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 is not appropriate to recognize the cumulative corrections in this period. Consequently, we have 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-Q (in millions, except per share amounts).

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


	Three Months Ended March 31, 2015									Three Months Ended June 30, 2015									Six Months Ended June 30, 2015
	As Reported			Adjustment			As Revised			As Reported			Adjustment			As Revised			As Reported			Adjustment			As Revised
Cost of products sold, excluding intangible asset amortization	$	278.7		$	6.2		$	284.9		$	290.5		$	3.8		$	294.3		$	569.2		$	10.0		$	579.2
Research and development		48.4			(0.1	)		48.3			51.4			(0.1	)		51.3			99.8			(0.2	)		99.6
Selling, general and administrative		425.0			(0.9	)		424.1			445.1			(0.9	)		444.2			870.1			(1.8	)		868.3
Special items		87.0			(0.2	)		86.8			469.4			(0.2	)		469.2			556.4			(0.4	)		556.0
Operating expenses		859.5			5.0			864.5			1,297.1			2.6			1,299.7			2,156.6			7.6			2,164.2
Other (expense), net		(22.6	)		—			(22.6	)		(4.0	)		(22.3	)		(26.3	)		(26.6	)		(22.3	)		(48.9	)
Earnings (loss) before income taxes		231.8			(5.0	)		226.8			(213.7	)		(24.9	)		(238.6	)		18.1			(29.9	)		(11.8	)
Provision (benefit) for income taxes		55.0			0.7			55.7			(55.5	)		(9.3	)		(64.8	)		(0.5	)		(8.6	)		(9.1	)
Net earnings (loss)		176.8			(5.7	)		171.1			(158.2	)		(15.6	)		(173.8	)		18.6			(21.3	)		(2.7	)
Net Earnings (Loss) of Zimmer Biomet Holdings, Inc.		177.1			(5.7	)		171.4			(158.0	)		(15.6	)		(173.6	)		19.1			(21.3	)		(2.2	)

Weighted Average Common Shares Outstanding—Diluted																				174.2			(2.7	)		171.5
Earnings (Loss) Per Common Share—Basic	$	1.04		$	(0.03	)	$	1.01		$	(0.91	)	$	(0.09	)	$	(1.00	)	$	0.11		$	(0.12	)	$	(0.01	)
Earnings (Loss) Per Common Share—Diluted	$	1.02		$	(0.03	)	$	0.99		$	(0.91	)	$	(0.09	)	$	(1.00	)	$	0.11		$	(0.12	)	$	(0.01	)

Foreign currency cumulative translation adjustments	$	(152.7	)	$	2.8		$	(149.9	)	$	27.8		$	(17.5	)	$	10.3		$	(124.9	)	$	(14.7	)	$	(139.6	)
Total other comprehensive loss		(117.4	)		2.8			(114.6	)		(9.0	)		(17.5	)		(26.5	)		(126.4	)		(14.7	)		(141.1	)
Comprehensive Income (Loss)		59.4			(2.9	)		56.5			(167.2	)		(33.1	)		(200.3	)		(107.8	)		(36.0	)		(143.8	)
Comprehensive Income (Loss) attributable to Zimmer Biomet Holdings, Inc.		59.2			(2.9	)		56.3			(167.0	)		(33.1	)		(200.1	)		(107.8	)		(36.0	)		(143.8	)


	Three Months Ended September 30, 2014									Nine Months Ended September 30, 2014
	As Reported			Adjustment			As Revised			As Reported			Adjustment			As Revised
Cost of products sold, excluding intangible asset amortization	$	296.7		$	(0.8	)	$	295.9		$	932.0		$	(3.0	)	$	929.0
Research and development		46.0			(0.1	)		45.9			141.4			(0.3	)		141.1
Selling, general and administrative		423.8			(1.0	)		422.8			1,304.4			7.1			1,311.5
Special items		66.4			(0.5	)		65.9			165.3			(1.0	)		164.3
Operating expenses		853.2			(2.4	)		850.8			2,636.6			2.8			2,639.4
Earnings before income taxes		227.4			2.4			229.8			749.7			(2.8	)		746.9
Provision for income taxes		62.1			(5.2	)		56.9			187.2			(5.8	)		181.4
Net earnings		165.3			7.6			172.9			562.5			3.0			565.5
Net Earnings of Zimmer Biomet Holdings, Inc.		165.5			7.6			173.1			563.5			3.0			566.5

Earnings Per Common Share—Basic	$	0.98		$	0.04		$	1.02		$	3.34		$	0.02		$	3.36
Earnings Per Common Share—Diluted	$	0.96		$	0.05		$	1.01		$	3.29		$	0.01		$	3.30

Foreign currency cumulative translation adjustments	$	(134.6	)	$	2.2		$	(132.4	)	$	(131.0	)	$	2.2		$	(128.8	)
Total other comprehensive loss		(87.6	)		2.2			(85.4	)		(98.6	)		2.2			(96.4	)
Comprehensive Income		77.7			9.8			87.5			463.9			5.2			469.1
Comprehensive Income attributable to Zimmer Biomet Holdings, Inc.		77.8			9.8			87.6			464.8			5.2			470.0

Revisions to the Condensed Consolidated Balance Sheets


	December 31, 2014							March 31, 2015									June 30, 2015
	As Reported		Adjustment			As Revised		As Reported			Adjustment			As Revised			As Reported			Adjustment			As Revised
Inventories	$	1,169.0	$	24.3		$	1,193.3	$	1,217.0		$	20.0		$	1,237.0		$	2,441.4		$	(2.3	)	$	2,439.1
Total Current Assets		4,289.0		24.3			4,313.3		11,917.2			20.0			11,937.2			6,751.5			(2.3	)		6,749.2
Property, plant and equipment, net		1,288.8		(3.5	)		1,285.3		1,300.7			(3.3	)		1,297.4			1,998.6			(3.0	)		1,995.6
Goodwill		2,514.2		—			2,514.2		2,417.0			—			2,417.0			7,730.7			(22.3	)		7,708.4
Other assets		939.2		2.5			941.7		976.9			2.4			979.3			781.7			2.4			784.1
Total Assets		9,634.7		23.3			9,658.0		17,190.1			19.1			17,209.2			27,204.0			(25.2	)		27,178.8
Accounts payable		167.1		(21.9	)		145.2		174.9			(23.8	)		151.1			268.2			(25.7	)		242.5
Income taxes payable		72.4		7.9			80.3		57.5			8.6			66.1			134.0			7.7			141.7
Total Current Liabilities		1,038.0		(14.0	)		1,024.0		908.7			(15.2	)		893.5			2,163.1			(18.0	)		2,145.1
Long-term income tax payable		181.7		8.2			189.9		181.9			8.2			190.1			358.8			8.2			367.0
Deferred income taxes		45.9		—			45.9		51.9			—			51.9			2,363.2			(8.3	)		2,354.9
Total Liabilities		3,112.1		(5.8	)		3,106.3		10,607.1			(7.0	)		10,600.1			17,078.1			(18.1	)		17,060.0
Retained earnings		8,285.2		76.9			8,362.1		8,426.8			71.1			8,497.9			8,232.3			55.4			8,287.7
Accumulated other comprehensive income		85.9		(47.8	)		38.1		(31.5	)		(45.0	)		(76.5	)		(40.5	)		(62.5	)		(103.0	)
Total Zimmer Biomet Holdings, Inc. stockholders’ equity		6,520.8		29.1			6,549.9		6,581.0			26.1			6,607.1			10,124.1			(7.1	)		10,117.0
Total Stockholders Equity		6,522.6		29.1			6,551.7		6,583.0			26.1			6,609.1			10,125.9			(7.1	)		10,118.8

Revisions to the Condensed Consolidated Statements of Cash Flows


	Three Months Ended March 31, 2015									Six Months Ended June 30, 2015
	As Reported			Adjustments			As Revised			As Reported			Adjustments			As Revised
Net earnings	$	176.8		$	(5.7	)	$	171.1		$	18.6		$	(21.3	)	$	(2.7	)
(Gain) loss on divestiture of assets		—			—			—			(18.9	)		22.3			3.4
Changes in operating assets and liabilities, net of effect of acquisitions:
Income taxes		(13.3	)		0.7			(12.6	)		30.5			(8.6	)		21.9
Inventories		(62.2	)		4.3			(57.9	)		(149.9	)		9.1			(140.8	)
Accounts payable and accrued expenses		(149.5	)		(1.9	)		(151.4	)		95.8			(3.8	)		92.0
Other assets and liabilities		22.2			2.6			24.8			(87.8	)		2.3			(85.5	)


	Nine Months Ended September 30, 2014
	As Reported			Adjustments			As Revised
Net earnings	$	562.5		$	3.0		$	565.5
Changes in operating assets and liabilities, net of effect of acquisitions:
Income taxes		(134.3	)		(5.9	)		(140.2	)
Inventories		(134.2	)		1.5			(132.7	)
Accounts payable and accrued expenses		6.5			(9.4	)		(2.9	)
Other assets and liabilities		92.2			10.8			103.0