Zimmer Biomet Combined

Zimmer Biomet: Reporting Changes

and Selected Combined Historical

Financials

Cautionary Statement Regarding Forward-Looking Statements

This communication contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of

1995. Forward-looking statements may be identified by the use of forward-looking terms such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,”

“estimates,” “projects,” “assumes,” “guides,” “targets,” “forecasts,” and “seeks” or the negative of such terms or other variations on such terms or comparable

terminology. Such forward-looking statements include, but are not limited to, statements about the benefits of the merger between Zimmer and LVB Acquisition,

Inc. (“LVB”), the parent company of Biomet, including future financial and operating results, the combined company’s plans, objectives, expectations and

intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of management and are

subject to significant risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not

limited to: the possibility that the anticipated synergies and other benefits from the merger will not be realized, or will not be realized within the expected time

periods; the risks and uncertainties related to our ability to successfully integrate the operations, products, employees and distributors of the legacy companies;

the effect of the potential disruption of management’s attention from ongoing business operations due to integration matters related to the merger; the effect of

the merger on our relationships with customers, vendors and lenders and on our operating results and businesses generally; Biomet’s compliance with its

Deferred Prosecution Agreement through March 2016; the outcome of government investigations; price and product competition; the success of our quality and

operational excellence initiatives; changes in customer demand for our products and services caused by demographic changes or other factors; the impact of

healthcare reform measures, including the impact of the U.S. excise tax on medical devices; reductions in reimbursement levels by third-party payors and cost

containment efforts of healthcare purchasing organizations; dependence on new product development, technological advances and innovation; shifts in the

product category or regional sales mix of our products and services; supply and prices of raw materials and products; control of costs and expenses; the ability

to obtain and maintain adequate intellectual property protection; the ability to form and implement alliances; challenges relating to changes in and compliance

with governmental laws and regulations, including regulations of the U.S. Food and Drug Administration (the “FDA”) and foreign government regulators, such as

more stringent requirements for regulatory clearance of products; the ability to remediate matters identified in any inspectional observations or warning letters

issued by the FDA; changes in tax obligations arising from tax reform measures or examinations by tax authorities; product liability and intellectual property

litigation losses; the ability to retain the independent agents and distributors who market our products; dependence on a limited number of suppliers for key raw

materials and outsourced activities; changes in general industry and market conditions, including domestic and international growth rates and general domestic

and international economic conditions, including interest rate and currency exchange rate fluctuations; and the impact of the ongoing economic uncertainty

affecting countries in the Euro zone on the ability to collect accounts receivable in affected countries. For a further list and description of such risks and

uncertainties, see our periodic reports filed with the U.S. Securities and Exchange Commission (the “SEC”). Copies of these filings, as well as subsequent

filings, are available online at www.sec.gov, www.zimmerbiomet.com or on request from us. We disclaim any intention or obligation to update or revise any

forward-looking statements, whether as a result of new information, future events or otherwise, except as may be set forth in our periodic reports. Readers of

this communication are cautioned not to place undue reliance on these forward-looking statements, since, while management believes 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.

This cautionary statement is applicable to all forward-looking statements contained in this communication.

2

Basis of Preparation of Certain Information

Certain information contained in this presentation includes calculations and amounts that have been prepared internally and have not been

reviewed or audited by an independent registered public accounting firm, including, but not limited to, the sections entitled “Selected Combined

Historical Financials” and “Appendix – Reclassification Adjustments” (collectively, the “Combined Financial Information”). Use of different

methods for preparing, calculating or presenting this information could lead to different results and such differences may be material.

The Combined Financial Information is presented strictly for illustrative purposes. It does not and is not intended to comply with Article 11 of

Regulation S-X promulgated by the SEC in respect of pro forma financial information. The Combined Financial Information should not be viewed

as a substitute for full financial statements prepared in accordance with generally accepted accounting principles in the United States or

Regulation S-X, as it could differ, including materially, from pro forma financial statements presented in accordance therewith. The Combined

Financial Information should be read in conjunction with the accompanying notes and assumptions, as well as the historical consolidated

financial statements of each of Zimmer and Biomet, contained in their related filings. The Combined Financial Information is based on a

December 31 year-end and has been prepared by using the same monthly periods for Zimmer and Biomet. Prior to the merger, Biomet had a

fiscal year that ended on May 31. As such, the historical Biomet information included and presented in the Combined Financial Information does

not correspond to the quarterly information reported in Biomet’s historical financial statements contained in its periodic reports filed with the SEC.

The Combined Financial Information is unaudited and is based on available information and certain assumptions. Actual results may differ

materially from the assumptions used to prepare the Combined Financial Information. The Combined Financial Information is not necessarily

indicative of the combined results that would have been realized if the Biomet merger had occurred prior to or during the periods presented, nor

is it meant to be indicative of any anticipated combined future results of operations or financial position of Zimmer Biomet.

Note on Non-GAAP Financial Measures

There are non-GAAP measures used in this presentation, including Combined Net Sales Less Divestitures and Adjusted Earnings Before

Interest and Taxes (“EBIT”). The term “adjusted” refers to operating performance measures that exclude inventory step-up and other inventory

and manufacturing related charges, 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 prior and

pending 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.

Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure are included in this presentation.

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Table of Contents

• Revenue Reporting Changes

• Product Categories – Legacy Zimmer Transitions

• Product Categories – Legacy Biomet Transitions

• Geographic Segment Transitions

• Selected Combined Historical Financials

• Appendix – Reclassification Adjustments

4

Revenue Reporting Changes

– Four legacy Zimmer product categories will remain the same (Knees, Hips, Spine, Dental);

new product category, S.E.T. – Surgical, Sports Medicine, Foot and Ankle, Extremities and

Trauma - will be created; and a stand-alone Other category will be established (A)

• Legacy Zimmer changes:

– Creation of S.E.T.

– Early intervention moved from Knees to S.E.T.

– Splitting Other from Surgical

• Legacy Biomet changes:

– Bone Healing moved from Spine, Bone Healing & CMF into Other

– Biologics (non-Spine/Dental) moved from Cement, Biologics, and Other into S.E.T.

– Blade sales moved from respective segments into Surgical (within new S.E.T.)

– Legacy Zimmer geographic segments will remain the same: Americas, Europe, Middle East

& Africa (EMEA) and Asia Pacific

– Legacy Biomet changes from three geographic segments – U.S., Europe, and International:

• Canada / Latin America (LATAM) moved from International into Americas

• Europe included in EMEA

• Balance of International included in Asia Pacific

Product Categories

Geographic Segments

(A) “Other” includes Bone Cement, Accelero, CAS, Forgings

5

Product Categories – Legacy Zimmer Transitions Z

imm

er

Knees

Hips

Extremities

Trauma

Dental

Spine

Surgical & Other Z

imm

er

Bio

me

t

Knees

Hips

S.E.T.

Dental

Spine & CMF

Other

• Early Intervention moves from Knees to S.E.T. (Surgical, Sports Medicine, Foot and Ankle, Extremities, Trauma)

• Extremities, Trauma, Surgical move to S.E.T.

• Spine now includes combined Spine, related Biologics

• Other splits from Surgical as a stand-alone category

6

Product Categories – Legacy Biomet Transitions B

iom

et

Knees

Hips

S.E.T.

Dental

Spine, Bone Healing & CMF

Cement, Biologics & Other

Zim

me

r B

iom

et

Knees

Hips

S.E.T.

Dental

Spine & CMF

Other

• Bone Healing moved from Spine, Bone Healing & CMF to Other

• Cement moved from Cement, Biologics & Other to Other

• Non-Spine/Dental Biologics moved from Cement, Biologics & Other to S.E.T.

• S.E.T. previously defined as Sports, Extremities and Trauma

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Geographic Segment Transitions

Americas [U.S., Canada, LATAM]

EMEA [EMEA, Middle East & Africa]

Asia Pacific [Australia, New Zealand, China, India, Japan,

Singapore & Rest of Asia]

Legacy Zimmer and Zimmer

Biomet Segments

United States

Europe

International [Canada, LATAM, Asia Pacific]

Legacy Biomet Segments

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Selected Combined Historical Financials

Unaudited

9

Combined Historical Revenue Growth* Three Month Periods Ended (Unaudited)

*Product categories and geographic segments reflect planned Zimmer Biomet reporting commencing in Q3 2015

YoY Growth % (Ex. Fx.)

31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 30-Jun

Knees 5.0 % 3.1 % 5.1 % 0.8 % 3.8 % 0.6 %

Hips 2.3 1.4 2.9 1.7 3.3 (0.9)

S.E.T. 5.4 2.0 3.0 3.7 5.9 (1.7)

Spine & CMF 14.7 14.7 18.5 10.0 4.3 (2.0)

Dental 2.5 (1.5) (0.3) 4.5 (3.6) (0.7)

Other 2.4 4.8 (0.3) (3.4) (4.3) (3.5)

Consolidated 4.8 % 3.1 % 4.7 % 2.4 % 3.3 % (0.4) %

YoY Growth % (Ex. Fx.)

31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 30-Jun

Americas 3.8 % 1.5 % 4.0 % (0.1) % 1.3 % 1.0 %

EMEA 5.0 4.7 4.8 4.6 5.8 (2.3)

Asia Pacific 8.7 7.5 7.4 9.0 6.6 (2.4)

Consolidated 4.8 % 3.1 % 4.7 % 2.4 % 3.3 % (0.4) %

2014 2015

20152014

10

Combined Historical Net Sales Reconciliation of Combined Net Sales to Combined Net Sales less Divestitures

11

Three months ended

($ in millions) 31-Mar 30-Jun 30-Sep 31-Dec Full Year 31-Mar 30-Jun

Combined net sales 2,001.2$ 2,016.6$ 1,888.4$ 2,059.0$ 7,965.2$ 1,941.8$ 1,892.9$

Sales from divestitures 27.7 26.7 26.2 26.7 107.2 27.3 25.8

Combined net sales less divestitures 1,973.5$ 1,989.9$ 1,862.2$ 2,032.3$ 7,857.9$ 1,914.5$ 1,867.1$

2014 2015

Combined Historical Statement of Earnings* Three Month Periods Ended (Unaudited)

1 The term "adjusted" refers to operating performance measures that exclude inventory step-up and other inventory and manufacturing related charges, special items, intangible asset amortization, certain claims, financing and other expenses related to the Biomet

merger. Included in special items are acquisition and integration costs and asset impairment charges related to prior and pending 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.

* See appendix – Reclassification Adjustments for information on the adjustments that were applied in preparation of this data

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2015

($ in millions) 31-Mar 30-Jun 30-Sep 31-Dec Full Year 31-Mar

Net sales 2,001.2$ 2,016.6$ 1,888.4$ 2,059.0$ 7,965.2$ 1,941.8$

Cost of products sold 526.6 535.5 476.4 503.5 2,042.0 463.8

Gross profit 1,474.6 1,481.1 1,412.0 1,555.5 5,923.2 1,478.0

Research and development 92.0 95.0 88.0 88.1 363.1 89.2

Selling, general, and administrative 809.9 806.3 781.8 798.1 3,196.1 758.3

Intangible asset amortization 113.1 93.6 92.5 99.7 398.9 89.2

Certain claims 81.2 27.9 5.8 (45.1) 69.8 (9.7)

Special items 74.3 95.0 96.9 219.2 485.4 121.2

Operating expenses 1,170.5 1,117.8 1,065.0 1,160.0 4,513.3 1,048.2

Operating profit 304.1 363.3 347.0 395.5 1,409.8 429.8

Non-operating expenses 3.5 19.1 16.7 22.1 61.4 28.6

Earnings before interest and taxes (EBIT) 300.6$ 344.2$ 330.3$ 373.4$ 1,348.4$ 401.2$

Reconciliation of EBIT to Adjusted EBIT

Inventory step-up and other inventory and mfg. related charges 35.4 28.0 12.2 7.2 82.8 5.5

Intangible asset amortization 113.1 93.6 92.5 99.7 398.9 89.2

Certain claims 81.2 27.9 5.8 (45.1) 69.8 (9.7)

Special Items 74.3 95.0 96.9 219.2 485.4 121.2

Other expenses on Biomet merger financing - 10.0 10.4 19.2 39.6 19.5

1Adjusted EBIT 604.6$ 598.7$ 548.1$ 673.6$ 2,424.9$ 626.9$

Adjusted Margin Analysis (% of sales)

Gross margin 75.5 % 74.8 % 75.4 % 75.9 % 75.4 % 76.4 %

Research and development 4.6 4.7 4.7 4.3 4.6 4.6

Selling, general, and administrative 40.5 40.0 41.4 38.8 40.1 39.1

Operating margin 30.4 30.1 29.4 32.9 30.7 32.8

Adjusted EBIT 30.2 29.7 29.0 32.7 30.4 32.3

2014

Appendix – Reclassification Adjustments

Unaudited

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Combined Historical Statement of Earnings Three Month Period Ended March 31, 2014 (Unaudited)

($ in millions)

Legacy

Zimmer

Legacy

Biomet

Reclassification

Adjustments

Reclassification

Reference

Zimmer Biomet

Combined

Net sales 1,161.5$ 839.7$ 2,001.2$ Cost of products sold 305.4 330.7 (109.5) 526.6

(29.1) A2.4 B

(81.2) D(1.6) E

Gross profit 856.1 509.0 109.5 1,474.6 Research and development 47.5 44.6 (0.1) 92.0

(0.1) B

Selling, general, and administrative 464.3 376.4 (30.8) 809.9 29.1 A

(30.7) B(29.2) C

Intangible asset amortization 83.9 29.2 C 113.1 Certain claims 81.2 D 81.2 Special items 45.9 - 28.4 B 74.3

Operating expenses 557.7 504.9 107.9 1,170.5

Operating profit 298.4 4.1 1.6 304.1 Non-operating expenses - 1.9 1.6 E 3.5

EBIT 298.4$ 2.2$ -$ 300.6$

A. Reclassify legacy Biomet distribution and product l iability to reflect legacy Zimmer policy

B. Reclassify legacy Biomet adjusted one-time expenses to special Items

C. Reclassify legacy Zimmer intangible amortization from selling, general, and administrative expenses

D. Reclassify legacy Biomet litigation expense and recoveries on "metal-on-metal" product l iability to certain claims

E. Reclassify legacy Zimmer foreign exchange remeasurement from operating profit to other income or expenses

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Combined Historical Statement of Earnings Three Month Period Ended June 30, 2014 (Unaudited)

($ in millions)

Legacy

Zimmer

Legacy

Biomet

Reclassification

Adjustments

Reclassification

Reference

Zimmer Biomet

Combined

Net sales 1,182.9$ 833.7$ 2,016.6$

Cost of products sold 333.2 239.2 (36.9) 535.5 (31.5) A

2.2 B(6.1) D(1.5) E


(0.7) B


(31.8) B(21.7) C

Intangible asset amortization 71.9 21.7 C 93.6 Certain claims 21.8 6.1 D 27.9 Special items 64.7 - 30.3 B 95.0


Operating profit 259.3 102.5 1.5 363.3 Non-operating expenses 10.0 7.6 1.5 E 19.1

EBIT 249.3$ 94.9$ -$ 344.2$






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Combined Historical Statement of Earnings Three Month Period Ended September 30, 2014 (Unaudited)

($ in millions)Legacy

Zimmer

Legacy

Biomet

Reclassification

Adjustments

Reclassification

Reference

Zimmer Biomet

Combined


(29.0) A(2.0) B(5.8) D(1.7) E


(0.5) B


(27.5) B(21.0) C

Intangible asset amortization 71.5 21.0 C 92.5 Certain claims 5.8 D 5.8 Special items 66.9 - 30.0 B 96.9



EBIT 240.7$ 89.6$ -$ 330.3$






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Combined Historical Statement of Earnings Three Month Period Ended December 31, 2014 (Unaudited)


Zimmer

Legacy

Biomet

Reclassification

Adjustments

Reclassification

Reference

Zimmer Biomet

Combined

Net sales 1,222.9$ 836.1$ 2,059.0$ Cost of products sold 312.9 181.3 9.3 503.5

(31.7) A(2.0) B

45.1 D(2.1) E

Gross profit 910.0 654.8 (9.3) 1,555.5 Research and development 46.6 41.8 (0.3) 88.1

(0.3) B


(38.2) B(20.5) C

Intangible asset amortization 79.2 20.5 C 99.7 Certain claims (45.1) D (45.1) Special items 178.7 - 40.5 B 219.2

Operating expenses 684.2 487.2 (11.4) 1,160.0


EBIT 206.7$ 166.7$ -$ 373.4$






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Combined Historical Statement of Earnings Three Month Period Ended March 31, 2015 (Unaudited)


Zimmer

Legacy

Biomet

Reclassification

Adjustments

Reclassification

Reference

Zimmer Biomet

Combined


(26.3) A9.7 D

Gross profit 855.7 605.7 16.6 1,478.0 Research and development 48.4 40.8 89.2


(34.2) B

Intangible asset amortization 20.4 68.8 89.2 Certain claims (9.7) D (9.7) Special items 87.0 - 34.2 B 121.2


Operating profit 274.9 154.9 - 429.8 Non-operating expenses 22.6 6.0 - 28.6

EBIT 252.3$ 148.9$ -$ 401.2$






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Documents

Zimmer Biomet Combined