22 |
| Year\tEnded\tDecember\t31,\t2014: |  |  |  |
| First\tQuarter | $98.95 | $90.77 | $0.22 |
| Second\tQuarter | $108.33 | $90.48 | $0.22 |
| Third\tQuarter | $105.68 | $94.73 | $0.22 |
| Fourth\tQuarter | $116.14 | $95.33 | $0.22 |

We	expect	to	continue	paying	cash	dividends	on	a	quarterly	basis;	however,	future	dividends	are	subject	to	approval	of	the	Board	of	Directors	and	may	be	adjusted as	business	needs	or	market	conditions	change.	As	further	discussed	in	Item	7	of	this	report,	our	debt	facilities	restrict	the	payment	of	dividends	under	certain circumstances.

The	number	of	holders	of	record	of	our	common	stock	on	February	24,	2016	was	approximately	26,600.	On	February	25,	2016,	the	closing	price	of	our	common stock,	as	reported	on	the	New	York	Stock	Exchange,	was	$96.89	per	share.

The	information	required	by	this	Item	concerning	equity	compensation	plans	is	incorporated	herein	by	reference	to	Item	12	of	this	report.

The	following	table	summarizes	repurchases	of	common	stock	settled	during	the	three	months	ended	December	31,	2015:

|  |  |  | Total	Number	of | Approximate |
| :--- | :--- | :--- | :--- | :--- |
|  |  |  | Shares\tPurchased | Dollar\tValue\tof |
|  |  |  | as\tPart\tof | Shares\tthat\tMay |
|  | Total\tNumber |  | Publicly | Yet\tBe\tPurchased |
|  | of\tShares\nPurchased | Average\tPrice\nPaid\tper\tShare | Announced\tPlans\nor\tPrograms^(1) | Under\tPlans\nor\tPrograms^(1) |
| October\t2015 |  | –\t\t\t\t $\t– | – | $599,534,755 |
| November\t2015 | \t1,414,960 | 106.01 | 1,414,960 | \t 449,534,731 |
| December\t2015 | – | – | – | \t 449,534,731 |
| Total | \t1,414,960 | $106.01 | 1,414,960 | $449,534,731 |

	Includes	repurchases	made	under	a	program	authorizing	$1.0	billion	of	repurchases	with	no	expiration	date. (1)

|  | 2015^(1) | 2014 | As	Revised^(2)<br>2013 | 2012 | 2011 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| STATEMENT\tOF\tEARNINGS\tDATA |  |  |  |  |  |
| Net\tsales | $5,997.8 | $4,673.3 | $4,623.4 | $4,471.7 | $4,451.8 |
| Net\tearnings\tof\tZimmer\tBiomet\tHoldings,\tInc. | 147.0 | 720.3 | 780.4 | 734.0 | 784.0 |
| Earnings\tper\tcommon\tshare |  |  |  |  |  |
| Basic | $0.78 | $4.26 | $4.60 | $4.20 | $4.18 |
| Diluted | 0.77 | 4.20 | 4.54 | 4.17 | 4.15 |
| Dividends\tdeclared\tper\tshare\tof\tcommon\tstock | $0.88 | $0.88 | $0.80 | $0.54 | $0.18 |
| Average\tcommon\tshares\toutstanding |  |  |  |  |  |
| Basic | 187.4 | 169.0 | 169.6 | 174.9 | 187.6 |
| Diluted | 189.8 | 171.7 | 171.8 | 176.0 | 188.7 |
| BALANCE\tSHEET\tDATA |  |  |  |  |  |
| Total\tassets | $27,219.5 | $9,658.0 | $9,595.0 | $8,995.6 | $8,514.4 |
| Long-term\tdebt | \t 11,556.3 | \t 1,425.5 | \t 1,672.3 | \t 1,720.8 | \t 1,576.0 |
| Other\tlong-term\tobligations | 4,155.9 | 656.8 | 583.6 | 568.2 | 558.2 |
| Stockholders'\tequity | 9,889.4 | \t 6,551.7 | \t 6,310.6 | \t 5,848.0 | \t 5,513.0 |

	Includes	the	results	of	Biomet	starting	on	June	24,	2015	and	Biomet	balance	sheet	data	as	of	December	31,	2015.	See	Note	4	to	the	audited	financial	statements	for	additional	information	on	the	Biomet	merger. (1)

	See	Note	2	to	the	audited	financial	statements	for	additional	information	on	revisions. (2)

# Item	7. 	 Management's	Discussion	and	Analysis	of	Financial	Condition	and	Results	of	Operations

The	following	discussion	and	analysis	should	be	read	in	conjunction	with the	consolidated	financial	statements	and	the	corresponding	notes	included elsewhere	in	this	Annual	Report	on	Form	10-K.	Certain	percentages	presented	in this	discussion	and	analysis	are	calculated	from	the	underlying	whole-dollar amounts	and	therefore	may	not	recalculate	from	the	rounded	numbers	used	for disclosure	purposes.	Certain	amounts	in	the	2014	and	2013	consolidated financial	statements	have	been	reclassified	to	conform	to	the	2015 presentation.	Additionally,	as	more	fully	described	in	Note	2	of	the	consolidated financial	statements	included	in	Part	II,	Item	8	of	this	report,	due	to	accounting errors	in	prior	periods,	certain	amounts	in	the	2014	and	2013	consolidated financial	statements	have	been	revised.

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	is	a	transformational	event	for	us	and	has	had	significant effects	on	all	aspects	of	our	business.	Accordingly,	our	revenues	and	expenses increased	significantly	in	the	year	ended	December	31,	2015.

In	portions	of	this	discussion	and	analysis,	we	also	present	sales	information on	an	unaudited,	pro	forma	basis	for	the	years	ended	December	31,	2015	and 2014.	This	pro	forma	information	includes	Zimmer	and	Biomet	sales	in	those periods	as	if	the	merger	occurred	on	January	1,	2014.	Accordingly,	the	pro	forma net	sales	information	for	periods	prior	to	the	Closing	Date	includes	the	net	sales of	Biomet,	but	does	not	include	the	impact	of	the	divestiture	of	certain	product line	rights	and	assets.	We	believe	this	pro	forma	analysis	is	beneficial	for investors	because	it	represents	how	the	merged	companies	may	have	performed on	a	combined	basis	in	2015	and	2014.	Such	pro	forma	net	sales	information may	not	be	indicative,	however,	of	future	operating	performance.

# EXECUTIVE	LEVEL	OVERVIEW

The	last	half	of	2015	was	significantly	affected	by	our	Biomet	integration activities.	We	made	significant	progress	by	accomplishing	important	commercial integration	milestones	across	all	geographies.	We	largely	completed	the appointment	of	our	global	sales	leaders.	We	also	began	to	execute	our integration	roadmaps	designed	to	capture	the	net	operating	synergy	opportunities presented	by	this	merger.

Our	results	have	been	significantly	impacted	by	the	Biomet	merger.	Our sales	for	2015	increased	by	28.3	percent	primarily	due	to	the	Biomet	merger. Volume/mix	growth	from	the	merger	was	partially	offset	by	the	negative	effects of	changes	in	foreign	currency	exchange	rates	and	continued,	but	stable,	pricing pressure	in	all	of	our	geographic	regions.

Our	net	earnings	decreased	in	2015	compared	to	2014.	The	primary	driver	of the	lower	net	earnings	was	expense	incurred	in	connection	with	the	Biomet merger.	As	a	result	of	the	merger,	we	recognized	significant	expenses	due	to stepping	up	the	acquired	inventory	to	fair	value,	intangible	asset	amortization, the	acceleration	of	the	vesting	of	unvested	LVB	stock	options	and	LVB	stock- based	awards,	retention	bonuses	paid	to	Biomet	employees	and	third-party	sales agents	who	remained	with	Biomet	through	the	Closing	Date,	severance	expense, contract	termination	expense	related	to	agreements	with	independent	agents, distributors,	suppliers	and	lessors,	a	loss	related	to	a	call	premium	on	Biomet debt	we	redeemed,	third	party	fees,	and	other	acquisition	and	integration	charges. Interest	expense	also	increased	due	to	financing-related	costs	for	the	merger.

We	expect	our	sales	in	the	first	half	of	2016	to	be	higher	than	in	the	first	half of	2015,	on	a	reported	basis,	since	the	Biomet	merger	was	completed	midway through	2015.	On	a	pro	forma	basis,	we	expect	revenues	to	be	approximately	flat in	2016	compared	to	2015.	This	estimate	assumes	foreign	currency	exchange rates	will	decrease	revenues	by	approximately	2	percent,	continued	pricing pressure	will	decrease	revenues	by	approximately	2	percent,	and	our	volume/mix growth	will	be	approximately	4	percent.	We	expect	pro	forma	sales	growth	will improve	in	the	last	half	of	the	year	compared	to	the	first	half	as	our	sales	force stabilizes,	we	take	advantage	of	cross-selling	opportunities	and	we	anniversary out	of	many	sales	force	dissynergies	caused	by	the	merger.

We	expect	cost	of	products	sold	to	continue	to	realize	significant	expense related	to	stepping	up	acquired	Biomet	inventory	to	fair	value.	Similarly,	our intangible	asset	amortization	expense	will	increase	significantly	as	we	recognize a	full	year	of	intangible	asset	amortization	from	the	Biomet	merger.	We	expect research	and	development	("R&D")	expense	for	the	year	to	be	in	a	range	of	4.5 to	5.0	percent	of	sales.	Selling,	general	and	administrative	("SG&A")	expense	is expected	to	approximate	37	percent	of	sales,	which	is	an	improvement	from 2015	as	we	realize	synergies	from	the	merger.	We	estimate	special	items	expense will	continue	to	be	significant	as	we	continue	our	integration	activities.

However,	we	expect	special	items	expense	will	be	less	in	2016	compared	to	2015 due	to	the	significant,	initial	expenses	incurred	in	2015	for	the	integration. Interest	expense	will	increase	in	2016	compared	to	2015	due	to	the	debt borrowed	in	2015	to	fund	the	Biomet	merger.

# RESULTS	OF	OPERATIONS

We	analyze	sales	by	three	geographies,	the	Americas,	EMEA	and	Asia Pacific,	and	by	the	following	product

categories:	Knees,	Hips,	S.E.T.,	Dental,	Spine	&	CMF	and	Other.	This	sales analysis	differs	from	our	reportable	operating	segments,	which	are	based	upon our	senior	management	organizational	structure	and	how	we	allocate	resources towards	achieving	operating	profit	goals.	We	analyze	sales	by

geography	because	the	underlying	market	trends	in	any	particular	geography tend	to	be	similar	across	product	categories	and	because	we	primarily	sell	the same	products	in	all	geographies.

# Net	Sales	by	Geography

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

|  | Year	Ended	December	31, | Year	Ended	December	31, |  | Volume/ |  | Foreign |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2014 | %\tInc | Mix | Price | Exchange |
| Americas | $3,662.4 | $2,594.2 | \t41.2% | 44.3% | \t(2.3)% | (0.8)% |
| EMEA | 1,417.8 | 1,269.5 | \t11.7 | 27.9 | \t(1.1) | (15.1) |
| Asia\tPacific | 917.6 | 809.6 | \t13.3 | 26.0 | \t(2.2) | (10.5) |
| Total | $5,997.8 | $4,673.3 | \t28.3 | 36.7 | \t(2.0) | (6.4) |

|  | Year	Ended	December	31, | Year	Ended	December	31, |  | Volume/ |  | Foreign |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2014 | 2013 | %\tInc/(Dec) | Mix | Price | Exchange |
| Americas | $2,594.2 | $2,619.8 | (1.0)% | 2.4% | \t(3.0)% | (0.4)% |
| EMEA | 1,269.5 | 1,212.6 | 4.7 | 7.3 | \t(1.8) | (0.8) |
| Asia\tPacific | 809.6 | 791.0 | 2.4 | 9.0 | \t(1.3) | (5.3) |
| Total | $4,673.3 | $4,623.4 | 1.1 | 4.8 | \t(2.4) | (1.3) |

"Foreign	Exchange"	as	used	in	the	tables	in	this	report	represents	the	effect	of	changes	in	foreign	currency	exchange	rates	on	sales	growth.

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

|  | Pro	Forma | Pro	Forma |  | Volume/ |  | Divestiture | Foreign |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2014 | %\t(Dec) | Mix | Price | Impact | Exchange |
| Americas | $4,685.2 | $4,748.6 | (1.3)% | 1.6% | \t(1.5)% | (0.9)% | (0.5)% |
| EMEA | 1,767.9 | 2,072.6 | (14.7) | 1.6 | \t(1.0) | (0.5) | (14.8) |
| Asia\tPacific | 1,064.7 | 1,144.1 | (6.9) | 5.6 | \t(1.9) | – | (10.6) |
| Total | $7,517.8 | $7,965.3 | (5.6) | 2.3 | \t(1.5) | (0.7) | (5.7) |

# Net	Sales	by	Product	Category

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

|  | Year	Ended	December	31, | Year	Ended	December	31, |  | Volume/ |  | Foreign |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2014 | %\tInc | Mix | Price | Exchange |
| Knees | $2,276.8 | $1,895.2 | \t20.1% | 28.8% | \t(2.4)% | (6.3)% |
| Hips | 1,537.2 | 1,326.4 | \t15.9 | 26.1 | \t(2.4) | (7.8) |
| S.E.T. | 1,214.9 | 863.2 | \t40.7 | 46.8 | \t(0.7) | (5.4) |
| Dental | 335.7 | 242.8 | \t38.2 | 45.0 | \t(1.1) | (5.7) |
| Spine\t&amp;\tCMF | 404.4 | 207.2 | \t95.2 | 101.2 | \t(1.6) | (4.4) |
| Other | 228.8 | 138.5 | \t65.3 | 70.4 | \t(1.8) | (3.3) |
| Total | $5,997.8 | $4,673.3 | \t28.3 | 36.7 | \t(2.0) | (6.4) |

|  | Year	Ended	December	31, | Year	Ended	December	31, |  | Volume/ |  | Foreign |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2014 | 2013 | %\tInc/(Dec) | Mix | Price | Exchange |
| Knees | $1,895.2 | $1,862.2 | 1.8% | 6.3% | \t(3.2)% | (1.3)% |
| Hips | 1,326.4 | 1,330.5 | (0.3) | 3.9 | \t(2.6) | (1.6) |
| S.E.T. | 863.2 | 847.2 | 1.9 | 4.5 | \t(1.2) | (1.4) |
| Dental | 242.8 | 239.3 | 1.5 | 2.5 | \t(0.4) | (0.6) |
| Spine\t&amp;\tCMF | 207.2 | 202.3 | 2.4 | 5.0 | \t(2.0) | (0.6) |
| Other | 138.5 | 141.9 | (2.4) | (0.3) | \t(1.4) | (0.7) |
| Total | $4,673.3 | $4,623.4 | 1.1 | 4.8 | \t(2.4) | (1.3) |

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

|  | Pro	Forma | Pro	Forma |  | Volume/ |  | Divestiture | Foreign |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | 2015 | 2014 | %\t(Dec) | Mix | \t\t\t\tPrice | Impact | Exchange |
| Knees | $2,735.9 | $2,888.9 | (5.3)% | 3.7% | (1.9)% | (1.1)% | (6.0)% |
| Hips | 1,842.6 | 1,984.3 | (7.1) | 2.2 | (2.1) | – | (7.2) |
| S.E.T. | 1,571.8 | 1,619.1 | (2.9) | 3.0 | (0.7) | (0.3) | (4.9) |
| Dental | 454.8 | 500.4 | (9.1) | (3.5) | 0.1 | – | (5.7) |
| Spine\t&amp;\tCMF | 583.5 | 604.1 | (3.4) | 0.1 | (0.7) | – | (2.8) |
| Other | 329.2 | 368.5 | (10.6) | (1.4) | (1.2) | (4.8) | (3.2) |
| Total | $7,517.8 | $7,965.3 | (5.6) | 2.3 | (1.5) | (0.7) | (5.7) |

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

|  | 2015 | 2014 | 2013 | 2015	vs.	2014<br>%	Inc | 2014	vs.	2013<br>%	Inc/(Dec) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Knees |  |  |  |  |  |
| Americas | $1,391.5 | $1,086.8 | $1,087.5 | 28.0% | (0.1)% |
| EMEA | 535.2 | 498.6 | 468.4 | 7.3 | 6.5 |
| Asia\tPacific | 350.1 | 309.8 | 306.3 | 13.0 | 1.1 |
| Total | \t 2,276.8 | \t 1,895.2 | \t 1,862.2 | 20.1 | 1.8 |
| Hips |  |  |  |  |  |
| Americas | 789.8 | 607.8 | 621.0 | 29.9 | (2.1) |
| EMEA | 459.2 | 448.9 | 445.0 | 2.3 | 0.9 |
| Asia\tPacific | 288.2 | 269.7 | 264.5 | 6.9 | 2.0 |
| Total | \t 1,537.2 | \t 1,326.4 | \t 1,330.5 | 15.9 | (0.3) |

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

|  | Pro<br>Forma<br>2015 | Pro<br>Forma<br>2014 | 2015	vs.	2014<br>%	Inc/(Dec) |
| :--- | :--- | :--- | :--- |
| Knees |  |  |  |
| Americas | $1,684.6 | $1,708.4 | (1.4)% |
| EMEA | 649.5 | 752.3 | (13.7) |
| Asia\tPacific | 401.8 | 428.2 | (6.1) |
| Total | \t 2,735.9 | \t 2,888.9 | (5.3) |
| Hips |  |  |  |
| Americas | 980.3 | 998.4 | (1.8) |
| EMEA | 537.2 | 625.9 | (14.2) |
| Asia\tPacific | 325.1 | 360.0 | (9.7) |
| Total | \t 1,842.6 | \t 1,984.3 | (7.1) |

# Demand	(Volume	and	Mix)	Trends

Increased	volume	and	changes	in	the	mix	of	product	sales	contributed	36.7 percentage	points	of	year-over-year	sales	growth	during	2015.	Volume/mix growth	was	driven	by	the	Biomet	merger,	new	product	introductions	and	sales	in key	emerging	markets.

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

# Pricing	Trends

Global	selling	prices	had	a	negative	effect	of	2.0	percentage	points	on	year- over-year	sales	during	2015.	The	negative	2.0	percent	effect	on	year-over-year sales	is	consistent	with	what	we	have	experienced	over	the	past	three	years.	The majority	of	countries	in	which	we	operate	continued	to

experience	pricing	pressure	from	governmental	healthcare	cost	containment efforts	and	from	local	hospitals	and	health	systems.

# Foreign	Currency	Exchange	Rates

In	2015,	changes	in	foreign	currency	exchange	rates	had	a	negative	effect	of 6.4	percentage	points	on	year-over-year	sales.	We	address	currency	risk	through regular	operating	and	financing	activities	and	through	the	use	of	forward contracts	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	contracts	and	options,	which are	recorded	in	cost	of	products	sold,	the	effect	on	net	earnings	in	the	near	term is	reduced.

# Sales	by	Product	Category

Knee	sales	increased	in	2015	when	compared	to	2014	due	to	the	Biomet merger.	On	a	pro	forma	basis,	Knee	sales	declined	in	2015	due	to	changes	in foreign	currency	exchange

rates,	the	divestiture	of	certain	product	line	rights	and	assets	and	continued pricing	pressure.	The	volume/mix	growth	on	a	pro	forma	basis	was	driven	by recent	product	introductions,	such	as	Persona	The	Personalized	Knee	System.	In particular,	our	EMEA	and	Asia	Pacific	operating	segments	experienced	strong volume/mix	growth	in	this	product	category.

Hip	sales	increased	in	2015	when	compared	to	2014	due	to	the	Biomet merger.	On	a	pro	forma	basis,	positive	volume	and	mix	trends	were	more	than offset	by	pricing	pressure	and	the	negative	effects	of	changes	in	foreign	currency exchange	rates.

Our	S.E.T.	product	category	sales	increased	in	2015	compared	to	2014	due to	the	Biomet	merger.	On	a	pro	forma	basis,	positive	volume	and	mix	trends were	more	than	offset	by	pricing	pressure,	the	divestiture	of	certain	product	line rights	and	assets	and	the	negative	effects	of	changes	in	foreign	currency exchange	rates.	On	a	pro	forma	basis	within	this	category,	our	Extremities business	achieved	solid	sales	growth	from	sales	of	our	shoulder	and	elbow products.

Dental	sales	increased	in	2015	compared	to	2014	due	to	the	Biomet merger.	On	a	pro	forma	basis,	sales	in	2015	declined	partly	due	to	a	supply disruption	related	to	a	voluntary	field	action	in	response	to	a	packaging	issue	and the	negative	effects	of	changes	in	foreign	currency	exchange	rates.	We	are	in	the process	of	remediating	the	supply	disruption	and	we	expect	to	do	so	fully	by	the close	of	the	first	quarter	of	2016.

# Spine	&	CMF

Spine	and	CMF	sales	increased	in	2015	compared	to	2014	due	to	the	Biomet merger.	On	a	pro	forma	basis,	strong	sales	of	our	CMF	products	were	offset	by	a decline	in	Spine	product	sales.

The	following	table	presents	estimated*	2015	global	market	size	and	market share	information	(dollars	in	billions):

|  |  |  | Zimmer | Zimmer |
| :--- | :--- | :--- | :--- | :--- |
|  | Global |  | Biomet | Biomet |
|  | Market\nSize | Global\tMarket\n%\tGrowth** | Market\nShare | Market\nPosition |
| Knees | $7.5 | 3% | 37% | 1 |
| Hips | 6.1 | 1 | 30 | 1 |
| S.E.T. | 14.8 | 5 | 11 | 5 |
| Dental | 4.1 | 4 | 11 | 4 |
| Spine\t&amp;\tCMF | 10.6 | 1 | 6 | 5 |

*	Estimates	are	not	precise	and	are	based	on	competitor	annual	filings,	Wall	Street	equity	research	and Company	estimates

**	Excludes	the	effect	of	changes	in	foreign	currency	exchange	rates	on	sales	growth

# Expenses	as	a	Percent	of	Net	Sales

|  | 2015 | 2014 | Year	Ended	December	31,<br>2013 | 2015	vs.	2014<br>Inc/(Dec) | 2014	vs.	2013<br>Inc/(Dec) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Cost\tof\tproducts\tsold,\texcluding |  |  |  |  |  |
| intangible\tasset |  |  |  |  |  |
| amortization | \t30.0% | \t26.6% | \t27.4% | 3.4 | (0.8) |
| Intangible\tasset\tamortization | 5.6 | 2.0 | 1.7 | 3.6 | 0.3 |
| Research\tand\ndevelopment | 4.5 | 4.0 | 4.4 | 0.5 | (0.4) |
| Selling,\tgeneral\tand |  |  |  |  |  |
| administrative | \t38.1 | \t37.5 | \t37.8 | 0.6 | (0.3) |
| Certain\tclaims | 0.1 | 0.5 | 1.0 | (0.4) | (0.5) |
| Special\titems | \t13.9 | 7.3 | 4.5 | 6.6 | 2.8 |
| Operating\tProfit | 7.8 | \t22.2 | \t23.1 | (14.4) | (0.9) |

# Cost	of	Products	Sold	and	Intangible	Asset	Amortization

The	following	table	sets	forth	the	factors	that	contributed	to	the	gross margin	changes	in	each	of	2015	and	2014	compared	to	the	prior	year:

|  | Year	Ended	December	31, |  |
| :--- | :--- | :--- |
|  | \t\t\t\t\t\t\t\t\t2015 | \t\t\t\t\t\t\t\t\t2014 |
| Prior\tyear\tgross\tmargin | 71.4% | 70.6% |
| Lower\taverage\tselling\tprices | (0.6) | (0.6) |
| Average\tcost\tper\tunit | 1.3 | 0.4 |
| Excess\tand\tobsolete\tinventory | (0.8) | 0.4 |
| Discontinued\tproducts\tand\tother\tcertain\texcess\tand\tobsolete |  |  |
| inventory\tcharges | – | 0.9 |
| Certain\tinventory\tand\tmanufacturing\trelated\tcharges\trelated |  |  |
| to\tquality | 0.2 | 0.1 |
| Foreign\tcurrency\thedges | 1.3 | 0.5 |
| Inventory\tstep-up | (5.1) | 0.1 |
| U.S.\tmedical\tdevice\texcise\ttax | – | (0.5) |
| Intangible\tasset\tamortization | (3.5) | (0.2) |
| Other | 0.2 | (0.3) |
| Current\tyear\tgross\tmargin | 64.4% | 71.4% |

The	decrease	in	gross	margin	percentage	in	2015	compared	to	2014	was primarily	due	to	increased	inventory	step-up	costs	as	well	as	increased	intangible asset	amortization	from	the	Biomet	merger.	The	decline	was	also	a	result	of lower	average	selling	prices	and	higher	excess	and	obsolete	inventory charges.	These	unfavorable	items	were	partially	offset	by	higher	hedge	gains	in 2015	from	our	foreign	currency	hedging	program	compared	to	2014.	Under	the hedging	program,	for	derivatives	which	qualify	as	hedges	of	future	cash	flows, the	effective	portion	of	changes	in	fair	value	is	temporarily	recorded	in	other comprehensive	income	and	then	recognized	in	cost	of	products	sold	when	the hedged	items	affect	earnings.	Further,	we	experienced	improved	product category	and	geographic	mix,	resulting	in	lower	average	costs	per	unit	sold	as	a percentage	of	sales.

In	2014,	we	experienced	an	increase	in	gross	margin	percentage	compared to	2013,	primarily	due	to	significant	excess	and	obsolete	inventory	charges related	to	products	we

intend	to	discontinue.	We	also	recognized	higher	hedge	gains	in	2014	from	our foreign	currency	hedging	program	compared	to	2013.

# Operating	Expenses

R&D	expenses	and	R&D	as	a	percentage	of	sales	increased	in	2015	compared to	2014.	The	primary	driver	of	the	increased	expense	was	the	Biomet merger.	The	combination	of	our	R&D	functions	subsequent	to	the	merger	will allow	us	to	allocate	a	greater	portion	of	the	combined	R&D	spending	towards innovation	efforts	to	address	unmet	clinical	needs	and	create	new-market adjacencies.	Additionally,	most	of	our	R&D	activities	occur	in	the	U.S.,	so expenses	do	not	decrease	proportionally	to	changes	in	net	sales	when	there	are significant	changes	in	foreign	currency	exchange	rates,	which	contributes	to	an increase	in	R&D	as	a	percentage	of	sales.	The	increase	in	2015	reverses	a	trend of	declines	in	R&D	expense	and	R&D	as	a	percentage	of	sales.	In	prior	years, the	lower	spending	reflected	a	natural	decline	from	certain	large	projects	that achieved	commercialization,	including	Persona	The	Personalized	Knee	System, and	a	dedication	of	resources	to	our	quality	and	operational	excellence initiatives.	We	expect	R&D	spending	in	2016	to	increase	and	be	between	4.5	and 5.0	percent	of	sales.

SG&A	as	a	percentage	of	sales	increased	in	2015	compared	to	2014	after realizing	improvements	in	2014	and	2013	due	to	our	operational	excellence initiatives.	The	Biomet	merger	was	the	primary	cause	of	the	increase.	We	expect that	SG&A	as	a	percentage	of	sales	will	continue	to	be	higher	than	prior	to	the Biomet	merger	until	we	can	realize	synergy	benefits	of	the	merger.	Additionally, a	significant	portion	of	our	SG&A	expenses	occur	in	the	U.S.,	so	expenses	do not	decrease	proportionally	to	changes	in	net	sales	when	there	are	significant changes	in	foreign	currency	exchange	rates.

"Certain	claims"	expense	is	for	estimated	liabilities	to	Durom	Cup	patients undergoing	revision	surgeries.	We	recorded	additional	expense	of	$7.7	million	in 2015	for	Durom	Cup-related	claims.	Since	2008,	we	have	recognized	$479.4 million	for	these	claims.	For	more	information	regarding	these	claims,	see	Note 20	to	the	consolidated	financial	statements.

"Special	items"	have	increased	significantly	in	the	past	three	years.	The increases	in	2015	were	due	to	Biomet	merger-related	expenses	such	as	the acceleration	of	unvested	LVB	stock	options	and	LVB	stock-based	awards, retention	bonuses	paid	to	Biomet	employees	and	third-party	sales	agents	who remained	with	Biomet	through	the	Closing	Date,	severance	expense	and	contract terminations.	"Special	items"	expense	also	includes	our	quality	and	operational excellence	initiatives,	which	are	intended	to	improve	our	future	operating	results by	centralizing	or	outsourcing	certain	functions	and	improving	quality, distribution,	sourcing,	manufacturing	and	our	information	technology	systems. See	Note	3	to	the	consolidated	financial	statements	for	more	information regarding	"Special	items"	charges.

# Other	Expense,	Interest	Income,	Interest	Expense,	and	Income	Taxes

Other	expense,	net,	represents	debt	issuance	costs	that	we	recognized	for	the bridge	credit	agreement	that	we	entered

into	in	May	2014	in	connection	with	the	Biomet	merger,	the	net	expense	related to	remeasuring	monetary	assets	and	liabilities	denominated	in	a	foreign	currency other	than	an	entity's	functional	currency	offset	by	foreign	currency	forward exchange	contracts	we	enter	into	to	mitigate	any	gain	or	loss,	and	the	call premium	expense	we	recognized	when	we	repaid	Biomet's	senior	notes,	partially offset	by	a	gain	related	to	selling	certain	product	line	rights	and	assets.	The decrease	in	Other	expense,	net	in	2015	compared	to	2014,	was	driven	by	fewer months	of	debt	issuance	costs	from	the	bridge	credit	agreement	and	the	gains recognized	on	the	sale	of	the	product	line	rights	and	assets.

Net	interest	expense	increased	in	2015	due	to	the	issuance	of	the	debt	in connection	with	the	Biomet	merger.

Our	effective	tax	rate	("ETR")	on	earnings	before	income	taxes	for	the	years ended	December	31,	2015,	2014	and	2013	was	4.6	percent,	23.4	percent	and 22.8	percent,	respectively.	"Special	items"	expense	has	significantly	affected	our ETR	as	such	expenses	have	generally	been	incurred	within	jurisdictions	with higher	tax	rates,	resulting	in	lower	taxable	income	in	these	higher	tax jurisdictions.	The	low	2015	tax	rate	results	from	operating	losses	in	the	U.S. caused	by	significant	expenses	incurred	in	connection	with	the	merger.	The	U.S. has	a	higher	tax	rate	compared	to	the	majority	of	foreign	operations	where	we realized	operating	income.	We	expect	"Special	items,"	the	outcome	of	various federal,	state	and	foreign	audits,	as	well	as	expiration	of	certain	statutes	of limitations,	to	impact	our	ETR	in	future	years.	Currently,	we	cannot	reasonably estimate	the	impact	of	these	items	on	our	financial	results.

# Segment	Operating	Profit

Similar	to	our	consolidated	results,	our	segment	operating	profit	has	been significantly	impacted	by	the	addition	of	Biomet	sales	and	expenses	to	these segments.	In	the	Americas,	operating	profit	as	a	percentage	of	sales	increased	in 2015	compared	to	2014,	as	we	started	to	realize	synergies	of	the	merger.	In EMEA,	operating	profit	as	a	percentage	of	sales	declined	in	2015	compared	to 2014	due	to	the	increased	Biomet	expenses.	This	decline	is	expected	to	continue until	we	can	realize	the	synergy	benefits	of	the	merger	in	this	region.	In	the	Asia Pacific	segment,	operating	profit	as	a	percentage	of	sales	increased	in	2015 compared	to	2014	due	to	changes	in	foreign	currency	exchange	rates	and	our hedging	program.

# Non-GAAP	operating	performance	measures

We	use	financial	measures	that	differ	from	financial	measures	determined	in accordance	with	generally	accepted	accounting	principles	("GAAP")	to	evaluate our	operating	performance.	These	non-GAAP	financial	measures	exclude	the impact	of	inventory	step-up,	certain	other	inventory	and	manufacturing	related charges	connected	to	quality	enhancement	and	remediation	efforts,	"Certain claims,"	intangible	asset	amortization,	"Special	items,"	other	expenses	related	to financing	obtained	for	the	Biomet	merger,	other	expenses	related	to	the	call premium	expense	recognized	to	redeem	the	assumed	Biomet	senior	notes,	the interest	expense	incurred	on	issued	debt	during	the	period	prior	to	the consummation	of	the	Biomet	merger	and	any	related	effects	on

our	income	tax	provision	associated	with	these	items	and	other	certain	tax adjustments.	We	use	this	information	internally	and	believe	it	is	helpful	to investors	because	it	provides	useful	period-to-period	comparisons	of	our	ongoing operating	results,	it	helps	to	perform	trend	analysis	and	to	better	identify operating	trends	that	may	otherwise	be	masked	or	distorted	by	these	types	of items,	and	it	provides	additional	transparency	of	certain	items.	Certain	of	these non-GAAP	financial	measures	are	used	as	metrics	for	our	incentive compensation	programs.

Our	non-GAAP	adjusted	net	earnings	used	for	internal	management	purposes for	the	years	ended	December	31,	2015,	2014	and	2013	were	$1,310.5	million, $1,098.0	million,	and	$1,069.0	million,	respectively,	and	our	non-GAAP adjusted	diluted	earnings	per	share	were	$6.90,	$6.40,	and	$6.22,	respectively. The	following	are	reconciliations	from	our	GAAP	net	earnings	and	diluted earnings	per	share	to	our	non-GAAP	adjusted	net	earnings	and	non-GAAP adjusted	diluted	earnings	per	share	used	for	internal	management	purposes	(in millions,	except	per	share	amounts).

| 2015 | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Net\tEarnings\tof\tZimmer\tBiomet\tHoldings,\tInc.\n$147.0 | Net\tEarnings\tof\tZimmer\tBiomet\tHoldings,\tInc.\n$147.0 | $720.3 | $780.4 |
| Inventory\tstep-up\tand\tother\tinventory\tand |  |  |  |
| manufacturing\trelated\tcharges | 348.8 | 36.3 | 88.7 |
| Certain\tclaims | 7.7 | 21.5 | 47.0 |
| Intangible\tasset\tamortization | 337.4 | 92.5 | 78.5 |
| Special\titems |  |  |  |
| Biomet\tmerger-related | 619.1 | 61.9 | – |
| Other\tspecial\titems | 212.7 | 279.2 | 210.3 |
| Other\texpense,\tnet | 23.0 | 39.6 | – |
| Interest\texpense\ton\tBiomet\tmerger\tfinancing | 70.0 | – | – |
| Taxes\ton\tabove\titems\tand\tother\tcertain\ttax |  |  |  |
| adjustments* | (455.2) | (153.3) | (135.9) |
| Adjusted\tNet\tEarnings\n$1,310.5 | Adjusted\tNet\tEarnings\n$1,310.5 | $1,098.0 | $1,069.0 |

*	The	tax	effect	is	calculated	based	upon	the	statutory	rates	for	the	jurisdictions	where	the	items	were incurred.

|  | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Diluted\tEPS | $ 0.77 | $ 4.20 | $ 4.54 |
| Inventory\tstep-up\tand\tother\tinventory\tand\tmanufacturing |  |  |  |
| related\tcharges | 1.84 | 0.21 | 0.52 |
| Certain\tclaims | 0.04 | 0.13 | 0.27 |
| Intangible\tasset\tamortization | 1.78 | 0.54 | 0.46 |
| Special\titems |  |  |  |
| Biomet\tmerger-related | 3.26 | 0.36 | – |
| Other\tspecial\titems | 1.12 | 1.63 | 1.22 |
| Other\texpense,\tnet | 0.12 | 0.23 | – |
| Interest\texpense\ton\tBiomet\tmerger\tfinancing | 0.37 | – | – |
| Taxes\ton\tabove\titems\tand\tother\tcertain\ttax\tadjustments* | (2.40) | (0.90) | (0.79) |
| Adjusted\tDiluted\tEPS | $ 6.90 | $ 6.40 | $ 6.22 |

# LIQUIDITY	AND	CAPITAL	RESOURCES

Cash	flows	provided	by	operating	activities	declined	to	$816.7	million	in 2015,	compared	to	$1,052.8	million	in	2014.	The	decreased	cash	flows	provided by	operating	activities	in	2015	were	primarily	due	to	higher	expenses	related	to the	Biomet	merger,	a	$97.6	million	loss	on	our	forward	starting	interest	rate swaps	we	settled	in	March	2015	when	we	issued	senior	notes	for	the	Biomet merger	and	inventory	investments.	These	unfavorable	items	were	partially	offset by	lower	tax	payments	and	the	receipt	of	insurance	proceeds	related	to	Durom Cup	product	liability	claims	in	the	2015	period.	In	2014,	we	made	significant	tax payments	for	certain	unresolved	matters	in	order	to	limit	the	potential	impact	of IRS	interest	charges.	In	2016,	we	estimate	operating	cash	flows	to	be	in	a	range of	$1,650.0	million	to	$1,750.0	million,	inclusive	of	approximately	$290.0 million	of	outflows	related	to	integration	expenses	to	drive	synergies. Cash	flows	used	in	investing	activities	were	$7,557.9	million	in	2015 compared	to	$469.4	million	in	2014.	The	primary	investing	activity	in	2015	was the	Biomet	merger.	We	continued	to	invest	in	instruments	for	significant	product launches,	such	as	Persona	The	Personalized	Knee	System,	as	we	deploy	that system	around	the	world.	In	2016,	we	expect	instrument	investments	to	be	in	a range	of	$300.0	million	to	$325.0	million	in	support	of	our	cross-sell	initiatives as	well	as	new	product	introductions.	In	2015,	we	continued	to	invest	in	other property,	plant	and	equipment	at	levels	necessary	to	complete	new	product- related	investments	and	to	replace	older	machinery	and	equipment.	In	2016,	we expect	to	spend	approximately	$250.0	million	on	property,	plant	and	equipment, including	$105.0	million	necessary	to	rationalize	facilities	and	IT	systems	as well	as	to	optimize	our	manufacturing	and	logistics	network.

Cash	flows	provided	by	financing	activities	were	$7,139.8	million	in	2015, compared	to	a	use	of	cash	of	$562.4	million	in	2014.	We	issued	debt	in	2015	for the	Biomet	merger,	which	resulted	in	proceeds	and	related	debt	issuance	costs. We	also	repaid	Biomet's	senior	notes	that	we	assumed	in	the	merger. Additionally,	with	an	increase	in	our	stock	price	throughout	2014,	many employees	exercised	stock	options	in	the	prior	year.	Accordingly,	there	were fewer	stock	options	outstanding	at	the	end	of	2014,	leading	to	fewer	option exercises	in	2015	compared	to	2014.

In	February,	May,	July	and	December	2015,	our	Board	of	Directors	declared cash	dividends	of	$0.22	per	share.	We	expect	to	continue	paying	cash	dividends on	a	quarterly	basis;	however,	future	dividends	are	subject	to	approval	of	the Board	of	Directors	and	may	be	adjusted	as	business	needs	or	market	conditions change.	As	further	discussed	below,	our	debt	facilities	restrict	the	payment	of dividends	in	certain	circumstances.

As	of	December	31,	2015,	$449.5	million	remained	authorized	under	our	$1.0 billion	share	repurchase	program,	which	has	no	expiration	date.	In	anticipation of	the	merger	with	Biomet,	we	suspended	repurchases	after	the	first	quarter	of 2014.	We	commenced	share	repurchases	in	the	fourth	quarter	of	2015	and continued	repurchases	in	the	first	two	months	of	2016.

Through	February	25,	2016,	we	repurchased	approximately	$415.0	million	of shares	of	our	common	stock,	which	includes	the	$250.0	million	of	shares	that	we repurchased	from	certain	selling	stockholders	on	February	10,	2016. In	order	to	achieve	operational	synergies,	we	expect	cash	outlays	related	to our	integration	plans	to	be	approximately	$290.0	million	in	2016.	These	cash outlays	are	necessary	to	achieve	our	integration	goals	of	net	annual	pre-tax operating	profit	synergies	of	$350.0	million	by	the	end	of	the	third	year	post- Closing	Date.

Also	as	discussed	in	Note	20	to	our	consolidated	financial	statements,	as	of December	31,	2015,	a	short-term	liability	of	$50.0	million	and	long-term liability	of	$264.6	million	related	to	Durom	Cup	product	liability	claims	was recorded	on	our	consolidated	balance	sheet.	We	expect	to	continue	paying	these claims	over	the	next	few	years.	We	expect	to	be	reimbursed	a	portion	of	these payments	for	product	liability	claims	from	insurance	carriers.	As	of	December 31,	2015,	we	have	received	a	portion	of	the	insurance	proceeds	we	estimate	we will	recover.	We	have	a	long-term	receivable	of	$95.3	million	remaining	for future	expected	reimbursements	from	our	insurance	carriers.	We	also	had	a short-term	liability	of	$33.4	million	related	to	Biomet	metal-on-metal	hip implant	claims.

At	December	31,	2015,	we	had	ten	tranches	of	senior	notes	outstanding	as follows	(dollars	in	millions):

We	issued	$7.65	billion	of	senior	notes	in	March	2015	(the	"Merger	Notes"), the	proceeds	of	which	were	used	to	finance	a	portion	of	the	cash	consideration payable	in	the	Biomet	merger,	pay	merger	related	fees	and	expenses	and	pay	a portion	of	Biomet's	funded	debt.	On	June	24,	2015,	we	also	borrowed	$3.0 billion	on	a	U.S.	term	loan	("U.S.	Term	Loan")	to	fund	the	Biomet	merger. We	may,	at	our	option,	redeem	our	senior	notes,	in	whole	or	in	part,	at	any time	upon	payment	of	the	principal,	any	applicable	make-whole	premium,	and accrued	and	unpaid	interest	to	the	date	of	redemption.	In	addition,	the	Merger Notes	and	the	3.375%	Senior	Notes	due	2021	may	be	redeemed	at	our	option without	any	make-whole	premium	at	specified	dates	ranging	from	one	month	to six	months	in	advance	of	the	scheduled	maturity	date.

We	have	a	$4.35	billion	credit	agreement	("Credit	Agreement")	that	contains: (i)	a	5-year	unsecured	U.S.	term	loan	facility	("U.S.	Term	Loan	Facility")	in	the principal	amount

of	$3.0	billion,	and	(ii)	a	5-year	unsecured	multicurrency	revolving	facility ("Multicurrency	Revolving	Facility")	in	the	principal	amount	of	$1.35	billion. The	Multicurrency	Revolving	Facility	will	mature	in	May	2019,	with	two	one- year	extensions	available	at	our	option.	Borrowings	under	the	Multicurrency Revolving	Facility	may	be	used	for	general	corporate	purposes.	There	were	no borrowings	outstanding	under	the	Multicurrency	Revolving	Facility	as	of December	31,	2015.	The	U.S.	Term	Loan	Facility	will	mature	in	June	2020,	with principal	payments	due	beginning	September	30,	2015,	as	follows:	$75.0	million on	a	quarterly	basis	during	the	first	three	years,	$112.5	million	on	a	quarterly basis	during	the	fourth	year,	and	$412.5	million	on	a	quarterly	basis	during	the fifth	year.	In	2015,	we	paid	$500.0	million	in	principal	under	the	U.S.	Term Loan	Facility,	resulting	in	$2.5	billion	in	outstanding	borrowings	as	of	December 31,	2015.

We	and	certain	of	our	wholly	owned	foreign	subsidiaries	are	the	borrowers under	the	Credit	Agreement.	Borrowings	under	the	Credit	Agreement	bear interest	at	floating	rates	based	upon	indices	determined	by	the	currency	of	the borrowings	plus	an	applicable	margin	determined	by	reference	to	our	senior unsecured	long-term	credit	rating,	or	at	an	alternate	base	rate,	or,	in	the	case	of borrowings	under	the	Multicurrency	Revolving	Facility	only,	at	a	fixed	rate determined	through	a	competitive	bid	process.	The	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.	Financial	covenants	include	a consolidated	indebtedness	to	consolidated	EBITDA	ratio	of	no	greater	than	5.0 to	1.0	through	June	24,	2016	and	no	greater	than	4.5	to	1.0	thereafter.	If	our credit	rating	falls	below	investment	grade,	additional	restrictions	would	result, including	restrictions	on	investments	and	payment	of	dividends.	We	were	in compliance	with	all	covenants	under	the	Credit	Agreement	as	of	December	31, 2015.

Commitments	under	the	Credit	Agreement	are	subject	to	certain	fees.	On	the Multicurrency	Revolving	Facility,	we	pay	a	facility	fee	at	a	rate	determined	by reference	to	our	senior	unsecured	long-term	credit	rating.

We	have	a	Japan	Term	Loan	agreement	with	one	of	the	lenders	under	the Credit	Agreement	for	11.7	billion	Japanese	Yen	that	will	mature	on	May	31, 2018.	Borrowings	under	the	Japan	Term	Loan	bear	interest	at	a	fixed	rate	of	0.61 percent	per	annum	until	maturity.

We	also	have	other	available	uncommitted	credit	facilities	totaling	$35.8 million.

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

As	of	December	31,	2015,	we	had	short-term	and	long-term	investments	in debt	securities	with	a	fair	value	of	$273.1	million.	These	investments	are	in	debt securities	of	many	different	issuers	and,	therefore,	we	believe	we	have	no significant	concentration	of	risk	with	a	single	issuer.	All	of	these	debt	securities remain	highly	rated	and	we	believe	the	risk	of	default	by	the	issuers	is	low.

As	of	December	31,	2015,	$921.9	million	of	our	cash	and	cash	equivalents and	short-term	and	long-term	investments	were	held	in	jurisdictions	outside	of the	U.S.	Of	this	amount,	$564.7	million	is	denominated	in	U.S.	Dollars	and, therefore,	bears	no	foreign	currency	translation	risk.	The	balance	of	these	assets is	denominated	in	currencies	of	the	various	countries	where	we	operate. In	light	of	our	commitments	under	various	credit	facilities,	as	well	as	our expectation	for	continued	business	development,	we	have	plans	to	repatriate	a significant	portion	of	our	offshore	earnings	to	the	U.S.	In	particular,	as	a	result	of the	Biomet	merger	we	have	unremitted	foreign	earnings	of	$4,387.9	million which	we	plan	to	repatriate	to	the	U.S.	in	future	periods.	We	have	recorded	a long-term	liability	of	$1,494.9	million	for	the	estimated	tax	impact	of	this repatriation.

Management	believes	that	cash	flows	from	operations	and	available borrowings	under	the	Multicurrency	Revolving	Facility	are	sufficient	to	meet our	working	capital,	capital	expenditure	and	debt	service	needs,	as	well	as	return cash	to	stockholders	in	the	form	of	dividends	and	share	repurchases.	Should additional	investment	opportunities	arise,	we	believe	that	our	earnings,	balance sheet	and	cash	flows	will	allow	us	to	obtain	additional	capital,	if	necessary.

# CONTRACTUAL	OBLIGATIONS

We	have	entered	into	contracts	with	various	third	parties	in	the	normal	course of	business	that	will	require	future	payments.	The	following	table	illustrates	our contractual	obligations	(in	millions):

|  |  |  | 2017 | 2019 | 2021 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Contractual |  |  | and | and | and |
| Obligations | Total | 2016 | 2018 | 2020 | Thereafter |
| Long-term\tdebt | $11,551.4 | $\t– | $2,263.9 | $3,987.5 | $ 5,300.0 |
| Interest\tpayments | 4,142.6 | \t 339.8 | 651.0 | 531.1 | 2,620.7 |
| Operating\tleases | 231.8 | 59.1 | 78.6 | 48.2 | 45.9 |
| Purchase\tobligations | 91.0 | 61.9 | 22.5 | 3.7 | 2.9 |
| Other\tlong-term\tliabilities | 406.7 | – | 136.9 | 107.6 | 162.2 |
| Total\tcontractual\tobligations | $16,423.5 | $460.8 | $3,152.9 | $4,678.1 | $ 8,131.7 |

$93.5	million	of	the	other	long-term	liabilities	on	our	balance	sheet	as	of December	31,	2015	are	liabilities	related	to	defined	benefit	pension plans.	Defined	benefit	plan	liabilities	are	based	upon	the	underfunded	status	of the	respective	plans;	they	are	not	based	upon	future	contributions.	Due	to uncertainties	regarding	future	plan	asset	performance,	changes	in	interest	rates and	our	intentions	with	respect	to	voluntary	contributions,	we	are	unable	to reasonably	estimate	future	contributions	beyond	2016.	Therefore,	this	table	does not	include	any	amounts	related	to	future	contributions	to	our	plans.	See	Note	15 to	our	consolidated	financial	statements	for	further	information	on	our	defined benefit	plans.

Also	included	in	other	long-term	liabilities	on	our	balance	sheet	are	liabilities related	to	unrecognized	tax	benefits	and	corresponding	interest	and	penalties thereon.	Due	to	the	uncertainties	inherent	in	these	liabilities,	such	as	the	ultimate timing	and	resolution	of	tax	audits,	we	are	unable	to

reasonably	estimate	the	amount	or	period	in	which	potential	tax	payments	related to	these	positions	will	be	made.	Therefore,	this	table	does	not	include	any obligations	related	to	unrecognized	tax	benefits.	We	have	also	excluded	long- term	deferred	tax	liabilities	from	this	table,	as	they	do	not	represent	liabilities that	will	be	settled	in	cash.	See	Note	16	to	our	consolidated	financial	statements for	further	information	on	these	tax-related	accounts.

We	have	entered	into	various	agreements	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,	to	maintain	exclusive	rights	to distribute	a	product.	Since	there	is	uncertainty	on	the	timing	or	whether	such payments	will	have	to	be	made,	we	have	not	included	them	in	this	table.	These payments	could	range	from	$0	to	$45	million.

# CRITICAL	ACCOUNTING	ESTIMATES

Our	financial	results	are	affected	by	the	selection	and	application	of accounting	policies	and	methods.	Significant	accounting	policies	which	require management's	judgment	are	discussed	below.

Excess	Inventory	and	Instruments	–	We	must	determine	as	of	each	balance sheet	date	how	much,	if	any,	of	our	inventory	may	ultimately	prove	to	be unsaleable	or	unsaleable	at	our	carrying	cost.	Similarly,	we	must	also	determine if	instruments	on	hand	will	be	put	to	productive	use	or	remain	undeployed	as	a result	of	excess	supply.	Accordingly,	inventory	and	instruments	are	written down	to	their	net	realizable	value.	To	determine	the	appropriate	net	realizable value,	we	evaluate	current	stock	levels	in	relation	to	historical	and	expected patterns	of	demand	for	all	of	our	products	and	instrument	systems	and components.	The	basis	for	the	determination	is	generally	the	same	for	all inventory	and	instrument	items	and	categories	except	for	work	-in-process inventory,	which	is	recorded	at	cost.	Obsolete	or	discontinued	items	are generally	destroyed	and	completely	written	off.	Management	evaluates	the	need for	changes	to	inventory	and	instruments	net	realizable	values	based	on	market conditions,	competitive	offerings	and	other	factors	on	a	regular	basis.

Income	Taxes	–	Our	income	tax	expense,	deferred	tax	assets	and	liabilities	and reserves	for	unrecognized	tax	benefits	reflect	management's	best	assessment	of estimated	future	taxes	to	be	paid.	We	are	subject	to	income	taxes	in	the	U.S.	and numerous	foreign	jurisdictions.	Significant	judgments	and	estimates	are	required in	determining	the	consolidated	income	tax	expense.

We	estimate	income	tax	expense	and	income	tax	liabilities	and	assets	by taxable	jurisdiction.	Realization	of	deferred	tax	assets	in	each	taxable jurisdiction	is	dependent	on	our	ability	to	generate	future	taxable	income sufficient	to	realize	the	benefits.	We	evaluate	deferred	tax	assets	on	an	ongoing basis	and	provide	valuation	allowances	unless	we	determine	it	is	"more	likely than	not"	that	the	deferred	tax	benefit	will	be	realized.	Federal	income	taxes	are provided	on	the	portion	of	the	income	of	foreign	subsidiaries	that	is	expected	to be	remitted	to	the	U.S.

The	calculation	of	our	tax	liabilities	involves	dealing	with	uncertainties	in	the application	of	complex	tax	laws	and	regulations	in	a	multitude	of	jurisdictions across	our	global	operations.	We	are	subject	to	regulatory	review	or	audit	in virtually	all	of	those	jurisdictions	and	those	reviews	and	audits	may	require extended	periods	of	time	to	resolve.	We	record	our	income	tax	provisions	based on	our	knowledge	of	all	relevant	facts	and	circumstances,	including	existing	tax laws,	our	experience	with	previous	settlement	agreements,	the	status	of	current examinations	and	our	understanding	of	how	the	tax	authorities	view	certain relevant	industry	and	commercial	matters.

We	recognize	tax	liabilities	in	accordance	with	the	Financial	Accounting Standards	Board's	("FASB")	guidance	on	income	taxes	and	we	adjust	these liabilities	when	our	judgment	changes	as	a	result	of	the	evaluation	of	new information	not	previously	available.	Due	to	the	complexity	of	some	of	these uncertainties,	the	ultimate	resolution	may	result	in	a	payment	that	is	materially different	from	our	current	estimate	of	the	tax	liabilities.	These	differences	will be	reflected	as	increases	or	decreases	to	income	tax	expense	in	the	period	in which	they	are	determined.

Commitments	and	Contingencies	–	Accruals	for	product	liability	and	other claims	are	established	with	the	assistance	of	internal	and	external	legal	counsel based	on	current	information	and	historical	settlement	information	for	claims, related	legal	fees	and	for	claims	incurred	but	not	reported.	We	use	an	actuarial model	to	assist	management	in	determining	an	appropriate	level	of	accruals	for product	liability	claims.	Historical	patterns	of	claim	loss	development	over	time are	statistically	analyzed	to	arrive	at	factors	which	are	then	applied	to	loss estimates	in	the	actuarial	model.

In	addition	to	our	general	product	liability,	we	have	recorded	provisions totaling	$479.4	million	related	to	the	Durom	Cup,	including	$7.7	million	in 2015.	See	Note	20	to	our	consolidated	financial	statements	for	further	discussion of	the	Durom	Cup	litigation.

Goodwill	and	Intangible	Assets	–	We	evaluate	the	carrying	value	of	goodwill and	indefinite	life	intangible	assets	annually,	or	whenever	events	or circumstances	indicate	the	carrying	value	may	not	be	recoverable.	We	evaluate the	carrying	value	of	finite	life	intangible	assets	whenever	events	or circumstances	indicate	the	carrying	value	may	not	be	recoverable.	Significant assumptions	are	required	to	estimate	the	fair	value	of	goodwill	and	intangible assets,	most	notably	estimated	future	cash	flows	generated	by	these	assets.	As such,	these	fair	value	measurements	use	significant	unobservable inputs.	Changes	to	these	assumptions	could	require	us	to	record	impairment charges	on	these	assets.

We	have	seven	reporting	units	with	goodwill	assigned	to	them.	Two	of	these reporting	units,	CMF	and	Bone	Healing,	consist	entirely	of	assets	and	liabilities acquired	in	the	Biomet	merger.	Since	these	assets	and	liabilities	were	valued	at their	estimated	fair	value	on	the	Closing	Date,	in	our	2015	impairment	test,	the carrying	value	approximated	the	fair	value.	Therefore,	if	these	reporting	units perform	below	what	we	expected	at	the	time	that	we	estimated	their	fair	value, we	may	be	required	to	record	impairment	charges.

Our	other	five	reporting	units	consist	of	combined	Zimmer	and	Biomet	assets and	liabilities.	In	our	2015	impairment	test,	our	EMEA	reporting	unit's estimated	fair	value	only	exceeded	the	carrying	value	of	its	net	assets	by	8 percent,	or	approximately	$240	million.	This	reporting	unit's	estimated	fair	value has	significantly	decreased	from	prior	year	impairment	tests	due	to	the weakening	of	the	Euro	against	the	U.S.	Dollar.	For	our	other	four	reporting units,	their	estimated	fair	value	exceeded	their	carrying	value	by	more	than	20 percent.

Share-based	Payment	–	We	measure	share-based	payment	expense	at	the grant	date	based	on	the	fair	value	of	the	award	and	recognize	expense	over	the requisite	service	period.	Determining	the	fair	value	of	share-based	awards	at	the grant	date	requires	judgment,	including	estimating	the	expected	life	of	stock options	and	the	expected	volatility	of	our	stock.	Additionally,	we	must	estimate the	amount	of	share-based	awards	that	are	expected	to	be	forfeited.	We	estimate expected	volatility	based	upon	the	implied	volatility	of	actively	traded	options	on our	stock.	The	expected	life	of	stock	options	and	estimated	forfeitures	are	based upon	our	employees'	historical	exercise	and	forfeiture	behaviors.	The assumptions	used	in	determining	the	grant	date	fair	value	and	the	expected forfeitures	represent	management's	best	estimates.

# RECENT	ACCOUNTING	PRONOUNCEMENTS

See	Note	3	to	our	consolidated	financial	statements	to	see	how	recent accounting	pronouncements	have	affected	or	may	affect	our	financial	position, results	of	operations	or	cash	flows.

# Item	7A. 	Quantitative	and	Qualitative	Disclosures	About	Market	Risk

# MARKET	RISK

We	are	exposed	to	certain	market	risks	as	part	of	our	ongoing	business operations,	including	risks	from	changes	in	foreign	currency	exchange	rates, interest	rates	and	commodity	prices	that	could	affect	our	financial	condition, results	of	operations	and	cash	flows.	We	manage	our	exposure	to	these	and	other market	risks	through	regular	operating	and	financing	activities	and	through	the use	of	derivative	financial	instruments.	We	use	derivative	financial	instruments solely	as	risk	management	tools	and	not	for	speculative	investment	purposes.

# FOREIGN	CURRENCY	EXCHANGE	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.	We	are	primarily	exposed	to	foreign currency	exchange	rate	risk	with	respect	to	transactions	and	net	assets denominated	in	Euros,	Swiss	Francs,	Japanese	Yen,

British	Pounds,	Canadian	Dollars,	Australian	Dollars,	Korean	Won,	Swedish Krona,	Czech	Koruna,	Thai	Baht,	Taiwan	Dollars,	South	African	Rand,	Russian Rubles	and	Indian	Rupees.	We	manage	the	foreign	currency	exposure	centrally, on	a	combined	basis,	which	allows	us	to	net	exposures	and	to	take	advantage	of any	natural	offsets.	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	and	options	with	major	financial	institutions.	These	forward contracts	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	and	options	that	qualify	as	cash	flow	hedges	are	temporarily	recorded in	other	comprehensive	income,	then	recognized	in	cost	of	products	sold	when the	hedged	item	affects	net	earnings.

For	contracts	outstanding	at	December	31,	2015,	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	and	Indian	Rupees and	purchase	Swiss	Francs	and	sell	U.S.	Dollars	at	set	maturity	dates	ranging from	January	2016	through	June	2018.	The	notional	amounts	of	outstanding forward	contracts	entered	into	with	third	parties	to	purchase	U.S.	Dollars	at December	31,	2015	were	$1,427.5	million.	The	notional	amounts	of	outstanding forward	contracts	entered	into	with	third	parties	to	purchase	Swiss	Francs	at December	31,	2015	were	$307.2	million.	The	weighted	average	contract	rates outstanding	at	December	31,	2015	were	Euro:USD	1.21,	USD:Swiss	Franc: 0.91,	USD:Japanese	Yen	112.44,	British	Pound:USD	1.59,	USD:Canadian Dollar	1.22,	Australian	Dollar:USD	0.77,	USD:Korean	Won	1,125, USD:Swedish	Krona	7.68,	USD:Czech	Koruna	22.88,	USD:Thai	Baht	35.03, USD:Taiwan	Dollar	31.48,	USD:South	African	Rand	13.60,	USD:Russian	Ruble 65.50	and	USD:Indian	Ruppee	68.80.

We	maintain	written	policies	and	procedures	governing	our	risk	management activities.	Our	policy	requires	that	critical	terms	of	hedging	instruments	be	the same	as	hedged	forecasted	transactions.	On	this	basis,	with	respect	to	cash	flow hedges,	changes	in	cash	flows	attributable	to	hedged	transactions	are	generally expected	to	be	completely	offset	by	changes	in	the	fair	value	of	hedge instruments.	As	part	of	our	risk	management	program,	we	also	perform sensitivity	analyses	to	assess	potential	changes	in	revenue,	operating	results,	cash flows	and	financial	position	relating	to	hypothetical	movements	in	currency exchange	rates.	A	sensitivity	analysis	of	changes	in	the	fair	value	of	foreign currency	exchange	forward	contracts	outstanding	at	December	31,	2015 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	differentials,	the fair	value	of	those	contracts	would	increase	or	decrease	earnings	before	income taxes	in	periods	through	June	2018,

depending	on	the	direction	of	the	change,	by	the	following	average	approximate amounts	(in	millions):

Any	change	in	the	fair	value	of	foreign	currency	exchange	forward	contracts	as a	result	of	a	fluctuation	in	a	currency	exchange	rate	is	expected	to	be	largely offset	by	a	change	in	the	value	of	the	hedged	transaction.	Consequently,	foreign currency	exchange	contracts	would	not	subject	us	to	material	risk	due	to exchange	rate	movements	because	gains	and	losses	on	these	contracts	offset gains	and	losses	on	the	assets,	liabilities	and	transactions	being	hedged.

We	had	net	assets,	excluding	goodwill	and	intangible	assets,	in	legal	entities with	non-U.S.	Dollar	functional	currencies	of	$2,042.4	million	at	December	31, 2015,	primarily	in	Euros,	Japanese	Yen	and	Australian	Dollars.

We	enter	into	foreign	currency	forward	exchange	contracts	with	terms	of	one month	to	manage	currency	exposures	for	monetary	assets	and	liabilities denominated	in	a	currency	other	than	an	entity's	functional	currency.	As	a	result, 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.

# COMMODITY	PRICE	RISK

We	purchase	raw	material	commodities	such	as	cobalt	chrome,	titanium, tantalum,	polymer	and	sterile	packaging.	We	enter	into	supply	contracts generally	with	terms	of	12	to	24	months,	where	available,	on	these	commodities to	alleviate	the	effect	of	market	fluctuation	in	prices.	As	part	of	our	risk management	program,	we	perform	sensitivity	analyses	related	to	potential commodity	price	changes.	A	10	percent	price	change	across	all	these commodities	would	not	have	a	material	effect	on	our	consolidated	financial position,	results	of	operations	or	cash	flows.

# INTEREST	RATE	RISK

In	the	normal	course	of	business,	we	are	exposed	to	market	risk	from	changes in	interest	rates	that	could	affect	our	results	of	operations	and	financial condition.	We	manage	our	exposure	to	interest	rate	risks	through	our	regular operations	and	financing	activities.

We	invest	our	cash	and	cash	equivalents	primarily	in	highly-rated	corporate commercial	paper	and	bank	deposits.	We	also	have	short-term	and	long-term investments	in	highly-rated	corporate	debt	securities,	U.S.	government	and agency	debt	securities,	U.S.	government	treasury	funds,	municipal	bonds, foreign	government	debt	securities,	commercial	paper	and	certificates	of deposit.	The	primary	investment	objective	is	to	ensure	capital	preservation	of	our invested	principal	funds.	Currently,	we	do	not	use	derivative	financial instruments	in	our	investment	portfolio.

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

We	have	multiple	fixed-to-variable	interest	rate	swap	agreements	that	we	have designated	as	fair	value	hedges	of	the	fixed	interest	rate	obligations	on	our	senior notes	due	2019	and	2021.	The	total	notional	amounts	are	$250.0	million	and $300.0	million	for	the	senior	notes	due	2019	and	2021,	respectively.	On	the interest	rate	swap	agreements	for	the	senior	notes	due	2019,	we	receive	a	fixed interest	rate	of	4.625	percent	and	pay	variable	interest	equal	to	the	three-month LIBOR	plus	an	average	of	133	basis	points.	On	the	interest	rate	swap	agreements for	the	senior	notes	due	2021,	we	receive	a	fixed	interest	rate	of	3.375	percent and	pay	variable	interest	equal	to	the	three-month	LIBOR	plus	an	average	of	99 basis	points.

The	interest	rate	swap	agreements	are	intended	to	manage	our	exposure	to interest	rate	movements	by	converting	fixed-rate	debt	into	variable-rate	debt.	The objective	of	the	instruments	is	to	more	closely	align	interest	expense	with	interest income	received	on	cash	and	cash	equivalents.

These	derivative	instruments	are	designated	as	fair	value	hedges	under GAAP.	Changes	in	the	fair	value	of	the	derivative	instrument	are	recorded	in earnings	and	are	offset	by	gains	or	losses	on	the	underlying	debt	instrument. Based	upon	our	overall	interest	rate	exposure	as	of	December	31,	2015,	a change	of	10	percent	in	interest	rates,	assuming	the	principal	amount	outstanding remains	constant,	would	not	have	a	material	effect	on	net	interest	expense.	This analysis	does	not	consider	the	effect	of	the	change	in	the	level	of	overall economic	activity	that	could	exist	in	such	an	environment.

# CREDIT	RISK

Financial	instruments,	which	potentially	subject	us	to	concentrations	of	credit risk,	are	primarily	cash	and	cash	equivalents,	short-term	and	long-term investments,	derivative	instruments,	counterparty	transactions	and	accounts receivable.

We	place	our	investments	in	highly-rated	financial	institutions	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	equivalents	and	investments.

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.

Our	concentrations	of	credit	risks	with	respect	to	trade	accounts	receivable	is limited	due	to	the	large	number	of	customers	and	their	dispersion	across	a number	of	geographic	areas	and	by	frequent	monitoring	of	the	creditworthiness of	the	customers	to	whom	credit	is	granted	in	the	normal	course	of business.	Substantially	all	of	our	trade	receivables	are	concentrated	in	the	public and	private	hospital	and	healthcare	industry	in	the	U.S.	and	internationally	or with	distributors	or	dealers	who	operate	in	international	markets	and, accordingly,	are	exposed	to	their	respective	business,	economic	and	country specific	variables.

Our	ability	to	collect	accounts	receivable	in	some	countries	depends	in	part upon	the	financial	stability	of	these	hospital	and	healthcare	sectors	and	the respective	countries'	national	economic	and	healthcare	systems.	Most	notably,	in Europe	healthcare	is	typically	sponsored	by	the	government.	Since	we	sell products	to	public	hospitals	in	those	countries,	we	are	indirectly	exposed	to government	budget	constraints.	The	ongoing	financial	uncertainties	in	the	Euro zone	impact	the	indirect	credit	exposure	we	have	to	those	governments	through their	public	hospitals.	As	of	December	31,	2015,	in	Greece,	Italy,	Portugal	and Spain,	countries	that	have	been	widely	recognized	as	presenting	the	highest	risk, our	gross	short-term	and	long-term	trade	accounts	receivable	combined	were $238.6	million.	With	allowances	for	doubtful	accounts	of	$17.3	million	recorded in	those	countries,	the	net	balance	was	$221.3	million,	representing	16	percent	of our	total	consolidated	short-term	and	long-term	trade	accounts	receivable balance,	net.	Italy	and	Spain	accounted	for	$194.2	million	of	that	net	amount. We	are	actively	monitoring	the	situations	in	these	countries.	We	maintain	contact with	customers	in	these	countries	on	a	regular	basis.	We	continue	to	receive payments,	albeit	at	a	slower	rate	than	in	the	past.	We	believe	our	allowance	for doubtful	accounts	is	adequate	in	these	countries,	as	ultimately	we	believe	the governments	in	these	countries	will	be	able	to	pay.	To	the	extent	the	respective governments'	ability	to	fund	their	public	hospital	programs	deteriorates,	we	may have	to	record	significant	bad	debt	expenses	in	the	future.

While	we	are	exposed	to	risks	from	the	broader	healthcare	industry	in	Europe and	around	the	world,	there	is	no	significant	net	exposure	due	to	any	individual customer.	Exposure	to	credit	risk	is	controlled	through	credit	approvals,	credit limits	and	monitoring	procedures,	and	we	believe	that	reserves	for	losses	are adequate.

# Management's	Report	on	Internal	Control	Over	Financial	Reporting

The	management	of	Zimmer	Biomet	Holdings,	Inc.	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting.	Internal control	over	financial	reporting	is	defined	in	Rules	13a-15(f)	or	15d-15(f)	promulgated	under	the	Securities	Exchange	Act	of	1934	as	a	process	designed	by,	or	under	the supervision	of,	the	Company's	principal	executive	and	principal	financial	officers	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	external	purposes	in	accordance	with	U.S. generally	accepted	accounting	principles	and	includes	those	policies	and	procedures	that:

•Pertain	to	the	maintenance	of	records	that	in	reasonable	detail	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	Company;

•Provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with	U.S.	generally	accepted accounting	principles,	and	that	receipts	and	expenditures	of	the	Company	are	being	made	only	in	accordance	with	authorizations	of	management	and	directors	of the	Company;	and

•Provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use	or	disposition	of	the	Company's	assets	that	could	have	a material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	the	Company's	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any evaluation	of	effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of compliance	with	the	policies	or	procedures	may	deteriorate.

The	Company	acquired	Biomet	during	the	second	quarter	of	2015	in	a	purchase	business	combination.	Management	excluded	Biomet	from	its	evaluation	of	internal control	over	financial	reporting	as	of	December	31,	2015.	The	Company	will	incorporate	Biomet	into	its	annual	report	on	internal	control	over	financial	reporting	as	of December	31,	2016.	Biomet's	assets	as	of	December	31,	2015	excluded	from	management's	assessment	were	$2,631.0	million,	or	10	percent	of	our	total	assets.

Biomet's	net	sales	for	the	year	ended	December	31,	2015	excluded	from	management's	assessment	were	$1,602.0	million,	or	27	percent	of	our	total	net	sales.

The	Company's	management	assessed	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting	as	of	December	31,	2015.	In	making	this assessment,	the	Company's	management	used	the	criteria	set	forth	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO)	in	Internal Control-Integrated	Framework	(2013).

Based	on	that	assessment,	management	has	concluded	that,	as	of	December	31,	2015,	the	Company's	internal	control	over	financial	reporting	is	effective	based	on those	criteria.

The	Company's	independent	registered	public	accounting	firm	has	audited	the	effectiveness	of	the	Company's	internal	control	over	financial	reporting	as	of December	31,	2015,	as	stated	in	its	report	which	appears	in	Item	8	of	this	Annual	Report	on	Form	10-K.

| Zimmer	Biomet	Holdings,	Inc. |  |
| :--- | :--- |
| Index\tto\tConsolidated\tFinancial\tStatements |  |
| Financial\tStatements: | Page |
| Report\tof\tIndependent\tRegistered\tPublic\tAccounting\tFirm | \t 36 |
| Consolidated\tStatements\tof\tEarnings\tfor\tthe\tYears\tEnded\tDecember\t31,\t2015,\t2014\tand\t2013 | \t 37 |
| Consolidated\tStatements\tof\tComprehensive\tIncome\tfor\tthe\tYears\tEnded\tDecember\t31,\t2015,\t2014\tand\t2013 | \t 38 |
| Consolidated\tBalance\tSheets\tas\tof\tDecember\t31,\t2015\tand\t2014 | \t 39 |
| Consolidated\tStatements\tof\tStockholders'\tEquity\tfor\tthe\tYears\tEnded\tDecember\t31,\t2015,\t2014\tand\t2013 | \t 40 |
| Consolidated\tStatements\tof\tCash\tFlows\tfor\tthe\tYears\tEnded\tDecember\t31,\t2015,\t2014\tand\t2013 | \t 41 |
| Notes\tto\tConsolidated\tFinancial\tStatements | \t 42 |

# Report	of	Independent	Registered	Public	Accounting	Firm

To	the	Stockholders	and	Board	of	Directors	of	Zimmer	Biomet	Holdings,	Inc.:

In	our	opinion,	the	consolidated	financial	statements	listed	in	the	index	appearing	under	Item	15(a)(1)	present	fairly,	in	all	material	respects,	the	financial	position	of Zimmer	Biomet	Holdings,	Inc.	and	its	subsidiaries	at	December	31,	2015	and	2014,	and	the	results	of	their	operations	and	their	cash	flows	for	each	of	the	three	years	in the	period	ended	December	31,	2015	in	conformity	with	accounting	principles	generally	accepted	in	the	United	States	of	America.	In	addition,	in	our	opinion,	the financial	statement	schedule	listed	in	the	index	appearing	under	Item	15(a)(2)	presents	fairly,	in	all	material	respects,	the	information	set	forth	therein	when	read	in conjunction	with	the	related	consolidated	financial	statements.	Also	in	our	opinion,	the	Company	maintained,	in	all	material	respects,	effective	internal	control	over financial	reporting	as	of	December	31,	2015,	based	on	criteria	established	in	Internal	Control	-	Integrated	Framework	(2013)	issued	by	the	Committee	of	Sponsoring Organizations	of	the	Treadway	Commission	(COSO).	The	Company's	management	is	responsible	for	these	financial	statements	and	financial	statement	schedule,	for maintaining	effective	internal	control	over	financial	reporting	and	for	its	assessment	of	the	effectiveness	of	internal	control	over	financial	reporting,	included	in Management's	Report	on	Internal	Control	over	Financial	Reporting	appearing	under	Item	7.	Our	responsibility	is	to	express	opinions	on	these	financial	statements,	on the	financial	statement	schedule,	and	on	the	Company's	internal	control	over	financial	reporting	based	on	our	integrated	audits.	We	conducted	our	audits	in	accordance with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require	that	we	plan	and	perform	the	audits	to	obtain	reasonable assurance	about	whether	the	financial	statements	are	free	of	material	misstatement	and	whether	effective	internal	control	over	financial	reporting	was	maintained	in	all material	respects.	Our	audits	of	the	financial	statements	included	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements, assessing	the	accounting	principles	used	and	significant	estimates	made	by	management,	and	evaluating	the	overall	financial	statement	presentation.	Our	audit	of	internal control	over	financial	reporting	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	and testing	and	evaluating	the	design	and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk.	Our	audits	also	included	performing	such	other	procedures	as we	considered	necessary	in	the	circumstances.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinions.

As	discussed	in	Note	3	to	the	consolidated	financial	statements,	the	Company	changed	the	manner	in	which	it	classifies	deferred	income	taxes	in	2015.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting	and	the preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal	control	over	financial reporting	includes	those	policies	and	procedures	that	(i)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and dispositions	of	the	assets	of	the	company;	(ii)	provide	reasonable	assurance	that	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	company	are	being	made	only	in	accordance	with	authorizations	of management	and	directors	of	the	company;	and	(iii)	provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or disposition	of	the	company's	assets	that	could	have	a	material	effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of	compliance	with	the policies	or	procedures	may	deteriorate.

As	described	in	Management's	Report	on	Internal	Control	Over	Financial	Reporting,	management	has	excluded	Biomet,	Inc.	from	its	assessment	of	internal	control over	financial	reporting	as	of	December	31,	2015	because	it	was	acquired	by	the	Company	in	a	purchase	business	combination	during	2015.	We	have	also	excluded Biomet,	Inc.	from	our	audit	of	internal	control	over	financial	reporting.	Biomet,	Inc.	is	a	wholly-owned	subsidiary	whose	total	assets	and	total	revenues	represent $2,631.0	million	or	10%	of	total	assets	and	$1,602.0	million	or	27%	of	total	net	sales,	respectively,	of	the	related	consolidated	financial	statement	amounts	as	of	and	for the	year	ended	December	31,	2015.

/s/	PricewaterhouseCoopers	LLP

Chicago,	Illinois

# CONSOLIDATED	STATEMENTS	OF	EARNINGS

| For	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Net\tSales | \t $5,997.8 | $4,673.3 | $4,623.4 |
| Cost\tof\tproducts\tsold,\texcluding\tintangible\tasset\tamortization | 1,800.6 | \t 1,242.8 | \t 1,266.7 |
| Intangible\tasset\tamortization | 337.4 | 92.5 | 78.5 |
| Research\tand\tdevelopment | 268.8 | 187.4 | 203.0 |
| Selling,\tgeneral\tand\tadministrative | 2,284.2 | \t 1,750.7 | \t 1,749.3 |
| Certain\tclaims\t(Note\t20) | 7.7 | 21.5 | 47.0 |
| Special\titems\t(Note\t3) | 831.8 | 341.1 | 210.3 |
| Operating\texpenses | 5,530.5 | \t 3,636.0 | \t 3,554.8 |
| Operating\tProfit | 467.3 | \t 1,037.3 | \t 1,068.6 |
| Other\texpense,\tnet | (36.9) | (46.7) | (6.0) |
| Interest\tincome | 9.4 | 11.9 | 15.6 |
| Interest\texpense | (286.6) | (63.1) | (70.1) |
| Earnings\tbefore\tincome\ttaxes | 153.2 | 939.4 | \t 1,008.1 |
| Provision\tfor\tincome\ttaxes | 7.0 | 220.2 | 229.5 |
| Net\tearnings | 146.2 | 719.2 | 778.6 |
| Less:\tNet\tloss\tattributable\tto\tnoncontrolling\tinterest | (0.8) | (1.1) | (1.8) |
| Net\tEarnings\tof\tZimmer\tBiomet\tHoldings,\tInc. | $147.0 | $720.3 | $780.4 |
| Earnings\tPer\tCommon\tShare\t–\tBasic | $0.78 | $4.26 | $4.60 |
| Earnings\tPer\tCommon\tShare\t–\tDiluted | $0.77 | $4.20 | $4.54 |
| Weighted\tAverage\tCommon\tShares\tOutstanding |  |  |  |
| Basic | 187.4 | 169.0 | 169.6 |
| Diluted | 189.8 | 171.7 | 171.8 |
| Cash\tDividends\tDeclared\tPer\tCommon\tShare | $0.88 | $0.88 | $0.80 |

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

# CONSOLIDATED	STATEMENTS	OF	COMPREHENSIVE	(LOSS)	INCOME

|  |  |  | (in	millions) |
| :--- | :--- | :--- | :--- |
| For\tthe\tYears\tEnded\tDecember\t31, | 2015 | 2014 | 2013 |
| Net\tEarnings | $146.2 | $719.2 | $778.6 |
| Other\tComprehensive\tIncome\t(Loss): |  |  |  |
| Foreign\tcurrency\tcumulative\ttranslation\tadjustments | (305.2) | (223.1) | (35.0) |
| Unrealized\tcash\tflow\thedge\tgains,\tnet\tof\ttax | 52.7 | 55.9 | 33.4 |
| Reclassification\tadjustments\ton\tcash\tflow\thedges,\tnet\tof\ttax | (93.0) | (18.9) | (4.4) |
| Unrealized\t(losses)/gains\ton\tsecurities,\tnet\tof\ttax | (0.2) | (0.5) | 0.1 |
| Reclassification\tadjustments\ton\tsecurities,\tnet\tof\ttax | – | (0.4) | – |
| Adjustments\tto\tprior\tservice\tcost\tand\tunrecognized\tactuarial\tassumptions,\tnet\tof\ttax | (21.4) | (75.8) | 38.5 |
| Total\tOther\tComprehensive\t(Loss)\tIncome | (367.1) | (262.8) | 32.6 |
| Comprehensive\t(Loss)\tIncome | (220.9) | 456.4 | \t 811.2 |
| Comprehensive\tLoss\tAttributable\tto\tNoncontrolling\tInterest | (0.3) | (1.0) | (2.0) |
| Comprehensive\t(Loss)\tIncome\tAttributable\tto\tZimmer\tBiomet\tHoldings,\tInc. | $(220.6) | $457.4 | $813.2 |

|  |  | (in	millions) |
| :--- | :--- | :--- |
| As\tof\tDecember\t31, | 2015 | 2014 |
| ASSETS |  |  |
| Current\tAssets: |  |  |
| Cash\tand\tcash\tequivalents | $1,459.3 | $1,083.3 |
| Short-term\tinvestments | 164.6 | 612.5 |
| Accounts\treceivable,\tless\tallowance\tfor\tdoubtful\taccounts | 1,446.5 | 912.1 |
| Inventories | 2,254.1 | 1,193.3 |
| Prepaid\texpenses\tand\tother\tcurrent\tassets | 538.4 | 317.2 |
| Deferred\tincome\ttaxes | – | 194.9 |
| Total\tCurrent\tAssets | 5,862.9 | 4,313.3 |
| Property,\tplant\tand\tequipment,\tnet | 2,062.6 | 1,285.3 |
| Goodwill | 9,934.2 | 2,514.2 |
| Intangible\tassets,\tnet | 8,746.3 | 603.5 |
| Other\tassets | 613.5 | 941.7 |
| Total\tAssets | $27,219.5 | $9,658.0 |
| LIABILITIES\tAND\tSTOCKHOLDERS'\tEQUITY |  |  |
| Current\tLiabilities: |  |  |
| Accounts\tpayable | $284.8 | $145.2 |
| Income\ttaxes | 147.2 | 80.3 |
| Other\tcurrent\tliabilities | 1,185.9 | 798.5 |
| Total\tCurrent\tLiabilities | 1,617.9 | 1,024.0 |
| Deferred\tincome\ttaxes | 3,150.2 | 45.9 |
| Other\tlong-term\tliabilities | 1,005.7 | 610.9 |
| Long-term\tdebt | \t 11,556.3 | 1,425.5 |
| Total\tLiabilities | \t 17,330.1 | 3,106.3 |
| Commitments\tand\tContingencies\t(Note\t20) |  |  |
| Stockholders'\tEquity: |  |  |
| Common\tstock,\t$0.01\tpar\tvalue,\tone\tbillion\tshares\tauthorized, |  |  |
| 302.7\tmillion\t(268.4\tmillion\tin\t2014)\tissued | 3.0 | 2.7 |
| Paid-in\tcapital | 8,195.3 | 4,330.7 |
| Retained\tearnings | 8,347.7 | 8,362.1 |
| Accumulated\tother\tcomprehensive\t(loss)\tincome | (329.0) | 38.1 |
| Treasury\tstock,\t100.0\tmillion\tshares\t(98.7\tmillion\tshares\tin\t2014) | (6,329.1) | (6,183.7) |
| Total\tZimmer\tBiomet\tHoldings,\tInc.\tstockholders'\tequity | 9,887.9 | 6,549.9 |
| Noncontrolling\tinterest | 1.5 | 1.8 |
| Total\tStockholders'\tEquity | 9,889.4 | 6,551.7 |
| Total\tLiabilities\tand\tStockholders'\tEquity |  |  |
|  | $27,219.5 | $9,658.0 |

# CONSOLIDATED	STATEMENTS	OF	STOCKHOLDERS'	EQUITY

|  | Common	Shares<br>Number | Amount | Paid-in<br>Capital | Retained<br>Earnings | Other<br>Comprehensive<br>(Loss)	Income | Treasury	Shares<br>Number | Amount | Noncontrolling<br>Interest | Total<br>Stockholders'<br>Equity |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tJanuary\t1,\t2013 | \t257.1 | $2.6 | $3,500.6 | $7,143.2 | $268.3 | (85.5) | $(5,072.1) | $5.4 | $ 5,848.0 |
| Net\tearnings | – | – | – | 780.4 | – | – | – | (1.8) | 778.6 |
| Other\tcomprehensive\tincome | – | – | – | – | 32.6 | – | – | (0.2) | 32.4 |
| Purchase\tof\tadditional\tshares\tfrom\tnoncontrolling |  |  |  |  |  |  |  |  |  |
| interest | – | – | (1.1) | – | – | – | – | (0.6) | (1.7) |
| Cash\tdividends\tdeclared | – | – | – | (135.4) | – | – | – | – | (135.4) |
| Stock\tcompensation\tplans,\tincluding\ttax\tbenefits | 7.2 | – | 501.1 | 1.2 | – | 0.1 | 5.4 | – | 507.7 |
| Share\trepurchases | – | – | – | – | – | (9.1) | (719.0) | – | (719.0) |
| Balance\tDecember\t31,\t2013 | \t264.3 | 2.6 | \t 4,000.6 | \t 7,789.4 | 300.9 | (94.5) | (5,785.7) | 2.8 | 6,310.6 |
| Net\tearnings | – | – | – | 720.3 | – | – | – | (1.1) | 719.2 |
| Other\tcomprehensive\tloss | – | – | – | – | (262.8) | – | – | 0.1 | (262.7) |
| Cash\tdividends\tdeclared | – | – | – | (148.6) | – | – | – | – | (148.6) |
| Stock\tcompensation\tplans,\tincluding\ttax\tbenefits | 4.1 | 0.1 | 330.1 | 1.0 | – | – | 2.5 | – | 333.7 |
| Share\trepurchases | – | – | – | – | – | (4.2) | (400.5) | – | (400.5) |
| Balance\tDecember\t31,\t2014 | \t268.4 | 2.7 | \t 4,330.7 | \t 8,362.1 | 38.1 | (98.7) | (6,183.7) | 1.8 | 6,551.7 |
| Net\tearnings | – | – | – | 147.0 | – | – | – | (0.8) | 146.2 |
| Other\tcomprehensive\tloss | – | – | – | – | (367.1) | – | – | 0.5 | (366.6) |
| Cash\tdividends\tdeclared | – | – | – | (164.4) | – | – | – | – | (164.4) |
| Stock\tcompensation\tplans,\tincluding\ttax\tbenefits | 1.6 | – | 142.2 | 3.0 | – | 0.1 | 4.6 | – | 149.8 |
| Share\trepurchases | – | – | – | – | – | (1.4) | (150.0) | – | (150.0) |
| Biomet\tmerger\tconsideration | 32.7 | 0.3 | \t 3,722.4 | – | – | – | – | – | 3,722.7 |
| Balance\tDecember\t31,\t2015 | \t302.7 | $3.0 | $8,195.3 | $8,347.7 | $(329.0) | \t(100.0) | $(6,329.1) | $1.5 | $ 9,889.4 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

|  |  |  | (in	millions) |
| :--- | :--- | :--- | :--- |
| For\tthe\tYears\tEnded\tDecember\t31, | 2015 | 2014 | 2013 |
| Cash\tflows\tprovided\tby\t(used\tin)\toperating\tactivities: |  |  |  |
| Net\tearnings | $146.2 | $719.2 | $778.6 |
| Adjustments\tto\treconcile\tnet\tearnings\tto\tnet\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 712.4 | 375.8 | 358.5 |
| Biomet\tmerger\tconsideration\tcompensation\texpense | 90.4 | – | – |
| Share-based\tcompensation | 46.4 | 49.4 | 48.5 |
| Income\ttax\tbenefit\tfrom\tstock\toption\texercises | 81.4 | 37.2 | 38.4 |
| Excess\tincome\ttax\tbenefit\tfrom\tstock\toption\texercises | (11.8) | (11.1) | (8.6) |
| Inventory\tstep-up | 317.8 | 5.4 | 8.0 |
| Gain\ton\tdivestiture\tof\tassets | (19.0) | – | – |
| Deferred\tincome\ttax\tprovision | (164.0) | (90.5) | (126.2) |
| Changes\tin\toperating\tassets\tand\tliabilities,\tnet\tof\tacquired\tassets\tand\tliabilities |  |  |  |
| Income\ttaxes | 163.3 | (50.4) | 104.4 |
| Receivables | (56.1) | (40.4) | (74.3) |
| Inventories | (205.4) | (164.6) | (148.1) |
| Accounts\tpayable\tand\taccrued\tliabilities | (263.1) | 108.4 | 33.6 |
| Other\tassets\tand\tliabilities | (21.8) | 114.4 | (49.7) |
| Net\tcash\tprovided\tby\toperating\tactivities | 816.7 | 1,052.8 | 963.1 |
| Cash\tflows\tprovided\tby\t(used\tin)\tinvesting\tactivities: |  |  |  |
| Additions\tto\tinstruments | (266.4) | (197.4) | (192.9) |
| Additions\tto\tother\tproperty,\tplant\tand\tequipment | (167.7) | (144.9) | (100.0) |
| Purchases\tof\tinvestments | (214.8) | (1,350.9) | (732.7) |
| Sales\tof\tinvestments | 802.9 | 1,282.2 | 830.8 |
| Proceeds\tfrom\tdivestiture\tof\tassets | 69.9 | – | – |
| Biomet\tacquistion,\tnet\tof\tacquired\tcash | (7,760.1) | – | – |
| Business\tcombination\tinvestments | – | (54.3) | (74.2) |
| Investments\tin\tother\tassets | (21.7) | (4.1) | (13.5) |
| Net\tcash\tused\tin\tinvesting\tactivities | (7,557.9) | (469.4) | (282.5) |
| Cash\tflows\tprovided\tby\t(used\tin)\tfinancing\tactivities: |  |  |  |
| Proceeds\tfrom\t(payments\ton)\tsenior\tnotes | 7,628.2 | (250.0) | – |
| Proceeds\tfrom\tterm\tloan | 3,000.0 | – | – |
| Redemption\tof\tsenior\tnotes | (2,740.0) | – | – |
| Payments\ton\tterm\tloan | (500.0) | – | – |
| Net\tproceeds\t(payments)\tunder\trevolving\tcredit\tfacilities | 0.1 | 2.3 | (97.5) |
| Dividends\tpaid\tto\tstockholders | (157.1) | (145.5) | (132.4) |
| Proceeds\tfrom\temployee\tstock\tcompensation\tplans | 105.2 | 284.7 | 474.8 |
| Excess\tincome\ttax\tbenefit\tfrom\tstock\toption\texercises | 11.8 | 11.1 | 8.6 |
| Debt\tissuance\tcosts | (58.4) | (64.1) | – |
| Repurchase\tof\tcommon\tstock | (150.0) | (400.9) | (720.8) |
| Net\tcash\tprovided\tby\t(used\tin)\tfinancing\tactivities | 7,139.8 | (562.4) | (467.3) |
| Effect\tof\texchange\trates\ton\tcash\tand\tcash\tequivalents | (22.6) | (18.3) | (17.0) |
| Increase\tin\tcash\tand\tcash\tequivalents | 376.0 | 2.7 | 196.3 |
| Cash\tand\tcash\tequivalents,\tbeginning\tof\tyear | 1,083.3 | 1,080.6 | 884.3 |
| Cash\tand\tcash\tequivalents,\tend\tof\tperiod | $1,459.3 | $1,083.3 | $1,080.6 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS

# 1. Business

We	design,	manufacture	and	market	orthopaedic	reconstructive	products; sports	medicine,	biologics,	extremities	and	trauma	products;	spine,	bone	healing, craniomaxillofacial	and	thoracic	products;	dental	implants;	and	related	surgical products.	We	collaborate	with	healthcare	professionals	around	the	globe	to advance	the	pace	of	innovation.	Our	products	and	solutions	help	treat	patients suffering	from	disorders	of,	or	injuries	to,	bones,	joints	or	supporting	soft tissues.

On	June	24,	2015	(the	"Closing	Date"),	pursuant	to	an	agreement	and	plan of	merger	dated	April	24,	2014,	we	acquired	LVB	Acquisition,	Inc.	("LVB"), the	parent	company	of	Biomet,	Inc.	("Biomet"),	and	LVB	and	Biomet	became our	wholly-owned	subsidiaries	(sometimes	hereinafter	referred	to	as	the	"Biomet merger"	or	the	"merger").	For	more	information	on	the	merger,	see	Note	4.	In connection	with	the	merger,	we	changed	our	name	from	Zimmer	Holdings,	Inc. to	Zimmer	Biomet	Holdings,	Inc.

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

# 2. Revision	of	Prior	Period	Financial	Statements

In	the	three	month	period	ended	September	30,	2015,	we	discovered	two errors	related	to	our	financial	statements	for	prior	periods.	One	error	related	to accounts	payable	accruals.	For	certain	received	goods	and	services,	we	did	not completely	relieve	the	related	accrual	in	a	timely	manner.	As	a	result,	our accounts	payable	balance	was	overstated.	This	error	had	been	accumulating since	2012.	The	second	error	related	to	the	accounting	for	the	divestiture	of certain	Biomet	product	lines	and	rights	in	the	three	month	period	ended	June	30, 2015.	We	calculated	a	gain	on	the	divestiture	based	upon	the	pre-merger	net book	value	of	the	assets.	However,	the	gain	should	have	been	calculated	based upon	the	fair	value	of	such	assets	post-merger.	We	evaluated	the	impact	of	these errors	on	our	prior	period	quarterly	and	annual	financial	statements,	assessing materiality	both	quantitatively	and	qualitatively,	and	concluded	the	errors	were not	material	to	any	of	our	previously	issued	financial	statements.	However,	we concluded	the	cumulative	corrections	of	these	errors	would	be	material	to	our financial	statements	for	the	three	month	period	ended	September	30,	2015	and, therefore,	it	was	not	appropriate	to	recognize	the	cumulative	corrections	in	that period.	Consequently,	we	revised	previous	periods'	financial	statements	to correct	these	errors	as	well	as	other	unrelated,	immaterial	out	of	period adjustments	that	had	been	previously	recorded.	Following	is	a	summary	of	the financial	statement	line	items	impacted	by	these	revisions	for	the	periods presented	in	this	Form	10-K	(in	millions,	except	per	share	amounts).

Revisions	to	the	Consolidated	Statements	of	Earnings	and	Comprehensive	Income	(Loss)

|  | Year	Ended	December	31,	2014 | Year	Ended	December	31,	2014 |  | Year	Ended	December	31,	2013 | Year	Ended	December	31,	2013 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | As\tReported | Adjustments | As\nRevised | As\tReported | Adjustments | As\nRevised |
| Cost\tof\tproducts\tsold,\texcluding\tintangible\tasset\tamortization | $1,242.7 | $0.1 | $1,242.8 | $1,280.1 | $(13.4) | $1,266.7 |
| Research\tand\tdevelopment | 187.9 | (0.5) | 187.4 | 203.4 | (0.4) | 203.0 |
| Selling,\tgeneral\tand\tadministrative | 1,744.4 | 6.3 | \t 1,750.7 | 1,758.8 | (9.5) | \t 1,749.3 |
| Special\titems | 342.5 | (1.4) | 341.1 | 214.0 | (3.7) | 210.3 |
| Operating\texpenses | 3,631.5 | 4.5 | \t 3,636.0 | 3,581.8 | (27.0) | \t 3,554.8 |
| Earnings\tbefore\tincome\ttaxes | 943.9 | (4.5) | 939.4 | 981.1 | 27.0 | \t 1,008.1 |
| Provision\tfor\tincome\ttaxes | 224.9 | (4.7) | 220.2 | 221.9 | 7.6 | 229.5 |
| Net\tearnings | 719.0 | 0.2 | 719.2 | 759.2 | 19.4 | 778.6 |
| Net\tEarnings\tof\tZimmer\tHoldings,\tInc. | $720.1 | $0.2 | $720.3 | $761.0 | $19.4 | $780.4 |
| Earnings\tPer\tCommon\tShare\t-\tBasic | $4.26 | $– | $4.26 | $4.49 | $0.11 | $4.60 |
| Earnings\tPer\tCommon\tShare\t-\tDiluted | $4.19 | $0.01 | $4.20 | $4.43 | $0.11 | $4.54 |
| Foreign\tcurrency\tcumulative\ttranslation\tadjustments | $(241.5) | $18.4 | $(223.1) | $(44.4) | $9.4 | $(35.0) |
| Total\tOther\tComprehensive\tIncome\t(Loss) | (281.2) | 18.4 | (262.8) | 23.2 | 9.4 | 32.6 |
| Comprehensive\tIncome | 437.8 | 18.6 | 456.4 | 782.4 | 28.8 | 811.2 |
| Comprehensive\tIncome\tAttributable\tto\tZimmer\tHoldings,\tInc. | 438.8 | 18.6 | 457.4 | 784.4 | 28.8 | 813.2 |

# NOTES	TO	CONSOLIDATED	FINANCIAL	STATEMENTS	(Continued)

# Revisions	to	the	Consolidated	Balance	Sheet

|  |  | December	31,	2014 |  |
| :--- | :--- | :--- | :--- |
|  | As\tReported | Adjustments | As\tRevised |
| Inventories | $1,169.0 | $24.3 | $1,193.3 |
| Total\tCurrent\tAssets | 4,289.0 | 24.3 | 4,313.3 |
| Property,\tplant\tand\tequipment,\tnet | 1,288.8 | (3.5) | 1,285.3 |
| Other\tassets | 939.2 | 2.5 | 941.7 |
| Total\tAssets | 9,634.7 | 23.3 | 9,658.0 |
| Accounts\tpayable | 167.1 | (21.9) | 145.2 |
| Income\ttaxes\tpayable | 72.4 | 7.9 | 80.3 |
| Other\tcurrent\tliabilities | 798.5 | – | 798.5 |
| Total\tCurrent\tLiabilities | 1,038.0 | (14.0) | 1,024.0 |
| Long-term\tincome\ttax\tpayable | 181.7 | 8.2 | 189.9 |
| Total\tLiabilities | 3,112.1 | (5.8) | 3,106.3 |
| Retained\tearnings | 8,285.2 | 76.9 | 8,362.1 |
| Accumulated\tother\tcomprehensive\tincome | 85.9 | (47.8) | 38.1 |
| Total\tZimmer\tHoldings,\tInc.\tstockholders'\tequity | 6,520.8 | 29.1 | 6,549.9 |
| Total\tStockholders'\tEquity | 6,522.6 | 29.1 | 6,551.7 |
| Total\tLiabilities\tand\tStockholders'\tEquity | 9,634.7 | 23.3 | 9,658.0 |

# Revisions	to	the	Consolidated	Statements	of	Cash	Flows

|  | Year	ended	December	31,	2014 | Year	ended	December	31,	2014 |  | Year	ended	December	31,	2013 | Year	ended	December	31,	2013 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | As\tReported | Adjustments | As\tRevised | As\tReported | Adjustments | As\tRevised |
| Net\tearnings | $719.0 | $0.2 | $719.2 | $759.2 | $19.4 | $778.6 |
| Deferred\tincome\ttax\tprovision | (84.2) | (6.3) | (90.5) | (126.2) | – | (126.2) |
| Changes\tin\toperating\tassets\tand\tliabilities,\tnet\tof\teffect\tof\tacquisitions: |  |  |  |  |  |  |
| Income\ttaxes\tpayable | (51.9) | 1.5 | (50.4) | 96.8 | 7.6 | 104.4 |
| Inventories | (154.1) | (10.5) | (164.6) | (128.4) | (19.7) | (148.1) |
| Accounts\tpayable\tand\taccrued\texpenses | 120.1 | (11.7) | 108.4 | 38.3 | (4.7) | 33.6 |
| Other\tassets\tand\tliabilities | 87.6 | 26.8 | 114.4 | (47.1) | (2.6) | (49.7) |

We	have	not	presented	revisions	to	our	consolidated	statements	of stockholders'	equity.	The	only	revisions	to	these	statements	are	related	to retained	earnings	caused	by	revisions	to	net	earnings	and	accumulated	other comprehensive	income	caused	by	revisions	to	other	comprehensive	income (loss).	These	revisions	have	already	been	presented	in	the	tables	for	the consolidated	statements	of	earnings	and	comprehensive	income	and	the consolidated	balance	sheets.

In	the	fourth	quarter	of	2015	we	discovered	an	error	that	was	immaterial	to previous	quarters'	condensed	consolidated	statements	of	cash	flows.	As	further discussed	in	Note	4,	we	recognized	$90.4	million	of	compensation	expense related	to

previously	unvested	LVB	stock	options	and	LVB	stock-based	awards	that	vested immediately	prior	to	the	merger	under	the	terms	of	the	merger	agreement.	$52.8 million	of	the	$90.4	million	represented	cash	payments	to	holders	of	these options	and	stock-based	awards.	In	the	six	month	period	ended	June	30,	2015 and	nine	month	period	ended	September	30,	2015,	we	presented	the	$52.8 million	as	a	cash	outflow	from	investing	activities.	However,	since	the	payment represented	compensation	expense,	the	$52.8	million	should	have	been presented	as	an	operating	cash	outflow.	We	have	corrected	this	error	in	the consolidated	statement	of	cash	flows	for	the	year	ended	December	31,	2015.	We will	also	revise	future	interim	filings	to	correct	for	this	error.

# 3. Significant	Accounting	Policies

Basis	of	Presentation	–	The	consolidated	financial	statements	include	the accounts	of	Zimmer	Biomet	Holdings	and	its	subsidiaries	in	which	it	holds	a controlling	financial	interest.	All	significant	intercompany	accounts	and transactions	are	eliminated.	Certain	amounts	in	the	2014	and

2013	consolidated	financial	statements	have	been	reclassified	to	conform	to	the 2015	presentation.

Use	of	Estimates	–	The	consolidated	financial	statements	are	prepared	in conformity	with	accounting	principles	generally	accepted	in	the	U.S.	which require	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.	Actual	results	could	differ	from	those	estimates. Foreign	Currency	Translation	–	The	financial	statements	of	our	foreign subsidiaries	are	translated	into	U.S.	Dollars	using	period-end	exchange	rates	for assets	and	liabilities	and	average	exchange	rates	for	operating	results.	Unrealized translation	gains	and	losses	are	included	in	accumulated	other	comprehensive income	in	stockholders'	equity.	When	a	transaction	is	denominated	in	a	currency other	than	the	subsidiary's	functional	currency,	we	recognize	a	transaction	gain or	loss	when	the	transaction	is	settled.	Foreign	currency	transaction	gains	and losses	included	in	net	earnings	for	the	years	ended	December	31,	2015,	2014	and 2013	were	not	significant.

Revenue	Recognition	–	We	sell	product	through	three	principal	channels:	1) direct	to	healthcare	institutions,	referred	to	as	direct	channel	accounts;	2)	through stocking	distributors	and	healthcare	dealers;	and	3)	directly	to	dental	practices and	dental	laboratories.	The	direct	channel	accounts	represented	approximately 80	percent	of	our	net	sales	in	2015.	Through	this	channel,	inventory	is	generally consigned	to	sales	agents	or	customers	so	that	products	are	available	when needed	for	surgical	procedures.	No	revenue	is	recognized	upon	the	placement	of inventory	into	consignment	as	we	retain	title	and	maintain	the	inventory	on	our balance	sheet.	Upon	implantation,	we	issue	an	invoice	and	revenue	is recognized.	Pricing	for	products	is	generally	predetermined	by	contracts	with customers,	agents	acting	on	behalf	of	customer	groups	or	by	government regulatory	bodies,	depending	on	the	market.	Price	discounts	under	group purchasing	contracts	are	generally	linked	to	volume	of	implant	purchases	by customer	healthcare	institutions	within	a	specified	group.	At	negotiated thresholds	within	a	contract	buying	period,	price	discounts	may	increase. Sales	to	stocking	distributors,	healthcare	dealers,	dental	practices	and	dental laboratories	accounted	for	approximately	20	percent	of	our	net	sales	in	2015. 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.	Payment	terms	vary	by	customer,	but	are	typically less	than	90	days.

If	sales	incentives	are	earned	by	a	customer	for	purchasing	a	specified	amount of	our	product,	we	estimate	whether	such	incentives	will	be	achieved	and,	if	so, recognize	these	incentives	as	a	reduction	in	revenue	in	the	same	period	the underlying	revenue	transaction	is	recognized.	Occasionally	products	are	returned and,	accordingly,	we	maintain	an	estimated	sales	return	reserve	that	is	recorded as	a	reduction	in	revenue.	Product	returns	were	not	significant	for	the	years ended	December	31,	2015,	2014	and	2013.

Taxes	collected	from	customers	and	remitted	to	governmental	authorities	are presented	on	a	net	basis	and	excluded	from	revenues.

Shipping	and	Handling	–	Amounts	billed	to	customers	for	shipping	and handling	of	products	are	reflected	in	net	sales	and	are	not	significant.	Expenses incurred	related	to	shipping	and	handling	of	products	are	reflected	in	selling, general	and	administrative	and	were	$214.2	million,	$181.9	million	and	$163.6 million	for	the	years	ended	December	31,	2015,	2014	and	2013,	respectively. Research	and	Development	–		We	expense	all	research	and	development ("R&D")	costs	as	incurred	except	when	there	is	alternative	future	use	for	the R&D.	Research	and	development	costs	include	salaries,	prototypes,	depreciation of	equipment	used	in	research	and	development,	consultant	fees	and	service	fees paid	to	collaborative	partners.	Where	contingent	milestone	payments	are	due	to third	parties	under	research	and	development	arrangements,	the	milestone payment	obligations	are	expensed	when	the	milestone	results	are	achieved. Litigation	–	We	record	a	liability	for	contingent	losses,	including	future	legal costs,	settlements	and	judgments,	when	we	consider	it	is	probable	that	a	liability has	been	incurred	and	the	amount	of	the	loss	can	be	reasonably	estimated. Special	Items	–	We	recognize	expenses	resulting	directly	from	our	business combinations,	employee	termination	benefits,	certain	R&D	agreements,	certain contract	terminations,	consulting	and	professional	fees	and	asset	impairment	or loss	on	disposal	charges	connected	with	global	restructuring,	quality	and operational	excellence	initiatives,

and	other	items	as	"Special	items"	in	our	consolidated	statement	of	earnings. "Special	items"	included	(in	millions):

|  | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Biomet-related |  |  |  |
| Merger\tcompensation\texpense | $90.4 | $– | $– |
| Retention\tplans | 73.0 | – | – |
| Employee\ttermination\tbenefits | \t 101.0 | – | – |
| Consulting\tand\tprofessional\tfees | \t 167.4 | 61.5 | – |
| Dedicated\tproject\tpersonnel | 62.3 | 0.4 | – |
| Relocated\tfacilities | 5.6 | – | – |
| Contract\tterminations | 95.0 | – | – |
| Information\ttechnology\tintegration | 5.2 | – | – |
| Other | 19.2 | – | – |
| Other |  |  |  |
| Employee\ttermination\tbenefits | 1.9 | 0.9 | 14.2 |
| Consulting\tand\tprofessional\tfees | \t 114.8 | \t 115.2 | 99.1 |
| Dedicated\tproject\tpersonnel | 31.8 | 50.4 | 34.0 |
| Impairment/loss\ton\tdisposal\tof\tassets | 2.3 | 24.0 | 10.9 |
| Certain\tR&amp;D\tagreements | – | 4.5 | 0.8 |
| Relocated\tfacilities | – | 0.7 | 3.6 |
| Distributor\tacquisitions | – | 0.6 | 0.4 |
| Certain\tlitigation\tmatters | 31.2 | 70.0 | 26.9 |
| Contract\tterminations | – | 1.8 | 3.9 |
| Information\ttechnology\tintegration | 1.8 | – | – |
| Contingent\tconsideration\tadjustments | 2.4 | 0.6 | 9.0 |
| Accelerated\tsoftware\tamortization | 1.5 | 6.0 | 6.0 |
| Other | 25.0 | 4.5 | 1.5 |
| Special\titems | $831.8 | $341.1 | $210.3 |

Pursuant	to	the	Biomet	merger	agreement,	all	outstanding	LVB	stock	options and	LVB	stock-based	awards	vested	immediately	prior	to	the	effective	time	of the	merger,	and	holders	of	these	options	and	awards	received	a	portion	of	the aggregate	merger	consideration.	Some	of	these	options	and	awards	were	already vested	under	the	terms	of	LVB's	equity	incentive	plans.	We	accounted	for	the fair	value	of	the	consideration	we	paid	in	exchange	for	previously	vested	options and	awards	as	consideration	to	complete	the	merger.	As	part	of	the	merger agreement	terms,	all	previously	unvested	options	and	awards	vested	immediately prior	to	the	effective	time	of	the	merger.	Under	LVB's	equity	incentive	plans, unvested	options	and	awards	would	have	otherwise	been	forfeited.	We	have concluded	that	the	discretionary	accelerated	vesting	of	these	unvested	options and	awards	was	for	the	economic	benefit	of	the	combined	company,	and, therefore,	we	classified	the	fair	value	of	the	merger	consideration	we	paid	to holders	of	such	unvested	options	and	awards	of	$90.4	million	as	compensation expense.

Pursuant	to	the	LVB	merger	agreement,	retention	plans	were	established	for certain	Biomet	employees	and	third-party	sales	agents.	Retention	payments	were earned	by	employees	and	third-party	sales	agents	who	remained	with	Biomet through	the	Closing	Date.	We	recognized	$73.0	million	of	expense	resulting from	these	retention	plans.

After	the	Closing	Date,	we	started	to	implement	our	integration	plans	to	drive operational	synergies.	Part	of	these	integration	plans	included	termination	of employees	and	certain	contracts.	Expenses	attributable	to	the	initial	phase	of these	integration	plans	that	were	recognized	in	2015	as	part	of	"Special	items" related	to	employee	termination	benefits	and	contract	termination	expense associated	with	agreements	with	independent	agents,	distributors,	suppliers	and lessors.	Our	integration	plans	are	expected	to	last	through	2018	and	we	expect	to incur	a	total	of	$170.0	million	for	employee	termination	benefits	and	$130.0 million	for	contract	termination	expense	in	that	time	period.	The	following	table summarizes	the	liabilities	related	to	these	integration	plans	(in	millions):

|  | Termination | Contract |  |
| :--- | :--- | :--- | :--- |
|  | Benefits | Terminations | Total |
| Balance,\tClosing\tDate | $– | $– | $– |
| Additions | 101.0 | 95.0 | \t 196.0 |
| Cash\tpayments | (54.1) | (39.0) | (93.1) |
| Foreign\tcurrency\texchange\trate\tchanges | (0.1) | – | (0.1) |
| Balance,\tDecember\t31,\t2015 | $46.8 | $56.0 | $102.8 |

Consulting	and	professional	fees	relate	to	third-party	consulting,	professional fees	and	contract	labor	related	to	our	quality	and	operational	excellence initiatives,	third-party	consulting	fees	related	to	certain	information	system implementations,	third-party	integration	consulting	performed	in	a	variety	of areas	such	as	tax,	compliance,	logistics	and	human	resources	for	our	business combinations	and	merger	with	Biomet,	third-party	fees	related	to	severance	and termination	benefits	matters	and	legal	fees	related	to	certain	litigation	matters. Our	quality	and	operational	excellence	initiatives	are	company-wide	and	include improvements	in	quality,	distribution,	sourcing,	manufacturing	and	information technology,	among	other	areas.

Dedicated	project	personnel	expenses	include	the	salary,	benefits,	travel expenses	and	other	costs	directly	associated	with	employees	who	are	100	percent dedicated	to	our	quality	and	operational	excellence	initiatives	or	integration	of acquired	businesses.

Impairment/loss	on	disposal	of	assets	relates	to	impairment	of	intangible	assets that	were	acquired	in	business	combinations	or	impairment	of	or	a	loss	on	the disposal	of	other	assets.	This	caption	also	includes	the	effect	of	reducing

the	estimated	useful	life	of	certain	intangible	assets	to	zero,	which	resulted	in	the remaining	net	book	values	of	those	assets	being	amortized	immediately. Certain	R&D	agreements	relate	to	agreements	with	upfront	payments	to	obtain intellectual	property	to	be	used	in	R&D	projects	that	have	no	alternative	future use	in	other	projects.

Relocated	facilities	expenses	are	the	moving	costs	and	the	lease	expenses incurred	during	the	relocation	period	in	connection	with	relocating	certain facilities.

Over	the	past	few	years	we	have	acquired	a	number	of	U.S.	and	foreign-based distributors.	We	have	incurred	various	costs	related	to	the	consummation	and integration	of	those	businesses.

Certain	litigation	matters	relate	to	net	expenses	recognized	during	the	year	for the	estimated	or	actual	settlement	of	certain	pending	litigation	and	similar claims,	including	matters	where	we	recognized	income	from	a	settlement	on more	favorable	terms	than	our	previous	estimate,	or	we	reduced	our	estimate	of a	previously	recorded	contingent	liability.	These	litigation	matters	have	included royalty	disputes,	patent	litigation	matters	and	commercial	litigation	matters. Contract	termination	costs	relate	to	terminated	agreements	in	connection	with the	integration	of	acquired	companies	and	changes	to	our	distribution	model	as part	of	business	restructuring	and	operational	excellence	initiatives.	The terminated	contracts	primarily	relate	to	sales	agents	and	distribution	agreements. Information	technology	integration	costs	are	non-capitalizable	costs	incurred related	to	integrating	information	technology	platforms	of	acquired	companies	or other	significant	software	implementations	as	part	of	our	quality	and	operational excellence	initiatives.

Contingent	consideration	adjustments	represent	the	changes	in	the	fair	value	of contingent	consideration	obligations	to	be	paid	to	the	prior	owners	of	acquired businesses.

Accelerated	software	amortization	is	the	incremental	amortization	resulting from	a	reduction	in	the	estimated	life	of	certain	software.	Due	to	an	approved plan	to	replace	certain	software,	the	estimated	economic	useful	life	of	the existing	software	was	decreased	to	represent	the	period	of	time	expected	to implement	replacement	software.	As	a	result,	the	amortization	from	the shortened	life	of	this	software	is	substantially	higher	than	the	previous amortization	being	recognized.

Cash	and	Cash	Equivalents	–	We	consider	all	highly	liquid	investments	with an	original	maturity	of	three	months	or	less	to	be	cash	equivalents.	The	carrying amounts	reported	in	the	balance	sheet	for	cash	and	cash	equivalents	are	valued	at cost,	which	approximates	their	fair	value.

Investments	–	We	invest	our	excess	cash	and	cash	equivalents	in	debt securities.	Our	investments	include	corporate	debt	securities,	U.S.	government and	agency	debt

securities,	foreign	government	debt	securities,	commercial	paper	and	certificates of	deposit,	and	are	classified	and	accounted	for	as	available-for-sale.	Available- for-sale	debt	securities	are	recorded	at	fair	value	on	our	consolidated	balance sheet.	Investments	with	a	contractual	maturity	of	less	than	one	year	are	classified as	short-term	investments	on	our	consolidated	balance	sheet,	or	in	other	non- current	assets	if	the	contractual	maturity	is	greater	than	one	year.	Changes	in	fair value	for	available-for-sale	securities	are	recorded,	net	of	taxes,	as	a	component of	accumulated	other	comprehensive	loss	on	our	consolidated	balance	sheet.	We review	our	investments	for	other-than-temporary	impairment	at	each	reporting period.	If	an	unrealized	loss	for	any	investment	is	considered	to	be	other-than- temporary,	the	loss	will	be	recognized	in	the	consolidated	statement	of	earnings in	the	period	the	determination	is	made.	See	Note	8	for	more	information regarding	our	investments.

Accounts	Receivable	–	Accounts	receivable	consists	of	trade	and	other miscellaneous	receivables.	We	grant	credit	to	customers	in	the	normal	course	of business	and	maintain	an	allowance	for	doubtful	accounts	for	potential	credit losses.	We	determine	the	allowance	for	doubtful	accounts	by	geographic	market and	take	into	consideration	historical	credit	experience,	creditworthiness	of	the customer	and	other	pertinent	information.	We	make	concerted	efforts	to	collect all	accounts	receivable,	but	sometimes	we	have	to	write-off	the	account	against the	allowance	when	we	determine	the	account	is	uncollectible.	The	allowance	for doubtful	accounts	was	$34.1	million	and	$22.3	million	as	of	December	31,	2015 and	2014,	respectively.

Inventories	–	Inventories	are	stated	at	the	lower	of	cost	or	market,	with	cost determined	on	a	first-in	first-out	basis.

Property,	Plant	and	Equipment	–	Property,	plant	and	equipment	is	carried	at cost	less	accumulated	depreciation.	Depreciation	is	computed	using	the	straight- line	method	based	on	estimated	useful	lives	of	ten	to	forty	years	for	buildings and	improvements	and	three	to	eight	years	for	machinery	and	equipment. Maintenance	and	repairs	are	expensed	as	incurred.	We	review	property,	plant and	equipment	for	impairment	whenever	events	or	changes	in	circumstances indicate	that	the	carrying	value	of	an	asset	may	not	be	recoverable.	An impairment	loss	would	be	recognized	when	estimated	future	undiscounted	cash flows	relating	to	the	asset	are	less	than	its	carrying	amount.	An	impairment	loss is	measured	as	the	amount	by	which	the	carrying	amount	of	an	asset	exceeds	its fair	value.

Software	Costs	–	We	capitalize	certain	computer	software	and	software development	costs	incurred	in	connection	with	developing	or	obtaining	computer software	for	internal	use	when	both	the	preliminary	project	stage	is	completed and	it	is	probable	that	the	software	will	be	used	as	intended.	Capitalized	software costs	generally	include	external	direct	costs	of	materials	and	services	utilized	in developing	or	obtaining	computer	software	and	compensation	and	related

benefits	for	employees	who	are	directly	associated	with	the	software	project. Capitalized	software	costs	are	included	in	property,	plant	and	equipment	on	our balance	sheet	and	amortized	on	a	straight-line	or	weighted	average	estimated user	basis	when	the	software	is	ready	for	its	intended	use	over	the	estimated useful	lives	of	the	software,	which	approximate	three	to	fifteen	years. Instruments	–	Instruments	are	hand-held	devices	used	by	surgeons	during	total joint	replacement	and	other	surgical	procedures.	Instruments	are	recognized	as long-lived	assets	and	are	included	in	property,	plant	and	equipment.	Undeployed instruments	are	carried	at	cost	or	realizable	value.	Instruments	in	the	field	are carried	at	cost	less	accumulated	depreciation.	Depreciation	is	computed	using the	straight-line	method	based	on	average	estimated	useful	lives,	determined principally	in	reference	to	associated	product	life	cycles,	primarily	five	years. We	review	instruments	for	impairment	whenever	events	or	changes	in circumstances	indicate	that	the	carrying	value	of	an	instrument	may	not	be recoverable.	Depreciation	of	instruments	is	recognized	as	selling,	general	and administrative	expense.

Goodwill	–	Goodwill	is	not	amortized	but	is	subject	to	annual	impairment tests.	Goodwill	has	been	assigned	to	reporting	units.	We	perform	annual impairment	tests	by	either	comparing	a	reporting	unit's	estimated	fair	value	to	its carrying	amount	or	doing	a	qualitative	assessment	of	a	reporting	unit's	fair	value from	the	last	quantitative	assessment	to	determine	if	there	is	potential impairment.	We	may	do	a	qualitative	assessment	when	the	results	of	the	previous quantitative	test	indicated	the	reporting	unit's	estimated	fair	value	was significantly	in	excess	of	the	carrying	value	of	its	net	assets	and	we	do	not believe	there	have	been	significant	changes	in	the	reporting	unit's	operations	that would	significantly	decrease	its	estimated	fair	value	or	significantly	increase	its net	assets.	If	a	quantitative	assessment	is	performed,	the	fair	value	of	the reporting	unit	and	the	implied	fair	value	of	goodwill	are	determined	based	upon	a discounted	cash	flow	analysis	and/or	use	of	a	market	approach	by	looking	at market	values	of	comparable	companies.	Significant	assumptions	are incorporated	into	our	discounted	cash	flow	analyses	such	as	estimated	growth rates	and	risk-adjusted	discount	rates.	We	perform	this	test	in	the	fourth	quarter of	the	year	or	whenever	events	or	changes	in	circumstances	indicate	that	the carrying	value	of	the	reporting	unit's	assets	may	not	be	recoverable.	If	the	fair value	of	the	reporting	unit	is	less	than	its	carrying	value,	an	impairment	loss	is recorded	to	the	extent	that	the	implied	fair	value	of	the	reporting	unit	goodwill	is less	than	the	carrying	value	of	the	reporting	unit	goodwill.	See	Note	10	for	more information	regarding	goodwill.

Intangible	Assets	–	Intangible	assets	are	initially	measured	at	their	fair value.	We	have	determined	the	fair	value	of	our	intangible	assets	either	by	the fair	value	of	the	consideration	exchanged	for	the	intangible	asset	or	the	estimated after-tax	discounted	cash	flows	expected	to	be

generated	from	the	intangible	asset.	Intangible	assets	with	an	indefinite	life, including	certain	trademarks	and	trade	names,	are	not	amortized.	Indefinite	life intangible	assets	are	assessed	annually	to	determine	whether	events	and circumstances	continue	to	support	an	indefinite	life.	Intangible	assets	with	a finite	life,	including	core	and	developed	technology,	certain	trademarks	and trade	names,	customer-related	intangibles,	intellectual	property	rights	and patents	and	licenses	are	amortized	on	a	straight-line	basis	over	their	estimated useful	life,	ranging	from	less	than	one	year	to	20	years.	Intangible	assets	with	a finite	life	are	tested	for	impairment	whenever	events	or	circumstances	indicate that	the	carrying	amount	may	not	be	recoverable.	Intangible	assets	with	an indefinite	life	are	tested	for	impairment	annually	or	whenever	events	or circumstances	indicate	that	the	carrying	amount	may	not	be	recoverable.	An impairment	loss	is	recognized	if	the	carrying	amount	exceeds	the	estimated	fair value	of	the	asset.	The	amount	of	the	impairment	loss	to	be	recorded	would	be determined	based	upon	the	excess	of	the	asset's	carrying	value	over	its	fair value.	The	fair	values	of	indefinite	lived	intangible	assets	are	determined	based upon	a	discounted	cash	flow	analysis	using	the	relief	from	royalty	method	or	a qualitative	assessment	may	be	performed	for	any	changes	to	the	asset's	fair	value from	the	last	quantitative	assessment.	The	relief	from	royalty	method	estimates the	cost	savings	associated	with	owning,	rather	than	licensing,	assets.	Significant assumptions	are	incorporated	into	these	discounted	cash	flow	analyses	such	as estimated	growth	rates,	royalty	rates	and	risk-adjusted	discount	rates.	We	may	do a	qualitative	assessment	when	the	results	of	the	previous	quantitative	test indicated	that	the	asset's	fair	value	was	significantly	in	excess	of	its	carrying value.

In	determining	the	useful	lives	of	intangible	assets,	we	consider	the	expected use	of	the	assets	and	the	effects	of	obsolescence,	demand,	competition, anticipated	technological	advances,	changes	in	surgical	techniques,	market influences	and	other	economic	factors.	For	technology-based	intangible	assets, we	consider	the	expected	life	cycles	of	products,	absent	unforeseen	technological advances,	which	incorporate	the	corresponding	technology.	Trademarks	and trade	names	that	do	not	have	a	wasting	characteristic	(i.e.,	there	are	no	legal, regulatory,	contractual,	competitive,	economic	or	other	factors	which	limit	the useful	life)	are	assigned	an	indefinite	life.	Trademarks	and	trade	names	that	are related	to	products	expected	to	be	phased	out	are	assigned	lives	consistent	with the	period	in	which	the	products	bearing	each	brand	are	expected	to	be	sold.	For customer	relationship	intangible	assets,	we	assign	useful	lives	based	upon historical	levels	of	customer	attrition.	Intellectual	property	rights	are	assigned useful	lives	that	approximate	the	contractual	life	of	any	related	patent	or	the period	for	which	we	maintain	exclusivity	over	the	intellectual	property.

Income	Taxes	–	We	account	for	income	taxes	under	the	asset	and	liability method,	which	requires	the	recognition	of

deferred	tax	assets	and	liabilities	for	the	expected	future	tax	consequences	of events	that	have	been	included	in	the	financial	statements.	Under	this	method, deferred	tax	assets	and	liabilities	are	determined	based	on	the	differences between	the	financial	statements	and	tax	basis	of	assets	and	liabilities	using enacted	tax	rates	in	effect	for	the	year	in	which	the	differences	are	expected	to reverse.	The	effect	of	a	change	in	tax	rates	on	deferred	tax	assets	and	liabilities	is recognized	in	income	in	the	period	that	includes	the	enactment	date.

We	reduce	our	deferred	tax	assets	by	a	valuation	allowance	if	it	is	more	likely than	not	that	we	will	not	realize	some	portion	or	all	of	the	deferred	tax	assets.	In making	such	determination,	we	consider	all	available	positive	and	negative evidence,	including	future	reversals	of	existing	taxable	temporary	differences, projected	future	taxable	income,	tax	planning	strategies	and	recent	financial operations.	In	the	event	we	were	to	determine	that	we	would	be	able	to	realize our	deferred	income	tax	assets	in	the	future	in	excess	of	their	net	recorded amount,	we	would	make	an	adjustment	to	the	valuation	allowance	which	would reduce	the	provision	for	income	taxes.	Federal	income	taxes	are	provided	on	the portion	of	the	income	of	foreign	subsidiaries	that	is	expected	to	be	remitted	to the	U.S.

We	operate	on	a	global	basis	and	are	subject	to	numerous	and	complex	tax laws	and	regulations.	Our	income	tax	filings	are	regularly	under	audit	in	multiple federal,	state	and	foreign	jurisdictions.	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.	Because	income	tax	adjustments	in	certain	jurisdictions	can	be significant,	we	record	accruals	representing	management's	best	estimate	of	the probable	resolution	of	these	matters.	To	the	extent	additional	information becomes	available,	such	accruals	are	adjusted	to	reflect	the	revised	estimated probable	outcome.

Derivative	Financial	Instruments	–	We	measure	all	derivative	instruments	at fair	value	and	report	them	on	our	consolidated	balance	sheet	as	assets	or liabilities.	We	maintain	written	policies	and	procedures	that	permit,	under appropriate	circumstances	and	subject	to	proper	authorization,	the	use	of derivative	financial	instruments	solely	for	risk	management	purposes.	The	use	of derivative	financial	instruments	for	trading	or	speculative	purposes	is	prohibited by	our	policy.	See	Note	14	for	more	information	regarding	our	derivative	and hedging	activities.

Other	Comprehensive	Income	(Loss)	–	Other	comprehensive	income	(loss) ("OCI")	refers	to	revenues,	expenses,	gains	and	losses	that	under	generally accepted	accounting	principles	are	included	in	comprehensive	income	but	are excluded	from	net	earnings	as	these	amounts	are	recorded	directly	as	an adjustment	to	stockholders'	equity.	Our	OCI	is	comprised	of	foreign	currency translation	adjustments,	unrealized	gains	and	losses	on	cash	flow	hedges, unrealized	gains	and	losses	on	available-for-sale	securities	and	amortization	of prior	service	costs	and	unrecognized	gains	and	losses	in	actuarial	assumptions.

Treasury	Stock	–	We	account	for	repurchases	of	common	stock	under	the	cost method	and	present	treasury	stock	as	a	reduction	of	stockholders'	equity.	We reissue	common	stock	held	in	treasury	only	for	limited	purposes.

Noncontrolling	Interest	–	In	2011,	we	made	an	investment	in	a	company	in which	we	acquired	a	controlling	financial	interest,	but	not	100	percent	of	the equity.	In	2013,	we	purchased	additional	shares	of	the	company	from	the minority	shareholders.	Further	information	related	to	the	noncontrolling	interests of	that	investment	has	not	been	provided	as	it	is	not	significant	to	our consolidated	financial	statements.

Accounting	Pronouncements	–	In	May	2014,	the	FASB	issued	Accounting Standard	Update	("ASU")	No.	2014-09	–	Revenue	from	Contracts	with Customers	(Topic	606).	This	ASU	provides	a	five-step	model	for	revenue recognition	that	all	industries	will	apply	to	recognize	revenue	when	a	customer obtains	control	of	a	good	or	service.	The	ASU	will	be	effective	for	us	beginning January	1,	2018.	We	are	in	the	initial	phases	of	our	adoption	plans	and, accordingly,	we	are	unable	to	estimate	any	effect	this	may	have	on	our	revenue recognition	practices.

In	April	2015,	the	FASB	issued	ASU	2015-03	–	Simplifying	the	Presentation of	Debt	Issuance	Costs.	This	ASU	requires	debt	issuance	costs	to	be	presented	in the	balance	sheet	as	a	direct	deduction	from	the	carrying	value	of	the	associated debt	liability,	consistent	with	the	presentation	of	a	debt	discount.	This	ASU	does not	affect	the	measurement	and	recognition	of	debt	issuance	costs	in	our statement	of	earnings.	As	of	December	31,	2015,	this	change	would	result	in	a reclassification	of	$11.7	million	of	other	current	assets	and	$60.6	million	of other	assets	to	debt.	The	ASU	will	be	effective	for	us	beginning	January	1,	2016. In	September	2015,	the	FASB	issued	ASU	2015-16	–	Business	Combinations: Simplifying	the	Accounting	for	Measurement-Period	Adjustments.	This	ASU eliminates	the	requirement	for	an	acquirer	in	a	business	combination	to	account for	measurement-period	adjustments	retrospectively.	Instead,	acquirers	must recognize	measurement-period	adjustments	during	the	period	in	which	they determine	the	amounts,	including	the	effect	on	earnings	of	any	amounts	they would	have	recorded	in	previous	periods	if	the	accounting	had	been	completed	at the	acquisition	date.	The	ASU	is	effective	for	us	beginning	January	1,	2017,	but early	adoption	is	permitted.	We	early	adopted	this	ASU	in	2015.

On	November	20,	2015,	the	FASB	issued	ASU	2015-17	–	Balance	Sheet Classification	of	Deferred	Taxes.	This	ASU	amends	existing	guidance	on	income taxes	to	require	the	classification	of	all	deferred	tax	assets	and	liabilities	as	non- current	on	the	balance	sheet.	The	ASU	will	be	effective	for	us	beginning January	1,	2017,	but	early	adoption	is	permitted.	Additionally,	the	ASU	allows for	both	retrospective	and	prospective	methods	of	transition	upon	adoption.	We early	adopted	this	ASU	effective	December	31,	2015	on	a	prospective	basis.	No prior	periods	were	retrospectively	adjusted.

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

# 4. Business	Combinations

# Biomet	Merger

On	the	Closing	Date,	we	completed	our	merger	with	LVB,	the	parent company	of	Biomet.	We	paid	$12,030.3	million	in	cash	and	stock	and	assumed Biomet's	senior	notes.	The	fair	value	of	the	principal	amount	of	the	senior	notes was	$2,740.0	million,	which	we	repaid	in	full	prior	to	June	30,	2015. The	merger	enhances	our	position	in	the	nearly	$50.0	billion musculoskeletal	industry.	Our	product	portfolio	now	includes	Biomet's	legacy product	lines,	including	knee	and	hip	reconstructive	products;	sports	medicine, extremities	and	trauma	products;	spine,	bone	healing,	craniomaxillofacial	and thoracic	products;	dental	reconstructive	products;	and	cement,	biologics	and other	products.	Our	larger	scale	provides	for	increased	competitiveness	in	our core	and	emerging	franchises	and	a	stronger	presence	in	our	geographic	markets. The	merger	positions	us	to	increase	cross-selling	opportunities	between	our legacy	product	portfolios	and	sales	force	specialization.	The	combination	of	our R&D	functions	will	allow	us	to	allocate	a	greater	portion	of	the	combined	R&D spending	towards	innovations	designed	to	address	unmet	clinical	needs	and create	new-market	adjacencies.	We	also	expect	to	realize	operational	synergies	to enhance	value	for	stockholders.

In	order	to	consummate	the	merger	under	applicable	antitrust	laws	and regulations	in	certain	countries,	we	had	to	divest	certain	product	line	rights	and assets.	As	a	result,	we	recognized	a	net	gain	of	$19.0	million	in	non-operating other	expense,	net	in	the	year	ended	December	31,	2015.

We	funded	the	cash	portion	of	the	merger	consideration	with	available	cash on	hand,	as	well	as	proceeds	from	a	$3.0	billion	senior	unsecured	term	loan	and $7.65	billion	in	senior	unsecured	notes	issued	in	March	2015.	See	Note	12	for further	information	regarding	these	debt	instruments.

The	aggregate	merger	consideration	paid	was	$12,030.3	million,	consisting of	$8,307.6	million	of	cash	and	32.7	million	shares	of	our	common	stock	valued at	$3,722.7	million.	The	value	of	our	common	stock	was	based	upon	a	stock price	of	$113.83	per	share	using	the	average	of	the	high	and	low	trading	prices on	the	Closing	Date.	As	discussed	in	Note	3,	$90.4	million	of	the	cash	and common	stock	consideration	was	allocated	to	compensation	expense	due	to	the acceleration	of	the	vesting	of	unvested	LVB	stock	options	and	LVB	stock-based awards	in	connection	with	the	merger.	Therefore,	the	amount	of	merger consideration	utilized	for	the	acquisition	method	of	accounting	was	$11,939.9 million.

The	merger	was	accounted	for	under	the	acquisition	method	of	accounting. Accordingly,	LVB's	results	of	operations	have	been	included	in	our	consolidated results	of	operations	starting	on	the	Closing	Date,	and	LVB's	assets	and liabilities	were	recorded	at	their	estimated	fair	values	in	our	consolidated statement	of	financial	position	as	of	the	Closing	Date,	with	the	excess	of	the purchase	price	over	the	estimated	fair	values	being	allocated	to	goodwill.	During the	year	ended	December	31,	2015,	Biomet	contributed	net	sales	of	$1,602.0 million.	During	the	year	ended	December	31,	2015,	Biomet	contributed	net operating	losses	of	$295.8	million	to	our	consolidated	results,	driven	by	$90.4 million	of	merger	compensation	expense	for	unvested	LVB	stock	options	and LVB	stock-based	awards,	$73.0	million	of	retention	plan	expense,	severance expense,	inventory	step-up	expense	and	intangible	asset	amortization.

The	purchase	price	allocation	as	of	December	31,	2015	is	preliminary.	The primary	tasks	to	be	completed	related	to	our	purchase	price	accounting	are refinements	to	intangible	assets	for	certain	less	significant	products,	finalizing tax	accounts,	including,	but	not	limited	to,	the	allocation	of	acquired	intangible assets	and	goodwill	on	a	jurisdictional	basis,	and	finalizing	the	estimated	fair values	of	contingent	assets	and	liabilities.	There	may	be	differences	between these	preliminary	estimates	of	fair	value	and	the	final	acquisition	accounting, which	differences	could	be	material.	The	final	estimates	of	fair	value	are expected	to	be	completed	as	soon	as	possible,	but	no	later	than	one	year	from	the Closing	Date.

The	following	table	summarizes	our	estimate	of	the	preliminary	fair	values	of	the	assets	acquired	and	liabilities	assumed	at	the	Closing	Date,	including measurement	period	adjustments	recognized	from	our	initial	purchase	price	allocation	through	December	31,	2015	(in	millions):

|  | Closing<br>Date<br>(initial) | Adjustments | Closing<br>Date<br>(as<br>adjusted) |
| :--- | :--- | :--- | :--- |
| Cash | $494.8 | $– | $494.8 |
| Accounts\treceivable,\tnet | 544.7 | (15.7) | 529.0 |
| Inventory | 1,161.7 | 84.0 | 1,245.7 |
| Other\tcurrent\tassets | 123.4 | (97.0) | 26.4 |
| Property,\tplant\tand\tequipment | 699.4 | 92.0 | 791.4 |
| Intangible\tassets\tnot\tsubject\tto\tamortization: |  |  |  |
| Trademarks\tand\ttrade\tnames | 515.0 | (36.0) | 479.0 |
| In-process\tresearch\tand\tdevelopment\t(IPR&amp;D) | – | 246.0 | 246.0 |
| Intangible\tassets\tsubject\tto\tamortization: |  |  |  |
| Technology | 3,075.3 | (583.2) | 2,492.1 |
| Customer\trelationships | 5,829.0 | (873.0) | 4,956.0 |
| Trademarks\tand\ttrade\tnames | – | 389.0 | 389.0 |
| Other\tassets | 29.5 | 211.6 | 241.1 |
| Goodwill | 5,270.2 | 2,303.7 | 7,573.9 |
| Total\tassets\tacquired | \t 17,743.0 | 1,721.4 | \t 19,464.4 |
| Current\tliabilities | 588.9 | 39.2 | 628.1 |
| Long-term\tdebt | 2,740.0 | – | 2,740.0 |
| Deferred\ttaxes | 2,489.7 | 1,607.8 | 4,097.5 |
| Other\tlong-term\tliabilities | 58.2 | 0.7 | 58.9 |
| Total\tliabilities\tassumed | 5,876.8 | 1,647.7 | 7,524.5 |
| Net\tassets\tacquired | $11,866.2 | $73.7 | $11,939.9 |

Adjustments	to	the	initial	preliminary	fair	values	of	the	assets	acquired	and liabilities	assumed	related	to	a	change	in	estimate	to	the	fair	value	of	merger compensation	expense	for	unvested	LVB	stock	options	and	LVB	stock-based awards,	refinement	of	the	estimated	fair	values	of	inventory,	property,	plant	and equipment	and	intangible	assets,	refinement	of	income	and	deferred	tax	balances and	adjustments	to	contingent	liabilities	and	contingent	gains	based	upon additional	evidence	obtained,	among	other	adjustments.	There	may	be	additional adjustments	to	these	preliminary	estimates	of	fair	value	which	could	be	material. The	weighted-average	amortization	period	selected	for	trademarks	and	trade names,	technology	and	customer	relationship	intangible	assets	was	15	years,	15 years	and	18	years,	respectively.

IPR&D	intangible	assets	represent	acquired	R&D	projects	which	have	not received	regulatory	approval.	IPR&D	intangible	assets	are	capitalized	and accounted	for	as	indefinite	lived	intangible	assets	and	will	be	subject	to	periodic impairment	testing	until	the	successful	completion	or	abandonment	of	the associated	R&D	project.	Upon	successful	completion	of	each	R&D	project,	the associated	indefinite	lived	intangible	asset	is	then	accounted	for	as	a	finite	lived intangible	asset	and	amortized	on	a	straight-line	basis	over	its	estimated	useful life.	If	an	R&D	project	is	abandoned,	the	associated	indefinite	lived	asset	is charged	to	expense.

The	IPR&D	intangible	assets	recognized	in	the	Biomet	merger	relates	to	a variety	of	R&D	projects.	The	fair	values	of	the	IPR&D	intangible	assets	were determined	using	the	income	approach.	Most	of	these	projects	are	expected	to	be completed	within	a	year	or	two	after	the	Closing	Date.	Remaining	costs	to complete	these	projects	are	expected	to	be	an	insignificant	amount	of	our	total annual	R&D	spending.

The	goodwill	is	generated	from	the	operational	synergies	we	expect	to achieve	from	our	combined	operations.	None	of	the	goodwill	is	expected	to	be deductible	for	tax	purposes.

The	following	sets	forth	unaudited	pro	forma	financial	information	derived from	(i)	the	audited	financial	statements	of	Zimmer	for	the	years	ended December	31,	2015	and	2014;	and	(ii)	the	unaudited	financial	statements	of	LVB for	the	period	January	1,	2015	to	June	23,	2015	and	for	the	year	ended December	31,	2014.	The	pro	forma	financial	information	has	been	adjusted	to give	effect	to	the	merger	as	if	it	had	occurred	on	January	1,	2014.

Pro	Forma	Financial	Information (Unaudited)

These	unaudited	pro	forma	results	have	been	prepared	for	comparative purposes	only	and	include	adjustments	such	as	inventory	step-up,	amortization of	acquired	intangible	assets	and	interest	expense	on	debt	incurred	to	finance	the merger.	Material,	nonrecurring	pro	forma	adjustments	directly	attributable	to	the Biomet	merger	include:

•	The	$90.4	million	of	merger	compensation	expense	for	unvested	LVB	stock options	and	LVB	stock-based	awards	was	removed	from	net	earnings	for	the year	ended	December	31,	2015	and	recognized	as	an	expense	in	the	year ended	December	31,	2014.

•	The	$73.0	million	of	retention	plan	expense	was	removed	from	net	earnings

for	the	year	ended	December	31,	2015	and	recognized	as	an	expense	in	the year	ended	December	31,	2014.

•	Transaction	costs	of	$17.7	million	was	removed	from	net	earnings	for	the	year ended	December	31,	2015	and	recognized	as	an	expense	in	the	year	ended December	31,	2014.

# Other	Acquisitions

We	made	a	number	of	business	acquisitions	during	the	years	2014	and	2013. In	October	2014,	we	acquired	ETEX	Holdings,	Inc.	("Etex").	The	Etex acquisition	enhanced	our	biologics	portfolio	through	the	addition	of	Etex's	bone void	filler	products.	In	May	2013,	we	acquired	the	business	assets	of	Knee Creations,	LLC	("Knee	Creations").	The	Knee	Creations	acquisition	enhanced our	product	portfolio	of	joint	preservation	solutions.	In	June	2013,	we	acquired NORMED	Medizin-Technik	GmbH	("Normed").	The	Normed	acquisition strengthened	our	Extremities	and	Trauma	product	portfolios	and	brought	new product	development	capabilities	in	the	foot	and	ankle	and	hand	and	wrist markets.

The	results	of	operations	of	these	acquired	companies	have	been	included	in our	consolidated	results	of	operations	subsequent	to	the	transaction	dates,	and	the respective	assets	and	liabilities	of	the	acquired	companies	have	been	recorded	at their	estimated	fair	values	in	our	consolidated	statement	of	financial	position	as of	the	transaction	dates,	with	any	excess	purchase	price	being	recorded	as goodwill.	Pro	forma	financial	information	and	other	information	required	by GAAP	have	not	been	included	for	these	acquisitions	as	they,	individually	and	in the	aggregate,	did	not	have	a	material	impact	upon	our	financial	position	or results	of	operations.

# 5. Share-Based	Compensation

Our	share-based	payments	primarily	consist	of	stock	options	and	restricted stock	units	("RSUs").	Share-based	compensation	expense	was	as	follows	(in millions):

| For	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Total\texpense,\tpre-tax | $46.4 | $49.4 | $48.5 |
| Tax\tbenefit\trelated\tto\tawards | (14.5) | (15.5) | (15.6) |
| Total\texpense,\tnet\tof\ttax | $31.9 | $33.9 | $32.9 |

# Stock	Options

We	had	two	equity	compensation	plans	in	effect	at	December	31,	2015:	the 2009	Stock	Incentive	Plan	("2009	Plan")	and	the	Stock	Plan	for	Non-Employee Directors.	The	2009	Plan	succeeded	the	2006	Stock	Incentive	Plan	("2006	Plan") and	the	TeamShare	Stock	Option	Plan	("TeamShare	Plan").	No	further	awards have	been	granted	under	the	2006	Plan	or	under	the	TeamShare	Plan	since	May 2009,	and	shares	remaining	available	for	grant	under	those	plans	have	been merged	into	the	2009	Plan.	Vested	stock	options	previously	granted	under	the 2006	Plan,	the	TeamShare	Plan	and	another	prior	plan,	the	2001	Stock	Incentive Plan,	remained	outstanding	as	of	December	31,	2015.	We	have	reserved	the maximum	number	of	shares	of	common	stock	available	for	award	under	the terms	of	each	of	these	plans.	We	have	registered	57.9	million	shares	of	common stock	under	these	plans.	The	2009	Plan	provides	for	the	grant	of	nonqualified stock	options	and	incentive	stock	options,	long-term	performance	awards	in	the form	of	performance	shares	or	units,	restricted	stock,	RSUs	and	stock appreciation	rights.	The	Compensation	and	Management	Development Committee	of	the	Board	of	Directors	determines	the	grant	date	for	annual	grants under	our	equity	compensation	plans.	The	date	for	annual	grants	under	the	2009 Plan	to	our	executive	officers	is	expected	to	occur	in	the	first	quarter	of	each	year following	the	earnings	announcements	for	the	previous	quarter	and	full	year.	In 2015,	the	Compensation	and	Management	Development	Committee	set	the Closing	Date	as	the	grant	date	for	awards	to	our	executive	officers.	The	Stock Plan	for	Non-Employee	Directors	provides	for	awards	of	stock	options, restricted	stock	and	RSUs	to	non-employee	directors.	It	has	been	our	practice	to issue	shares	of	common	stock	upon	exercise	of	stock	options	from	previously unissued	shares,	except	in	limited	circumstances	where	they	are	issued	from treasury	stock.	The	total	number	of	awards	which	may	be	granted	in	a	given	year and/or	over	the	life	of	the	plan	under	each	of	our	equity	compensation	plans	is limited.	At	December	31,	2015,	an	aggregate	of	5.6	million	shares	were available	for	future	grants	and	awards	under	these	plans.

Stock	options	granted	to	date	under	our	plans	vest	over	four	years	and	have a	maximum	contractual	life	of	10	years.	As	established	under	our	equity compensation	plans,	vesting	may	accelerate	upon	retirement	after	the	first anniversary	date	of	the	award	if	certain	criteria	are	met.	We	recognize	expense related	to	stock	options	on	a	straight-line	basis	over	the	requisite	service	period, less	awards	expected	to	be	forfeited	using	estimated	forfeiture	rates.	Due	to	the accelerated	retirement	provisions,	the	requisite	service	period	of	our	stock options	range	from	one	to	four	years.	Stock	options	are	granted	with	an	exercise price	equal	to	the	market	price	of	our	common	stock	on	the	date	of	grant,	except in	limited	circumstances	where	local	law	may	dictate	otherwise.

A	summary	of	stock	option	activity	for	the	year	ended	December	31,	2015	is	as	follows	(options	in	thousands):

|  |  | Weighted | Average |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Average | Remaining | Intrinsic |
|  |  | Exercise | Contractual | Value |
|  | Stock\tOptions | Price | Life | (in\tmillions) |
| Outstanding\tat\tJanuary\t1,\t2015 | 7,846 | $71.94 |  |  |
| Options\tgranted | 1,717 | 107.10 |  |  |
| Options\texercised | (1,404) | 73.09 |  |  |
| Options\tforfeited | (185) | 97.02 |  |  |
| Options\texpired | (43) | 80.59 |  |  |
| Outstanding\tat\tDecember\t31,\t2015 | 7,931 | $78.73 | 5.7 | $201.1 |
| Vested\tor\texpected\tto\tvest\tas\tof\tDecember\t31,\t2015 | 7,497 | $77.59 | 5.5 | $197.4 |
| Exercisable\tat\tDecember\t31,\t2015 | 4,969 | $68.67 | 3.9 | $168.6 |

We	use	a	Black-Scholes	option-pricing	model	to	determine	the	fair	value	of our	stock	options.	Expected	volatility	was	derived	from	a	combination	of historical	volatility	and	implied	volatility	because	the	traded	options	that	were actively	traded	around	the	grant	date	of	our	stock	options	did	not	have	maturities of	over	one	year.	The	expected	term	of	the	stock	options	has	been	derived	from historical	employee	exercise	behavior.	The	risk-free	interest	rate	was	determined using	the	implied	yield	currently	available	for	zero-coupon	U.S.	government issues	with	a	remaining	term	approximating	the	expected	life	of	the	options.	The dividend	yield	was	determined	by	using	an	estimated	annual	dividend	and dividing	it	by	the	market	price	of	our	stock	on	the	grant	date.

The	following	table	presents	information	regarding	the	weighted	average fair	value	for	stock	options	granted,	the	assumptions	used	to	determine	fair	value, and	the	intrinsic	value	of	options	exercised	in	the	indicated	year:

| For	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Dividend\tyield | 0.8% | 0.9% | 1.1% |
| Volatility | 22.2% | 25.2% | 24.5% |
| Risk-free\tinterest\trate | 1.7% | 1.8% | 1.1% |
| Expected\tlife\t(years) | 5.3 | 5.5 | 6.1 |
| Weighted\taverage\tfair\tvalue\tof\toptions\tgranted | $22.30 | $22.59 | $16.33 |
| Intrinsic\tvalue\tof\toptions\texercised\t(in\tmillions) | $49.4 | $99.6 | $97.9 |

As	of	December	31,	2015,	there	was	$40.3	million	of	unrecognized	share- based	payment	expense	related	to	nonvested	stock	options	granted	under	our plans.	That	expense	is	expected	to	be	recognized	over	a	weighted	average	period of	3.0	years.

We	have	awarded	RSUs	to	certain	of	our	employees.	The	terms	of	the awards	have	been	two	to	four	years.	Some	of	the	awards	have	only	service conditions	while	some	have	performance	and	market	conditions	in	addition	to service

conditions.	The	service	condition-only	awards	vest	ratably	on	the	anniversary date	of	the	award.	The	awards	that	have	performance	and	market	conditions	vest all	at	once	on	the	third	anniversary	date.	Future	service	conditions	may	be waived	if	an	employee	retires	after	the	first	anniversary	date	of	the	award,	but performance	and	market	conditions	continue	to	apply.	Accordingly,	the	requisite service	period	used	for	share-based	payment	expense	on	our	RSUs	range	from one	to	four	years.

A	summary	of	nonvested	RSU	activity	for	the	year	ended	December	31, 2015	is	as	follows	(RSUs	in	thousands):

|  | RSUs | Fair	Value |
| :--- | :--- | :--- |
| Outstanding\tat\tJanuary\t1,\t2015 | \t1,475 | $76.60 |
| Granted | 556 | 104.77 |
| Vested | (347) | 67.50 |
| Forfeited | (384) | 74.82 |
| Outstanding\tat\tDecember\t31,\t2015 | \t1,300 | 91.64 |

For	the	RSUs	with	service	conditions	only,	the	fair	value	of	the	awards	was determined	based	upon	the	fair	market	value	of	our	common	stock	on	the	date	of grant.	For	the	RSUs	with	market	conditions,	a	Monte	Carlo	valuation	technique was	used	to	simulate	the	market	conditions	of	the	awards.	The	outcome	of	the simulation	was	used	to	determine	the	fair	value	of	the	awards.

We	are	required	to	estimate	the	number	of	RSUs	that	will	vest	and recognize	share-based	payment	expense	on	a	straight-line	basis	over	the	requisite service	period.	As	of	December	31,	2015,	we	estimate	that	approximately 795,000	outstanding	RSUs	will	vest.	If	our	estimate	were	to	change	in	the	future, the	cumulative	effect	of	the	change	in	estimate	will	be	recorded	in	that	period. Based	upon	the	number	of	RSUs	that	we	expect	to	vest,	the	unrecognized	share- based	payment	expense	as	of	December	31,	2015	was	$39.6	million	and	is

expected	to	be	recognized	over	a	weighted-average	period	of	2.4	years.	The	fair value	of	RSUs	vesting	during	the	years	ended	December	31,	2015,	2014	and 2013	based	upon	our	stock	price	on	the	date	of	vesting	was	$40.6	million,	$29.3 million	and	$32.5	million,	respectively.

# 6. Inventories

Inventories	consisted	of	the	following	(in	millions):

| As	of	December	31, | 2015 | 2014 |
| :--- | :--- | :--- |
| Finished\tgoods | $1,827.9 | $924.2 |
| Work\tin\tprogress | 146.1 | 87.8 |
| Raw\tmaterials | 280.1 | 181.3 |
| Inventories | $2,254.1 | $1,193.3 |

Finished	goods	inventory	as	of	December	31,	2015	includes	$284.4	million to	step-up	the	acquired	Biomet	inventory	to	fair	value.

Amounts	charged	to	the	consolidated	statement	of	earnings	for	excess	and obsolete	inventory	in	the	years	ended

# 7. Property,	Plant	and	Equipment

Property,	plant	and	equipment	consisted	of	the	following	(in	millions):

| As	of	December	31, | 2015 | 2014 |
| :--- | :--- | :--- |
| Land | $39.6 | $20.4 |
| Building\tand\tequipment | 1,789.3 | 1,283.4 |
| Capitalized\tsoftware\tcosts | 330.1 | 294.7 |
| Instruments | 2,160.5 | 1,692.8 |
| Construction\tin\tprogress | 108.4 | 115.8 |
|  | 4,427.9 | 3,407.1 |
| Accumulated\tdepreciation | (2,365.3) | (2,121.8) |
| Property,\tplant\tand\tequipment,\tnet | $ 2,062.6 | $ 1,285.3 |

# 8. Investments

We	invest	in	short	and	long-term	investments	classified	as	available-for-sale	securities.	Information	regarding	our	investments	is	as	follows	(in	millions):

|  | Amortized<br>Cost | Gains | Losses | Fair<br>value |
| :--- | :--- | :--- | :--- | :--- |
| As\tof\tDecember\t31,\t2015 |  |  |  |  |
| Corporate\tdebt\tsecurities | $245.7 | $ 0.1 | $(0.4) | $245.4 |
| U.S.\tgovernment\tand\tagency\tdebt\tsecurities | 21.6 | – | (0.1) | 21.5 |
| Commercial\tpaper | 4.2 | – | – | 4.2 |
| Certificates\tof\tdeposit | 2.0 | – | – | 2.0 |
| Total\tshort\tand\tlong-term\tinvestments | $273.5 | $ 0.1 | $(0.5) | $273.1 |
| As\tof\tDecember\t31,\t2014 |  |  |  |  |
| Corporate\tdebt\tsecurities | $516.9 | $ 0.1 | $(0.5) | $516.5 |
| U.S.\tgovernment\tand\tagency\tdebt\tsecurities | 194.3 | – | – | \t 194.3 |
| Commercial\tpaper | 57.8 | – | – | 57.8 |
| Certificates\tof\tdeposit | 100.3 | – | – | \t 100.3 |
| Total\tshort\tand\tlong-term\tinvestments | $869.3 | $ 0.1 | $(0.5) | $868.9 |

The	unrealized	losses	on	our	investments	in	corporate	debt	securities	were caused	by	increases	in	interest	yields	in	the	global	credit	markets.	We	believe	the unrealized	losses	associated	with	these	securities	as	of	December	31,	2015	are temporary	because	we	do	not	intend	to	sell	these	investments,	and	we	do	not believe	we	will	be	required	to	sell	them	before	recovery	of	their	amortized	cost basis.

The	amortized	cost	and	fair	value	of	our	available-for-sale	fixed-maturity securities	by	contractual	maturity	are	as	follows	(in	millions):

| As	of	December	31,	2015 | Amortized	Cost | Fair<br>Value |
| :--- | :--- | :--- |
| Due\tin\tone\tyear\tor\tless | $164.7 | $164.6 |
| Due\tafter\tone\tyear\tthrough\ttwo\tyears | 108.8 | \t 108.5 |
| Total | $273.5 | $273.1 |

# 9. Fair	Value	Measurements	of	Assets	and	Liabilities

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

|  |  | Markets	for | Significant	Other | Significant |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Identical | Observable | Unobservable |
| Description | Recorded\nBalance | Assets\n(Level\t1) | Inputs\n(Level\t2) | Inputs\n(Level\t3) |
| Assets |  |  |  |  |
| Available-for-sale\tsecurities |  |  |  |  |
| Corporate\tdebt\tsecurities | $245.4 | $– | $245.4 | $– |
| U.S.\tgovernment\tand\tagency\tdebt |  |  |  |  |
| securities | 21.5 | – | 21.5 | – |
| Commercial\tpaper | 4.2 | – | 4.2 | – |
| Certificates\tof\tdeposit | 2.0 | – | 2.0 | – |
| Total\tavailable-for-sale\tsecurities | 273.1 | – | 273.1 | – |
| Derivatives,\tcurrent\tand\tlong-term |  |  |  |  |
| Foreign\tcurrency\tforward\tcontracts | 96.9 | – | 96.9 | – |
| Interest\trate\tswaps | 26.8 | – | 26.8 | – |
|  | $396.8 | $– | $396.8 | $– |
| Liabilities |  |  |  |  |
| Derivatives,\tcurrent\tand\tlong-term |  |  |  |  |
| Foreign\tcurrency\tforward\tcontracts | 1.6 | – | 1.6 | – |
|  | $1.6 | $– | $1.6 | $– |

|  |  | Markets	for | Significant	Other | Significant |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Identical | Observable | Unobservable |
|  | Recorded | Assets | Inputs | Inputs |
| Description | Balance | (Level\t1) | (Level\t2) | (Level\t3) |
| Assets |  |  |  |  |
| Available-for-sale\tsecurities |  |  |  |  |
| Corporate\tdebt\tsecurities | $516.5 | $– | $516.5 | $– |
| U.S.\tgovernment\tand\tagency\tdebt |  |  |  |  |
| securities | 194.3 | – | 194.3 | – |
| Commercial\tpaper | 57.8 | – | 57.8 | – |
| Certificates\tof\tdeposit | 100.3 | – | 100.3 | – |
| Total\tavailable-for-sale |  |  |  |  |
| securities | 868.9 | – | 868.9 | – |
| Derivatives,\tcurrent\tand\tlong-term |  |  |  |  |
| Foreign\tcurrency\tforward\tcontracts | 125.5 | – | 125.5 | – |
| Interest\trate\tswaps | 24.0 | – | 24.0 | – |
|  | $1,018.4 | $– | $1,018.4 | $– |
| Liabilities |  |  |  |  |
| Derivatives,\tcurrent\tand\tlong-term |  |  |  |  |
| Foreign\tcurrency\tforward |  |  |  |  |
| contracts | 1.7 | – | 1.7 | – |
| Forward\tstarting\tinterest\trate |  |  |  |  |
| swaps | 59.3 | – | 59.3 | – |
|  | $61.0 | $– | $61.0 | $– |

We	value	our	available-for-sale	securities	using	a	market	approach	based	on broker	prices	for	identical	assets	in	over-the-counter	markets	and	we	perform ongoing	assessments	of	counterparty	credit	risk.

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

We	value	our	interest	rate	swaps	using	a	market	approach	based	on	publicly available	market	yield	curves	and	the	terms	of	our	swaps	and	we	perform ongoing	assessments	of	counterparty	credit	risk.

# 10. Goodwill	and	Other	Intangible	Assets

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

|  | Americas | EMEA | Asia<br>Pacific | Operating<br>Segments | Total |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Balance\tat\tJanuary\t1,\t2014 |  |  |  |  |  |
| Goodwill | $894.8 | $1,271.9 | $161.8 | $655.7 | $2,984.2 |
| Accumulated\timpairment\tlosses | – | – | – | (373.0) | (373.0) |
|  | 894.8 | \t 1,271.9 | \t 161.8 | 282.7 | 2,611.2 |
| Acquisitions | 40.6 | – | – | – | 40.6 |
| Currency\ttranslation | (4.3) | (114.6) | (13.6) | (5.1) | (137.6) |
| Balance\tat\tDecember\t31,\t2014 |  |  |  |  |  |
| Goodwill | 931.1 | \t 1,157.3 | \t 148.2 | 650.6 | 2,887.2 |
| Accumulated\timpairment\tlosses | – | – | – | (373.0) | (373.0) |
|  | 931.1 | \t 1,157.3 | \t 148.2 | 277.6 | 2,514.2 |
| Biomet\tMerger | \t 6,445.2 | 225.6 | \t 408.1 | 495.0 | 7,573.9 |
| Currency\ttranslation | (48.3) | (91.9) | (7.4) | (6.3) | (153.9) |
| Balance\tat\tDecember\t31,\t2015 |  |  |  |  |  |
| Goodwill | \t 7,328.0 | \t 1,291.0 | \t 548.9 | 1,139.3 | \t 10,307.2 |
| Accumulated\timpairment\tlosses | – | – | – | (373.0) | (373.0) |
|  | $7,328.0 | $1,291.0 | $548.9 | $766.3 | $9,934.2 |

The	components	of	identifiable	intangible	assets	were	as	follows	(in	millions):

|  | Technology | Intellectual<br>Property<br>Rights | Trademarks<br>and	Trade<br>Names | Customer<br>Relationships | IPR&amp;D | Other | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| As\tof\tDecember\t31,\t2015: |  |  |  |  |  |  |  |
| Intangible\tassets\tsubject\tto\tamortization: |  |  |  |  |  |  |  |
| Gross\tcarrying\tamount | $3,161.6 | $181.0 | $583.3 | $5,133.0 | $– | $101.8 | $ 9,160.7 |
| Accumulated\tamortization | (591.9) | (164.8) | (50.9) | (269.6) | – | (64.8) | (1,142.0) |
| Intangible\tassets\tnot\tsubject\tto\tamortization: |  |  |  |  |  |  |  |
| Gross\tcarrying\tamount | – | – | 479.0 | – | \t 248.6 | – | 727.6 |
| Total\tidentifiable\tintangible\tassets | $2,569.7 | $16.2 | $1,011.4 | $4,863.4 | $248.6 | $37.0 | $ 8,746.3 |
| As\tof\tDecember\t31,\t2014: |  |  |  |  |  |  |  |
| Intangible\tassets\tsubject\tto\tamortization: |  |  |  |  |  |  |  |
| Gross\tcarrying\tamount | $727.2 | $173.4 | $74.2 | $213.8 | $– | $93.9 | $ 1,282.5 |
| Accumulated\tamortization | (458.3) | (157.7) | (34.1) | (99.6) | – | (58.3) | (808.0) |
| Intangible\tassets\tnot\tsubject\tto\tamortization: |  |  |  |  |  |  |  |
| Gross\tcarrying\tamount | – | – | 129.0 | – | – | – | 129.0 |
| Total\tidentifiable\tintangible\tassets | $268.9 | $15.7 | $169.1 | $114.2 | $– | $35.6 | $603.5 |

During	2015,	we	reclassified	$129.0	million	of	indefinite	lived	trademarks	and	trade	names	to	finite	lived	trademarks	and	trade	names	as	they	were	determined	to have	a	finite	useful	life.

Estimated	annual	amortization	expense	based	upon	intangible	assets recognized	as	of	December	31,	2015	for	the	years	ending	December	31,	2016 through	2020	is	(in	millions):

# 11. Other	Current	and	Long-term	Liabilities

Other	current	and	long-term	liabilities	consisted	of	the	following	(in	millions):

| As	of	December	31, | 2015 | 2014 |
| :--- | :--- | :--- |
| Other\tcurrent\tliabilities: |  |  |
| License\tand\tservice\tagreements | $144.1 | $100.2 |
| Certain\tclaims\taccrual\t(Note\t20) | 50.0 | 50.0 |
| Litigation\tsettlement\taccrual\t(Note\t20) | – | 70.0 |
| Forward\tstarting\tinterest\trate\tswaps | – | 59.3 |
| Salaries,\twages\tand\tbenefits | 265.9 | \t 167.7 |
| Accrued\tliabilities | 725.9 | \t 351.3 |
| Total\tother\tcurrent\tliabilities | $1,185.9 | $798.5 |
| Other\tlong-term\tliabilities: |  |  |
| Long-term\tincome\ttax\tpayable | $478.1 | $189.9 |
| Certain\tclaims\taccrual\t(Note\t20) | 264.6 | \t 307.2 |
| Other\tlong-term\tliabilities | 263.0 | \t 113.8 |
| Total\tother\tlong-term\tliabilities | $1,005.7 | $610.9 |

Our	debt	consisted	of	the	following	(in	millions):

| As	of	December	31, | 2015 | 2014 |
| :--- | :--- | :--- |
| Long-term\tdebt |  |  |
| 1.450%\tSenior\tNotes\tdue\t2017 | $500.0 | $– |
| 2.000%\tSenior\tNotes\tdue\t2018 | 1,150.0 | – |
| 4.625%\tSenior\tNotes\tdue\t2019 | 500.0 | 500.0 |
| 2.700%\tSenior\tNotes\tdue\t2020 | 1,500.0 | – |
| 3.375%\tSenior\tNotes\tdue\t2021 | 300.0 | 300.0 |
| 3.150%\tSenior\tNotes\tdue\t2022 | 750.0 | – |
| 3.550%\tSenior\tNotes\tdue\t2025 | 2,000.0 | – |
| 4.250%\tSenior\tNotes\tdue\t2035 | 500.0 | – |
| 5.750%\tSenior\tNotes\tdue\t2039 | 500.0 | 500.0 |
| 4.450%\tSenior\tNotes\tdue\t2045 | 1,250.0 | – |
| U.S.\tTerm\tLoan | 2,500.0 | – |
| Japan\tTerm\tLoan | 96.8 | 98.0 |
| Other\tlong-term\tdebt | 4.6 | 4.9 |
| Debt\tdiscount | (21.9) | (1.4) |
| Adjustment\trelated\tto\tinterest\trate\tswaps | 26.8 | 24.0 |
| Total\tlong-term\tdebt | $11,556.3 | $1,425.5 |

At	December	31,	2015,	our	total	debt	consisted	of	$8.95	billion	aggregate principal	amount	of	our	senior	notes,	a	$2.5	billion	U.S.	term	loan	("U.S.	Term Loan"),	an	11.7	billion	Japanese	Yen	term	loan	agreement	("Japan	Term	Loan") that	will	mature	on	May	31,	2018,	and	other	debt,	debt	discount	and	fair	value adjustments	totaling	$9.5	million.

The	U.S.	Term	Loan	is	part	of	our	$4.35	billion	credit	agreement	("Credit Agreement")	that	contains:	(i)	a	5-year	unsecured	term	loan	facility	in	the principal	amount	of	$3.0	billion	(the	"U.S.	Term	Loan	Facility"),	and	(ii)	a	5- year	unsecured	multicurrency	revolving	facility	in	the	principal	amount	of	$1.35 billion	(the	"Multicurrency	Revolving	Facility").	The	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.	Financial	covenants	include	a consolidated	indebtedness	to	consolidated	EBITDA	ratio	of	no	greater	than	5.0 to	1.0	through	June	24,	2016	and	no	greater	than	4.5	to	1.0	thereafter.	If	our credit	rating	falls	below	investment	grade,	additional	restrictions	would	result, including	restrictions	on	investments	and	payment	of	dividends.	We	were	in compliance	with	all	covenants	under	the	Credit	Agreement	as	of	December	31, 2015.

On	June	24,	2015,	we	borrowed	$3.0	billion	under	the	U.S.	Term	Loan Facility	to	fund	a	portion	of	the	Biomet	merger.	Under	the	terms	of	the	U.S. Term	Loan	Facility,	starting	September	30,	2015,	principal	payments	are	due	as follows:	$75.0	million	on	a	quarterly	basis	during	the	first	three	years,	$112.5 million	on	a	quarterly	basis	during	the	fourth	year,	and	$412.5	million	on	a quarterly	basis	during	the	fifth	year.	In	2015,	we	paid	$500.0	million	in	principal under	the	U.S.	Term	Loan	Facility,	resulting	in	$2.5	billion	in	outstanding borrowings	as	of	December	31,	2015.	Due	to	the	$500.0	million	of	advanced payments	in	2015	on	the	U.S.	Term	Loan	Facility,	we	have	no	quarterly	principal obligations	in	2016.

Borrowings	under	the	Multicurrency	Revolving	Facility	may	be	used	for general	corporate	purposes.	There	were	no	borrowings	outstanding	under	the Multicurrency	Revolving	Facility	as	of	December	31,	2015.

Of	the	total	$8.95	billion	aggregate	principal	amount	of	senior	notes outstanding	at	December	31,	2015,	we	issued	$7.65	billion	of	this	amount	in March	2015	(the	"Merger	Notes"),	the	proceeds	of	which	were	used	to	finance	a portion	of	the	cash	consideration	payable	in	the	Biomet	merger,	pay	merger related	fees	and	expenses	and	pay	a	portion	of	Biomet's	funded	debt.	The	Merger Notes	consist	of	the	following	seven	tranches:	the	1.450%	Senior	Notes	due 2017,	the	2.000%	Senior	Notes	due	2018,	the	2.700%	Senior	Notes	due	2020, the	3.150%	Senior	Notes	due	2022,	the	3.550%	Senior	Notes	due	2025,	the 4.250%	Senior	Notes	due	2035	and	the	4.450%	Senior	Notes	due	2045.

We	may,	at	our	option,	redeem	our	senior	notes,	in	whole	or	in	part,	at	any time	upon	payment	of	the	principal,	any	applicable	make-whole	premium,	and accrued	and	unpaid

interest	to	the	date	of	redemption.	In	addition,	the	Merger	Notes	and	the	3.375% Senior	Notes	due	2021	may	be	redeemed	at	our	option	without	any	make-whole premium	at	specified	dates	ranging	from	one	month	to	six	months	in	advance	of the	scheduled	maturity	date.

Between	the	Closing	Date	and	June	30,	2015,	we	repaid	the	Biomet	senior notes	we	assumed	in	the	merger.	The	fair	value	of	the	principal	amount	plus interest	was	$2,798.6	million.	These	senior	notes	required	us	to	pay	a	call premium	in	excess	of	the	fair	value	of	the	notes	when	they	were	repaid.	As	a result,	we	recognized	$22.0	million	in	non-operating	other	expense	related	to	this call	premium.

The	estimated	fair	value	of	our	senior	notes	as	of	December	31,	2015,	based on	quoted	prices	for	the	specific	securities	from	transactions	in	over-the-counter markets	(Level	2),	was	$8,837.5	million.	The	estimated	fair	value	of	the	Japan Term	Loan	as	of	December	31,	2015,	based	upon	publicly	available	market	yield curves	and	the	terms	of	the	debt	(Level	2),	was	$96.4	million.	The	carrying	value of	the	U.S.	Term	Loan	approximates	fair	value	as	it	bears	interest	at	short-term variable	market	rates.

We	have	entered	into	interest	rate	swap	agreements	which	we	designated	as fair	value	hedges	of	underlying	fixed-rate	obligations	on	our	senior	notes	due 2019	and	2021.	See	Note	14	for	additional	information	regarding	the	interest	rate swap	agreements.

We	also	have	available	uncommitted	credit	facilities	totaling	$35.8	million. At	December	31,	2015	and	2014,	the	weighted	average	interest	rate	for	our long-term	borrowings	was	2.9	percent	and	3.5	percent,	respectively.	We	paid $207.1	million,	$67.5	million	and	$68.1	million	in	interest	during	2015,	2014 and	2013,	respectively.

# 13. Accumulated	Other	Comprehensive	(Loss)	Income

OCI	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	OCI	may be	reclassified	to	net	earnings	upon	the	occurrence	of	certain	events.

Our	OCI	is	comprised	of	foreign	currency	translation	adjustments, unrealized	gains	and	losses	on	cash	flow	hedges,	unrealized	gains	and	losses	on available-for-sale	securities,	and	amortization	of	prior	service	costs	and unrecognized	gains	and	losses	in	actuarial	assumptions	on	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. Unrealized	gains	and	losses	on	available-for-sale	securities	are	reclassified	to	net earnings	if	we	sell	the	security	before	maturity	or	if	the	unrealized	loss	is considered	to	be	other-than-temporary.	Amounts	related	to	defined	benefit	plans that	are	in	OCI	are	reclassified	over	the	service	periods	of	employees	in	the	plan. The	reclassification	amounts	are	allocated	to	all	employees	in	the	plans	and, therefore,	the	reclassified	amounts	may	become	part	of	inventory	to	the	extent they	are	considered	direct	labor	costs.	See	Note	15	for	more	information	on	our defined	benefit	plans.

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

|  |  |  |  | Defined |
| :--- | :--- | :--- | :--- | :--- |
|  | Foreign | Cash | Unrealized | Benefit |
|  | Currency | Flow | Gains\ton | Plan |
|  | Translation | Hedges | Securities | Items |
| Balance\tDecember\t31,\t2014 | $111.8 | $70.1 | $(0.4) | $(143.4) |
| OCI\tbefore\treclassifications | (305.2) | 52.7 | (0.2) | (30.6) |
| Reclassifications | – | (93.0) | – | 9.2 |
| Balance\tDecember\t31,\t2015 | $(193.4) | $29.8 | $(0.6) | $(164.8) |

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

| Component	of	OCI | 2015 | 2014 | 2013 | Location	on	Statement	of	Earnings |
| :--- | :--- | :--- | :--- | :--- |
| Cash\tflow\thedges |  |  |  |  |
| Foreign\texchange\tforward\tcontracts | $122.3 | $33.3 | $8.0 | Cost\tof\tproducts\tsold |
| Foreign\texchange\toptions | – | – | (0.2) | Cost\tof\tproducts\tsold |
| Forward\tstarting\tinterest\trate\tswaps | (1.3) | – | – | Interest\texpense |
|  | 121.0 | 33.3 | 7.8 | Total\tbefore\ttax |
|  | 28.0 | 14.4 | 3.4 | Provision\tfor\tincome\ttaxes |
|  | $93.0 | $18.9 | $4.4 | Net\tof\ttax |
| Investments |  |  |  |  |
| Realized\tgains\ton\tsecurities | $– | $0.4 | $– | Interest\tincome |
|  | – | 0.4 | – | Total\tbefore\ttax |
|  | – | – | – | Provision\tfor\tincome\ttaxes |
|  | $– | $0.4 | $– | Net\tof\ttax |
| Defined\tbenefit\tplans |  |  |  |  |
| Prior\tservice\tcost | $5.6 | $3.9 | $3.9 | * |
| Unrecognized\tactuarial\t(loss) | (20.1) | (11.1) | (16.6) | * |
|  | (14.5) | (7.2) | (12.7) | Total\tbefore\ttax |
|  | (5.3) | (3.0) | (4.8) | Provision\tfor\tincome\ttaxes |
|  | $(9.2) | $(4.2) | $(7.9) | Net\tof\ttax |
| Total\treclassifications | $83.8 | $15.1 | $(3.5) | Net\tof\ttax |

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

|  |  | Before	Tax |  |  | Tax |  |  | Net	of	Tax |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| For\tthe\tYears\tEnded\tDecember\t31, | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 |
| Foreign\tcurrency\tcumulative\ttranslation\tadjustments | \t\t $(305.2) | $(223.1) | $(35.0) | $– | $– | $– | $(305.2) | $ (223.1) | $ (35.0) |
| Unrealized\tcash\tflow\thedge\tgains | 59.1 | 60.5 | 63.6 | 6.4 | 4.6 | 30.2 | 52.7 | 55.9 | 33.4 |
| Reclassification\tadjustments\ton\tforeign\tcurrency\thedges | (121.0) | (33.3) | (7.8) | (28.0) | (14.4) | (3.4) | (93.0) | (18.9) | (4.4) |
| Reclassification\tadjustments\ton\tsecurities | – | (0.4) | – | – | – | – | – | (0.4) | – |
| Unrealized\tgains/(losses)\ton\tsecurities | (0.2) | (0.5) | 0.1 | – | – | – | (0.2) | (0.5) | 0.1 |
| Adjustments\tto\tprior\tservice\tcost\tand\tunrecognized\tactuarial\tassumptions | (25.0) | (104.8) | 50.3 | (3.6) | (29.0) | 11.8 | (21.4) | (75.8) | 38.5 |
| Total\tOther\tComprehensive\t(Loss)\tIncome | \t\t $(392.3) | $(301.6) | $ 71.2 | $(25.2) | $(38.8) | $38.6 | $(367.1) | $ (262.8) | $32.6 |

# 14. 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.

# Derivatives	Designated	as	Fair	Value	Hedges

We	use	interest	rate	derivative	instruments	to	manage	our	exposure	to interest	rate	movements	by	converting	fixed-rate

debt	into	variable-rate	debt.	Under	these	agreements,	we	agree	to	exchange,	at specified	intervals,	the	difference	between	fixed	and	variable	interest	amounts calculated	by	reference	to	an	agreed-upon	notional	principal	amount.	The objective	of	the	instruments	is	to	more	closely	align	interest	expense	with	interest income	received	on	cash	and	cash	equivalents.	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.

We	have	multiple	fixed-to-variable	interest	rate	swap	agreements	that	we have	designated	as	fair	value	hedges	of	the	fixed	interest	rate	obligations	on	our 4.625%	Senior	Notes	due	2019	and	3.375%	Senior	Notes	due	2021.	The	total notional	amounts	are	$250.0	million	and	$300.0	million	for	the	4.625%	Senior Notes	due	2019	and	3.375%	Senior	Notes	due

2021,	respectively.	On	the	interest	rate	swap	agreements	for	the	4.625%	Senior Notes	due	2019,	we	receive	a	fixed	interest	rate	of	4.625	percent	and	pay variable	interest	equal	to	the	three-month	LIBOR	plus	an	average	of	133	basis points.	On	the	interest	rate	swap	agreements	for	the	3.375%	Senior	Notes	due 2021,	we	receive	a	fixed	interest	rate	of	3.375	percent	and	pay	variable	interest equal	to	the	three-month	LIBOR	plus	an	average	of	99	basis	points.

# Derivatives	Designated	as	Cash	Flow	Hedges

In	2014,	we	entered	into	forward	starting	interest	rate	swaps	that	were designated	as	cash	flow	hedges	of	the	thirty	year	tranche	of	senior	notes	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	Merger	Notes offering.	The	total	notional	amounts	of	the	forward	starting	interest	rate	swaps were	$1	billion	and	settled	in	March	2015	at	a	loss	of	$97.6	million.	The	loss	will be	recognized	using	the	effective	interest	rate	method	over	the	maturity	period	of the	4.450%	Senior	Notes	due	2045.

# 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	and	options	with	major	financial	institutions.	We	are	primarily exposed	to	foreign	currency	exchange	rate	risk	with	respect	to	transactions	and net	assets	denominated	in	Euros,	Swiss	Francs,	Japanese	Yen,	British	Pounds, Canadian	Dollars,	Australian	Dollars,	Korean	Won,	Swedish	Krona,	Czech Koruna,	Thai	Baht,	Taiwan	Dollars,	South	African	Rand,	Russian	Rubles	and Indian	Rupees.	We	do	not	use	derivative	financial	instruments	for	trading	or speculative	purposes.

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	and	options. 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	that	forecasted transactions	have	not	changed	significantly.	We	also	assess	on	a	quarterly	basis whether	there	have	been	adverse	developments	regarding	the	risk	of	a counterparty	default.	For	derivatives	which	qualify	as	hedges	of	future	cash flows,	the	effective	portion	of	changes	in	fair	value	is	temporarily	recorded	in other	comprehensive	income	and	then	recognized	in	cost	of	products	sold	when the	hedged	item	affects	net	earnings.	The	ineffective	portion	of	a	derivative's change	in	fair	value,	if	any,	is	immediately	reported	in	cost	of	products	sold.	On our	consolidated	statement	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 December	31,	2015,	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	and	Indian	Rupees	and	obligations	to	purchase	Swiss Francs	and	sell	U.S.	Dollars.	These	derivatives	mature	at	dates	ranging	from January	2016	through	June	2018.	As	of	December	31,	2015,	the	notional amounts	of	outstanding	forward	contracts	and	options	entered	into	with	third parties	to	purchase	U.S.	Dollars	were	$1,427.5	million.	As	of	December	31, 2015,	the	notional	amounts	of	outstanding	forward	contracts	and	options	entered into	with	third	parties	to	purchase	Swiss	Francs	were	$307.2	million.

# Derivatives	Not	Designated	as	Hedging	Instruments

We	enter	into	foreign	currency	forward	exchange	contracts	with	terms	of	one month	to	manage	currency	exposures	for	monetary	assets	and	liabilities denominated	in	a	currency	other	than	an	entity's	functional	currency.	As	a	result, any	foreign	currency	re-measurement	gains/losses	recognized	in	earnings	are generally	offset	with	gains/losses	on	the	foreign	currency	forward	exchange contracts	in	the	same	reporting	period.	Starting	in	2015,	the	net	amount	of	these offsetting	gains/losses	is	recorded	in	other	expense.	In	prior	periods,	the	net amount	was	recorded	in	cost	of	products	sold	and	was	not	material.	Prior	periods have	been	reclassified	to	conform	to	the	2015	presentation.	These	contracts	are settled	on	the	last	day	of	each	reporting	period.	Therefore,	there	is	no outstanding	balance	related	to	these	contracts	recorded	on	the	balance	sheet	as	of the	end	of	the	reporting	period.	The	notional	amounts	of	these	contracts	are typically	in	a	range	of	$1.5	billion	to	$2.0	billion	per	quarter.

# Income	Statement	Presentation

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

|  |  | Gain	/(Loss)	on	Instrument | Gain	/(Loss)	on	Instrument | Gain	/(Loss)	on	Instrument | Gain	/(Loss)	on	Hedged	Item | Gain	/(Loss)	on	Hedged	Item | Gain	/(Loss)	on	Hedged	Item |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Year\tEnded\tDecember\t31, | Year\tEnded\tDecember\t31, | Year\tEnded\tDecember\t31, | Year\tEnded\tDecember\t31, | Year\tEnded\tDecember\t31, | Year\tEnded\tDecember\t31, |
| Derivative\tInstrument | Location\ton\tStatement\tof\tEarnings | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 |
| Interest\trate\tswaps | Interest\texpense | $ 2.8 | $ 14.7 | $(24.6) | $ (2.8) | $(14.7) | $24.6 |

We	had	no	ineffective	fair	value	hedging	instruments	nor	any	amounts	excluded	from	the	assessment	of	hedge	effectiveness	during	the	years	ended	December	31, 2015,	2014	and	2013.

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

|  | Amount	of	Gain	/	(Loss)<br>Recognized	in	OCI | Amount	of	Gain	/	(Loss)<br>Recognized	in	OCI | Amount	of	Gain	/	(Loss)<br>Recognized	in	OCI |  | Amount	of	Gain	/	(Loss)<br>Reclassified	from	OCI | Amount	of	Gain	/	(Loss)<br>Reclassified	from	OCI | Amount	of	Gain	/	(Loss)<br>Reclassified	from	OCI |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Year\tEnded\tDecember\t31, | Year\tEnded\tDecember\t31, | Year\tEnded\tDecember\t31, |  | Year\tEnded\tDecember\t31, | Year\tEnded\tDecember\t31, | Year\tEnded\tDecember\t31, |
| Derivative\tInstrument | 2015 | 2014 | 2013 | Location\ton\tStatement\tof\tEarnings | 2015 | 2014 | 2013 |
| Foreign\texchange\tforward\tcontracts | \t\t $ 97.4 | $119.8 | $63.9 | Cost\tof\tproducts\tsold | \t\t $122.3 | $33.3\t\t\t\t $ | 8.0 |
| Foreign\texchange\toptions | – | – | (0.3) | Cost\tof\tproducts\tsold | – | – | (0.2) |
| Forward\tstarting\tinterest\trate\tswaps | (38.3) | (59.3) | – | Interest\texpense | (1.3) | – | – |
|  | \t\t $ 59.1 | $60.5 | $63.6 |  | \t\t $121.0 | $33.3\t\t\t\t $ | 7.8 |

The	net	amount	recognized	in	earnings	during	the	years	ended	December	31,	2015,	2014	and	2013	due	to	ineffectiveness	and	amounts	excluded	from	the assessment	of	hedge	effectiveness	were	not	significant.

The	fair	value	of	outstanding	derivative	instruments	designated	as	cash	flow	hedges	and	recorded	on	the	balance	sheet	at	December	31,	2015,	together	with	settled derivatives	where	the	hedged	item	has	not	yet	affected	earnings,	was	a	net	unrealized	gain	of	$26.1	million,	or	$29.8	million	after	taxes,	which	is	deferred	in accumulated	other	comprehensive	income.	Of	the	net	unrealized	gain,	$101.4	million,	or	$76.7	million	after	taxes,	is	expected	to	be	reclassified	to	earnings	in	cost	of products	sold	and	a	loss	of	$1.7	million,	or	$1.1	million	after	taxes,	is	expected	to	be	reclassified	to	earnings	in	interest	expense	over	the	next	twelve	months.

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

|  | Location	on | Year	Ended	December	31, | Year	Ended	December	31, | Year	Ended	December	31, |
| :--- | :--- | :--- | :--- | :--- |
| Derivative\tInstrument | Statement\tof\tEarnings | 2015 | 2014 | 2013 |
| Foreign\texchange\tforward\tcontracts | Other\texpense,\tnet | \t $28.8 | \t\t $15.3 | $– |

This	impact	does	not	include	any	offsetting	gains/losses	recognized	in	earnings	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	December	31,	2015	and	December	31,	2014,	all	derivative	instruments	designated	as	fair	value	hedges	and	cash	flow	hedges	are	recorded	at	fair	value	on	the balance	sheet.	On	our	consolidated	balance	sheets,	we	recognize	individual	forward	contracts	and	options	with	the	same	counterparty	on	a	net	asset/liability	basis	if	we have	a	master	netting	agreement	with	the	counterparty.	Under	these	master	netting	agreements,	we	are	able	to	settle	derivative	instrument	assets	and	liabilities	with	the same	counterparty	in	a	single	transaction,	instead	of	settling	each	derivative	instrument	separately.	We	have	master	netting	agreements	with	all	of	our	counterparties.

The	fair	value	of	derivative	instruments	on	a	gross	basis	is	as	follows	(in	millions):

| Foreign	exchange	forward	contracts | Other	current	assets		 $100.5 | Other	current	assets		 $100.5 | Other	current	assets		 $ | 98.7 |
| :--- | :--- | :--- | :--- | :--- |
| Foreign\texchange\tforward\tcontracts | Other\tassets | 19.8 | Other\tassets | 53.1 |
| Interest\trate\tswaps | Other\tassets | 26.8 | Other\tassets | 24.0 |
| Total\tasset\tderivatives |  | \t\t $147.1 |  | \t\t $175.8 |
| Liability\tDerivatives |  |  |  |  |
| Foreign\texchange\tforward\tcontracts | Other\tcurrent\tliabilities\t\t $ | 16.7 | Other\tcurrent\tliabilities\t\t $ | 16.4 |
| Forward\tstarting\tinterest\trate\tswaps | Other\tcurrent\tliabilities | – | Other\tcurrent\tliabilities | 59.3 |
| Foreign\texchange\tforward\tcontracts | Other\tlong-term\tliabilities | 8.3 | Other\tlong-term\tliabilities | 11.6 |
| Total\tliability\tderivatives | Total\tliability\tderivatives | \t\t $25.0 |  | \t\t $87.3 |

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

|  |  | As	of	December	31,	2015 | As	of	December	31,	2015 | As	of	December	31,	2015 | As	of	December	31,	2014 | As	of	December	31,	2014 | As	of	December	31,	2014 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  |  |  | Net\tAmount |  |  | Net\tAmount |
|  |  | Gross |  | in\tBalance | Gross |  | in\tBalance |
| Description | Location | Amount | Offset | Sheet | Amount | Offset | Sheet |
| Asset\tDerivatives |  |  |  |  |  |  |  |
| Cash\tflow\thedges | Other\tcurrent\tassets | $100.5 | $16.3 | $84.2 | $98.7 | $15.9 | $82.8 |
| Cash\tflow\thedges | Other\tassets | 19.8 | 7.1 | 12.7 | 53.1 | \t 10.4 | 42.7 |
| Liability\tDerivatives |  |  |  |  |  |  |  |
| Cash\tflow\thedges | Other\tcurrent\tliabilities | 16.7 | \t 16.3 | 0.4 | 16.4 | \t 15.9 | 0.5 |
| Cash\tflow\thedges | \tOther\tlong-term\tliabilities | 8.3 | 7.1 | 1.2 | 11.6 | \t 10.4 | 1.2 |

# 15. Retirement	Benefit	Plans

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

We	use	a	December	31	measurement	date	for	our	benefit	plans.

# Defined	Benefit	Plans

The	components	of	net	pension	expense	for	our	defined	benefit	retirement	plans	were	as	follows	(in	millions):

|  | U.S.	and	Puerto	Rico | U.S.	and	Puerto	Rico |  |  | Foreign |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| For\tthe\tYears\tEnded\tDecember\t31, | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 |
| Service\tcost | $ 11.8 | $ 10.9 | $ 11.9 | $ 18.9 | $ 14.7 | $16.1 |
| Interest\tcost | 15.8 | 15.5 | 13.2 | 8.8 | 9.2 | 5.6 |
| Expected\treturn\ton\tplan\tassets | (31.8) | (30.8) | (28.7) | (13.9) | (11.0) | (6.7) |
| Amortization\tof\tprior\tservice\tcost | (3.7) | (2.6) | (2.6) | (1.9) | (1.3) | (1.3) |
| Amortization\tof\tunrecognized\tactuarial\tloss | 17.4 | 10.6 | 14.8 | 2.7 | 0.5 | 1.8 |
| Net\tperiodic\tbenefit\tcost | $9.5 | $3.6 | $8.6 | $ 14.6 | $ 12.1 | $15.5 |

The	weighted	average	actuarial	assumptions	used	to	determine	net	pension	expense	for	our	defined	benefit	retirement	plans	were	as	follows:

|  | U.S.	and	Puerto	Rico | U.S.	and	Puerto	Rico | U.S.	and	Puerto	Rico |  | Foreign |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| For\tthe\tYears\tEnded\tDecember\t31, | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 |
| Discount\trate | \t4.56% | \t4.98% | \t4.32% | \t 1.94% | \t 2.46% | 2.13% |
| Rate\tof\tcompensation\tincrease | \t3.29% | \t3.29% | \t3.29% | \t 2.00% | \t 1.48% | 2.29% |
| Expected\tlong-term\trate\tof\treturn\ton\tplan\tassets | \t7.75% | \t7.75% | \t7.75% | \t 3.05% | \t 2.88% | 2.74% |

The	expected	long-term	rate	of	return	on	plan	assets	is	based	on	the	historical	and	estimated	future	rates	of	return	on	the	different	asset	classes	held	in	the	plans.	The expected	long-term	rate	of	return	is	the	weighted	average	of	the	target	asset	allocation	of	each	individual	asset	class.	We	believe	that	historical	asset	results	approximate expected	market	returns	applicable	to	the	funding	of	a	long-term	benefit	obligation.

Discount	rates	were	determined	for	each	of	our	defined	benefit	retirement	plans	at	their	measurement	date	to	reflect	the	yield	of	a	portfolio	of	high	quality	bonds matched	against	the	timing	and	amounts	of	projected	future	benefit	payments.	Beginning	in	2016,	we	will	change	the	method	used	to	estimate	the	service	and	interest costs	for	pension	and	postretirement	benefits.	The	new	method	utilizes	a	full	yield	curve	approach	to	estimate	service	and	interest	costs	by	applying	specific	spot	rates along	the	yield	curve	used	to	determine	the	benefit	obligation	of	relevant	projected	cash	outflows.	Historically,	we	utilized	a	single	weighted-average	discount	rate applied	to	projected	cash	outflows.	We	made	the	change	to	provide	a	more	precise	measurement	of	service	and	interest	costs	by	aligning	the	timing	of	the	plan's	liability cash	flows	to	the	corresponding	spot	rate	on	the	yield	curve.	The	change	does	not	impact	the	measurement	of	the	plan's	obligations.	We	will	account	for	this	change	as	a change	in	accounting	estimate.

Changes	in	projected	benefit	obligations	and	plan	assets	were	(in	millions):

|  | U.S.	and	Puerto	Rico | U.S.	and	Puerto	Rico | Foreign |  |
| :--- | :--- | :--- | :--- | :--- |
| For\tthe\tYears\tEnded\tDecember\t31, | 2015 | 2014 | 2015 | 2014 |
| Projected\tbenefit\tobligation\t–\tbeginning\tof\tyear | $386.6 | $316.7 | $423.7 | $371.5 |
| Obligation\tassumed\tfrom\tBiomet | – | – | \t 159.4 | – |
| Service\tcost | 11.8 | 10.9 | 18.9 | 14.7 |
| Interest\tcost | 15.8 | 15.5 | 8.8 | 9.2 |
| Plan\tamendments | (21.9) | – | – | (7.0) |
| Employee\tcontributions | – | – | 16.9 | 18.5 |
| Benefits\tpaid | (12.3) | (10.0) | (24.1) | (22.6) |
| Actuarial\t(gain)\tloss | (4.9) | 53.5 | (18.9) | 77.9 |
| Expenses\tpaid | – | – | (0.3) | (0.2) |
| Settlement | – | – | (0.2) | – |
| Translation\t(gain)\tloss | – | – | (15.6) | (38.3) |
| Projected\tbenefit\tobligation\t–\tend\tof\tyear | $375.1 | $386.6 | $568.6 | $423.7 |
| Plan\tassets\tat\tfair\tmarket\tvalue\t–\tbeginning\tof\tyear | $402.2 | $398.6 | $385.4 | $372.3 |
| Assets\tcontributed\tby\tBiomet | – | – | \t 129.4 | – |
| Actual\treturn\ton\tplan\tassets | (16.6) | 10.9 | (4.0) | 38.0 |
| Employer\tcontributions | 0.8 | 2.7 | 14.8 | 14.7 |
| Employee\tcontributions | – | – | 16.9 | 18.5 |
| Plan\tamendments | – | – | (0.2) | – |
| Benefits\tpaid | (12.3) | (10.0) | (24.1) | (22.6) |
| Expenses\tpaid | – | – | (0.3) | (0.2) |
| Translation\tgain\t(loss) | – | – | (12.3) | (35.3) |
| Plan\tassets\tat\tfair\tmarket\tvalue\t–\tend\tof\tyear | $374.1 | $402.2 | $505.6 | $385.4 |
| Funded\tstatus | $(1.0) | $15.6 | $(63.0) | $(38.3) |
| Amounts\trecognized\tin\tconsolidated\tbalance\tsheet: |  |  |  |  |
| Prepaid\tpension | $14.6 | $29.4 | $16.5 | $12.4 |
| Short-term\taccrued\tbenefit\tliability | (1.0) | (0.7) | (0.6) | (0.5) |
| Long-term\taccrued\tbenefit\tliability | (14.6) | (13.1) | (78.9) | (50.2) |
| Net\tamount\trecognized | $(1.0) | $15.6 | $(63.0) | $(38.3) |

We	estimate	the	following	amounts	recorded	as	part	of	accumulated	other	comprehensive	income	will	be	recognized	as	part	of	our	net	pension	expense	during	2016 (in	millions):

|  | Puerto	Rico | Foreign |
| :--- | :--- | :--- |
| Unrecognized\tprior\tservice\tcost | $(5.9) | $(1.9) |
| Unrecognized\tactuarial\tloss | 17.1 | 2.9 |
|  | $11.2 | $1.0 |

The	weighted	average	actuarial	assumptions	used	to	determine	the	projected	benefit	obligation	for	our	defined	benefit	retirement	plans	were	as	follows:

|  |  | U.S.	and	Puerto	Rico |  |  | Foreign |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| For\tthe\tYears\tEnded\tDecember\t31, | 2015 | 2014 | 2013 | 2015 | 2014 | 2013 |
| Discount\trate | \t4.36% | \t4.10% | \t4.98% | \t1.86% | \t1.38% | \t2.45% |
| Rate\tof\tcompensation\tincrease | \t3.29% | \t3.29% | \t3.29% | \t2.02% | \t1.43% | \t1.52% |

Plans	with	projected	benefit	obligations	in	excess	of	plan	assets	were	as	follows	(in	millions):

| As	of	December	31, | 2015 | 2014 | 2015 | 2014 |
| :--- | :--- | :--- | :--- | :--- |
| Projected\tbenefit\tobligation | $53.8 | $54.6 | $393.4 | $365.2 |
| Plan\tassets\tat\tfair\tmarket\tvalue | 38.2 | 40.8 | \t 319.6 | \t 315.0 |

Total	accumulated	benefit	obligations	and	plans	with	accumulated	benefit	obligations	in	excess	of	plan	assets	were	as	follows	(in	millions):

| As	of	December	31, | 2015 | 2014 | 2015 | 2014 |
| :--- | :--- | :--- | :--- | :--- |
| Total\taccumulated\tbenefit\tobligations | $354.6 | $337.5 | $556.8 | $413.1 |
| Plans\twith\taccumulated\tbenefit\tobligations\tin\texcess\tof\tplan\tassets: |  |  |  |  |
| Accumulated\tbenefit\tobligation | 34.8 | 32.8 | \t 380.1 | \t 358.6 |
| Plan\tassets\tat\tfair\tmarket\tvalue | 20.6 | 22.0 | \t 314.9 | \t 315.0 |

The	benefits	expected	to	be	paid	out	in	each	of	the	next	five	years	and	for the	five	years	combined	thereafter	are	as	follows	(in	millions):

The	U.S.	and	Puerto	Rico	defined	benefit	retirement	plans'	overall investment	strategy	is	to	maximize	total	returns	by	emphasizing	long-term growth	of	capital	while	mitigating	risk.	We	have	established	target	ranges	of assets	held	by	the	plans	of	40	to	45	percent	for	equity	securities,	30	to	35	percent for	debt	securities	and	20	to	25	percent	in	non-traditional	investments.	The	plans strive	to	have	sufficiently	diversified	assets	so	that	adverse	or	unexpected	results from	one	asset	class	will	not	have	an	unduly	detrimental	impact	on	the	entire portfolio.	We	regularly	review	the	investments	in	the	plans	and	we	may rebalance	them	from	time-to-time	based	upon	the	target	asset	allocation	of	the plans.

For	the	U.S.	and	Puerto	Rico	plans,	we	maintain	an	investment	policy statement	that	guides	the	investment	allocation	in	the	plans.	The	investment policy	statement	describes	the	target	asset	allocation	positions	described	above. Our	benefits	committee,	along	with	our	investment	advisor,	monitor	compliance with	and	administer	the	investment	policy	statement	and	the	plans'	assets	and oversee	the	general

investment	strategy	and	objectives	of	the	plans.	Our	benefits	committee generally	meets	quarterly	to	review	performance	and	to	ensure	that	the	current investment	allocation	is	within	the	parameters	of	the	investment	policy statement.

The	investment	strategies	of	foreign	based	plans	vary	according	to	the	plan provisions	and	local	laws.	The	majority	of	the	assets	in	foreign	based	plans	are located	in	Switzerland-based	plans.	These	assets	are	held	in	trusts	and	are commingled	with	the	assets	of	other	Swiss	companies	with	representatives	of	all the	companies	making	the	investment	decisions.	The	overall	strategy	is	to maximize	total	returns	while	avoiding	risk.	The	trustees	of	the	assets	have established	target	ranges	of	assets	held	by	the	plans	of	30	to	50	percent	in	debt securities,	20	to	37	percent	in	equity	securities,	15	to	24	percent	in	real	estate,	3 to	15	percent	in	cash	funds	and	0	to	12	percent	in	other	funds.

The	fair	value	of	our	U.S.	and	Puerto	Rico	pension	plan	assets	by	asset category	was	as	follows	(in	millions):

The	fair	value	of	our	foreign	pension	plan	assets	was	as	follows	(in millions):

|  |  | in	Active | Significant |  |
| :--- | :--- | :--- | :--- | :--- |
|  |  | Markets\tfor | Other | Significant |
|  |  | Identical | Observable | Unobservable |
|  |  | Assets | Inputs | Inputs |
| Asset\tCategory | Total | (Level\t1) | (Level\t2) | (Level\t3) |
| Cash\tand\tcash\tequivalents | $31.0 | $31.0 | $— | $— |
| Equity\tsecurities: |  |  |  |  |
| Energy | 4.7 | 4.7 | — | — |
| Materials | 7.1 | 7.1 | — | — |
| Industrials | 7.5 | 7.5 | — | — |
| Consumer\tdiscretionary | 6.5 | 6.5 | — | — |
| Consumer\tstaples | 7.5 | 7.5 | — | — |
| Healthcare | 6.8 | 6.8 | — | — |
| Financials | 16.3 | 16.3 | — | — |
| Information\ttechnology | 4.9 | 4.9 | — | — |
| Telecommunication\tservices | 2.0 | 2.0 | — | — |
| Utilities | 3.4 | 3.4 | — | — |
| Other | 36.7 | 34.5 | 2.2 | — |
| Fixed\tincome\tsecurities: |  |  |  |  |
| Government\tbonds | 72.5 | — | 72.5 | — |
| Corporate\tbonds | 58.9 | — | 58.9 | — |
| Asset-backed\tsecurities | 22.0 | — | 22.0 | — |
| Other\tdebt\nOther\ttypes\tof\tinvestments: | 1.7 | — | 1.7 | — |
| Mortgage\tloans | 9.2 | — | 9.2 | — |
| Insurance\tcontracts | 6.1 | — | 6.1 | — |
| Other\tinvestments | 12.0 | — | 12.0 | — |
| Real\testate | 68.6 | — | — | 68.6 |
| Total | $385.4 | $132.2 | $184.6 | $68.6 |

As	of	December	31,	2015	and	2014,	our	defined	benefit	pension	plans' assets	did	not	hold	any	direct	investment	in	Zimmer	Biomet	Holdings	common stock.

Equity	securities	are	valued	using	a	market	approach,	based	on	quoted prices	for	the	specific	security	from	transactions	in	active	exchange	markets (Level	1),	or	in	some	cases	where	we	are	invested	in	mutual	or	collective	funds, based	upon	the	net	asset	value	per	unit	of	the	fund	which	is	determined	from quoted	market	prices	of	the	underlying	securities	in	the	fund's	portfolio	(Level 2).	Fixed	income	securities	are	valued	using	a	market	approach,	based	upon quoted	prices	for	the	specific	security	or	from	institutional	bid	evaluations.	Some fixed	income	securities	are	in	funds	with	a	net	asset	value	per	unit	which	is determined	using	similar	techniques	for	the	underlying	securities	in	the	fund's portfolio.	Real	estate	is	valued	by	discounting	to	present	value	the	cash	flows expected	to	be	generated	by	the	specific	properties.

# 16. Income	Taxes

The	components	of	earnings	before	income	taxes	consisted	of	the	following (in	millions):

      The	provision	for	income	taxes	and	the	income	taxes	paid consisted	of	(in	millions):

A	reconciliation	of	the	U.S.	statutory	income	tax	rate	to	our	effective	tax rate	is	as	follows:

| For	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| U.S.\tstatutory\tincome\ttax\trate | 35.0% | 35.0% | 35.0% |
| State\ttaxes,\tnet\tof\tfederal\tdeduction | (2.4) | 0.7 | 0.8 |
| Tax\timpact\tof\tforeign\toperations, |  |  |  |
| including\tforeign\ttax\tcredits | \t(40.2) | \t(11.7) | \t(12.1) |
| Change\tin\tvaluation\tallowance | (3.7) | – | – |
| Non-deductible\texpenses | 2.4 | – | – |
| Tax\timpact\tof\tcertain\tsignificant |  |  |  |
| transactions | 21.6 | 1.4 | 1.6 |
| Tax\tbenefit\trelating\tto\tU.S. |  |  |  |
| manufacturer's\tdeduction\tand |  |  |  |
| export\tsales | (6.2) | (1.9) | (1.8) |
| R&amp;D\tcredit | (2.5) | (0.2) | (0.6) |
| Other | 0.6 | 0.1 | (0.1) |
| Effective\tincome\ttax\trate | 4.6% | 23.4% | 22.8% |

Our	operations	in	Puerto	Rico	and	Switzerland	benefit	from	various	tax incentive	grants.	These	grants	expire	between	fiscal	years	2019	and	2029. Deferred	income	taxes	reflect	the	net	tax	effects	of	temporary	differences between	the	carrying	amounts	of	assets	and	liabilities	for	financial	reporting purposes	and	the	amounts	used	for	income	tax	purposes.	Valuation	allowances are	recorded	to	reduce	deferred	income	tax	assets	when	it	is	more	likely	than	not that	an	income	tax	benefit	will	not	be	realized.

The	components	of	deferred	taxes	consisted	of	the	following	(in	millions):

| As	of	December	31, | 2015 | 2014 |
| :--- | :--- | :--- |
| Deferred\ttax\tassets: |  |  |
| Inventory | $159.7 | $ 275.1 |
| Net\toperating\tloss\tcarryover | 117.4 | 116.9 |
| Tax\tcredit\tcarryover | 207.8 | 185.5 |
| Capital\tloss\tcarryover | 4.2 | 7.4 |
| Accrued\tliabilities | 190.2 | 106.7 |
| Share-based\tcompensation | 59.0 | 59.9 |
| Accounts\treceivable | 23.7 | – |
| Unremitted\tearnings\tof\tforeign\tsubsidiaries | – | 32.3 |
| Other | 133.6 | 50.3 |
| Total\tdeferred\ttax\tassets | 895.6 | 834.1 |
| Less:\tValuation\tallowances | (72.7) | (122.8) |
| Total\tdeferred\ttax\tassets\tafter\tvaluation\tallowances | 822.9 | 711.3 |
| Deferred\ttax\tliabilities: |  |  |
| Fixed\tassets | $(144.6) | $(104.3) |
| Intangible\tassets | (2,337.2) | (95.9) |
| Unremitted\tearnings\tof\tforeign\tsubsidiaries | (1,374.8) | – |
| Other | (4.3) | – |
| Total\tdeferred\ttax\tliabilities | (3,860.9) | (200.2) |
| Total\tnet\tdeferred\tincome\ttaxes | $(3,038.0) | $ 511.1 |

Net	operating	loss	carryovers	are	available	to	reduce	future	federal,	state	and foreign	taxable	earnings.	At	December	31,	2015,	$103.9	million	of	these	net operating	loss	carryovers	generally	expire	within	a	period	of	1	to	20	years	and $13.5	million	of	these	net	operating	loss	carryovers	have	an	indefinite	life. Valuation	allowances	for	net	operating	loss	carryovers	have	been	established	in the	amount	of	$47.0	million	and	$99.0	million	at	December	31,	2015	and	2014, respectively.

Deferred	tax	assets	related	to	tax	credit	carryovers	are	available	to	offset future	federal,	state	and	foreign	tax	liabilities.	At	December	31,	2015,	the Company's	total	tax	credit	carryovers	of	$207.8	million	generally	expire	within a	period	of	1	to	10	years.	Valuation	allowances	for	certain	tax	credit	carryovers have	been	established	in	the	amount	of	$14.4	million	and	$11.5	million	at December	31,	2015	and	2014,	respectively.

Deferred	tax	assets	related	to	capital	loss	carryovers	are	also	available	to reduce	future	federal	capital	gains.	At	December	31,	2015,	the	Company's capital	loss	carryovers	of	$4.2	million	generally	expire	within	a	period	of	2	to	4 years.	Valuation	allowances	for	certain	capital	loss	carryovers	have	been established	in	the	amount	of	$4.2	million	and	$7.4	million	at	December	31,	2015 and	2014,	respectively.	The	remaining	valuation	allowances	booked	against deferred	tax	assets	of	$7.1	million	and	$4.9	million	at	December	31,	2015	and 2014,	respectively,	relate	primarily	to	intangible	assets	and	potential	capital losses	that	management	believes,	more	likely	than	not,	will	not	be	realized. At	December	31,	2015,	we	had	an	aggregate	of	approximately	$3,853 million	of	unremitted	earnings	of	foreign	subsidiaries	that	have	been,	or	are intended	to	be,	indefinitely	reinvested	for	continued	use	in	foreign	operations.	If the	total	undistributed	earnings	of	foreign	subsidiaries	were	remitted,	a significant	amount	of	the	additional	tax	would	be	offset	by	the	allowable	foreign tax	credits.	It	is	not	practical	for	us	to	determine	the	additional	tax	related	to remitting	these	earnings.

The	following	is	a	tabular	reconciliation	of	the	total	amounts	of unrecognized	tax	benefits	(in	millions):

| For	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Balance\tat\tJanuary\t1 | $321.7 | $311.0 | $293.9 |
| Increase\trelated\tto\tthe\tmerger* | \t 247.6 | – | – |
| Increases\trelated\tto\tprior\tperiods | 1.3 | 0.9 | 16.5 |
| Decreases\trelated\tto\tprior\tperiods | – | (3.8) | (17.3) |
| Increases\trelated\tto\tcurrent\tperiod | 25.7 | 18.3 | 20.8 |
| Decreases\trelated\tto\tsettlements\twith\ttaxing\tauthorities | (1.4) | (3.0) | (2.9) |
| Decreases\trelated\tto\tlapse\tof\tstatute\tof\tlimitations | (3.0) | (1.7) | – |
| Balance\tat\tDecember\t31 | $591.9 | $321.7 | $311.0 |
| Amounts\timpacting\teffective\ttax\trate,\tif\trecognized\tbalance\nat\tDecember\t31* | $526.6 | $186.3 | $191.2 |

*	Subject	to	change	during	measurement	period	of	the	merger.

We	recognize	accrued	interest	and	penalties	related	to	unrecognized	tax benefits	as	income	tax	expense.	During	2015,	we	accrued	interest	and	penalties of	$4.8	million,	and	as	of	December	31,	2015,	had	a	recognized	liability	for interest	and	penalties	of	$82.9	million,	which	included	a	$29.8	million	increase from	December	31,	2014	related	to	the	Biomet	merger.

During	2014,	we	accrued	interest	and	penalties	of	$5.9	million,	and	as	of December	31,	2014,	had	recognized	a	liability	for	interest	and	penalties	of	$48.3 million.	During	2013,	we	accrued	interest	and	penalties	of	$8.1	million,	and	as	of December	31,	2013,	had	recognized	a	liability	for	interest	and	penalties	of	$42.4 million.

We	operate	on	a	global	basis	and	are	subject	to	examinations	by	taxing authorities	throughout	the	world,	including	major	jurisdictions	such	as: Australia,	Canada,	China,

France,	Germany,	Ireland,	Italy,	Japan,	Luxembourg,	the	Netherlands,	Puerto Rico,	Spain,	Switzerland,	the	United	Kingdom	and	the	United	States. Our	U.S.	Federal	income	tax	returns	have	been	audited	through	2009	and are	currently	under	audit	for	years	2010-2014.	The	IRS	has	proposed adjustments	for	years	2005-2009,	reallocating	profits	between	certain	of	our U.S.	and	foreign	subsidiaries.	We	have	disputed	these	adjustments	and	intend	to continue	to	vigorously	defend	our	positions.	For	years	2005-2007,	we	have	filed a	petition	with	the	U.S.	Tax	Court.	For	years	2008-2009,	we	are	pursuing resolution	through	the	IRS	Administrative	Appeals	Process.	The	acquired Biomet	consolidation	group	has	been	audited	through	financial	year	2008. State	income	tax	returns	are	generally	subject	to	examination	for	a	period	of 3	to	5	years	after	filing	of	the	respective	return.	The	state	impact	of	any	federal changes	generally	remains	subject	to	examination	by	various	states	for	a	period of	up	to	one	year	after	formal	notification	to	the	states.	We	have	various	state income	tax	return	positions	in	the	process	of	examination,	administrative	appeals or	litigation.

In	other	major	jurisdictions,	open	years	are	generally	2008	or	later. The	net	amount	of	tax	liability	for	unrecognized	tax	benefits	may	change within	the	next	twelve	months	due	to	changes	in	audit	status,	expiration	of statutes	of	limitations,	settlements	of	tax	assessments	and	other	events	which could	impact	our	determination	of	unrecognized	tax	benefits.	Currently,	we cannot	reasonably	estimate	the	amount	by	which	our	unrecognized	tax	benefits will	change.

# 17. Capital	Stock	and	Earnings	per	Share

We	are	authorized	to	issue	250.0	million	shares	of	preferred	stock,	none	of which	were	issued	or	outstanding	as	of	December	31,	2015.

The	numerator	for	both	basic	and	diluted	earnings	per	share	is	net	earnings available	to	common	stockholders.	The	denominator	for	basic	earnings	per	share is	the	weighted	average	number	of	common	shares	outstanding	during	the period.	The	denominator	for	diluted	earnings	per	share	is	weighted	average shares	outstanding	adjusted	for	the	effect	of	dilutive	stock	options	and	other equity	awards.	The	following	is	a	reconciliation	of	weighted	average	shares	for the	basic	and	diluted	share	computations	(in	millions):

| For	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Weighted\taverage\tshares\toutstanding\tfor\tbasic\tnet |  |  |  |
| earnings\tper\tshare | 187.4 | 169.0 | 169.6 |
| Effect\tof\tdilutive\tstock\toptions\tand\tother\tequity\tawards | 2.4 | 2.7 | 2.2 |
| Weighted\taverage\tshares\toutstanding\tfor\tdiluted\tnet\nearnings\tper\tshare | 189.8 | 171.7 | 171.8 |

For	the	years	ended	December	31,	2015	and	2013,	an	average	of	0.5	million and	3.1	million	options,	respectively,	to	purchase	shares	of	common	stock	were not	included	in	the	computation	of	diluted	earnings	per	share	as	the	exercise prices	of	these	options	were	greater	than	the	average	market	price	of	the common	stock.	In	the	year	ended	December	31,	2014,	all	outstanding	options	to purchase	shares	of	common	stock	were	included	in	the	computation	of	diluted earnings	per	share	as	the	exercise	prices	of	all	options	were	less	than	the	average market	price	of	the	common	stock.

During	2015,	we	repurchased	1.4	million	shares	of	our	common	stock	at	an average	price	of	$106.01	per	share	for	a	total	cash	outlay	of	$150.0	million, including	commissions.

# 18. Segment	Data

We	design,	manufacture	and	market	orthopaedic	reconstructive	products; sports	medicine,	biologics,	extremities	and	trauma	products;	spine,	bone	healing, craniomaxillofacial	and	thoracic	products;	dental	implants;	and	related	surgical products.	Due	to	the	Biomet	merger,	we	changed	our	senior	management organizational	structure	which	has	resulted	in	a	change	to	our	operating segments.	We	now	allocate	resources	to	achieve	our	operating	profit	goals through	seven	operating	segments.	Our	operating	segments	are	comprised	of both	geographic	and	product	category	business	units.	The	geographic	operating segments	are	the	Americas,	which	is	comprised	principally	of	the	U.S.	and includes	other	North,	Central	and	South	American	markets;	EMEA,	which	is comprised	principally	of	Europe	and	includes	the	Middle	East	and	African markets;	and	Asia	Pacific,	which	is	comprised	primarily	of	Japan	and	includes other	Asian	and	Pacific	markets.	The	product	category	operating	segments	are Americas	Spine,	Bone	Healing,	CMF	and	Dental.	The	geographic	operating segments	include	results	from	all	of	our	product	categories	except	those	in	the product	category	operating	segments.	The	Bone	Healing,	CMF	and	Dental

product	category	operating	segments	reflect	those	respective	product	category results	from	all	regions,	whereas	the	Americas	Spine	operating	segment	only includes	spine	product	results	from	the	Americas.

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

Management	reviews	accounts	receivable,	inventory,	and	property,	plant and	equipment	assets	by	reportable	segment	exclusive	of	manufacturing operations	and	logistics	and	corporate	assets.

These	seven	operating	segments	are	the	basis	for	our	reportable	segment information	provided	below.	The	four	product	category	operating	segments	are individually	insignificant	to	our	consolidated	results	and	therefore	do	not constitute	a	reporting	segment	either	individually	or	combined.	For	presentation purposes,	these	product	category	operating	segments	have	been	aggregated. Prior	period	reportable	segment	financial	information	has	been	restated	to conform	to	the	current	period.

Net	sales	and	other	information	by	segment	is	as	follows	(in	millions):

|  | Americas | EMEA | Asia<br>Pacific | Product<br>Category<br>Operating<br>Segments | Global<br>Operations<br>and<br>Corporate<br>Functions | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| As\tof\tand\tfor\tthe\tYear\tEnded\tDecember\t31,\t2015 |  |  |  |  |  |  |
| Net\tsales | $3,109.4 | $1,302.9 | $881.6 | $703.9 | $– | $5,997.8 |
| Depreciation\tand\tamortization | 110.0 | 61.1 | 37.9 | 21.0 | 482.4 | 712.4 |
| Segment\toperating\tprofit | \t 1,647.0 | 445.3 | \t 421.9 | 167.9 | (689.1) | 1,993.0 |
| Inventory\tstep-up\tand\tcertain\tother\tinventory\tand\tmanufacturing\trelated\tcharges |  |  |  |  |  | (348.8) |
| Intangible\tasset\tamortization |  |  |  |  |  | (337.4) |
| Certain\tclaims |  |  |  |  |  | (7.7) |
| Special\titems |  |  |  |  |  |  |
| Biomet\tmerger\trelated |  |  |  |  |  | (619.1) |
| Other\tspecial\titems |  |  |  |  |  | (212.7) |
| Operating\tprofit |  |  |  |  |  | 467.3 |
| Total\tassets | \t 1,525.0 | \t 1,382.2 | \t 642.4 | 788.3 | \t 22,881.6 | \t 27,219.5 |
| Additions\tto\tinstruments | 1.6 | 0.2 | 4.7 | 22.8 | 237.1 | 266.4 |
| Additions\tto\tother\tproperty,\tplant\tand\tequipment | 21.7 | 3.4 | 9.0 | 4.6 | 129.0 | 167.7 |
| As\tof\tand\tfor\tthe\tYear\tEnded\tDecember\t31,\t2014 |  |  |  |  |  |  |
| Net\tsales | $2,320.2 | $1,189.1 | $789.2 | $374.8 | $– | $4,673.3 |
| Depreciation\tand\tamortization | 70.5 | 46.0 | 30.2 | 7.5 | 221.6 | 375.8 |
| Segment\toperating\tprofit | \t 1,215.4 | 435.6 | \t 371.0 | 76.5 | (569.8) | 1,528.7 |
| Inventory\tstep-up\tand\tcertain\tother\tinventory\tand\tmanufacturing\trelated\tcharges |  |  |  |  |  | (36.3) |
| Intangible\tasset\tamortization |  |  |  |  |  | (92.5) |
| Certain\tclaims |  |  |  |  |  | (21.5) |
| Special\titems |  |  |  |  |  |  |
| Biomet\tmerger\trelated |  |  |  |  |  | (61.9) |
| Other\tspecial\titems |  |  |  |  |  | (279.2) |
| Operating\tprofit |  |  |  |  |  | 1,037.3 |
| Total\tassets | \t 1,012.0 | 924.0 | \t 380.3 | 295.1 | 7,046.6 | 9,658.0 |
| Additions\tto\tinstruments | 0.2 | 0.1 | 6.0 | 16.3 | 174.8 | 197.4 |
| Additions\tto\tother\tproperty,\tplant\tand\tequipment | 8.6 | 2.1 | 9.1 | 2.6 | 122.5 | 144.9 |
| As\tof\tand\tfor\tthe\tYear\tEnded\tDecember\t31,\t2013 |  |  |  |  |  |  |
| Net\tsales | $2,347.6 | $1,134.0 | $771.9 | $369.9 | $– | $4,623.4 |
| Depreciation\tand\tamortization | 62.6 | 48.2 | 30.0 | 7.7 | 210.0 | 358.5 |
| Segment\toperating\tprofit | \t 1,293.5 | 401.2 | \t 335.6 | 79.9 | (617.1) | 1,493.1 |
| Inventory\tstep-up\tand\tcertain\tother\tinventory\tand\tmanufacturing\trelated\tcharges |  |  |  |  |  | (88.7) |
| Intangible\tasset\tamortization |  |  |  |  |  | (78.5) |
| Certain\tclaims |  |  |  |  |  | (47.0) |
| Special\titems |  |  |  |  |  |  |
| Biomet\tmerger\trelated |  |  |  |  |  | – |
| Other\tspecial\titems |  |  |  |  |  | (210.3) |
| Operating\tprofit |  |  |  |  |  | 1,068.6 |
| Total\tassets | 947.9 | 974.5 | \t 375.9 | 322.9 | 6,973.8 | 9,595.0 |
| Additions\tto\tinstruments | 0.2 | 0.3 | 6.5 | 14.9 | 171.0 | 192.9 |
| Additions\tto\tother\tproperty,\tplant\tand\tequipment | 8.7 | 1.2 | 7.6 | 4.6 | 77.9 | 100.0 |

For	segment	reporting	purposes,	deployed	instruments	are	included	in	the measurement	of	reportable	segment	assets	while	undeployed	instruments	at manufacturing	operations	and	logistics	are	included	in	global	operations	and corporate	functions.	The	majority	of	instruments	are	purchased	by	manufacturing operations	and	logistics	and	are	deployed	to	the	reportable	segments	as	needed for	the	business.	Therefore,	the	reportable	segment	assets	include	deployed instruments	even	though	that	reportable	segment	may	not	report	the	instrument addition.

We	conduct	business	in	the	following	countries	that	hold	10	percent	or	more	of our	total	consolidated	Property,	plant	and	equipment,	net:

U.S.	sales	were	$3,447.2	million,	$2,397.9	million	and	$2,418.2	million	for the	years	ended	December	31,	2015,	2014	and	2013,	respectively.	Sales	within any	other	individual	country	were	less	than	10	percent	of	our	consolidated	sales in	each	of	those	years.	Sales	are	attributable	to	a	country	based	upon	the customer's	country	of	domicile.

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

| For	the	Years	Ended	December	31, | 2015 | 2014 | 2013 |
| :--- | :--- | :--- | :--- |
| Knees | $2,276.8 | $1,895.2 | $1,862.2 |
| Hips | \t 1,537.2 | \t 1,326.4 | \t 1,330.5 |
| S.E.T. | \t 1,214.9 | 863.2 | 847.2 |
| Dental | 335.7 | 242.8 | 239.3 |
| Spine\t&amp;\tCMF | 404.4 | 207.2 | 202.3 |
| Other | 228.8 | 138.5 | 141.9 |
| Total | \t 5,997.8 | \t 4,673.3 | \t 4,623.4 |

Total	rent	expense	for	the	years	ended	December	31,	2015,	2014	and	2013 aggregated	$60.1	million,	$48.4	million	and	$49.2	million,	respectively. Future	minimum	rental	commitments	under	non-cancelable	operating	leases	in effect	as	of	December	31,	2015	were	(in	millions):

# 20. Commitments	and	Contingencies

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	when	it	is	probable	that	a	loss	has	been	incurred and	the	amount	of	the	loss	can	be	reasonably	estimated.	For	matters	where	a	loss is	believed	to	be	reasonably	possible,	but	not	probable,	no	accrual	has	been made.

# Litigation

Durom ®	Cup-related	claims:	On	July	22,	2008,	we	temporarily	suspended marketing	and	distribution	of	the	Durom	Cup	in	the	U.S.	Subsequently,	a number	of	product	liability	lawsuits	were	filed	against	us	in	various	U.S.	and foreign	jurisdictions.	The	plaintiffs	seek	damages	for	personal	injury,	and	they generally	allege	that	the	Durom	Cup	contains	defects	that	result	in	complications and	premature	revision	of	the	device.	We	have	settled	some	of	these	claims	and others	are	still	pending.	The	majority	of	the	pending	U.S.	lawsuits	are	currently in	a	federal	Multidistrict	Litigation	("MDL")	in	the	District	of	New	Jersey	(In Re:	Zimmer	Durom	Hip	Cup	Products	Liability	Litigation).	Multi-plaintiff	state court	cases	are	pending	in	St.	Clair	County,	Illinois	(Santas,	et	al.	v.	Zimmer,

Inc.,	et	al.)	and	Los	Angeles	County,	California	(McAllister,	et	al.	v.	Zimmer,

Inc.,	et	al.).	As	of	December	31,	2015,	case	specific	discovery	in	these	lawsuits was	ongoing.	The	initial	trial	in	Santas	took	place	in	November	2014,	the	initial trial	in	the	MDL	took	place	in	May	2015	and	the	initial	trial	in	McAllister	took place	in	July	2015.	Other	lawsuits	are	pending	in	various	jurisdictions,	and additional	claims	may	be	asserted	in	the	future.

Since	2008,	we	have	recognized	expense	of	$479.4	million	for	Durom	Cup- related	claims,	including	$7.7	million	during	the	year	ended	December	31,	2015 that	is	reported	on	the	"Certain	claims"	line	of	our	consolidated	statement	of earnings.	We	recognized	$21.5	million	and	$47.0	million	in	expense for	Durom	Cup-related	claims	during	the	years	ended	December	31,	2014	and 2013,	respectively.

We	maintain	insurance	for	product	liability	claims,	subject	to	self-insurance retention	requirements.	As	of	December	31,	2015,	we	have	exhausted	our	self- insured	retention	under	our	insurance	program	and	have	a	claim	for	insurance proceeds	for	ultimate	losses	which	exceed	the	self-insured	retention	amount, subject	to	a	20	percent	co-payment	requirement	and	a	cap.	We	believe	our contracts	with	the	insurance	carriers	are	enforceable	for	these	claims	and, therefore,	it	is	probable	that	we	will	recover	some	amount	from	our	insurance carriers.	We	have	received	a	portion	of	the	insurance	proceeds	we	estimate	we will	recover.	We	have	a	$95.3	million	receivable	in	"Other	assets"	remaining	on our	consolidated	balance	sheet	as	of	December	31,	2015	for	estimated	insurance recoveries	for	Durom	Cup-related	claims.	As	is	customary	in	this	process,

our	insurance	carriers	have	reserved	all	rights	under	their	respective	policies	and could	still	ultimately	deny	coverage	for	some	or	all	of	our	insurance	claims. Our	estimate	as	of	December	31,	2015	of	the	remaining	liability	for all	Durom	Cup-related	claims	is	$314.6	million,	of	which	$50.0	million	is classified	as	short-term	in	"Other	current	liabilities"	and	$264.6	million	is classified	as	long-term	in	"Other	long-term	liabilities"	on	our	consolidated balance	sheet.	We	expect	to	pay	the	majority	of	the	Durom	Cup-related	claims within	the	next	few	years.

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

Margo	and	Daniel	Polett	v.	Zimmer,	Inc.	et	al.:	On	August	20,	2008,	Margo and	Daniel	Polett	filed	an	action	against	us	and	an	unrelated	third	party,	Public Communications,	Inc.	("PCI"),	in	the	Court	of	Common	Pleas,	Philadelphia, Pennsylvania	seeking	an	unspecified	amount	of	damages	for	injuries	and	loss	of consortium	allegedly	suffered	by	Mrs.	Polett	and	her	spouse,	respectively.	The complaint	alleged	that	defendants	were	negligent	in	connection	with Mrs.	Polett's	participation	in	a	promotional	video	featuring	one	of	our	knee products.	The	case	was	tried	in	November	2010	and	the	jury	returned	a	verdict	in favor	of	plaintiffs.	The	jury	awarded	$27.6	million	in	compensatory	damages	and apportioned	fault	30	percent	to	plaintiffs,	34	percent	to	us	and	36	percent	to	PCI. Under	applicable	law,	we	may	be	liable	for	any	portion	of	the	damages apportioned	to	PCI	that	it	does	not	pay.	On	December	2,	2010,	we	and	PCI	filed a	motion	for	post-trial	relief	seeking	a	judgment	notwithstanding	the	verdict,	a new	trial	or	a	remittitur.	On	June	10,	2011,	the	trial	court	entered	an	order denying	our	motion	for	post-trial	relief	and	affirming	the	jury	verdict	in	full	and entered	judgment	for	$20.3	million	against	us	and	PCI.	On	June	29,	2011,	we filed	a	notice	of	appeal	to	the	Superior	Court	of	Pennsylvania	and	posted	a	bond for	the	verdict	amount	plus	interest.	Oral	argument	before	the	appellate	court	in Philadelphia,	Pennsylvania	was	held	on	March	13,	2012.	On	March	1,	2013,	the Superior	Court	of	Pennsylvania	vacated	the	$27.6	million	judgment	and remanded	the	case	for	a	new	trial.	On	March	15,	2013,	plaintiffs	filed	a	motion for	re-argument	en	banc,	and	on	March	28,	2013,	we	filed	our	response	in opposition.	On	May	9,	2013,	the	Superior	Court	of	Pennsylvania	granted plaintiffs'	motion	for	re-argument	en	banc.	Oral	argument	(re-argument	en	banc) before	the	Superior	Court	of	Pennsylvania	was	held	on	October	16,	2013.	On December	20,	2013,	the	Court	issued

its	opinion	again	vacating	the	trial	court	judgment	and	remanding	the	case	for	a new	trial.	On	January	21,	2014,	plaintiffs	filed	a	petition	for	allowance	of	appeal in	the	Supreme	Court	of	Pennsylvania,	which	was	granted	on	May	21,	2014. Oral	argument	before	the	Supreme	Court	of	Pennsylvania	took	place	on October	8,	2014.	On	October	27,	2015,	the	Supreme	Court	of	Pennsylvania reversed	the	order	of	the	Superior	Court	of	Pennsylvania	and	remanded	the	case to	that	court	to	consider	the	question	of	whether	the	trial	court	erred	in	refusing to	remit	the	jury's	compensatory	damages	award.	Although	we	are	defending this	lawsuit	vigorously,	its	ultimate	resolution	is	uncertain.

NexGen	Knee	System	claims:	Following	a	wide-spread	advertising	campaign conducted	by	certain	law	firms	beginning	in	2010,	a	number	of	product	liability lawsuits	have	been	filed	against	us	in	various	jurisdictions.	The	plaintiffs	seek damages	for	personal	injury,	alleging	that	certain	products	within the	NexGen	Knee	System	suffer	from	defects	that	cause	them	to	loosen prematurely.	The	majority	of	the	cases	are	currently	pending	in	a	federal	MDL	in the	Northern	District	of	Illinois	(In	Re:	Zimmer	NexGen	Knee	Implant	Products Liability	Litigation).	Other	cases	are	pending	in	other	state	and	federal	courts, and	additional	lawsuits	may	be	filed.	As	of	December	31,	2015,	discovery	in these	lawsuits	was	ongoing.	The	initial	bellwether	trial	took	place	in	October 2015.	We	have	not	accrued	an	estimated	loss	relating	to	these	lawsuits	because we	believe	the	plaintiffs'	allegations	are	not	consistent	with	the	record	of	clinical success	for	these	products.	As	a	result,	we	do	not	believe	that	it	is	probable	that we	have	incurred	a	liability,	and	we	cannot	reasonably	estimate	any	loss	that might	eventually	be	incurred.	Although	we	are	vigorously	defending	these lawsuits,	their	ultimate	resolution	is	uncertain.

Biomet	metal-on-metal	hip	implant	claims:	Biomet	is	a	defendant	in	a	number of	product	liability	lawsuits	relating	to	metal-on-metal	hip	implants.	The majority	of	these	cases	involve	the	M2a-Magnum	hip	system.	The	majority	of the	cases	are	currently	consolidated	in	one	federal	MDL	proceeding	in	the	U.S. District	Court	for	the	Northern	District	of	Indiana	(In	Re:	Biomet	M2a	Magnum Hip	Implant	Product	Liability	Litigation).	Other	cases	are	pending	in	various state	and	foreign	courts.

On	February	3,	2014,	Biomet	announced	the	settlement	of	the	MDL.	Lawsuits filed	in	the	MDL	by	April	15,	2014	may	participate	in	the	settlement.	Biomet continues	to	evaluate	the	inventory	of	lawsuits	in	the	MDL	pursuant	to	the categories	and	procedures	set	forth	in	the	settlement	agreement.	The	final amount	of	payments	under	the	settlement	is	uncertain.	The	settlement	does	not affect	certain	other	claims	relating	to	Biomet's	metal-on-metal	hip	products	that are	pending	in	various	state	and	foreign	courts,	or	other	claims	that	may	be	filed in	the	future.	Our	estimate	as	of	December	31,	2015	of	the	remaining	liability	for all	Biomet	metal-on-metal	hip	implant	claims	is	$33.4	million.

Biomet	has	exhausted	the	self-insured	retention	in	its	insurance	program	and has	been	reimbursed	for	claims	related

to	its	metal-on-metal	products	up	to	its	policy	limits	in	the	program.	Zimmer Biomet	will	be	responsible	for	any	amounts	by	which	the	ultimate	losses	exceed the	amount	of	Biomet's	third-party	insurance	coverage.	As	of	December	31, 2015,	Biomet	had	received	all	of	the	insurance	proceeds	it	expects	to	recover under	the	excess	policies.

Heraeus	trade	secret	misappropriation	lawsuits:	In	December	2008,	Heraeus Kulzer	GmbH	(together	with	its	affiliates,	"Heraeus")	initiated	legal	proceedings in	Germany	against	Biomet,	Biomet	Europe	BV	and	certain	other	subsidiaries	of Biomet,	Inc.,	alleging	that	Biomet,	Inc.	and	Biomet	Europe	BV	misappropriated Heraeus	trade	secrets	when	developing	Biomet	Europe's	Refobacin	and	Biomet Bone	Cement	line	of	cements	("European	Cements").	The	lawsuit	sought	to preclude	the	defendants	from	producing,	marketing	and	offering	for	sale	their current	line	of	European	Cements	and	to	compensate	Heraeus	for	any	damages incurred	(alleged	to	be	in	excess	of	€30.0	million).	On	December	20,	2012,	the trial	court	dismissed	Biomet,	Inc.,	Biomet	Europe	BV,	Biomet	Deutschland GmbH	and	other	defendants	from	the	lawsuit.	Biomet	Orthopaedics	Switzerland GmbH	was	the	only	Biomet	entity	remaining	as	a	defendant. Following	an	appeal	by	Heraeus,	on	June	5,	2014,	the	German	appeals	court (i)	enjoined	Biomet,	Inc.,	Biomet	Europe	BV	and	Biomet	Deutschland	GmbH from	manufacturing,	selling	or	offering	the	European	Cements	to	the	extent	they contain	certain	raw	materials	in	particular	specifications;	(ii)	held	the	defendants jointly	and	severally	liable	to	Heraeus	for	any	damages	from	the	sale	of European	Cements	since	2005;	and	(iii)	ruled	that	no	further	review	may	be sought.	Damages	have	not	been	determined.	The	judgment	is	not	final	and	the defendants	are	seeking	review	(including	review	of	the	appeals	court	ruling	that no	further	review	may	be	sought)	from	Germany's	Supreme	Court.	No prediction	can	be	made	as	to	the	likelihood	of	review	being	granted	by Germany's	Supreme	Court.

As	a	result,	Biomet	Europe	BV	and	Biomet	Deutschland	GmbH	are	enjoined from	the	manufacture,	marketing,	sale	and	offering	of	European	Cements	in Germany.	While	Heraeus	has	indicated	that	it	intends	to	take	the	position	that the	judgment	would	prohibit	the	manufacture,	marketing,	sale	and	offering	of European	Cements	outside	of	Germany	as	well	and	is	attempting	to	enforce	the judgment	in	a	limited	number	of	other	European	jurisdictions,	Biomet,	Inc., Biomet	Europe	BV	and	Biomet	Deutschland	GmbH	are	vigorously	contesting any	enforcement	of	the	judgment	beyond	Germany.	Biomet,	Inc.,	Biomet Europe	BV	and	Biomet	Deutschland	GmbH	thus	filed	a	declaratory	action	in Germany	on	August	3,	2014	to	have	the	court	determine	the	reach	of	the	appeals court	decision.

On	September	8,	2014,	Heraeus	filed	a	complaint	against	a	Biomet	supplier, Esschem,	Inc.	("Esschem"),	in	the	United	States	District	Court	for	the	Eastern District	of	Pennsylvania.	The	lawsuit	contains	allegations	that	focus	on	two copolymer	compounds	that	Esschem	sells	to	Biomet,	which	Biomet	incorporates into	certain	bone	cement	products	that	compete

with	Heraeus'	bone	cement	products.	The	complaint	alleges	that	Biomet	helped Esschem	to	develop	these	copolymers,	using	Heraeus	trade	secrets	that	Biomet allegedly	misappropriated.	The	complaint	asserts	a	claim	under	the	Pennsylvania Trade	Secrets	Act,	as	well	as	other	various	common	law	tort	claims,	all	based upon	the	same	trade	secret	misappropriation	theory.	Heraeus	is	seeking	to	enjoin Esschem	from	supplying	the	copolymers	to	any	third	party	and	actual	damages in	an	unspecified	amount.	The	complaint	also	seeks	punitive	damages,	costs	and attorneys'	fees.	If	Esschem	is	enjoined,	Biomet	may	not	be	able	to	obtain	the copolymers	from	another	supplier	and	as	a	result	may	not	be	able	to	continue	to manufacture	the	subject	bone	cement	products.	Although	Heraeus	has	not	named Biomet	as	a	party	to	this	lawsuit,	Biomet	has	agreed,	at	Esschem's	request	and subject	to	certain	limitations,	to	indemnify	Esschem	for	any	liability,	damages and	legal	costs	related	to	this	matter.	On	November	3,	2014,	the	court	entered	an order	denying	Heraeus'	motion	for	a	temporary	restraining	order.

On	October	15,	2015,	Heraeus	initiated	expedited	proceedings	against	Biomet France,	Biomet	SAS,	Biomet	Europe	BV,	Biomet,	Inc.,	Biomet	Orthopedics Switzerland	GmbH	and	Biomet	Global	Supply	Chain	Center	BV	before	the Commercial	Court	in	Paris	seeking	to	enjoin	these	entities	from	importing	the certain	raw	materials	subject	to	the	rulings	in	Germany	and	from	manufacturing, selling	or	exporting	the	bone	cements	made	from	those	raw	materials,	including under	the	names	of	the	European	Cements.	On	November	16,	2015,	the presiding	judge	ruled	that	it	had	no	jurisdiction	over	Biomet,	Inc.	and	on December	4,	2015,	the	judge	denied	the	preliminary	measures	requested	by Heraeus.	Heraeus	has	not	appealed	this	ruling	or	filed	an	action	on	the	merits before	the	Commercial	Court	in	Paris.	On	December	8,	2015,	Heraeus	filed separate	proceedings	against	Biomet	France,	Biomet	SAS	and	Biomet	France Holding	before	the	Commercial	Court	of	Roman-Sur-Isere	seeking	to	gain	access to	certain	documents	which	had	been	seized	during	searches	of	Biomet	France's premises	in	June	2015.	Biomet	is	defending	itself	vigorously	in	this	proceeding, which	is	still	ongoing.

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

No	assurance	can	be	made	as	to	the	time	or	resources	that	will	be	needed	to devote	to	this	litigation	or	its	final	outcome.

Stryker	patent	infringement	lawsuit:	On	December	10,	2010,	Stryker

Corporation	and	related	entities	("Stryker")	filed	suit	against	us	in	the	U.S. District	Court	for	the	Western	District	of	Michigan,	alleging	that	certain	of our	Pulsavac ®	Plus	Wound	Debridement	Products	infringe	three	U.S.	patents assigned	to	Stryker.	The	case	was	tried	beginning	on	January	15,	2013,	and	on February	5,	2013,	the	jury	found	that	we	infringed	certain	claims	of	the	subject patents.	The	jury	awarded	$70.0	million	in	monetary	damages	for	lost	profits. The	jury	also	found	that	we	willfully	infringed	the	subject

patents.	We	filed	multiple	post-trial	motions,	including	a	motion	seeking	a	new trial.	On	August	7,	2013,	the	trial	court	issued	a	ruling	denying	all	of	our motions	and	awarded	treble	damages	and	attorneys'	fees	to	Stryker.	We	filed	a notice	of	appeal	to	the	Court	of	Appeals	for	the	Federal	Circuit	to	seek	reversal of	both	the	jury's	verdict	and	the	trial	court's	rulings	on	our	post-trial	motions. Oral	argument	before	the	Court	of	Appeals	for	the	Federal	Circuit	took	place	on September	8,	2014.	On	December	19,	2014,	the	Federal	Circuit	issued	a	decision affirming	the	$70.0	million	lost	profits	award	but	reversed	the	willfulness finding,	vacating	the	treble	damages	award	and	vacating	and	remanding	the attorneys'	fees	award.	We	accrued	an	estimated	loss	of	$70.0	million	related	to this	matter	in	the	three	month	period	ended	December	31,	2014.	On	January	20, 2015,	Stryker	filed	a	motion	with	the	Federal	Circuit	for	a	rehearing	en	banc.	On March	23,	2015,	the	Federal	Circuit	denied	Stryker's	petition.	Stryker subsequently	filed	a	petition	for	certiorari	to	the	U.S.	Supreme	Court.	In	July 2015,	we	paid	the	final	award	of	$90.3	million,	which	includes	the	original $70.0	million	plus	pre-	and	post-judgment	interest	and	damages	for	sales	that occurred	post-trial	but	prior	to	our	entry	into	a	license	agreement	with	Stryker. On	October	19,	2015,	the	U.S.	Supreme	Court	granted	Stryker's	petition	for certiorari.	Oral	argument	took	place	on	February	23,	2016.	Although	we	are defending	this	lawsuit	vigorously,	the	ultimate	resolution	of	this	matter	is uncertain.	In	the	future,	we	could	be	required	to	record	a	charge	of	up	to	$140.0 million	that	could	have	a	material	adverse	effect	on	our	results	of	operations. Bonutti	patent	infringement	lawsuits:	On	May	3,	2013,	Bonutti	Skeletal Innovations	LLC	("Bonutti	Skeletal"),	a	company	formed	to	hold	certain	patents acquired	from	Dr.	Peter	M.	Bonutti	and	an	affiliate	of	patent	licensing	firm Acacia	Research	Group	LLC	("Acacia"),	filed	suit	against	Biomet	in	the	U.S. District	Court	for	the	Eastern	District	of	Texas,	alleging	a	failure	to	pay	royalties due	under	a	license	agreement	with	Dr.	Bonutti,	misuse	of	confidential information	and	infringement	of	15	U.S.	patents.	Prior	to	the	filing	of	this lawsuit,	on	March	8,	2013,	Biomet	had	filed	a	complaint	for	declaratory judgment	with	the	U.S.	District	Court	for	the	Northern	District	of	Indiana seeking	a	judgment	of	non-infringement	and	invalidity	of	the	patents	at	issue, and	Acacia	entered	counterclaims	of	infringement	seeking	damages	in	an	amount yet	to	be	determined	and	injunctive	relief.	On	September	17,	2013,	the	May	3, 2013	case	filed	in	the	Eastern	District	of	Texas	was	dismissed.	On	March	31, 2014,	Biomet	entered	into	a	settlement	and	license	agreement	with	Bonutti Skeletal	settling	all	claims	related	to	five	of	the	patents	at	issue	for	a	one-time payment,	and	on	June	25,	2014,	the	U.S.	District	Court	for	the	Northern	District of	Indiana	issued	an	order	dismissing	the	claims	related	to	those	patents	with prejudice.	The	litigation	then	proceeded	with	respect	to	the	remaining	patents	at issue.

On	September	10,	2012,	Bonutti	Skeletal	filed	suit	against	Zimmer	in	the	U.S. District	Court	for	the	District	of	Delaware,

alleging	infringement	of	three	U.S.	patents.	An	amended	complaint	was	filed	on January	15,	2013,	alleging	infringement	of	three	additional	patents.	Zimmer requested	an	Inter	Partes	Review	("IPR")	of	three	of	the	patents	at	issue.	IPRs were	granted	for	two	of	the	patents.	Zimmer	moved	for	a	stay	of	the	case	during the	pendency	of	the	IPRs,	and	on	April	7,	2014,	the	court	granted	the	stay.	In May	2015,	the	U.S.	Patent	and	Trademark	Office	issued	its	decision	in	the	IPRs, invalidating	all	of	the	challenged	patent	claims	in	both	patents.	Bonutti	Skeletal decided	not	to	appeal	that	decision.	On	June	30,	2015,	the	court	lifted	the	stay and	the	litigation	then	proceeded	with	respect	to	the	remaining	patents	at	issue. On	October	30,	2015,	the	Bonutti	litigation	was	settled	in	a	joint	settlement	of the	legacy	Biomet	litigation	and	legacy	Zimmer	litigation	related	to	the	same entity.

# Regulatory	Matters,	Government	Investigations	and	Other	Matters

FDA	warning	letters:	In	September	2012,	Zimmer	received	a	warning	letter from	FDA	citing	concerns	relating	to	certain	processes	pertaining	to	products manufactured	at	our	Ponce,	Puerto	Rico	manufacturing	facility.	In	June	2015, Biomet	received	a	warning	letter	from	the	FDA	that	requested	additional information	to	allow	the	FDA	to	evaluate	the	adequacy	of	Biomet's	responses	to certain	Form	483	observations	issued	following	an	inspection	of	Biomet's Zhejiang,	China	manufacturing	facility	in	January	2015.	We	have	provided detailed	responses	to	the	FDA	as	to	our	corrective	actions	and	will	continue	to work	expeditiously	to	address	the	issues	identified	by	the	FDA	during inspections	in	Ponce	and	Zhejiang.	As	of	December	31,	2015,	these	warning letters	remained	pending.	Until	the	violations	are	corrected,	we	may	be	subject to	additional	regulatory	action	by	the	FDA,	including	seizure,	injunction	and/or civil	monetary	penalties.	Additionally,	requests	for	Certificates	to	Foreign Governments	related	to	products	manufactured	at	the	Ponce	and	Zhejiang facilities	may	not	be	granted	and	premarket	approval	applications	for	Class	III devices	to	which	the	quality	system	regulation	deviations	at	these	facilities	are reasonably	related	will	not	be	approved	until	the	violations	have	been	corrected. In	addition	to	responding	to	the	warning	letters	described	above,	we	are	in	the process	of	addressing	various	FDA	Form	483	inspectional	observations	at certain	of	our	manufacturing	facilities.	The	ultimate	outcome	of	these	matters	is presently	uncertain.

Biomet	DPA	and	Consent:	On	March	26,	2012,	Biomet	entered	into	a Deferred	Prosecution	Agreement	("DPA")	with	the	DOJ	and	a	Consent	with	the SEC	related	to	an	investigation	by	the	DOJ	and	the	SEC	into	possible	violations of	the	FCPA	in	the	marketing	and	sale	of	medical	devices	in	certain	foreign countries.	Pursuant	to	the	DPA,	the	DOJ	agreed	to	defer	prosecution	of	Biomet in	connection	with	those	matters,	provided	that	Biomet	satisfies	its	obligations under	the	DPA	over	the	term	of	the	DPA.	The	DPA	had	a	three-year	term	and provided	that	it	could	be	extended	in	the	sole	discretion	of	the	DOJ	for	an additional	year.	Pursuant	to	the

Consent,	Biomet	consented	to	the	entry	of	a	Final	Judgment	which,	among	other things,	permanently	enjoined	Biomet	from	violating	the	provisions	of	the	FCPA. In	addition,	pursuant	to	the	terms	of	the	DPA,	an	independent	external compliance	monitor	was	appointed	to	review	Biomet's	compliance	with	the DPA,	particularly	in	relation	to	Biomet's	international	sales	practices.	The Consent	that	Biomet	entered	into	with	the	SEC	mirrors	the	DPA's	provisions with	respect	to	the	compliance	monitor.

Pursuant	to	the	DPA,	the	DOJ	has	sole	discretion	to	determine	whether conduct	by	Biomet	constitutes	a	violation	or	breach	of	the	DPA.	The	DOJ	has informed	Biomet	that	it	retains	its	rights	under	the	DPA	to	bring	further	action against	Biomet	relating	to	the	conduct	in	Brazil	and	Mexico	referenced	above	or the	violations	set	forth	in	the	DPA.	The	DOJ	could,	among	other	things,	revoke the	DPA	or	prosecute

Biomet	and/or	the	involved	former	employees	and	executives.	Biomet	continues to	cooperate	with	the	SEC	and	DOJ	and	expects	that	discussions	with	the	SEC and	the	DOJ	will	continue.	While	we	are	devoting	significant	time	and	resources to	these	matters,	we	can	give	no	assurances	as	to	their	final	outcome.

# Other	Government	Investigations	and	Document	Requests:	In	June	2013,

Biomet	received	a	subpoena	from	the	U.S.	Attorney's	Office	for	the	District	of New	Jersey	requesting	various	documents	relating	to	the	fitting	of	custom- fabricated	or	custom-fitted	orthoses,	or	bracing,	to	patients	in	New	Jersey,	Texas and	Washington.	Biomet	has	produced	responsive	documents	and	is	fully cooperating	with	the	request	of	the	U.S.	Attorney's	Office.	We	may	need	to devote	significant	time	and	resources	to	this	inquiry	and	can	give	no	assurances as	to	its	final	outcome.

In	July	2011,	Biomet	received	an	administrative	subpoena	from	the	Office of	Foreign	Assets	Control	of	the	U.S.	Department	of	the	Treasury	("OFAC") requesting	documents	concerning	the	export	of	products	to	Iran.	OFAC	informed Biomet	that	the	subpoena	related	to	allegations	that	Biomet	may	have	been involved	in	unauthorized	sales	of	dental	products	to	Iran.	Biomet	is	fully cooperating	in	the	investigation	and	submitted	its	response	to	the	subpoena	in October	2011.	We	may	need	to	devote	significant	time	and	resources	to	this inquiry	and	can	give	no	assurances	as	to	its	final	outcome.

In	February	2010,	Biomet	received	a	subpoena	from	the	Office	of	the Inspector	General	of	the	U.S.	Department	of	Health	and	Human	Services requesting	various	documents	relating	to	agreements	or	arrangements	between physicians	and	Biomet's	Interpore	Cross	subsidiary	for	the	period	from	1999 through	the	date	of	the	subpoena	and	the	marketing	and	sales	activities associated	with	Interpore	Cross'	spinal	products.	Biomet	is	fully	cooperating	in the	investigation.	We	may	need	to	devote	significant	time	and	resources	to	this inquiry	and	can	give	no	assurances	as	to	its	final	outcome.

# 21. Quarterly	Financial	Information	(Unaudited)

(in	millions,	except	per	share	data)

|  |  | 2015	Quarter	Ended | 2015	Quarter	Ended |  |  | 2014	Quarter	Ended | 2014	Quarter	Ended |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Mar | Jun | Sep | Dec | Mar | Jun | Sep | Dec |
| Net\tsales | $1,134.4 | $1,167.6 | $1,762.2 | $1,933.6 | $1,161.5 | $1,182.9 | $1,106.0 | $1,222.9 |
| Gross\tprofit | 829.1 | 840.3 | \t 1,087.5 | \t 1,102.9 | 826.8 | 833.1 | 789.5 | 888.6 |
| Net\tearnings\tof\tZimmer\tBiomet\tHoldings,\tInc. | 171.4 | (173.6) | 22.2 | 127.0 | 221.0 | 172.4 | 173.1 | 153.8 |
| Earnings\tper\tcommon\tshare |  |  |  |  |  |  |  |  |
| Basic | 1.01 | (1.00) | 0.11 | 0.62 | 1.31 | 1.02 | 1.02 | 0.91 |
| Diluted | 0.99 | (1.00) | 0.11 | 0.62 | 1.29 | 1.01 | 1.01 | 0.89 |

# Item	9. Changes	in	and	Disagreements	with	Accountants	on	Accounting	and	Financial	Disclosure

# None.

# Item	9A. Controls	and	Procedures

# Evaluation	of	Disclosure	Controls	and	Procedures

We	maintain	disclosure	controls	and	procedures	(as	defined	in	Rule	13a- 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	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.	Because of	inherent	limitations,	disclosure	controls	and	procedures,	no	matter	how	well designed	and	operated,	can	provide	only	reasonable,	and	not	absolute,	assurance that	the	objectives	of	disclosure	controls	and	procedures	are	met.

Our	management,	with	the	participation	of	our	Chief	Executive	Officer	and Chief	Financial	Officer,	evaluated	the	effectiveness	of	the	design	and	operation of	our	disclosure	controls	and	procedures.	Based	on	that	evaluation,	our	Chief Executive	Officer	and	Chief	Financial	Officer	concluded	that	as	of December	31,	2015,	the	end	of	the	period	covered	by	this	report,	our	disclosure controls	and	procedures	are	effective	at	a	reasonable	assurance	level.

# Management's	Annual	Report	on	Internal	Control	Over	Financial	Reporting

Our	management's	report	on	internal	control	over	financial	reporting appears	on	page	34	of	this	report	and	is	incorporated	herein	by	reference.

# Remediation	of	Previously	Reported	Material	Weakness

As	discussed	in	our	Quarterly	Report	on	Form	10-Q	for	the	quarter	ended September	30,	2015,	in	the	three	month	period	ended	September	30,	2015,	our management	identified	a	material	weakness	in	our	internal	control	over	financial reporting.	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.	The	material weakness	in	our	internal	control	over	financial	reporting	that

we	identified	was	a	result	of	us	not	enhancing	the	level	of	resources	and processes	necessary	to	analyze	and	determine	the	appropriate	accounting treatment	of	non-routine,	complex	transactions	under	GAAP	commensurate	with the	additional	complexities	existing	subsequent	to	the	Biomet	merger.	As	a	result of	this	material	weakness,	we	inappropriately	accounted	for	the	divestiture	of certain	Biomet	product	lines	and	rights	in	the	three	month	period	ended	June	30, 2015,	and	we	subsequently	revised	our	financial	statements	for	that	period.

As	of	December	31,	2015,	we	have	remediated	the	previously	reported material	weakness	in	our	internal	control	over	financial	reporting.	We	have implemented	the	following	changes	in	our	internal	control	over	financial reporting	that	contributed	to	the	remediation	of	the	material	weakness	described above:

•	we	enhanced	our	processes	for	analyzing	and	determining	the	appropriate accounting	treatment	for	non-routine,	complex	transactions	under	GAAP; •	we	enhanced	our	policies	and	procedures	related	to	analysis	of	non-

routine,	complex	transactions,	including,	but	not	limited	to,	increased

management	oversight;	and

•	we	added	additional,	experienced	resources	to	augment	our	existing corporate	accounting	resources.

Based	on	the	remedial	measures	taken	and	implemented,	our	management has	tested	the	applicable	controls	and	determined	that	they	are	designed	and operating	effectively.	As	a	result,	our	management	has	concluded	that	the material	weakness	described	above	has	been	remediated	as	of	December	31, 2015.

# Changes	in	Internal	Control	Over	Financial	Reporting

As	described	above,	there	were	changes	in	our	internal	control	over financial	reporting	(as	defined	in	Rule	13a-15(f)	of	the	Exchange	Act)	that occurred	during	the	quarter	ended	December	31,	2015	that	have	materially affected,	or	are	reasonably	likely	to	materially	affect,	our	internal	control	over financial	reporting.	Also,	as	previously	noted,	we	completed	our	merger	with Biomet	on	June	24,	2015.	We	are	completing	the	process	of	reviewing	the internal	control	structure	of	Biomet	and	will	make	appropriate	changes	as necessary	as	we	integrate	Biomet	into	our	overall	internal	control	over	financial reporting	process.

ZIMMER	BIOMET	HOLDINGS,	INC. 2015	FORM	10-K	ANNUAL	REPORT

# Item	9B. 	 Other	Information

During	the	fourth	quarter	of	2015,	the	Audit	Committee	of	our	Board	of	Directors	approved	the	engagement	of	PricewaterhouseCoopers	LLP,	our	independent registered	public	accounting	firm,	to	perform	certain	non-audit	services	related	to	certain	tax	matters.	This	disclosure	is	made	pursuant	to	Section	10A(i)(2)	of	the Exchange	Act.

# Item	10. Directors,	Executive	Officers	and	Corporate	Governance

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	3, 2016	(the	"2016	Proxy	Statement").

We	have	adopted	the	Zimmer	Biomet	Code	of	Ethics	for	Chief	Executive	Officer	and	Senior	Financial	Officers	(the	"finance	code	of	ethics"),	a	code	of	ethics	that applies	to	our	Chief	Executive	Officer,	Chief	Financial	Officer,	Chief	Accounting	Officer	and	Corporate	Controller,	and	other	finance	organization	senior	employees. The	finance	code	of	ethics	is	publicly	available	in	the	Investor	Relations	section	of	our	website,	which	may	be	accessed	from	our	homepage	at	www.zimmerbiomet.com or	directly	at	http://investor.zimmerbiomet.com.	If	we	make	any	substantive	amendments	to	the	finance	code	of	ethics	or	grant	any	waiver,	including	any	implicit waiver,	from	a	provision	of	the	code	to	our	Chief	Executive	Officer,	Chief	Financial	Officer,	or	Chief	Accounting	Officer	and	Corporate	Controller,	we	will	disclose	the nature	of	that	amendment	in	the	Investor	Relations	section	of	our	website.

# Item	11. Executive	Compensation

Information	required	by	this	item	is	incorporated	by	reference	from	our	2016	Proxy	Statement.

# Item	12. Security	Ownership	of	Certain	Beneficial	Owners	and	Management	and	Related	Stockholder	Matters

# Item	13. Certain	Relationships	and	Related	Transactions	and	Director	Independence

# Item	14. Principal	Accounting	Fees	and	Services

Information	required	by	this	item	is	incorporated	by	reference	from	of	our	2016	Proxy	Statement.

# PART	IV

# Item	15. Exhibits,	Financial	Statement	Schedules

# (a)	1. Financial	Statements

The	following	consolidated	financial	statements	of	Zimmer	Biomet	Holdings,	Inc.	and	its	subsidiaries	are	set	forth	in	Part	II,	Item	8.

Consolidated	Statements	of	Earnings	for	the	Years	Ended	December	31,	2015,	2014	and	2013

Consolidated	Statements	of	Comprehensive	Income	for	the	Years	Ended	December	31,	2015,	2014	and	2013

Consolidated	Balance	Sheets	as	of	December	31,	2015	and	2014

Consolidated	Statements	of	Stockholders'	Equity	for	the	Years	Ended	December	31,	2015,	2014	and	2013

Consolidated	Statements	of	Cash	Flows	for	the	Years	Ended	December	31,	2015,	2014	and	2013

# 2. Financial	Statement	Schedule

# Schedule	II.	Valuation	and	Qualifying	Accounts

Other	financial	statement	schedules	are	omitted	because	they	are	not	applicable	or	the	required	information	is	shown	in	the	financial	statements	or	the	notes thereto.

# 3. Exhibits

A	list	of	exhibits	required	to	be	filed	as	part	of	this	report	is	set	forth	in	the	Index	to	Exhibits,	which	immediately	precedes	such	exhibits	and	is	incorporated herein	by	reference.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	report	to	be	signed	on	its	behalf	by	the undersigned,	thereunto	duly	authorized.

By: /s/	David	C.	Dvorak

	 David	C.	Dvorak

	 President	and	Chief	Executive	Officer

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	report	has	been	signed	below	by	the	following	persons	on	behalf	of	the	registrant	and	in	the capacities	and	on	the	dates	indicated.

# INDEX	TO	EXHIBITS

10.4* Zimmer	Biomet	Holdings,	Inc.	Executive	Performance	Incentive	Plan,	as	amended	May	7,	2013	and	further	amended	as	of	June	24,	2015 (incorporated	by	reference	to	Exhibit	10.4	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	filed	November	9,	2015)

10.23* Form	of	Restricted	Stock	Unit	Award	Letter	under	the	Zimmer	Biomet	Holdings,	Inc.	Stock	Plan	for	Non-Employee	Directors

10.24* Form	of	Nonqualified	Stock	Option	Award	Letter	under	the	Zimmer	Holdings,	Inc.	2006	Stock	Incentive	Plan	(incorporated	by	reference	to	Exhibit 10.2	to	the	Registrant's	Current	Report	on	Form	8-K	filed	December	13,	2006)

10.25* Form	of	Nonqualified	Stock	Option	Award	Letter	for	Non-U.S.	Employees	under	the	Zimmer	Holdings,	Inc.	2006	Stock	Incentive	Plan	(incorporated by	reference	to	Exhibit	10.3	to	the	Registrant's	Current	Report	on	Form	8-K	filed	December	13,	2006)

ZIMMER	BIOMET	HOLDINGS,	INC. 2015	FORM	10-K	ANNUAL	REPORT Exhibit	No Description† 10.26* Amended	and	Restated	Zimmer	Biomet	Holdings,	Inc.	Deferred	Compensation	Plan	for	Non-Employee	Directors,	as	amended	May	5,	2015	and	further amended	as	of	June	24,	2015	(incorporated	by	reference	to	Exhibit	10.6	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	filed	November	9,	2015)

10.27* Zimmer	Biomet	Deferred	Compensation	Plan	(incorporated	by	reference	to	Exhibit	10.3	to	the	Registrant's	Current	Report	on	Form	8-K	filed	January 7,	2016)

10.28* Zimmer	Biomet	Holdings,	Inc.	2009	Stock	Incentive	Plan,	as	amended	May	7,	2013	and	further	amended	as	of	June	24,	2015	(incorporated	by reference	to	Exhibit	10.3	to	the	Registrant's	Quarterly	Report	on	Form	10-Q	filed	November	9,	2015)

10.29* Form	of	Nonqualified	Stock	Option	Award	Letter	under	the	Zimmer	Biomet	Holdings,	Inc.	2009	Stock	Incentive	Plan

10.30* Form	of	Restricted	Stock	Unit	Award	Letter	(two-year	vesting)	under	the	Zimmer	Holdings,	Inc.	2009	Stock	Incentive	Plan	(incorporated	by	reference to	Exhibit	10.30	to	the	Registrant's	Annual	Report	on	Form	10-K	filed	February	23,	2015)

†	Unless	otherwise	indicated,	exhibits	incorporated	by	reference	herein	were	originally	filed	under	SEC	File	No.	001-16407.

*	Management	contract	or	compensatory	plan	or	arrangement.

# SCHEDULE	II

# ZIMMER	HOLDINGS,	INC.

# VALUATION	AND	QUALIFYING	ACCOUNTS

|  |  | Additions |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Balance\tat | Charged |  | Effects\tof |  | Balance\tat |
|  | Beginning | (Credited) | Deductions | Foreign | Acquired | End\tof |
| Description | of\tPeriod | to\tExpense | to\tReserve | Currency | Allowances | Period |
| Allowance\tfor\tDoubtful\tAccounts: |  |  |  |  |  |  |
| Year\tEnded\tDecember\t31,\t2013 | 22.8 | 1.9 | (1.5) | (0.5) | – | 22.7 |
| Year\tEnded\tDecember\t31,\t2014 | 22.7 | 2.0 | (1.4) | (1.0) | – | 22.3 |
| Year\tEnded\tDecember\t31,\t2015 | 22.3 | 13.5 | (0.4) | (1.3) | – | 34.1 |
| Deferred\tTax\tAsset\tValuation\tAllowances: |  |  |  |  |  |  |
| Year\tEnd\tDecember\t31,\t2013 | 41.3 | 1.5 | (0.1) | – | – | 42.7 |
| Year\tEnd\tDecember\t31,\t2014 | 42.7 | 74.7 | (9.2) | – | 14.6 | 122.8 |
| Year\tEnd\tDecember\t31,\t2015 | 122.8 | (53.7) | (5.6) | (1.6) | 10.8 | 72.7 |



Question: what was the change in total expense net of tax for share based compensation from 2014 to 2015 in millions?
Calculation:   expense_change = 31.9 - 33.9
 answer = expense_change
Answer: -2