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, 2013
	As Reported			Adjustments			As Revised			As Reported			Adjustments			As Revised
Cost of products sold, excluding intangible asset amortization	$	1,242.7		$	0.1		$	1,242.8		$	1,280.1		$	(13.4	)	$	1,266.7
Research and development		187.9			(0.5	)		187.4			203.4			(0.4	)		203.0
Selling, general and administrative		1,744.4			6.3			1,750.7			1,758.8			(9.5	)		1,749.3
Special items		342.5			(1.4	)		341.1			214.0			(3.7	)		210.3
Operating expenses		3,631.5			4.5			3,636.0			3,581.8			(27.0	)		3,554.8
Earnings before income taxes		943.9			(4.5	)		939.4			981.1			27.0			1,008.1
Provision for income taxes		224.9			(4.7	)		220.2			221.9			7.6			229.5
Net earnings		719.0			0.2			719.2			759.2			19.4			778.6
Net Earnings of Zimmer Holdings, Inc.	$	720.1		$	0.2		$	720.3		$	761.0		$	19.4		$	780.4
Earnings Per Common Share - Basic	$	4.26		$	–		$	4.26		$	4.49		$	0.11		$	4.60
Earnings Per Common Share - Diluted	$	4.19		$	0.01		$	4.20		$	4.43		$	0.11		$	4.54
Foreign currency cumulative translation adjustments	$	(241.5	)	$	18.4		$	(223.1	)	$	(44.4	)	$	9.4		$	(35.0	)
Total Other Comprehensive Income (Loss)		(281.2	)		18.4			(262.8	)		23.2			9.4			32.6
Comprehensive Income		437.8			18.6			456.4			782.4			28.8			811.2
Comprehensive Income Attributable to Zimmer Holdings, Inc.		438.8			18.6			457.4			784.4			28.8			813.2

Revisions to the Consolidated Balance Sheet


	December 31, 2014
	As Reported		Adjustments			As Revised
Inventories	$	1,169.0	$	24.3		$	1,193.3
Total Current Assets		4,289.0		24.3			4,313.3
Property, plant and equipment, net		1,288.8		(3.5	)		1,285.3
Other assets		939.2		2.5			941.7
Total Assets		9,634.7		23.3			9,658.0
Accounts payable		167.1		(21.9	)		145.2
Income taxes payable		72.4		7.9			80.3
Other current liabilities		798.5		–			798.5
Total Current Liabilities		1,038.0		(14.0	)		1,024.0
Long-term income tax payable		181.7		8.2			189.9
Total Liabilities		3,112.1		(5.8	)		3,106.3
Retained earnings		8,285.2		76.9			8,362.1
Accumulated other comprehensive income		85.9		(47.8	)		38.1
Total Zimmer Holdings, Inc. stockholders’ equity		6,520.8		29.1			6,549.9
Total Stockholders’ Equity		6,522.6		29.1			6,551.7
Total Liabilities and Stockholders’ Equity		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, 2013
	As Reported			Adjustments			As Revised			As Reported			Adjustments			As Revised
Net earnings	$	719.0		$	0.2		$	719.2		$	759.2		$	19.4		$	778.6
Deferred income tax provision		(84.2	)		(6.3	)		(90.5	)		(126.2	)		–			(126.2	)
Changes in operating assets and liabilities, net of effect of acquisitions:
Income taxes payable		(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 payable and accrued expenses		120.1			(11.7	)		108.4			38.3			(4.7	)		33.6
Other assets and liabilities		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.