Zimmer Biomet Holdings, Inc. Reports Third Quarter 2015 Financial Results

Zimmer Biomet Holdings, Inc. (NYSE and SIX: ZBH) today reported financial results for the quarter ended September 30, 2015.  The Company reported third quarter net sales of $1.76 billion, an increase of 59.3% as reported.  The increase in the quarter was 0.7% on an adjusted pro forma, constant currency basis over the same prior year period.  Reported diluted earnings per share for the quarter were $0.11and adjusted earnings per share were $1.64, an increase of 13.1% over the prior year period.

“We are pleased with the achievements of our global teams during Zimmer Biomet’s first quarter as a combined company,” said David Dvorak, President and CEO of Zimmer Biomet. “In an operating period marked by significant progress in the execution of our sales channel integration, we generated sequential top-line improvement and strong earnings growth.  As we exit this year and progress through 2016, we are well positioned to continue improving revenue growth and delivering on our synergy commitments.”

Net earnings for the third quarter were $22.2 million on a reported basis and $338.4 million on an adjusted basis, an increase of 35.5% adjusted over the prior year period.  Operating cash flow for the third quarter was $151.3 million.

During the quarter, the Company paid $37.6 million in dividends, or $0.22 per share.

Additionally, the Company is reinstating its share repurchase program.  The existing program was temporarily suspended in April 2014 in anticipation of the Biomet transaction.  Currently, $599.5 million of share repurchase authorization remains available under this program.

Guidance  
The Company updated its full-year 2015 sales and adjusted earnings per share guidance.  Full-year 2015 constant currency revenue, relative to comparable adjusted pro forma 2014 revenue, is now expected to increase between 1.0% and 1.5%.  Previously, the Company had expected full-year constant currency revenue to increase between 1.5% and 2.0%.  The Company expects foreign currency translation to decrease revenues by approximately 5.75% for the full year, resulting in reported revenue decreasing between 4.25% and 4.75% when compared to adjusted pro forma 2014 revenue for the comparable period.

The Company now expects full-year 2015 adjusted earnings per share to be in a range of $6.83 to $6.87.  Previously, the Company estimated full-year 2015 adjusted earnings per share to be in a range of $6.65 to $6.80.

Zimmer Biomet’s increased earnings per share guidance is due, in part, to the Company’s outperformance in the third quarter in capturing operating synergies associated with the merger.  The Company now forecasts net synergies of $155.0 million within the first 12 months post-closing, a $20.0 million increase over the previous guidance.

Conference Call  
The Company will conduct its third quarter 2015 investor conference call today, October 29, 2015, at 8:00 a.m. Eastern Time.  The live audio webcast can be accessed via Zimmer Biomet’s Investor Relations website at http://investor.zimmerbiomet.com.  It will be archived for replay following the conference call.

Individuals in the U.S. and Canada who wish to dial into the conference call may do so by dialing (877) 941-1227 and entering conference ID 4696683.  For a complete listing of international toll-free and local numbers, please visit http://investor.zimmerbiomet.com.  A digital recording will be available 24 hours after the completion of the conference call, from October 30, 2015 to November 29, 2015.  To access the recording, U.S. and Canada callers should dial (800) 406-7325 and enter the Access Code ID 4696670.  International callers should dial +1 (303) 590-3030.

Sales Tables  
The following sales table provides results by geographic segment and product category, as well as the percentage change compared to the prior year quarter, on a reported basis, a pro forma reported basis, and an adjusted pro forma constant currency basis.

About the Company  
Founded in 1927 and headquartered in Warsaw, Indiana, 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.

We have operations in more than 25 countries around the world and sell products in more than 100 countries.  For more information, visit www.zimmerbiomet.com, or follow Zimmer Biomet on Twitter at www.twitter.com/zimmerbiomet.

Website Information 
We routinely post important information for investors on our website, www.zimmerbiomet.com, in the “Investor Relations” section.  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, SECfilings, public conference calls, presentations and webcasts.  The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this document.

Note on Non-GAAP Financial Measures  
Adjusted earnings per share and adjusted net earnings exclude the effect of inventory step-up and other inventory and manufacturing related charges, certain claims, special items, intangible asset amortization, financing and other expenses related to the Biomet merger and certain tax adjustments.  Included in special items are acquisition and integration costs and asset impairment charges related to acquisitions, as well as employee termination benefits, consulting and professional fees, certain litigation matters, dedicated personnel expenses, certain contract terminations and asset impairment charges connected with global restructuring and operational excellence initiatives.  “Pro forma” revenue refers to revenue for prior year periods adjusted to reflect the inclusion of Biomet revenue on a GAAP (reported) basis.  “Adjusted pro forma” revenue refers to pro forma revenue adjusted to reflect the impact of the previously announced divestiture remedies.  “Constant currency” refers to any financial measure that excludes the effect of changes in foreign currency exchange rates.  Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure are included in this press release.

Updated Quarter Closing Convention   
Beginning with the three months ended March 31, 2015, we have changed our quarter-end closing convention for the majority of our international reporting units.  As a consequence, our results of operations for the nine months ended September 30, 2015 include up to three more billing days for such international reporting units than were included in our results of operations for the nine months ended September 30, 2014.  We have not restated the presentation of our 2014 financial statements to conform to this change of closing convention because the impact of the change is not material to the results of operations or to the comparisons between the 2015 and 2014 periods.