e10vq

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

ZIMMER HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

345 East Main Street, Warsaw, IN 46580
(Address of principal executive offices)
Telephone: (574) 267-6131

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 [ x ] No [ ]

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [ x ] No [ ]

At October 31, 2003, there were 241,823,745 shares outstanding of the Registrant’s $0.01 par value Common Stock.


Part I — Financial Information			Page

Item 1.
	Financial Statements
		Consolidated Statements of Earnings for the Three and Nine Months Ended September 30, 2003 and 2002	3
		Consolidated Balance Sheets — September 30, 2003 and December 31, 2002	4
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002	5
		Notes to Interim Consolidated Financial Statements	6
Item 2.
	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3.
	Quantitative and Qualitative Disclosures About Market Risk		24
Item 4.
	Controls and Procedures		24
Part II — Other Information
	There is no information required to be reported under any items except those indicated below.
Item 1.
	Legal Proceedings		25
Item 4.
	Submission of Matters to a Vote of Security Holders		25
Item 6.
	Exhibits and Reports on Form 8-K		25
Signatures			27

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in millions, except per share amounts, unaudited)


			Three Months Ended				Nine Months Ended
			September 30				September 30

			2003		2002		2003		2002

Net Sales			$	398.2	$	337.5	$	1,199.4	$	1,002.2
Cost of products sold				96.8		85.1		292.1		251.1

Gross Profit				301.4		252.4		907.3		751.1

Research and development				24.4		20.6		68.5		58.9
Selling, general and administrative				146.8		133.7		450.4		402.4
Acquisition and integration				1.7		—		3.2		—

		Operating expenses		172.9		154.3		522.1		461.3

Operating Profit				128.5		98.1		385.2		289.8
Interest expense				0.7		3.0		3.0		9.9

Earnings before income taxes and cumulative effect of change in accounting principle				127.8		95.1		382.2		279.9
Provision for income taxes				42.8		30.0		128.0		94.3

Earnings before cumulative effect of change in accounting principle				85.0		65.1		254.2		185.6
Cumulative effect of change in accounting principle, net of tax				—		—		55.1		—

Net Earnings			$	85.0	$	65.1	$	309.3	$	185.6

Earnings Per Common Share — Basic
	Earnings before cumulative effect of change in accounting principle		$	0.43	$	0.33	$	1.30	$	0.96
	Cumulative effect of change in accounting principle, net of tax			—		—		0.28		—

	Earnings Per Common Share — Basic		$	0.43	$	0.33	$	1.58	$	0.96

Earnings Per Common Share — Diluted
	Earnings before cumulative effect of change in accounting principle		$	0.43	$	0.33	$	1.28	$	0.95
	Cumulative effect of change in accounting principle, net of tax			—		—		0.27		—

	Earnings Per Common Share — Diluted		$	0.43	$	0.33	$	1.55	$	0.95

Pro Forma Amounts Assuming the New Accounting Principle is Applied Retroactively
	Net Earnings		$	85.0	$	66.2	$	254.2	$	189.6
	Earnings Per Common Share — Basic		$	0.43	$	0.34	$	1.30	$	0.98
	Earnings Per Common Share — Diluted		$	0.43	$	0.34	$	1.28	$	0.97
Weighted Average Common Shares Outstanding
	Basic			196.8		194.7		196.3		194.3
	Diluted			199.6		196.5		199.1		196.2

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

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except share amounts)


				September 30,		December 31,
				2003		2002

				(unaudited)
ASSETS
Current Assets:
	Cash and equivalents			$	177.0	$	15.7
	Accounts receivable, less allowance for doubtful accounts				254.7		214.8
	Inventories, net				294.0		257.6
	Prepaid expenses				21.1		71.7
	Deferred income taxes				67.2		52.6

		Total Current Assets			814.0		612.4
Property, Plant and Equipment, net					337.9		157.8
Deferred Income Taxes					30.2		70.1
Other Assets					50.4		18.6
Goodwill					11.9		—

Total Assets				$	1,244.4	$	858.9

			LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
	Accounts payable			$	69.8	$	59.8
	Income taxes payable				37.1		19.5
	Other current liabilities				213.5		164.8
	Short-term debt				80.0		156.7

		Total Current Liabilities			400.4		400.8
Other Long-term Liabilities					98.9		91.8

Total Liabilities					499.3		492.6

Commitments and Contingencies (Note 12)
Stockholders’ Equity:
		Common stock, $0.01 par value, one billion shares authorized, 197.1 in 2003 and 195.2 in 2002 issued and outstanding			2.0		2.0
		Paid-in capital			103.4		36.9
		Retained earnings			622.7		313.4
		Accumulated other comprehensive income			17.0		14.0

Total Stockholders’ Equity					745.1		366.3

Total Liabilities and Stockholders’ Equity				$	1,244.4	$	858.9

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

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions, unaudited)


			For the Nine Months
			Ended September 30,

			2003			2002

Cash flows provided by (used in) operating activities:
	Net earnings		$	309.3		$	185.6
Adjustments to reconcile net earnings to operating cash flows:
	Depreciation			62.7			18.7
	Income taxes			68.4			22.0
	Cumulative effect of change in accounting principle			(89.1	)		—
	Receivables			(30.2	)		(17.6	)
	Inventories			(29.0	)		(57.5	)
	Accounts payable and accrued expenses			47.6			(6.7	)
	Other assets and liabilities			(13.9	)		(7.5	)

		Net cash provided by operating activities		325.8			137.0

Cash flows used in investing activities:
	Additions to instruments			(85.2	)		—
	Additions to other property, plant and equipment			(21.8	)		(23.7	)
	Investments in other assets			(15.4	)		(2.0	)
	Centerpulse acquisition costs			(3.4	)		—

		Net cash used in investing activities		(125.8	)		(25.7	)

Cash flows provided by (used in) financing activities:
	Repayments of borrowings, net			(82.4	)		(118.9	)
	Proceeds from exercise of stock options			46.4			17.9
	Debt issuance costs			(2.5	)		—
	Equity issuance costs			(1.2	)		—
	Net decrease in due to/from former parent			—			(8.9	)

		Net cash used in financing activities		(39.7	)		(109.9	)

Effect of exchange rates on cash and equivalents				1.0			1.0

	Increase in cash and equivalents			161.3			2.4
Cash and equivalents, beginning of year				15.7			18.4

Cash and equivalents, end of period			$	177.0		$	20.8

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

ZIMMER HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The financial data presented herein is unaudited and should be read in conjunction with the consolidated financial statements and accompanying notes included in the 2002 annual report on Form 10-K filed by Zimmer Holdings, Inc. (together with all its subsidiaries, the “Company”). In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Results for interim periods should not be considered indicative of results for the full year. Certain amounts in the three and nine months ended September 30, 2002 have been reclassified to conform to the current year presentation.

2. Subsequent Event — Acquisition of Centerpulse AG and InCentive Capital AG

On October 2, 2003 (the “Closing Date”), the Company announced the closing of its exchange offer for Centerpulse AG (“Centerpulse”), a leading global orthopaedic medical device company headquartered in Switzerland that services the reconstructive joint, spine and dental implant markets. The Company also announced the closing of its exchange offer for InCentive Capital AG (“InCentive”), a company that beneficially owned 18.3 percent of the issued Centerpulse shares. The primary reasons for making the Centerpulse and InCentive exchange offers (the “Exchange Offers”) were to obtain a leading position in the European orthopaedic reconstructive implant market and to obtain a platform in the fast growing spinal market. As a result of the Exchange Offers, the Company beneficially owns 98.7 percent of the issued Centerpulse shares (including the Centerpulse shares owned by InCentive) and 99.9 percent of the issued InCentive shares. Pursuant to Swiss law, the Company has initiated the compulsory acquisition process to acquire all of the outstanding shares of Centerpulse and InCentive that it does not already own, and expects to complete this process in 2004.

The aggregate consideration paid by the Company in the Exchange Offers, excluding direct acquisition costs, was approximately $3.4 billion, consisting of approximately 44.5 million shares of Company common stock (valued at approximately $2.2 billion) and approximately $1.2 billion in cash. The Company’s $1.75 billion senior credit facility (the “Senior Credit Facility”) was used to finance the cash component of the Exchange Offers. For further information on the Senior Credit Facility, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources”.

The acquisition will be accounted for in the fourth quarter under the purchase method of accounting pursuant to SFAS No. 141, “Business Combinations”. Accordingly, Centerpulse and InCentive results of operations will be included in the Company’s consolidated results of operations subsequent to the Closing Date, and their respective assets and liabilities will be recorded at their fair values in the Company’s consolidated statement of financial position as of the Closing Date, with the excess purchase price being allocated to goodwill. The Company is in the process of determining the fair values of the acquired assets and assumed liabilities; accordingly, a summary of the fair values of the assets acquired and liabilities assumed as of the

Closing Date is not yet available, including the value allocated to in-process research and development which will be charged to expense as of the Closing Date.

As of September 30, 2003, the Company had incurred costs of $31.1 million related to the Exchange Offers. Direct acquisition costs, debt issuance costs, and equity issuance costs represent $27.9 million of the total and have been capitalized and reported within Other Assets. Indirect acquisition and integration costs represent $3.2 million of the total ($1.7 million of which was incurred in the third quarter) and have been expensed as incurred.

On July 25, 2003, the Staff of the Securities and Exchange Commission informed Centerpulse that it was conducting an informal investigation of Centerpulse relating to certain accounting issues. The Company and Centerpulse are cooperating with the Securities and Exchange Commission in this matter.

On June 25, 2003, the Company acquired the TransFx™ External Fixation System product line from Immedica, Inc. for $14.8 million, which has been allocated primarily to goodwill and technology based intangible assets. The Company has sold the TransFx product line since early 2001 under a distribution agreement with Immedica.

Instruments are hand held devices used by orthopaedic surgeons during total joint replacement and other surgical procedures. Effective January 1, 2003, instruments are recognized as long-lived assets and are included in property, plant and equipment. Undeployed instruments are carried at cost, net of allowances for obsolescence. 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 of approximately five years. In accordance with SFAS No. 144, the Company reviews instruments 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 cash flows relating to the asset are less than its carrying amount. Depreciation of instruments is recognized as selling, general and administrative expense, consistent with the classification of instrument cost in periods prior to January 1, 2003.

Prior to January 1, 2003, undeployed instruments were carried as a prepaid expense at cost, net of allowances for obsolescence ($54.8 million, net, at December 31, 2002), and recognized in selling, general and administrative expense in the year in which the instruments were placed into service. The new method of accounting for instruments was adopted to recognize the cost of these important assets of the Company’s business within the consolidated balance sheet and meaningfully allocate the cost of these assets over the periods benefited, typically five years.

The effect of the change during the three months ended September 30, 2003 was to increase earnings before cumulative effect of change in accounting principle by $5.8 million, or $0.03 per diluted share. The effect of the change during the nine months ended September 30, 2003 was to increase earnings before cumulative effect of change in accounting principle by $12.3 million, or $0.06 per diluted share. The cumulative effect adjustment of $55.1 million (net of income taxes

of $34.0 million) to retroactively apply the new capitalization method as if applied in years prior to 2003 is included in earnings during the nine months ended September 30, 2003. The pro forma amounts shown on the consolidated statement of earnings have been adjusted for the effect of the retroactive application on depreciation and related income taxes.

At September 30, 2003, the Company had three stock-based compensation plans for employees and non-employee directors, which are described more fully in the notes to the consolidated financial statements included in the Company’s 2002 annual report on Form 10-K. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. No stock based compensation cost is reflected in net earnings related to those plans, as all stock options granted had exercise prices equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock Based Compensation,” to the above plans.


		Three Months						Nine Months
		Ended September 30,						Ended September 30,

		2003			2002			2003			2002

Net earnings, as reported		$	85.0		$	65.1		$	309.3		$	185.6
Deduct: Total stock-based compensation expense determined under fair value based method for all awards, net of tax			(3.8	)		(3.2	)		(10.8	)		(9.5	)

Pro forma net earnings		$	81.2		$	61.9		$	298.5		$	176.1

Earnings per share:
	Basic — as reported	$	0.43		$	0.33		$	1.58		$	0.96
	Basic — pro forma		0.41			0.32			1.52			0.91
	Diluted — as reported		0.43			0.33			1.55			0.95
	Diluted — pro forma		0.41			0.32			1.50			0.90


		Three Months						Nine Months
		Ended September 30,						Ended September 30,

		2003			2002			2003			2002

					(in millions)
Net Earnings		$	85.0		$	65.1		$	309.3		$	185.6
Other Comprehensive Income (Loss):
	Foreign currency translation		3.4			—			15.8			8.3
	Unrealized foreign currency hedge gains (losses), net of tax		(10.2	)		2.0			(14.0	)		(17.4	)
	Reclassifications		2.0			(0.8	)		1.2			6.5

Total Other Comprehensive Income (Loss)			(4.8	)		1.2			3.0			(2.6	)

Comprehensive Income		$	80.2		$	66.3		$	312.3		$	183.0

The following table reconciles the diluted shares used in computing diluted earnings per share:

There were no anti-dilutive securities outstanding at September 30, 2003 or 2002.

The Company is exposed to market risk due to changes in currency exchange rates. As a result, the Company utilizes foreign exchange forward contracts to offset the effect of exchange rate fluctuations on certain anticipated foreign currency transactions, primarily intercompany sales and purchases expected to occur within the next twelve to twenty-four months. The Company does not hold financial instruments for trading or speculative purposes. 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, then recognized in earnings when the hedged item affects earnings. The ineffective portion of a derivative’s change in fair value, if any, is reported in earnings. The fair value of outstanding derivative instruments recorded on the balance sheet at September 30, 2003, together with settled derivative instruments where the hedged item has not yet affected earnings, was a net unrealized loss of $34.4 million, or $21.3 million net of taxes, and is deferred in other comprehensive income and is expected to be reclassified to earnings over the next two years; $17.0 million, or $10.5 million net of taxes, is expected to be reclassified to earnings over the next twelve months.

The Company designs, develops, manufactures and markets orthopaedic reconstructive implants, trauma products, and orthopaedic surgical products which include surgical supplies and equipment designed to aid in orthopaedic procedures and to accommodate patient rehabilitation needs post surgery. Operations are managed through three major geographic areas — the Americas, which is comprised principally of the United States and includes other North, Central and South American markets; Asia Pacific, which is comprised primarily of Japan and includes other Asian and Pacific markets; and Europe, which is comprised principally of Europe as well as the Middle East and Africa. This structure is the basis for the Company’s reportable segment information discussed below. Segment performance is evaluated based on sales and segment operating profit, exclusive of operating expenses pertaining to global operations and corporate expenses. Global operations include U.S. based research, development engineering, brand management, corporate legal, finance, human resource functions and operations and logistics.


		Net Sales				Operating Profit

		Three Months Ended				Three Months Ended
		September 30,				September 30,

		2003		2002		2003			2002

Americas		$	276.1	$	230.7	$	142.8		$	110.6
Asia Pacific			71.6		67.9		30.1			31.4
Europe			50.5		38.9		13.4			8.0

	Total	$	398.2	$	337.5

Global operations and corporate expenses							(57.8	)		(51.9	)

Operating profit						$	128.5		$	98.1


		Net Sales				Operating Profit

		Nine Months Ended				Nine Months Ended
		September 30,				September 30,

		2003		2002		2003			2002

Americas		$	815.9	$	688.9	$	421.3		$	330.7
Asia Pacific			217.6		194.5		96.7			87.6
Europe			165.9		118.8		47.0			27.0

	Total	$	1,199.4	$	1,002.2

Global operations and corporate expenses							(179.8	)		(155.5	)

Operating profit						$	385.2		$	289.8

The Company is subject to product liability and other claims arising in the ordinary course of business, for which the Company maintains insurance, subject to self-insured retention limits. The Company establishes accruals for product liability and other claims in conjunction with outside counsel based on current information and historical settlement information for open claims, related fees and for claims incurred but not reported. While it is not possible to predict with certainty the outcome of these cases, it is the opinion of management that these cases will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company.

In addition to product liability, the Company is subject to other lawsuits and claims arising in the ordinary course of business, none of which are expected to have, upon ultimate resolution, a material effect on the Company’s consolidated financial position, results of operations or cash flows.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Zimmer Holdings, Inc. is a global leader in the design, development, manufacture and marketing of orthopaedic reconstructive implants and trauma products. Orthopaedic reconstructive implants restore joint function lost due to disease, deformity or trauma in joints such as knees, hips, shoulders and elbows. Trauma products are devices used primarily to reattach or stabilize damaged bone and tissue to support the body’s natural healing process. The Company also manufactures and markets other products relating to orthopaedic surgery. With operations in 20 countries and products marketed in more than 70 countries, operations are managed through three geographic regions — the Americas, Asia Pacific and Europe. As used in this discussion, the “Company” means Zimmer Holdings, Inc. and its subsidiaries.

On October 2, 2003, the Company closed its exchange offers (the “Exchange Offers”) for all of the outstanding share capital of each of Centerpulse AG (“Centerpulse”), a global medical technology company with corporate headquarters in Zurich, Switzerland, and InCentive Capital AG (“InCentive”), an investment company domiciled in Zug, Switzerland, as described in Note 2 to the unaudited financial statements included in this report. Accordingly, Centerpulse and InCentive will be included in the Company’s consolidated results of operations and financial position beginning in the fourth quarter of 2003.

Net sales for the three month period ended September 30, 2003 increased 18 percent to $398.2 million from $337.5 million for the comparable 2002 period. Sales growth reflected the continued strong demand for reconstructive implants, favorable demographics, continued pricing improvements in the Americas and Europe, new product launches and strong results in the Americas and Europe segments. This increase was comprised of a 13 percent increase due to incremental volume and changes in the mix of product sales, a 3 percent increase due to higher average selling prices and a 2 percent increase due to foreign exchange rate fluctuations.

Net sales in the Americas increased 20 percent to $276.1 million in the three months ended September 30, 2003 compared to the same period in 2002. This increase was comprised of a 16 percent increase due to incremental volume and changes in the mix of product sales, together with a 4 percent increase due to higher average selling prices. Reconstructive implant sales increased 24 percent. Knee sales increased 25 percent led by growth in sales of the NexGen® Legacy® Posterior Stabilized Knee, including the Flex Knee, the NexGen Trabecular Metal™ Technology tibial components, the NexGen Cruciate Retaining knee with Prolong ™ Crosslinked Polyethylene and the NexGen Rotating Hinge Knee. Hip sales increased 23 percent, driven by continued conversion to porous stems including significant growth of the VerSys® Hip System Fiber Metal Taper stem, which is often used in Minimally Invasive Solutions™ (“MIS”) hip replacement procedures; Trabecular Metal acetabular cups; and increased sales of Trilogy® Acetabular System cups incorporating Longevity® Crosslinked Polyethylene Liners. Trauma product sales increased 5 percent in the quarter in large part due to increased sales of the new

ITST™ Intertrochanteric/Subtrochanteric Fixation system, the Zimmer® Periarticular Plating System and Zimmer Plates and Screws.

Net sales in Asia Pacific increased 5 percent to $71.6 million in the three month period ended September 30, 2003 compared to the same period in 2002. This increase was comprised of a 2 percent increase due to incremental volume and changes in the mix of product sales and a 3 percent increase due to foreign exchange rate fluctuations. The Company believes Asia Pacific sales growth during the quarter continued to be negatively affected due to cancelled surgeries related to the SARS epidemic. Reconstructive implant sales increased 6 percent (increased 2 percent constant currency), reflecting strong, double-digit constant currency growth in Australia and single digit constant currency growth in other markets in the region. Knee sales increased 12 percent (increased 7 percent constant currency), reflecting continuing strong sales of the NexGen Legacy Posterior Stabilized Flex Knee, NexGen Trabecular Metal Technology tibial components and the NexGen Cruciate Retaining Knee. Hip sales were flat (decreased 2 percent constant currency). Trauma product sales increased 1 percent (decreased 2 percent constant currency) with the Zimmer Periarticular Plating System and Zimmer Plates and Screws exhibiting solid growth, which was offset by sales declines in M/DN® Intramedullary Fixation and compression hip screws.

Net sales in Europe grew 30 percent to $50.5 million in the three month period ended September 30, 2003 compared to the same period in 2002. This increase was comprised of a 16 percent increase due to incremental volume and changes in the mix of product sales, a 3 percent increase due to higher average selling prices and an 11 percent increase due to foreign exchange rate fluctuations. Reconstructive implant sales increased 27 percent (increased 16 percent constant currency). Knee sales increased 25 percent (increased 13 percent constant currency) driven by strong sales of the NexGen Legacy System of knee prosthesis, the NexGen Cruciate Retaining Knee, NexGen Trabecular Metal components, and the NexGen Rotating Hinge Knee. Hip sales increased 32 percent (increased 21 percent constant currency) supported by increased sales of Trilogy Acetabular System cups incorporating Longevity Crosslinked Polyethylene Liners, strong sales of porous hips including the VerSys System taper stems, and Trabecular Metal Technology Cups. Trauma product sales for the quarter increased 57 percent (43 percent constant currency), including strong sales growth of Zimmer Periarticular Plating System, Herbert™ Bone Screws and Trabecular Metal Technology Avascular Necrosis (AVN) rods.

Overall, worldwide sales of reconstructive implants grew 21 percent (increased 19 percent constant currency) in the three month period ended September 30, 2003 to $312.9 million compared to $258.4 million during the 2002 three month period. Knee sales increased 23 percent (increased 20 percent constant currency) in the three month period ended September 30, 2003 to $174.6 million compared to $141.9 million during the 2002 three month period. Hip sales increased 19 percent (increased 17 percent constant currency) in the three month period ended September 30, 2003 to $128.6 million compared to $108.3 million during the 2002 three month period. Sales of trauma products increased 8 percent (increased 6 percent constant currency) over the prior year to $36.5 million. Sales of orthopaedic surgical products increased 8 percent (increased 7 percent constant currency) over the prior year to $48.8 million.

Gross profit as a percentage of net sales was 75.7 percent for the three month period ended September 30, 2003 compared to 74.8 percent in the comparable 2002 period. The increase in gross margin is principally due to the increases in average selling prices in the Americas and Europe, the continued conversion from cemented implants to higher margin porous implants, increased penetration of Longevity Crosslinked Polyethylene Liners, further penetration into the revision implant category and the ongoing efforts to reduce manufacturing costs through automation, in-sourcing and process improvements. These favorable effects were partially offset by strong sales growth in Europe at lower gross profit margins.

Research and development as a percentage of net sales was 6.1 percent for both the three month periods ended September 30, 2003 and 2002. Research and development increased 18.4 percent to $24.4 million from $20.6 million. The Company has many active projects underway focused on areas of strategic significance, including MIS, innovative materials such as Trabecular Metal and Crosslinked Polyethylene, lifestyle designs, revision implants and biological solutions. The Company has more than 30 active, major, new product development projects, with the majority expected to be released in 2003 and 2004.

Selling, general and administrative expense as a percentage of net sales was 36.9 percent for the three month period ended September 30, 2003 compared to 39.6 percent (39.0 percent assuming the change in accounting principle for instruments is applied retroactively) for the comparable 2002 period. The improvement in the expense ratio reflects lower selling expenses as a result of lower costs associated with the Company’s U.S. distributor network and leveraged general and administrative expenses. This was partially offset by increased promotional activities associated with product launches, the continued investments in various strategic initiatives including MIS, direct-to-consumer advertising, training and medical education. In addition, the Company recognized charges of $1.7 million, or 0.4 percent of net sales, relating to indirect acquisition and integration expenses of the Exchange Offers.

Operating profit for the three month period ended September 30, 2003 increased 31.0 percent to $128.5 million from $98.1 million in the comparable 2002 period. Operating profit increased due primarily to sales growth, improved gross profit margin and operating expenses growing at a slower rate than sales.

The effective tax rate on earnings before taxes increased to 33.5 percent for the three month period ended September 30, 2003 from 31.5 percent in the same period in 2002. During the three months ended September 30, 2002, the Company implemented certain business strategies which resulted in reducing taxes in certain jurisdictions and increased tax credits. Due to this, the Company made a year-to-date adjustment to the effective tax rate during the three months ended September 30, 2002.

Net earnings increased 30.6 percent to $85.0 million for the three month period ended September 30, 2003 compared to $65.1 million in the comparable 2002 period due primarily to sales growth, improved gross profit margin, leveraged operating expenses and lower interest

expense. Diluted earnings per share for the three month period ended September 30, 2003 increased 30.3 percent to $0.43 from $0.33 in the comparable 2002 period.

The following table sets forth operating profit as a percentage of sales by segment for the three months ended September 30, 2003 and 2002:

Operating profit for the Americas as a percentage of net sales increased to 51.7 percent for the three month period ended September 30, 2003, as compared with 47.9 percent for the same period in 2002, reflecting the favorable effects of increased sales of higher margin products, higher average selling prices, lower selling expenses as a percent of sales due to lower costs associated with the U.S. distributor network and the favorable impact of the change in accounting principle for instruments. The increase was partially offset by increases in instrument and other promotional expenses related to new product launches and investments in MIS initiatives.

Operating profit for Asia Pacific as a percentage of net sales decreased to 42.0 percent for the three month period ended September 30, 2003 as compared with 46.2 percent for the same period in 2002. Asia Pacific operating profit margin decreased primarily due to less favorable rates on hedge contracts during the three month period ended September 30, 2003 as compared to the same period in 2002.

Operating profit for Europe as a percentage of net sales increased to 26.5 percent for the three month period ended September 30, 2003 as compared with 20.6 percent for the same period in 2002, principally due to improved gross profit margins reflecting higher average selling prices and favorable product and country mix, leveraged growth in selling, general and administrative expenses and the favorable impact of the change in accounting principle for instruments.

Net sales for the nine month period ended September 30, 2003 increased 20 percent to $1,199.4 million from $1,002.2 million for the comparable 2002 period. This increase was comprised of a 13 percent increase due to incremental volume and changes in the mix of product sales, a 3 percent increase due to higher average selling prices and a 4 percent increase due to foreign exchange rate fluctuations.

Net sales in the Americas increased 18 percent to $815.9 million in the nine months ended September 30, 2003 compared to the same period in 2002. This increase was comprised of a 14 percent increase due to incremental volume and changes in the mix of product sales, together with a 4 percent increase due to higher average selling prices.

Net sales in Asia Pacific increased 12 percent to $217.6 million in the nine month period ended September 30, 2003 compared to the same period in 2002. This increase was comprised of a 4 percent increase due to incremental volume and changes in the mix of product sales, a 1 percent increase due to higher average selling prices, and a 7 percent increase due to foreign exchange rate fluctuations.

Net sales in Europe grew 40 percent to $165.9 million in the nine month period ended September 30, 2003 compared to the same period in 2002. This increase was comprised of a 19 percent increase due to incremental volume and changes in the mix of product sales, a 3 percent increase due to higher average selling prices and an 18 percent increase due to foreign exchange rate fluctuations.

Overall, worldwide sales of reconstructive implants grew 23 percent (increased 19 percent constant currency) in the nine month period ended September 30, 2003 to $949.4 million compared to $771.7 million during the 2002 nine month period. Knee sales increased 25 percent (increased 20 percent constant currency) in the nine month period ended September 30, 2003 to $531.0 million compared to $425.8 million during the 2002 nine month period. Hip sales increased 21 percent (increased 17 percent constant currency) in the nine month period ended September 30, 2003 to $388.1 million compared to $320.7 million during the 2002 nine month period. Sales of trauma products increased 8 percent (increased 5 percent constant currency) over the prior year to $108.0 million. Sales of orthopaedic surgical products increased 9 percent (increased 6 percent constant currency) over the prior year to $142.0 million.

Gross profit as a percentage of net sales was 75.6 percent for the nine month period ended September 30, 2003 compared to 74.9 percent in the comparable 2002 period. The increase in gross margin is principally due to the increases in average selling prices realized in all geographic segments, the continued conversion from cemented implants to higher margin porous implants, increased penetration of Longevity Crosslinked Polyethylene Liners, further penetration into the revision implant category and the ongoing efforts to reduce manufacturing costs through automation, in-sourcing and process improvements. These favorable effects were partially offset by strong sales growth in Europe at lower gross profit margins.

Research and development as a percentage of net sales was 5.7 percent for the nine month period ended September 30, 2003 compared to 5.9 percent for the comparable 2002 period. Research and development increased 16.3 percent over the prior year to $68.5 million.

Selling, general and administrative expense as a percentage of net sales was 37.6 percent for the nine month period ended September 30, 2003 compared to 40.2 percent (39.5 percent assuming the change in accounting principle for instruments is applied retroactively) for the comparable 2002 period. In addition, the Company recognized charges of $3.2 million, or 0.3

percent of net sales, relating to indirect acquisition and integration expenses of the Exchange Offers.

Operating profit for the nine month period ended September 30, 2003 increased 32.9 percent to $385.2 million from $289.8 million in the comparable 2002 period. Operating profit increased due primarily to sales growth, improved gross profit margin and operating expenses growing at a slower rate than sales.

The effective tax rate on earnings before taxes decreased to 33.5 percent for the nine month period ended September 30, 2003 from 33.7 percent in the same period in 2002. The decrease is due to the implementation of certain business strategies which resulted in reducing taxes in certain jurisdictions during 2003 and expanded operations in Puerto Rico.

Net earnings increased 66.7 percent to $309.3 million for the nine month period ended September 30, 2003 compared to $185.6 million in the comparable 2002 period. Net earnings include a one time, non-cash cumulative effect of change in accounting principle gain of $55.1 million (net of tax) which was the result of capitalizing instruments in service at January 1, 2003 which, under the Company’s former accounting method, had been expensed. Net earnings before the cumulative effect of a change in accounting principle increased 37 percent to $254.2 million compared to $185.6 million for the prior year, due primarily to strong sales growth, improved gross profit margin, leveraged operating expenses, lower interest expense and a lower effective tax rate. Diluted earnings per share for the nine month period ended September 30, 2003 increased 63.2 percent to $1.55 from $0.95 in the comparable 2002 period. Diluted earnings per share before cumulative effect of change in accounting principle increased 34.7 percent to $1.28 from $0.95 in the comparable 2002 period.

The following table sets forth operating profit as a percentage of sales by segment for the nine months ended September 30, 2003 and 2002:

Operating profit for the Americas as a percentage of net sales increased to 51.6 percent for the nine month period ended September 30, 2003, as compared with 48.0 percent for the same period in 2002, reflecting the favorable effects of increased sales of higher margin products, higher average selling prices, lower selling expenses as a percent of sales due to lower costs associated with the U.S. distributor network and the favorable impact of the change in accounting principle for instruments. The increase was partially offset by increases in instrument

and other promotional expenses related to new product launches and investments in MIS initiatives.

Operating profit for Asia Pacific as a percentage of net sales decreased to 44.4 percent for the nine month period ended September 30, 2003 as compared with 45.0 percent for the same period in 2002. Asia Pacific operating profit margin declined primarily due to less favorable rates on hedge contracts during the nine month period ended September 30, 2003 as compared to the same period in 2002.

Operating profit for Europe as a percentage of net sales increased to 28.3 percent for the nine month period ended September 30, 2003 as compared with 22.7 percent for the same period in 2002, due to improved gross profit margins reflecting higher average selling prices and favorable product and country mix, leveraged growth in selling, general and administrative expenses and the favorable impact of the change in accounting principle for instruments.

Cash flows provided by operating activities were $325.8 million for the nine months ended September 30, 2003 compared to $137.0 million for the nine months ended September 30, 2002. The principal source of cash was net earnings before cumulative effect of change in accounting principle of $254.2 million and non-cash charges for depreciation of $62.7 million. Non-cash charges for depreciation increased to $62.7 million from $18.7 million for the comparable period of 2002 due primarily to the January 1, 2003 change in accounting principle for instruments. Operating cash flows include outflows of $2.5 million related to the indirect acquisition and integration costs of the Exchange Offers.

At September 30, 2003, the Company had 273 days of inventory on hand compared to 268 days in the comparable prior year period due to higher net inventory balances to support anticipated new product launches. At September 30, 2003, the Company had 58 days of sales outstanding in accounts receivable compared to 55 days in the comparable prior year period. The increase was due to rapid sales growth in Europe which has longer payment terms and the negative impact of foreign exchange as a result of the continual weakening of the U.S. dollar relative to the Euro and Yen. The Americas days of sales outstanding in accounts receivable was 34 days at September 30, 2003, consistent with the comparable period in the prior year.

Cash flows used in investing activities were $125.8 million in the nine months ended September 30, 2003 compared to $25.7 million in the comparable period last year. The increase in capital expenditures in 2003 was principally due to the change in accounting principle to capitalize instruments effective January 1, 2003, as the Company invested $85.2 million in instruments to support sales growth, new product launches and MIS procedures during the first nine months of 2003. During June 2003, the Company acquired the TransFx™ External Fixation System product line from Immedica, Inc. for $14.8 million. The Company also invested in additional manufacturing equipment for new products, the Zimmer Institute and computer equipment. In addition, investing cash flows include outflows of $3.4 million of direct acquisition costs related to the Exchange Offers.

Cash flows used in financing activities were $39.7 million in the nine months ended September 30, 2003 compared to $109.9 million in the comparable period last year. The Company repaid $82.4 million in debt with cash generated from operating activities and

proceeds from the exercise of stock options. Financing cash flows for the current period also include outflows of $3.7 million related to debt and equity issuance costs of the Exchange Offers.

In connection with the Exchange Offers, the Company entered into the following committed financing arrangements: (i) $400 million 364-day revolving credit facility, (ii) $800 million three-year revolving credit facility and (iii) $550 million five-year term loan facility, (collectively, the “Senior Credit Facility”). Upon closing of the Exchange Offers on October 2, 2003, the Company’s Senior Credit Facility was used to fund the cash portion of the Exchange Offers, refinance the existing debt of both the Company and Centerpulse, and pay certain closing costs. On October 2, 2003, approximately $1.3 billion was outstanding under the Senior Credit Facility, as follows: $257 million under the $400 million 364-day revolving credit facility, $531 million under the $800 million three-year revolving credit facility and $550 million under the $550 million five-year term loan facility. The Company’s $600 million, committed, multi-currency, revolving senior credit facility was terminated effective October 2, 2003.

Upon maturity of the Senior Credit Facility’s $400 million 364-day revolving facility in June 2004, the Company may convert the outstanding balance to a term loan repayable in a single payment due in June 2005. The lenders’ commitments under the Senior Credit Facility’s $800 million three-year revolving credit facility expire in June 2006. The Senior Credit Facility’s $550 million five-year term loan facility amortizes in equal quarterly installments in aggregate annual amounts equal to $50 million, $150 million and $350 million, payable in the third, fourth and fifth years of the term, respectively. There is no prepayment penalty included in the Senior Credit Facility. The $800 million three-year revolving credit facility has a multi-currency option of up to an aggregate principal amount of $350 million.

The Company and certain of its wholly owned foreign and domestic subsidiaries are the borrowers and its wholly owned domestic subsidiaries are the guarantors of the Senior Credit Facility. Borrowings may bear interest at the appropriate LIBOR-based rate, or an alternative base rate, plus an applicable margin determined by reference to the Company’s senior unsecured long-term debt rating and the amounts drawn under the Senior Credit Facility. The Senior Credit Facility contains customary affirmative and negative covenants and events of default for an unsecured financing arrangement. Financial covenants include a maximum leverage ratio and a minimum interest coverage ratio. Commitments under the $400 million 364-day revolving credit facility and the $800 million three-year revolving credit facility are subject to certain fees, including a facility and a utilization fee.

The Company also has available uncommitted credit facilities totaling $35 million.

Management believes that cash flows from operating activities, together with available borrowings under the Senior Credit Facility, will be sufficient to meet the Company’s general corporate, working capital, capital expenditure and debt service needs. Should investment opportunities arise, the Company believes that its earnings, balance sheet and cash flows will allow the Company to obtain additional capital, if necessary. The Company’s ability to issue additional equity is subject to limitations in order to preserve the tax-free nature of the separation from its former parent. Under the tax sharing agreement with its former parent, the Company is required to indemnify its former parent if any Company actions cause tax to be imposed under Section 355(e) of the Internal Revenue Code.

During the quarter ended March 31, 2003, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” and SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” without any material impact on its financial position, results of operations or cash flows.

In 2003, the FASB issued FASB Interpretation (“FIN”) No. 46, “Consolidation of Variable Interest Entities.” FIN 46 defines a variable interest entity (“VIE”) as a corporation, partnership, trust, or any other legal structure that does not have equity investors with a controlling financial interest or has equity investors that do not provide sufficient financial resources for the entity to support its activities. FIN 46 requires consolidation of a VIE by the primary beneficiary of the assets, liabilities, and results of activities and is effective in the fourth quarter of 2003. FIN 46 also requires certain disclosures by all holders of a significant variable interest in a VIE that are not the primary beneficiary. The Company does not have any material investments in variable interest entities; therefore, the adoption of this interpretation will not have a material effect on the Company’s financial position, results of operations or cash flows.

In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 149 is effective for contracts entered into or modified after June 30, 2003. The Company has adopted the provisions of SFAS No. 149 without any material impact on its financial position, results of operations or cash flows.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company has adopted the provisions of SFAS No. 150 without any material impact on its financial position, results of operations or cash flows.

The financial results of the Company are affected by the selection and application of accounting policies and methods. Significant accounting policies which, in some cases, require management’s judgment are discussed below.

Revenue Recognition — A significant portion of the Company’s revenue is recognized for field based product upon notification that the product has been implanted or used. For all other transactions, the Company recognizes revenue when title is passed to customers, generally upon shipment. Estimated returns and allowances are recorded as a reduction of sales when the revenue is recognized.

Inventories — The Company must determine as of each balance sheet date how much, if any, of its inventory may ultimately prove to be unsaleable or unsaleable at its carrying cost. Reserves are established to effectively adjust any such inventory to net realizable value. To determine the appropriate level of reserves, the Company evaluates current stock levels in relation to historical and expected patterns of demand for all of its products. A series of algorithms is applied to the data to assist management in its evaluation. Management evaluates the need for changes to valuation reserves based on market conditions, competitive offerings and other factors on a regular basis. Further information about inventory reserves is provided in notes to the consolidated financial statements included in the Company’s 2002 annual report on Form 10-K.

Instruments — Instruments are hand held devices used by orthopaedic surgeons during total joint replacement and other surgical procedures. Effective January 1, 2003, instruments are recognized as long-lived assets and included in property, plant and equipment. Undeployed instruments are carried at cost, net of allowances for obsolescence. 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 of approximately five years. In accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the Company reviews instruments 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 cash flows relating to the asset are less than its carrying amount. Depreciation of instruments is recognized as a selling, general and administrative expense.

Property, Plant and Equipment — The Company determines estimated useful lives of property, plant and equipment based on historical patterns of use and physical and technological characteristics of assets, as appropriate. In accordance with SFAS No. 144, the Company reviews 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 cash flows relating to the asset are less than its carrying amount.

Derivative Financial Instruments — Critical aspects of the Company’s accounting policy for derivative financial instruments include conditions which require that significant terms of a hedging instrument are essentially the same as the hedged forecasted transaction. Another important element of the policy demands that formal documentation be maintained as required by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Failure to comply with these conditions would result in a requirement to recognize changes in market value of hedge instruments in earnings as they occur. Management routinely monitors significant estimates, assumptions and judgments associated with derivative instruments, and compliance with formal documentation requirements.

Stock Compensation — The Company applies the provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” in accounting for stock-based compensation; therefore, no compensation expense has been recognized for its fixed stock option plans as options are granted at fair market value. SFAS No. 123, “Accounting for Stock-Based Compensation” provides an alternative method of accounting for stock options based on an option pricing model, such as Black-Scholes. The Company has adopted the disclosure requirements of SFAS No. 123 and SFAS No. 148, “Accounting for Stock-Based Compensation

— Transition and Disclosure.” Information regarding compensation expense under the alternative method is provided in the notes to the unaudited interim consolidated financial statements.

Pensions and Other Postretirement Benefits — The Company’s pension and postretirement benefit costs and liabilities are calculated utilizing various actuarial assumptions and methodologies prescribed under SFAS No. 87, “Employers’ Accounting for Pensions” and No. 106, “Employers Accounting for Postretirement Benefits Other Than Pensions.” The most significant actuarial assumptions include the discount rate, expected rate of return on plan assets, salary increases and the expected healthcare cost trend rate. Other actuarial assumptions utilized in determining pension and postretirement benefit costs include, among others, mortality rates and employee turnover rates. The discount rate assumption is based upon the review of high quality corporate bond rates and the change in those rates during the year. The expected rate of return on plan assets and healthcare cost trend rate are based upon an evaluation of trends and experiences taking into account current and expected market conditions.

A twenty-five basis point change in the discount rate or the expected rate of return on plan assets would not have a material impact on the Company’s financial position, results of operations or cash flows. A reasonable change in the other actuarial assumptions would not have a material impact on the Company’s financial position, results of operations or cash flows.

Income Taxes — The Company estimates income tax expense and income tax liabilities and assets by taxable jurisdiction. Realization of deferred tax assets in each taxable jurisdiction is dependent on the Company’s ability to generate future taxable income sufficient to realize the benefits. The Company evaluates deferred tax assets on an ongoing basis and provides valuation allowances if it is determined to be “more likely than not” that the deferred tax benefit will not 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.

Commitments and Contingencies — Accruals for product liability and other claims are established with internal and external counsel based on current information and historical settlement information for claims, related fees and for claims incurred but not reported. An actuarial model is used by the Company 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. The amounts established represent management’s best estimate of the ultimate costs that it will incur under the various contingencies.

This quarterly report contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 based on current expectations, estimates, forecasts and projections about the orthopaedics industry, management’s beliefs and assumptions made by management. Forward-looking statements may be identified by the use of forward-looking terms such as “may,” “will,” “expects,” “believes,” “anticipates,” “plans,” “estimates,” “projects,” “targets,” “forecasts,” and “seeks” or the negative of such terms or other variations on such terms or comparable terminology. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not

limited to, our ability to successfully integrate Centerpulse AG, price and product competition, rapid technological development, demographic changes, dependence on new product development, the mix of our products and services, supply and prices of raw materials and products, customer demand for our products and services, control of costs and expenses, our ability to form and implement alliances, international growth, U.S. and foreign government regulation, product liability and intellectual property litigation losses, reimbursement levels from third-party payors, general industry and market conditions and growth rates and general domestic and international economic conditions including interest rate and currency exchange rate fluctuations. For a further list and description of such risks and uncertainties, see the disclosure materials filed by Zimmer with the U.S. Securities and Exchange Commission. Zimmer disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers of this document are cautioned not to place undue reliance on these forward-looking statements, since, 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. This cautionary statement is applicable to all forward-looking statements contained in this document.

There have been no material changes from the information provided in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.

The Company carried out an evaluation under the supervision and participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2003. There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2003 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Information pertaining to legal proceedings can be found in Note 12 to the Interim Consolidated Financial Statements included in Part I of this report.

The Company held a special meeting of stockholders on July 22, 2003 to vote on the issuance of shares of the Company’s common stock in connection with its acquisitions of Centerpulse AG and InCentive Capital AG. The special meeting was successively adjourned and reconvened on July 30, 2003, August 6, 2003, August 13, 2003 and August 21, 2003. On August 21, 2003, the stockholders approved the issuance of the Company’s shares in connection with the acquisitions, with 136,761,961 shares voted in favor, 1,655,394 shares voted against or withheld, and 1,563,580 abstentions and broker non-votes.


(a)	Exhibits

	The following documents are filed as exhibits to this report:

3		Restated By-Laws of Zimmer Holdings, Inc., together with Amendment No. 1 to the Restated By-Laws of Zimmer Holdings, Inc.

10.1		Tender Agreement, dated as of August 31, 2003, between René Braginsky, Hans Kaiser, Zürich Versicherungs-Gesellschaft, III Institutional Investors International Corp. and Zimmer Holdings, Inc. (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K, filed September 2, 2003)

10.2		Amendment No. 3 to Letter Agreement, dated as of July 31, 2003, between Zimmer Holdings, Inc. and Bank of America, N.A.

31.1		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Executive Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 of the Chief Financial Officer, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)		Reports on Form 8-K.

The Company filed 18 reports on Form 8-K during the period under Item 5 — “Other Events” and Item 7— “Financial Statements and Exhibits” relating to its acquisitions of Centerpulse AG and InCentive Capital AG and its special meeting of stockholders in connection therewith. The reports were filed on July 9, 2003, July 22, 2003, July 23, 2003, July 25, 2003, July 30, 2003, August 6, 2003 (two reports), August 13, 2003, August 15, 2003, August 19, 2003, August 21, 2003, August 22, 2003, August 26, 2003, August 28, 2003, September 2, 2003, September 4, 2003, September 16, 2003 and September 19, 2003. The report filed on July 25, 2003 also incorporated by reference as an exhibit a transcript of the Company’s earnings conference call held on July 24, 2003.

On July 23, 2003, under Item 9 — “Regulation FD Disclosure,” the Company reported that it had issued a press release reporting its results of operations for the quarter ended June 30, 2003. A copy of the press release was included as an exhibit to the filing. The exhibit was furnished pursuant to Item 9 and Item 12 —“Results of Operation and Financial Condition” of Form 8-K.

On July 30, 2003, the Company filed a report on Form 8-K under Item 5 — “Other Events” and Item 7 — “Financial Statements and Exhibits” relating to an amendment to the Restated By-Laws of the Company.

Pursuant to the requirements 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.

SECTION 1.01. Delaware Office. The principal office of the Zimmer Holdings, Inc. (the “Corporation”) in the State of Delaware shall be located in the City of Wilmington, County of New Castle, and the name and address of its registered agent is the Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle.

SECTION 1.02. Other Offices. The Corporation may have such other offices, either within or without the State of Delaware, as the board of directors of the Corporation (the “Board of Directors”, and each member thereof, a “Director”) may designate or as the business of the Corporation may from time to time require.

SECTION 1.03. Books and Records. The books and records of the Corporation may be kept outside the State of Delaware at such place or places as may from time to time be designated by the Board of Directors.

SECTION 2.01. Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held on such date and at such time as may be fixed by resolution of the Board of Directors.

SECTION 2.02. Special Meeting. Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having a preference over the common stock, par value $0.01 per share, of the Corporation (the “Common Stock”) as to dividends or upon liquidation, dissolution or winding up, special meetings of stockholders of the Corporation for any purpose or purposes may be called only by (a) the Board of Directors pursuant to a resolution stating the purpose or purposes thereof approved by a majority of the total number of Directors which the Corporation would have if there were no vacancies or unfilled newly-created directorships (the “Whole Board”), or (b) by the Chairman of the Board of Directors (the “Chairman of the Board”). No business other than that stated in the notice shall be transacted at any special meeting.

SECTION 2.03. Place of Meeting. The Board of Directors or the Chairman of the Board, as the case may be, may designate the place, if any, of meeting for any annual meeting or for any special meeting of the stockholders. If no designation is so made, the place of meeting shall be the principal office of the Corporation.

SECTION 2.04. Notice of Meeting. Notice, stating the place, day and hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered by the Corporation not less than 10 calendar days nor more than 60 calendar days before the date of the meeting, either personally, by mail or by other lawful means, to each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, addressed to the stockholder at such person’s address as it appears on the stock transfer books of the Corporation. Such further notice shall be given as may be required by law. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Meetings may be held without notice if all stockholders entitled to notice are present (except when stockholders entitled to notice attend the meeting for the express purpose of objecting, at the beginning of the meeting, because the meeting is not lawfully called or convened), or if notice is waived by those not present in accordance with Section 6.04. Any previously scheduled meeting of the stockholders may be postponed, and any special meeting of the stockholders may be canceled, by resolution of the Board of Directors, upon public notice given prior to the date previously scheduled for such meeting of stockholders.

SECTION 2.05. Quorum and Adjournment; Voting. Except as otherwise provided by law or by the Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”), the holders of a majority of the voting power of all outstanding shares of the Corporation entitled to vote generally in the election of Directors (the “Voting Stock”), represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, except that when specified business is to be voted on by a class or series of stock voting as a class, the holders of a majority of the voting power of the outstanding shares of such class or series shall constitute a quorum of such class or series for the transaction of such business. The chairman of the meeting may adjourn the meeting from time to time, whether or not there is such a quorum. No notice of the time and place of adjourned meetings need be given except as required by law. The stockholders present at a duly called meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.

SECTION 2.06. Proxies. At all meetings of stockholders, a stockholder may vote by proxy in accordance with the General Corporation Law of the State of Delaware (the “DGCL”) or by such person’s duly authorized attorney in fact.

SECTION 2.07. Notice of Stockholder Business and Nominations. (a) Annual Meetings of Stockholders. (i) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (A) pursuant to the Corporation’s notice of meeting pursuant to Section 2.04, (B) by or at the direction of the Chairman of the Board or (C) by any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this By-Law, who is entitled to vote at the meeting and who complies with the notice procedures set forth in this By-Law.

(ii) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (C) of paragraph (a)(i) of this Section 2.07, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the ninetieth calendar day nor earlier than the close of business on the one hundred twentieth calendar day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty calendar days before or more than sixty calendar days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth calendar day prior to such annual meeting and not later than the close of business on the later of the ninetieth calendar day prior to such annual meeting or the tenth calendar day following the calendar day on which public announcement of the date of such meeting is first made by the Corporation. For purposes of determining whether a stockholder’s notice shall have been delivered in a timely manner for the annual meeting of stockholders in 2002, the first anniversary of the previous year’s meeting shall be deemed to be June 1, 2002. In no event shall the public announcement of an adjournment or postponement of an annual meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above. Such stockholder’s notice shall set forth (A) as to each person whom the stockholder proposes to nominate for election or reelection as a Director all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors in an election contest, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a Director if elected); (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event that such business includes a proposal to amend these By-Laws, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (1) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (2) the class and number of shares of stock of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (3) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and (4) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (y) otherwise to solicit proxies from stockholders in support of such proposal or nomination. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act and such stockholder’s proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such

other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a Director.

(iii) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this Section 2.07 to the contrary, in the event that the number of Directors to be elected to the Board of Directors at an annual meeting is increased and there is no public announcement by the Corporation naming all of the nominees for Director or specifying the size of the increased Board of Directors at least one hundred calendar days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this By-Law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth calendar day following the day on which such public announcement is first made by the Corporation.

(b) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting under Section 2.04. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which Directors are to be elected (i) pursuant to the Corporation’s notice of meeting, (ii) by or at the direction of the Chairman of the Board or (iii) provided that the Board of Directors has determined that Directors shall be elected at such meeting, by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in this By-Law, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this By-Law. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more Directors to the Board of Directors, any stockholder entitled to vote in such election of Directors may nominate pursuant to clause (iii) of the immediately preceding sentence of this Section 2.07(b) a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice required by paragraph (a)(ii) of this Section 2.07 shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth calendar day prior to such special meeting and not later than the close of business on the later of the ninetieth calendar day prior to such special meeting or the tenth calendar day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period (or extend any time period) for the giving of a stockholder’s notice as described above.

(c) General. (i) Only such persons who are nominated in accordance with the procedures set forth in this Section 2.07 shall be eligible to serve as Directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this By-Law. Except as otherwise provided by law, the Certificate of Incorporation or these By-Laws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 2.07 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by clause

(a)(ii)(C)(4) of this Section 2.07) and, if any proposed nomination or business is not in compliance with this By-Law, to declare that such defective proposal or nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 2.07, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

(ii) For purposes of this By-Law, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(iii) Notwithstanding the foregoing provisions of this Section 2.07, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2.07. Nothing in this Section 2.07 shall be deemed to affect any rights (a) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) of the holders of any series of preferred stock of the Corporation (“Preferred Stock”) to elect Directors under an applicable Preferred Stock Designation (as defined in the Certificate of Incorporation).

SECTION 2.08. Procedure for Election of Directors; Required Vote. Election of Directors at all meetings of the stockholders at which Directors are to be elected shall be by ballot, and, subject to the rights of the holders of any series of Preferred Stock to elect Directors under an applicable Preferred Stock Designation, a plurality of the votes cast thereat shall elect Directors. Except as otherwise provided by law, the Certificate of Incorporation, a Preferred Stock Designation, applicable stock exchange rules or other rules and regulations applicable to the Corporation or these By-Laws, in all matters other than the election of Directors, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the stockholders.

SECTION 2.09. Inspectors of Elections; Opening and Closing the Polls. (a) The Board of Directors by resolution shall appoint, or shall authorize an officer of the Corporation to appoint, one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of stockholders and make a written report thereof. One or more persons may be designated as alternate inspector(s) to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging such person’s duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of such person’s ability. The inspector(s) shall have the duties prescribed by law.

(b) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the person presiding over any meeting of stockholders shall have the right and

authority to convene and to adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such presiding officer, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the presiding officer of the meeting, may include, without limitation, the following: (i) an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The presiding officer at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding officer should so determine, such person shall so declare to the meeting that any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

SECTION 3.01. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these By-Laws required to be exercised or done by the stockholders.

SECTION 3.02. Regular Meetings. A regular meeting of the Board of Directors shall be held without other notice than this By-Law in conjunction with the annual meeting of stockholders. The Board of Directors may, by resolution, provide the time and place for the holding of additional regular meetings without other notice than such resolution.

SECTION 3.03. Special Meetings. Special meetings of the Board of Directors shall be called at the request of the Chairman of the Board, the President and Chief Executive Officer or a majority of the Board of Directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings.

SECTION 3.04. Notice. Notice of any special meeting of Directors shall be given to each Director at such person’s business or residence in writing by hand delivery, first-class or overnight mail or courier service, telegram or facsimile transmission, orally by telephone or any other lawful means. If mailed by first-class mail, such notice shall be deemed adequately delivered when deposited in the United States mail so addressed, with postage thereon prepaid, at least 5 calendar days before such meeting. If by telegram, overnight mail or courier service, such notice shall be deemed adequately delivered when the telegram is delivered to the telegraph company or the notice is delivered to the overnight mail or courier service company at least 24

hours before such meeting. If by facsimile transmission, such notice shall be deemed adequately delivered when the notice is transmitted at least 12 hours before such meeting. If by telephone, by hand delivery or by other lawful means, the notice shall be given at least 12 hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting, except for amendments to these By-Laws, as provided under Section 8.01. A meeting may be held at any time without notice if all the Directors are present (except when Directors attend for the express purpose of objecting, at the beginning of the meeting, because it is not lawfully called or conveyed) or if those not present waive notice of the meeting either before or after such meeting.

SECTION 3.05. Action By Consent of Board of Directors. Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in accordance with applicable law.

SECTION 3.06. Conference Telephone Meetings. Members of the Board of Directors or any committee thereof may participate in a meeting of the Board of Directors or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

SECTION 3.07. Quorum. Subject to Article VII of the Certificate of Incorporation, a whole number of Directors equal to at least a majority of the Whole Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the Directors present may adjourn the meeting from time to time without further notice. The act of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

SECTION 3.08. Committees of the Board of Directors. (a) The Board of Directors may from time to time designate committees, which shall consist of one or more Directors. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee may, to the extent permitted by law, exercise such powers and shall have such responsibilities as shall be specified in the designating resolution. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Each committee shall keep written minutes of its proceedings and shall report such proceedings to the Board of Directors when required.

(b) A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. Notice of such meetings shall be given to each member of the committee in the manner provided for in Section 3.04. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. Nothing herein shall be deemed to prevent the Board of Directors from appointing one or more committees consisting in whole or in part of

persons who are not Directors; provided, however, that no such committee shall have or may exercise any authority of the Board of Directors.

SECTION 3.09. Records. The Board of Directors shall cause to be kept a record containing the minutes of the proceedings of the meetings of the Board of Directors and of the stockholders, appropriate stock books and registers and such books of records and accounts as may be necessary for the proper conduct of the business of the Corporation.

SECTION 4.01. Elected Officers. The elected officers of the Corporation shall be a Chairman of the Board, a President and Chief Executive Officer, a Secretary, a Treasurer, and such other officers (including, without limitation, Senior Vice Presidents and Executive Vice Presidents and Vice Presidents) as the Board of Directors from time to time may deem proper. The Chairman of the Board shall be chosen from among the Directors. All officers elected by the Board of Directors shall each have such powers and duties as generally pertain to their respective offices, subject to the specific provisions of this Article IV. Such officers shall also have such powers and duties as from time to time may be conferred by the Board of Directors or by any committee thereof. The Board of Directors or any committee thereof may from time to time elect, or the Chairman of the Board or President and Chief Executive Officer may appoint, such other officers (including one or more Vice Presidents, Controllers, Assistant Secretaries and Assistant Treasurers), as may be necessary or desirable for the conduct of the business of the Corporation. Such other officers and agents shall have such duties and shall hold their offices for such terms as shall be provided in these By-Laws or as may be prescribed by the Board of Directors or such committee or by the Chairman of the Board or President and Chief Executive Officer, as the case may be.

SECTION 4.02. Election and Term of Office. The elected officers of the Corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held in conjunction with the annual meeting of the stockholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until such person’s successor shall have been duly elected and shall have qualified or until such person’s death or until he shall resign or be removed pursuant to Section 4.08.

SECTION 4.03. Chairman of the Board. The Chairman of the Board shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall be responsible for the general management of the affairs of the Corporation and shall perform all duties incidental to such person’s office which may be required by law and all such other duties as are properly required of him by the Board of Directors. The Chairman of the Board shall make reports to the Board of Directors and the stockholders, and shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect. The Chairman of the Board shall be the President and Chief Executive Officer of the Corporation if no other person has been elected as the President and Chief Executive Officer. The Board of Directors also may elect a Vice-Chairman to act in the place of the Chairman of the Board upon his or her absence or inability to act.

SECTION 4.04. President; Chief Executive Officer. The President shall be the Chief Executive Officer of the Corporation, shall act in a general executive capacity and shall assist the Chairman of the Board in the administration and operation of the Corporation’s business and general supervision of its policies and affairs. The President and Chief Executive Officer, if he or she is also a Director, shall, in the absence of or because of the inability to act of the Chairman of the Board, perform all duties of the Chairman of the Board and preside at all meetings of stockholders and of the Board of Directors.

SECTION 4.05. Vice Presidents. Each Senior Vice President and Executive Vice President and any Vice President shall have such powers and shall perform such duties as shall be assigned to such person by the Board of Directors or by the President and Chief Executive Officer.

SECTION 4.06. (a) Treasurer. The Treasurer shall exercise general supervision over the receipt, custody and disbursement of corporate funds. The Treasurer shall cause the funds of the Corporation to be deposited in such banks as may be authorized by the Board of Directors, or in such banks as may be designated as depositories in the manner provided by resolution of the Board of Directors. The Treasurer shall have such further powers and duties and shall be subject to such directions as may be granted or imposed from time to time by the Board of Directors, the Chairman of the Board or the President and Chief Executive Officer.

(b) The Board of Directors, the Chairman of the Board or the President and Chief Executive Officer may designate one or more Assistant Treasurers who shall have such of the authority and perform such of the duties of the Treasurer as may be assigned to them by the Board of Directors, the Chairman of the Board or the President and Chief Executive Officer. During the Treasurer’s absence or inability, the Treasurer’s authority and duties shall be possessed by such Assistant Treasurer(s) as the Board of Directors, the Chairman of the Board or the President and Chief Executive Officer may designate.

SECTION 4.07. Secretary. (a) The Secretary shall keep or cause to be kept in one or more books provided for that purpose, the minutes of all meetings of the Board of Directors, the committees of the Board of Directors and the stockholders; shall see that all notices are duly given in accordance with the provisions of these By-Laws and as required by law; shall be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal and shall see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and in general, shall perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to the Secretary by the Board of Directors, the Chairman of the Board or the President and Chief Executive Officer.

(b) The Board of Directors, the Chairman of the Board or the President and Chief Executive Officer may designate one or more Assistant Secretaries who shall have such of the authority and perform such of the duties of the Secretary as may be provided in these By-Laws or assigned to them by the Board of Directors, the Chairman of the Board or the President and Chief Executive Officer. During the Secretary’s absence or inability, the Secretary’s authority and duties shall be possessed by such Assistant Secretary or Assistant Secretaries as the Board of

Directors, the Chairman of the Board or the President and Chief Executive Officer may designate.

SECTION 4.08. Removal. Any officer or agent of the Corporation may be removed by the affirmative vote of a majority of the Board of Directors whenever, in their judgment, the best interests of the Corporation would be served thereby. Any officer or agent appointed by the Chairman of the Board or the President and Chief Executive Officer may be removed by him or her whenever, in such person’s judgment, the best interests of the Corporation would be served thereby. No elected officer shall have any contractual rights against the Corporation for compensation by virtue of such election beyond the date of the election of such person’s successor, such person’s death, such person’s resignation or such person’s removal, whichever event shall first occur, except as otherwise provided in an employment contract or under an employee benefit plan.

SECTION 4.09. Vacancies. A newly created elected office and a vacancy in any elected office because of death, resignation, or removal may be filled by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors. Any vacancy in an office appointed by the Chairman of the Board or the President and Chief Executive Officer because of death, resignation, or removal may be filled by the Chairman of the Board or the President and Chief Executive Officer.

SECTION 5.01. Stock Certificates and Transfers. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the Corporation may from time to time prescribe. The shares of the stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof in person or by such person’s attorney, upon surrender for cancelation of certificates for at least the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. The certificates of stock shall be signed, countersigned and registered in such manner as the Board of Directors may by resolution prescribe or as may otherwise be permitted by applicable law, which resolution may permit all or any of the signatures on such certificates to be in facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. Notwithstanding the foregoing provisions regarding share certificates, the Corporation may provide that, subject to the rights of stockholders under applicable law, some or all of any or all classes or series of the Corporation’s common or any preferred shares may be uncertificated shares.

SECTION 5.02. Lost, Stolen or Destroyed Certificates. No certificate for shares of stock in the Corporation shall be issued in place of any certificate alleged to have been lost, destroyed or stolen, except on production of such evidence of such loss, destruction or theft and on delivery to the Corporation of a bond of indemnity in such amount, upon such terms and

secured by such surety, as the Board of Directors or any financial officer may in its or such person’s discretion require.

SECTION 6.01. Fiscal Year. The fiscal year of the Corporation shall begin on the first day of January and end on the last day of December of each year.

SECTION 6.02. Dividends. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and the Certificate of Incorporation.

SECTION 6.03. Seal. The corporate seal shall have inscribed thereon the words “Corporate Seal,” the year of incorporation and the word “Delaware.”

SECTION 6.04. Waiver of Notice. Whenever any notice is required to be given to any stockholder or Director under the provisions of the DGCL or these By-Laws, a waiver thereof given in accordance with applicable law shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or the Board of Directors or committee thereof need be specified in any waiver of notice of such meeting.

SECTION 6.05. Audits. The accounts, books and records of the Corporation shall be audited upon the conclusion of each fiscal year by an independent certified public accountant selected by the Board of Directors, and it shall be the duty of the Board of Directors to cause such audit to be done annually.

SECTION 6.06. Resignations. Any Director or any officer, whether elected or appointed, may resign at any time by giving written notice of such resignation to the Chairman of the Board, the President and Chief Executive Officer, or the Secretary, and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chairman of the Board, the President and Chief Executive Officer, or the Secretary, or at such later time as is specified therein. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective.

SECTION 7.01. Contracts. Except as otherwise required by law, the Certificate of Incorporation, a Preferred Stock Designation, or these By-Laws, any contracts or other instruments may be executed and delivered in the name and on the behalf of the Corporation by such officer or officers of the Corporation as the Board of Directors may from time to time direct. Such authority may be general or confined to specific instances as the Board of Directors may determine. The Chairman of the Board, the President and Chief Executive Officer or any Senior Vice President, Executive Vice President or Vice President may execute bonds, contracts, deeds, leases and other instruments to be made or executed or for or on behalf of the Corporation. Subject to any restrictions imposed by the Board of Directors or the Chairman of the Board, the President and Chief Executive Officer or any Senior Vice President, Executive Vice President or Vice President of the Corporation may delegate contractual powers to others under such person’s jurisdiction, it being understood, however, that any such delegation of power shall not relieve such officer of responsibility with respect to the exercise of such delegated power.

SECTION 7.02. Proxies. Unless otherwise provided by resolution adopted by the Board of Directors, the Chairman of the Board, the President and Chief Executive Officer or any Senior Vice President, Executive Vice President or Vice President may from time to time appoint an attorney or attorneys or agent or agents of the Corporation, in the name and on behalf of the Corporation, to cast the votes which the Corporation may be entitled to cast as the holders of stock or other securities in any other entity, any of whose stock or other securities may be held by the Corporation, at meetings of the holders of the stock or other securities of such other entity, or to consent in accordance with applicable law, in the name of the Corporation as such holder, to any action by such other entity, and may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent, and may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal or otherwise, all such proxies, consents or other instruments as such person may deem necessary or proper in the premises.

SECTION 8.01. Amendments. The By-Laws may be altered or repealed and new By-Laws may be adopted (a) at any annual or special meeting of stockholders by the affirmative vote of the holders of a majority of the voting power of the Voting Stock then outstanding, voting as a single class, provided, however, that any proposed alteration or repeal of, or the adoption of any By-Law inconsistent with, Section 2.02, Section 2.07 or this Section 8.01 by the stockholders shall require the affirmative vote of the holders of at least 80% of the voting power of all Voting Stock then outstanding, voting together as a single class, and provided, further, however, that, in the case of any such stockholder action at a special meeting of stockholders, notice of the proposed alteration, repeal or adoption of the new By-Law or By-Laws must be contained in the notice of such special meeting, or (b) by the affirmative vote of a majority of the Whole Board.

Article IV, Section 4.03 of the By-Laws is, effective immediately, hereby amended and restated in its entirety to read as follows:

SECTION 4.03. CHAIRMAN OF THE BOARD. The Chairman of the Board shall act as chairman of all meetings of the stockholders and of the Board of Directors; PROVIDED, HOWEVER, that if the Chairman of the Board is absent from, or unable to act as chairman of, a meeting of the stockholders, then, if present and able to act, (i) the Vice-Chairman, if any, (ii) the President and Chief Executive Officer, (iii) the Chief Financial Officer, (iv) the General Counsel or (v) the Controller of the Corporation, in the order named, shall act as chairman of the meeting of stockholders in place of the Chairman of the Board. The Chairman of the Board shall be responsible for the general management of the affairs of the Corporation and shall perform all duties incidental to such person’s office which may be required by law and all such other duties as are properly required of him by the Board of Directors. The Chairman of the Board shall make reports to the Board of Directors and the stockholders, and shall see that all orders and resolutions of the Board of Directors and of any committee thereof are carried into effect. The Chairman of the Board shall be the President and Chief Executive Officer of the Corporation if no other person has been elected as the President and Chief Executive Officer. The Board of Directors also may elect a Vice-Chairman to act in the place of the Chairman of the Board upon his or her absence or inability to act.

Article IV, Section 4.04 of the By-Laws is, effective immediately, hereby amended and restated in its entirety to read as follows:

SECTION 4.04. PRESIDENT; CHIEF EXECUTIVE OFFICER. The President shall be the Chief Executive Officer of the Corporation, shall act in a general executive capacity and shall assist the Chairman of the Board in the administration and operation of the Corporation’s business and general supervision of its policies and affairs. The President and Chief Executive Officer, if he or she is also a Director, shall, in the absence of or because of the inability to act of the Chairman of the Board, perform all duties of the Chairman of the Board and act as chairman of all meetings of stockholders and of the Board of Directors.

40 EX-10.2 4 c80942exv10w2.htm EXHIBIT 10.2 AMENDMENT #3 TO LETTER AGREEMENT exv10w2

THIS AMENDMENT NO. 3 TO LETTER AGREEMENT (“Amendment”) is made as of July 31, 2003, by and between ZIMMER HOLDINGS, INC., a Delaware corporation and successor-in-interest to Zimmer, Inc. (the “Parent Borrower”) and BANK OF AMERICA, N.A., a national banking association (the “Bank”).

A. The Parent Borrower and the Bank are parties to that certain Letter Agreement dated as of July 17, 2001, as amended from time to time (the “Letter Agreement”), pursuant to which the Bank has made a $26,000,000 uncommitted standard instrument credit facility available to the Parent Borrower and certain designated subsidiaries of the Parent Borrower.

B. The Parent Borrower has requested certain changes in the terms of the Letter Agreement, and the Bank is willing to agree to those changes on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and for other good and valuable consideration, the parties do hereby agree as follows:

1. Capitalized terms used but not defined in this Amendment shall have the meanings given them in the Letter Agreement.

(a) The subject line on page 1 of the Letter Agreement is hereby amended and restated in its entirety to read as follows:

(b) The last sentence of Paragraph I.E of the Letter Agreement is hereby amended and restated in its entirety to read as follows:

“This Agreement (including without limitation the obligations of Zimmer under Paragraph I.C(2) hereof) shall remain in full force and effect so long as either (a) any Standard Instrument is outstanding, or (b) the Bank has any obligation to, or for the benefit of, Zimmer in connection with this Agreement.”

(i) The definition of “Availability Termination Date” is hereby amended and restated in its entirety to read as follows:

(ii) The definition of “Obligation Cutoff Date” is hereby amended and restated in its entirety to read as follows:

(a) this Amendment has been duly authorized, executed and delivered on its behalf, and the Letter Agreement, as amended hereby, constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms, except as limited by: (i) the Bankruptcy Code of the United States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments, or similar debtor relief laws from time to time in effect affecting the rights of creditors generally; and (ii) general principles of equity;

(b) the representations and warranties of Parent Borrower set forth in Paragraph III of the Letter Agreement (other than any representations and warranties that relate exclusively to a prior date, which representations and warranties were true and correct in all material respects as of such prior date), are true and correct in all material respects on and as of the date hereof with the same force and effect as if made on and as of such date; and

(c) no Default or Event of Default under the Letter Agreement has occurred and is continuing or will result from the execution and delivery of this Amendment.

4. This Amendment shall be governed by and construed in accordance with the laws of the State of New York. As expressly amended hereby, the Letter Agreement is hereby ratified and confirmed and shall continue in full force and effect.

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized officers as of the date first written above.

EX-31.1 5 c80942exv31w1.htm EX-31.1 302 CERTIFICATION OF CHIEF EXEC. OFFICER exv31w1

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors:

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

EX-31.2 6 c80942exv31w2.htm EX-31.2 302 CERTIFICATION OF CHIEF FIN. OFFICER exv31w2

CERTIFICATION PURSUANT TO RULE 13a-14(a)/15d-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

(a)

(b)

(c)

(a)

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Zimmer Holdings, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Delaware		13-4151777
(State or other jurisdiction of		(IRS Employer Identification No.)
incorporation or organization)


Part I — Financial Information
Item 1. Financial Statements
	Consolidated Statements of Earnings
	Consolidated Balance Sheets
	Consolidated Statements of Cash Flows
	Notes to Interim Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II — Other Information
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit 3 Amended and Restated By-Laws
Exhibit 10.2 Amendment #3 to Letter Agreement
Ex-31.1 302 Certification of Chief Exec. Officer
Ex-31.2 302 Certification of Chief Fin. Officer
Exhibit 32 Section 906 Certification


		September 30,			December 31,
		2003			2002

		(in millions)
Land		$	8.4		$	8.2
Buildings and equipment			375.1			354.4
Instruments			330.9			—
Construction in progress			13.9			13.3

			728.3			375.9
Accumulated depreciation			(390.4	)		(218.1	)

	Property, plant and equipment, net	$	337.9		$	157.8


		ZIMMER HOLDINGS, INC.

		(Registrant)

Date: November 14, 2003

		By: /s/ Sam R. Leno

		Sam R. Leno
		Executive Vice President, Corporate Finance
		and Operations and Chief Financial Officer

Date: November 14, 2003

		By: /s/ James T. Crines

		James T. Crines
		Senior Vice President, Finance and Controller


Subsidiary Borrower		Advised Sublimit
Zimmer CIS (Russia)		$	2,000,000
Zimmer Korea		$	5,000,000
Zimmer Taiwan Co. Ltd.		$	4,000,000
Zimmer Pte, Ltd. — Singapore		$	2,000,000
Zimmer (Shanghai) Medical International Trading Co. Ltd.		$	2,000,000
	Total Uncommitted Standard Instrument Line of Credit	$	15,000,000

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	Three Months Ended September 30,

	2003			2002

Americas		51.7	%		47.9	%
Asia Pacific		42.0			46.2
Europe		26.5			20.6


	Nine Months Ended September 30,

	2003			2002

Americas		51.6	%		48.0	%
Asia Pacific		44.4			45.0
Europe		28.3			22.7


		ZIMMER HOLDINGS, INC.

		By: /s/ James T. Crines

		Name: James T. Crines

		Title: Vice President and Controller


		BANK OF AMERICA, N.A.

		By: /s/Kevin P. Bertelsen

		Name: Kevin P. Bertelsen

		Title: Vice President


Date: November 14, 2003

		/s/ J. Raymond Elliott
		J. Raymond Elliott
		Chairman, President and
		Chief Executive Officer


Date: November 14, 2003

		/s/ Sam R. Leno
		Sam R. Leno
		Executive Vice President, Corporate Finance and
		Operations and Chief Financial Officer