8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)   April 25, 2005

Zimmer Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	001-16407	13-4151777
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

345 East Main Street
Warsaw, Indiana 46580

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code   (574) 267-6131

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02      RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     On April 25, 2005, Zimmer Holdings, Inc. (the “Registrant”) reported its results of operations for the quarter ended March 31, 2005. The Registrant’s earnings release is attached as Exhibit 99.1 and the information set forth therein is incorporated herein by reference and constitutes a part of this report.

     As previously announced, the Registrant acquired Centerpulse AG on October 2, 2003 and Implex Corp. on April 23, 2004. The earnings release attached as Exhibit 99.1 includes the operating performance measures of adjusted net earnings, adjusted diluted EPS and projected diluted EPS which exclude acquisition and integration expenses and inventory step-up. It also includes other non-GAAP financial measures including net margin, operating margin, gross margin and net debt.

     Management believes that the presentation of these non-GAAP financial measures allows investors to better understand the operating results of the Registrant. However, these measures should be considered in addition to, and not as a substitute for, or superior to, other measures prepared in accordance with GAAP.

     All of the non-GAAP financial measures are reconciled to the most directly comparable GAAP financial measure in the press release.

     The Registrant is furnishing the information contained in this report, including the Exhibits, pursuant to Item 2.02 of Form 8-K promulgated by the Securities and Exchange Commission (the “SEC”). This information shall not be deemed to be “filed” with the SEC or incorporated by reference into any other filing with the SEC. By filing this report on Form 8-K and furnishing this information, the Registrant makes no admission as to the materiality of any information in this report, including the Exhibits.

ITEM 9.01      FINANCIAL STATEMENTS AND EXHIBITS

     (c)      Exhibits

     99.1   Press Release, dated April 25, 2005, issued by the Registrant.

SIGNATURES

     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 hereunto duly authorized.

Dated: April 25, 2005
ZIMMER HOLDINGS, INC.
By:	/s/ David C. Dvorak David C. Dvorak, Executive Vice President, Corporate Services and Chief Counsel

EX-99.1 2 c94557exv99w1.htm PRESS RELEASE

Exhibit 99.1

Contacts:
Media	Investors
Brad Bishop	Marc Ostermann	Sam Leno
574-372-4291	574-371-8515	574-372-4790
bradley.bishop@zimmer.com	marc.ostermann@zimmer.com	sam.leno@zimmer.com

Zimmer Reports First Quarter 2005 Financial Results

Highlights

•   Net Sales of $829 million represents an increase of 12% (includes 2% increase due to changes in foreign exchange rates)

•   Worldwide Reconstructive Sales increased 13% (includes 2% increase due to changes in foreign exchange rates) with Americas Reconstructive Sales increasing 17%

•   Record adjusted* margins — 77% gross, 31% operating and 21% net reported; 77% gross, 33% operating and 23% net adjusted*

•   Diluted EPS were $0.70 reported, and $0.75 adjusted*, an increase of 34% adjusted* over prior year

•   Operating cash flow of $153 million, total debt reduced to $426 million with cash on hand $75 million and resulting in net debt* of $351 million

•   Increasing annual 2005 diluted EPS guidance to approximately $2.86 reported and $3.00 adjusted*, representing a 24% adjusted* growth over prior year

(WARSAW, IN) April 25, 2005 — Zimmer Holdings, Inc. (NYSE and SWX: ZMH) today reported financial results for the quarter ended March 31, 2005. For the quarter, the Company announced net sales of $829 million and diluted earnings per share of $0.70 reported and $0.75 adjusted*, exceeding the high end of the Company’s guidance and First Call estimates of $812 million and $0.67 adjusted*, respectively. Reported results include acquisition and integration expenses and inventory step-up, as applicable.

“Zimmer is off to a good start in 2005, powered by the strength of our knee replacement product sales, particularly in the Americas where we experienced a 22% increase, double digit growth from our spine business for the first time since acquiring Centerpulse and record margins,” said Ray Elliott, Zimmer Chairman, President and CEO. “In February, the American Academy of

Orthopaedic Surgeons’ meeting took place, providing a perfect showcase for our new developments in Minimally Invasive Solutions™ (MIS™) Procedures and Technologies, electromagnetic surgical navigation and Trabecular Metal™ Technology applications. Education and innovation remain the keys to our success. During the first quarter, Zimmer Institutes trained approximately 450 surgeons globally on MIS techniques—more than double the same quarter last year. We will continue to pursue the marriage of improved patient quality of life and measurable economic value added to our health care system.”

Zimmer continued to build on its industry leadership in MIS Procedures and Technologies with the release of a white paper evaluating more than 1,000 patient outcomes and associated economic benefits of the Company’s MIS 2-Incision™ Hip Replacement Procedure. When compared to conventional hip replacement, the MIS 2-Incision technique, as taught worldwide at Zimmer Institute facilities, saved an average of 30% in costs while improving three month clinical outcomes by more than 30%. The Company also launched a new MIS procedure in February, the Anterolateral Hip Replacement technique, to appeal to a broader range of surgeon philosophies and to date has trained more than 150 surgeons.

“The acquisitions of Centerpulse and Implex continue to exceed our expectations, both in the marketplace and financially,” said Elliott. “By year end, we expect to complete our cross-selling training and realize more than $100 million in annual expense synergies.”

The following table provides sales results by geographic segment and product category, as well as the percent change compared to the prior year quarter and the impact of changes in foreign exchange rates.

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NET SALES — THREE MONTHS ENDED MARCH 31, 2005
(in millions, unaudited)

	Net		%			FX
	Sales		Growth			Impact**
Geographic Segments
Americas	$	480		14	%		1	%
Europe		235		9			5
Asia Pacific		114		9			4
Total		829		12			2
Product Categories
Reconstructive
Americas		386		17			1
Europe		214		8			5
Asia Pacific		90		9			4
Total		690		13			2
Knees
Americas		223		22			0
Europe		89		16			6
Asia Pacific		37		10			4
Total		349		19			2
Hips
Americas		132		9			0
Europe		112		3			5
Asia Pacific		48		7			4
Total		292		6			3
Extremities		16		11			3
Dental		33		19			2
Trauma		46		1			2
Spine		38		14			1
Orthopaedic Surgical Products		55		6			2
** Effect of changes in foreign exchange rates on growth

Net earnings for the quarter were $174 million on a reported basis, and were $187 million adjusted*, an increase of 36% adjusted* over the prior year. Diluted earnings per share for the

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quarter were $0.70 reported and were $0.75 adjusted*, an increase of 34% adjusted* over the prior year.

Guidance

The Company is reaffirming its full year 2005 sales guidance, estimated to be in a range of $3,325 million to $3,345 million which represents approximately 12% growth over prior year. Additionally, the Company is reaffirming its second quarter sales guidance estimate of approximately 15% growth over the prior year period.

Diluted earnings per share guidance for the full year is being increased to approximately $2.86 reported and $3.00 adjusted*, representing 24% adjusted* growth over prior year. Diluted earnings per share guidance for the second quarter is being increased to approximately $0.71 reported and $0.75 adjusted*, representing a 29% adjusted* increase over prior year. Second quarter guidance assumes increases in direct to consumer advertising spending related to MIS procedures and technologies, incremental legal and IT costs, and increased R&D spending primarily related to, but not limited to, biologics.

Conference Call

The Company will conduct its first quarter 2005 investor conference call on Tuesday, April 26, 2005, at 8:00 a.m. Eastern Time. The live audio webcast can be accessed live via Zimmer’s Investor Relations website at http://investor.zimmer.com. It will be archived for replay following the conference. Individuals who wish to dial into the conference call may do so at (800) 406-1106. International callers should dial (706) 634-7075. A digital recording will be available two hours after the completion of the conference call from April 26, 2005 to April 29, 2005. To access the recording, US/Canada callers should dial (800) 642-1687, or for International callers, dial (706) 645-9291, and enter the Conference ID, 5170737. A copy of this press release and other financial and statistical information about the periods to be presented in the conference call will be accessible through the Zimmer website at http://investor.zimmer.com.

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About the Company

Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is the worldwide #1 pure-play orthopaedic leader in designing, developing, manufacturing and marketing reconstructive and spinal implants, trauma and related orthopaedic surgical products. Zimmer has operations in more than 24 countries around the world and sells products in more than 100 countries. Zimmer’s 2004 sales were approximately $3 billion. The Company is supported by the efforts of more than 6,500 employees worldwide.

###

Visit Zimmer on the worldwide web at www.zimmer.com

*Note on Non-GAAP Financial Measures

As used in this press release, the term “adjusted” refers to operating performance measures that exclude acquisition and integration expenses and inventory step-up. The term “net debt” refers to short-term and long-term debt obligations minus the Company’s cash and equivalents and restricted cash. Reconciliations of non-GAAP measures to the most directly comparable GAAP measure are included in this press release.

Zimmer Safe Harbor Statement

This press release 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 and Implex Corp., the outcome of the Department of Justice investigation announced in March 2005 and the pending informal SEC investigation of Centerpulse accounting, 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

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alliances, international growth, governmental laws and regulations affecting our U.S. and international businesses, including tax obligations and risks, 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.

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ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(in millions, except per share amounts, unaudited)

	2005			2004		% Inc/(Dec)
Net Sales	$	828.5		$	742.2		12	%
Cost of products sold		190.3			219.5		(13	)
Gross Profit		638.2			522.7		22
Research and development		42.1			39.8		6
Selling, general and administrative		321.6			297.8		8
Acquisition and integration		16.9			31.3		(46	)
Operating expenses		380.6			368.9		3
Operating Profit		257.6			153.8		68
Interest expense		7.2			9.8		(27	)
Earnings before income taxes and minority interest		250.4			144.0		74
Provision for income taxes		76.6			46.4		65
Minority interest		(0.2	)		—		N/A
Net Earnings	$	173.6		$	97.6		78
Earnings Per Common Share
Basic	$	0.71		$	0.40		78
Diluted	$	0.70		$	0.40		75
Weighted Average Common Shares Outstanding
Basic		246.1			242.9
Diluted		249.2			246.4

7

ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2005 AND DECEMBER 31, 2004
(in millions)

	March 31,		December 31,
	2005		2004
	(unaudited)
Assets
Current Assets:
Cash and equivalents	$	57.0	$	154.6
Restricted cash		18.0		18.9
Receivables, net		570.6		524.8
Inventories, net		551.9		536.0
Other current assets		281.0		326.6
Total current assets		1,478.5		1,560.9
Property, plant and equipment, net		643.1		628.5
Goodwill		2,494.5		2,528.9
Intangible assets, net		789.6		794.8
Other assets		185.7		182.4
Total Assets	$	5,591.4	$	5,695.5
Liabilities and Shareholders’ Equity
Current liabilities	$	608.0	$	673.5
Short-term debt		—		27.5
Other long-term liabilities		402.0		420.9
Long-term debt		426.3		624.0
Minority interest		1.6		7.1
Shareholders’ equity		4,153.5		3,942.5
Total Liabilities and Shareholders’ Equity	$	5,591.4	$	5,695.5

8

ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(in millions, unaudited)

	2005			2004
Cash flows provided by (used in) operating activities
Net earnings	$	173.6		$	97.6
Depreciation and amortization		45.1			41.7
Inventory step-up		2.0			31.0
Changes in operating assets and liabilities, net of acquired assets and liabilities
Income taxes		29.2			75.5
Receivables		(53.1	)		(38.8	)
Inventories		(24.4	)		(5.1	)
Accounts payable and accrued expenses		(20.1	)		(16.2	)
Other assets and liabilities		0.2			8.3
Net cash provided by operating activities		152.5			194.0
Cash flows provided by (used in) investing activities
Additions to instruments		(42.6	)		(37.6	)
Additions to other property, plant and equipment		(18.4	)		(13.0	)
Investments in other assets		(9.2	)		—
Net cash used in investing activities		(70.2	)		(50.6	)
Cash flows provided by (used in) financing activities
Proceeds from exercise of stock options		44.4			36.5
Net proceeds/(payments) on lines of credit		329.0			(149.3	)
Payments on term loan		(550.0	)		—
Debt issuance costs		(1.9	)		—
Net cash provided by (used in) financing activities		(178.5	)		(112.8	)
Effect of exchange rates on cash and equivalents		(1.4	)		0.6
Increase in cash and equivalents		(97.6	)		31.2
Cash and equivalents, beginning of period		154.6			77.5
Cash and equivalents, end of period	$	57.0		$	108.7

9

ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC SEGMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(in millions, unaudited)

	Three Months Ended March 31,
	2005		2004		% Increase
Americas	$	480.4	$	422.7		14	%
Europe		234.6		215.1		9
Asia Pacific		113.5		104.4		9
Total	$	828.5	$	742.2		12

ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(in millions, unaudited)

	Three Months Ended March 31,
	2005		2004		% Increase
Reconstructive	$	689.4	$	611.3		13	%
Trauma		45.4		45.0		1
Spine		38.3		33.5		14
OSP		55.4		52.4		6
Total	$	828.5	$	742.2		12

10

ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET EARNINGS
AND ADJUSTED* NET EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(in millions, unaudited)

	Three Months
	Ended March 31,
	2005			2004
Net Earnings	$	173.6		$	97.6
Acquisition and integration		16.9			31.3
Inventory step-up		2.0			31.0
Tax benefit of acquisition and integration and inventory step-up		(5.6	)		(22.3	)
Adjusted Net Earnings	$	186.9		$	137.6

ZIMMER HOLDINGS, INC.
RECONCILIATION OF DILUTED EPS
AND ADJUSTED* DILUTED EPS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(unaudited)

	Three Months
	Ended March 31,
	2005			2004
Diluted EPS	$	0.70		$	0.40
Acquisition and integration		0.06			0.13
Inventory step-up		0.01			0.12
Tax benefit of acquisition and integration and inventory step-up		(0.02	)		(0.09	)
Adjusted* Diluted EPS	$	0.75		$	0.56

11

ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED
AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(in millions, except per share amounts, unaudited)

	Reported 2005			Adjustments			Adjusted* 2005
Net Sales	$	828.5		$	—		$	828.5
Cost of products sold		190.3			(2.0	)		188.3
Gross Profit		638.2			2.0			640.2
Research and development		42.1			—			42.1
Selling, general and administrative		321.6			—			321.6
Acquisition and integration		16.9			(16.9	)		—
Operating expenses		380.6			(16.9	)		363.7
Operating Profit		257.6			18.9			276.5
Interest expense		7.2			—			7.2
Earnings before income taxes and minority interest		250.4			18.9			269.3
Provision for income taxes		76.6			5.6			82.2
Minority interest		(0.2	)		—			(0.2	)
Net Earnings	$	173.6		$	13.3		$	186.9
Earnings Per Common Share
Basic	$	0.71		$	0.05		$	0.76
Diluted	$	0.70		$	0.05		$	0.75
Weighted Average Common Shares Outstanding
Basic		246.1						246.1
Diluted		249.2						249.2

12

ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED
AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(in millions, except per share amounts, unaudited)

	Reported 2004		Adjustments			Adjusted* 2004
Net Sales	$	742.2	$	—		$	742.2
Cost of products sold		219.5		(31.0	)		188.5
Gross Profit		522.7		31.0			553.7
Research and development		39.8		—			39.8
Selling, general and administrative		297.8		—			297.8
Acquisition and integration		31.3		(31.3	)		—
Operating expenses		368.9		(31.3	)		337.6
Operating Profit		153.8		62.3			216.1
Interest expense		9.8		—			9.8
Earnings before income taxes		144.0		62.3			206.3
Provision for income taxes		46.4		22.3			68.7
Net Earnings	$	97.6	$	40.0		$	137.6
Earnings Per Common Share
Basic	$	0.40	$	0.17		$	0.57
Diluted	$	0.40	$	0.16		$	0.56
Weighted Average Common Shares Outstanding
Basic		242.9					242.9
Diluted		246.4					246.4

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ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET MARGIN
AND ADJUSTED* NET MARGIN
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(unaudited)

	Three Months Ended
	March 31,
	2005
Net Margin		21.0	%
Acquisition and integration		2.0
Inventory step-up		0.3
Tax benefit of acquisition and integration and inventory step-up		(0.7	)
Adjusted* Net Margin		22.6	%

ZIMMER HOLDINGS, INC.
RECONCILIATION OF OPERATING MARGIN
AND ADJUSTED* OPERATING MARGIN
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(unaudited)

	Three Months Ended
	March 31,
	2005
Operating Margin		31.1	%
Acquisition and integration		2.0
Inventory step-up		0.3
Adjusted* Operating Margin		33.4	%

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ZIMMER HOLDINGS, INC.
RECONCILIATION OF GROSS MARGIN
AND ADJUSTED* GROSS MARGIN
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(unaudited)

	Three Months Ended
	March 31,
	2005
Gross Margin		77.0	%
Inventory step-up		0.3
Adjusted* Gross Margin		77.3	%

ZIMMER HOLDINGS, INC.
RECONCILIATION OF DEBT AND NET DEBT*
AS OF MARCH 31, 2005 and DECEMBER 31, 2004
(in millions, unaudited)

	March 31,		December 31,
	2005		2004
Short-term debt	$	—	$	27.5
Long-term debt		426.3		624.0
Total debt		426.3		651.5
Cash and equivalents		57.0		154.6
Restricted cash		18.0		18.9
Total cash		75.0		173.5
Net debt*	$	351.3	$	478.0

15

ZIMMER HOLDINGS, INC.
RECONCILIATION OF PROJECTED DILUTED EPS
AND PROJECTED ADJUSTED* DILUTED EPS
(unaudited)

Projected three months ended June 30, 2005:
Diluted EPS	$	0.71
Acquisition and Integration, net of tax		0.03
Inventory Step-up, net of tax		0.01
Adjusted* Diluted EPS	$	0.75
Projected twelve months ended December 31, 2005:
Diluted EPS	$	2.86
Acquisition and Integration, net of tax		0.12
Inventory Step-up, net of tax		0.02
Adjusted* Diluted EPS	$	3.00

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-----END PRIVACY-ENHANCED MESSAGE-----

EX-99.1

Exhibit 99.1

Contacts:
Media	Investors
Brad Bishop	Marc Ostermann	Sam Leno
574-372-4291	574-371-8515	574-372-4790
bradley.bishop@zimmer.com	marc.ostermann@zimmer.com	sam.leno@zimmer.com

Zimmer Reports First Quarter 2005 Financial Results

Highlights

•   Net Sales of $829 million represents an increase of 12% (includes 2% increase due to changes in foreign exchange rates)

•   Worldwide Reconstructive Sales increased 13% (includes 2% increase due to changes in foreign exchange rates) with Americas Reconstructive Sales increasing 17%

•   Record adjusted* margins — 77% gross, 31% operating and 21% net reported; 77% gross, 33% operating and 23% net adjusted*

•   Diluted EPS were $0.70 reported, and $0.75 adjusted*, an increase of 34% adjusted* over prior year

•   Operating cash flow of $153 million, total debt reduced to $426 million with cash on hand $75 million and resulting in net debt* of $351 million

•   Increasing annual 2005 diluted EPS guidance to approximately $2.86 reported and $3.00 adjusted*, representing a 24% adjusted* growth over prior year

(WARSAW, IN) April 25, 2005 — Zimmer Holdings, Inc. (NYSE and SWX: ZMH) today reported financial results for the quarter ended March 31, 2005. For the quarter, the Company announced net sales of $829 million and diluted earnings per share of $0.70 reported and $0.75 adjusted*, exceeding the high end of the Company’s guidance and First Call estimates of $812 million and $0.67 adjusted*, respectively. Reported results include acquisition and integration expenses and inventory step-up, as applicable.

“Zimmer is off to a good start in 2005, powered by the strength of our knee replacement product sales, particularly in the Americas where we experienced a 22% increase, double digit growth from our spine business for the first time since acquiring Centerpulse and record margins,” said Ray Elliott, Zimmer Chairman, President and CEO. “In February, the American Academy of

Orthopaedic Surgeons’ meeting took place, providing a perfect showcase for our new developments in Minimally Invasive Solutions™ (MIS™) Procedures and Technologies, electromagnetic surgical navigation and Trabecular Metal™ Technology applications. Education and innovation remain the keys to our success. During the first quarter, Zimmer Institutes trained approximately 450 surgeons globally on MIS techniques—more than double the same quarter last year. We will continue to pursue the marriage of improved patient quality of life and measurable economic value added to our health care system.”

Zimmer continued to build on its industry leadership in MIS Procedures and Technologies with the release of a white paper evaluating more than 1,000 patient outcomes and associated economic benefits of the Company’s MIS 2-Incision™ Hip Replacement Procedure. When compared to conventional hip replacement, the MIS 2-Incision technique, as taught worldwide at Zimmer Institute facilities, saved an average of 30% in costs while improving three month clinical outcomes by more than 30%. The Company also launched a new MIS procedure in February, the Anterolateral Hip Replacement technique, to appeal to a broader range of surgeon philosophies and to date has trained more than 150 surgeons.

“The acquisitions of Centerpulse and Implex continue to exceed our expectations, both in the marketplace and financially,” said Elliott. “By year end, we expect to complete our cross-selling training and realize more than $100 million in annual expense synergies.”

The following table provides sales results by geographic segment and product category, as well as the percent change compared to the prior year quarter and the impact of changes in foreign exchange rates.

2

NET SALES — THREE MONTHS ENDED MARCH 31, 2005
(in millions, unaudited)

	Net		%			FX
	Sales		Growth			Impact**
Geographic Segments
Americas	$	480		14	%		1	%
Europe		235		9			5
Asia Pacific		114		9			4
Total		829		12			2
Product Categories
Reconstructive
Americas		386		17			1
Europe		214		8			5
Asia Pacific		90		9			4
Total		690		13			2
Knees
Americas		223		22			0
Europe		89		16			6
Asia Pacific		37		10			4
Total		349		19			2
Hips
Americas		132		9			0
Europe		112		3			5
Asia Pacific		48		7			4
Total		292		6			3
Extremities		16		11			3
Dental		33		19			2
Trauma		46		1			2
Spine		38		14			1
Orthopaedic Surgical Products		55		6			2
** Effect of changes in foreign exchange rates on growth

Net earnings for the quarter were $174 million on a reported basis, and were $187 million adjusted*, an increase of 36% adjusted* over the prior year. Diluted earnings per share for the

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quarter were $0.70 reported and were $0.75 adjusted*, an increase of 34% adjusted* over the prior year.

Guidance

The Company is reaffirming its full year 2005 sales guidance, estimated to be in a range of $3,325 million to $3,345 million which represents approximately 12% growth over prior year. Additionally, the Company is reaffirming its second quarter sales guidance estimate of approximately 15% growth over the prior year period.

Diluted earnings per share guidance for the full year is being increased to approximately $2.86 reported and $3.00 adjusted*, representing 24% adjusted* growth over prior year. Diluted earnings per share guidance for the second quarter is being increased to approximately $0.71 reported and $0.75 adjusted*, representing a 29% adjusted* increase over prior year. Second quarter guidance assumes increases in direct to consumer advertising spending related to MIS procedures and technologies, incremental legal and IT costs, and increased R&D spending primarily related to, but not limited to, biologics.

Conference Call

The Company will conduct its first quarter 2005 investor conference call on Tuesday, April 26, 2005, at 8:00 a.m. Eastern Time. The live audio webcast can be accessed live via Zimmer’s Investor Relations website at http://investor.zimmer.com. It will be archived for replay following the conference. Individuals who wish to dial into the conference call may do so at (800) 406-1106. International callers should dial (706) 634-7075. A digital recording will be available two hours after the completion of the conference call from April 26, 2005 to April 29, 2005. To access the recording, US/Canada callers should dial (800) 642-1687, or for International callers, dial (706) 645-9291, and enter the Conference ID, 5170737. A copy of this press release and other financial and statistical information about the periods to be presented in the conference call will be accessible through the Zimmer website at http://investor.zimmer.com.

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About the Company

Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is the worldwide #1 pure-play orthopaedic leader in designing, developing, manufacturing and marketing reconstructive and spinal implants, trauma and related orthopaedic surgical products. Zimmer has operations in more than 24 countries around the world and sells products in more than 100 countries. Zimmer’s 2004 sales were approximately $3 billion. The Company is supported by the efforts of more than 6,500 employees worldwide.

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Visit Zimmer on the worldwide web at www.zimmer.com

*Note on Non-GAAP Financial Measures

As used in this press release, the term “adjusted” refers to operating performance measures that exclude acquisition and integration expenses and inventory step-up. The term “net debt” refers to short-term and long-term debt obligations minus the Company’s cash and equivalents and restricted cash. Reconciliations of non-GAAP measures to the most directly comparable GAAP measure are included in this press release.

Zimmer Safe Harbor Statement

This press release 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 and Implex Corp., the outcome of the Department of Justice investigation announced in March 2005 and the pending informal SEC investigation of Centerpulse accounting, 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

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alliances, international growth, governmental laws and regulations affecting our U.S. and international businesses, including tax obligations and risks, 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.

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ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(in millions, except per share amounts, unaudited)

	2005			2004		% Inc/(Dec)
Net Sales	$	828.5		$	742.2		12	%
Cost of products sold		190.3			219.5		(13	)
Gross Profit		638.2			522.7		22
Research and development		42.1			39.8		6
Selling, general and administrative		321.6			297.8		8
Acquisition and integration		16.9			31.3		(46	)
Operating expenses		380.6			368.9		3
Operating Profit		257.6			153.8		68
Interest expense		7.2			9.8		(27	)
Earnings before income taxes and minority interest		250.4			144.0		74
Provision for income taxes		76.6			46.4		65
Minority interest		(0.2	)		—		N/A
Net Earnings	$	173.6		$	97.6		78
Earnings Per Common Share
Basic	$	0.71		$	0.40		78
Diluted	$	0.70		$	0.40		75
Weighted Average Common Shares Outstanding
Basic		246.1			242.9
Diluted		249.2			246.4

7

ZIMMER HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2005 AND DECEMBER 31, 2004
(in millions)

	March 31,		December 31,
	2005		2004
	(unaudited)
Assets
Current Assets:
Cash and equivalents	$	57.0	$	154.6
Restricted cash		18.0		18.9
Receivables, net		570.6		524.8
Inventories, net		551.9		536.0
Other current assets		281.0		326.6
Total current assets		1,478.5		1,560.9
Property, plant and equipment, net		643.1		628.5
Goodwill		2,494.5		2,528.9
Intangible assets, net		789.6		794.8
Other assets		185.7		182.4
Total Assets	$	5,591.4	$	5,695.5
Liabilities and Shareholders’ Equity
Current liabilities	$	608.0	$	673.5
Short-term debt		—		27.5
Other long-term liabilities		402.0		420.9
Long-term debt		426.3		624.0
Minority interest		1.6		7.1
Shareholders’ equity		4,153.5		3,942.5
Total Liabilities and Shareholders’ Equity	$	5,591.4	$	5,695.5

8

ZIMMER HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(in millions, unaudited)

	2005			2004
Cash flows provided by (used in) operating activities
Net earnings	$	173.6		$	97.6
Depreciation and amortization		45.1			41.7
Inventory step-up		2.0			31.0
Changes in operating assets and liabilities, net of acquired assets and liabilities
Income taxes		29.2			75.5
Receivables		(53.1	)		(38.8	)
Inventories		(24.4	)		(5.1	)
Accounts payable and accrued expenses		(20.1	)		(16.2	)
Other assets and liabilities		0.2			8.3
Net cash provided by operating activities		152.5			194.0
Cash flows provided by (used in) investing activities
Additions to instruments		(42.6	)		(37.6	)
Additions to other property, plant and equipment		(18.4	)		(13.0	)
Investments in other assets		(9.2	)		—
Net cash used in investing activities		(70.2	)		(50.6	)
Cash flows provided by (used in) financing activities
Proceeds from exercise of stock options		44.4			36.5
Net proceeds/(payments) on lines of credit		329.0			(149.3	)
Payments on term loan		(550.0	)		—
Debt issuance costs		(1.9	)		—
Net cash provided by (used in) financing activities		(178.5	)		(112.8	)
Effect of exchange rates on cash and equivalents		(1.4	)		0.6
Increase in cash and equivalents		(97.6	)		31.2
Cash and equivalents, beginning of period		154.6			77.5
Cash and equivalents, end of period	$	57.0		$	108.7

9

ZIMMER HOLDINGS, INC.
NET SALES BY GEOGRAPHIC SEGMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(in millions, unaudited)

	Three Months Ended March 31,
	2005		2004		% Increase
Americas	$	480.4	$	422.7		14	%
Europe		234.6		215.1		9
Asia Pacific		113.5		104.4		9
Total	$	828.5	$	742.2		12

ZIMMER HOLDINGS, INC.
NET SALES BY PRODUCT CATEGORY
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(in millions, unaudited)

	Three Months Ended March 31,
	2005		2004		% Increase
Reconstructive	$	689.4	$	611.3		13	%
Trauma		45.4		45.0		1
Spine		38.3		33.5		14
OSP		55.4		52.4		6
Total	$	828.5	$	742.2		12

10

ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET EARNINGS
AND ADJUSTED* NET EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(in millions, unaudited)

	Three Months
	Ended March 31,
	2005			2004
Net Earnings	$	173.6		$	97.6
Acquisition and integration		16.9			31.3
Inventory step-up		2.0			31.0
Tax benefit of acquisition and integration and inventory step-up		(5.6	)		(22.3	)
Adjusted Net Earnings	$	186.9		$	137.6

ZIMMER HOLDINGS, INC.
RECONCILIATION OF DILUTED EPS
AND ADJUSTED* DILUTED EPS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 and 2004
(unaudited)

	Three Months
	Ended March 31,
	2005			2004
Diluted EPS	$	0.70		$	0.40
Acquisition and integration		0.06			0.13
Inventory step-up		0.01			0.12
Tax benefit of acquisition and integration and inventory step-up		(0.02	)		(0.09	)
Adjusted* Diluted EPS	$	0.75		$	0.56

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ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED
AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(in millions, except per share amounts, unaudited)

	Reported 2005			Adjustments			Adjusted* 2005
Net Sales	$	828.5		$	—		$	828.5
Cost of products sold		190.3			(2.0	)		188.3
Gross Profit		638.2			2.0			640.2
Research and development		42.1			—			42.1
Selling, general and administrative		321.6			—			321.6
Acquisition and integration		16.9			(16.9	)		—
Operating expenses		380.6			(16.9	)		363.7
Operating Profit		257.6			18.9			276.5
Interest expense		7.2			—			7.2
Earnings before income taxes and minority interest		250.4			18.9			269.3
Provision for income taxes		76.6			5.6			82.2
Minority interest		(0.2	)		—			(0.2	)
Net Earnings	$	173.6		$	13.3		$	186.9
Earnings Per Common Share
Basic	$	0.71		$	0.05		$	0.76
Diluted	$	0.70		$	0.05		$	0.75
Weighted Average Common Shares Outstanding
Basic		246.1						246.1
Diluted		249.2						249.2

12

ZIMMER HOLDINGS, INC.
RECONCILIATION OF REPORTED
AND ADJUSTED* STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(in millions, except per share amounts, unaudited)

	Reported 2004		Adjustments			Adjusted* 2004
Net Sales	$	742.2	$	—		$	742.2
Cost of products sold		219.5		(31.0	)		188.5
Gross Profit		522.7		31.0			553.7
Research and development		39.8		—			39.8
Selling, general and administrative		297.8		—			297.8
Acquisition and integration		31.3		(31.3	)		—
Operating expenses		368.9		(31.3	)		337.6
Operating Profit		153.8		62.3			216.1
Interest expense		9.8		—			9.8
Earnings before income taxes		144.0		62.3			206.3
Provision for income taxes		46.4		22.3			68.7
Net Earnings	$	97.6	$	40.0		$	137.6
Earnings Per Common Share
Basic	$	0.40	$	0.17		$	0.57
Diluted	$	0.40	$	0.16		$	0.56
Weighted Average Common Shares Outstanding
Basic		242.9					242.9
Diluted		246.4					246.4

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ZIMMER HOLDINGS, INC.
RECONCILIATION OF NET MARGIN
AND ADJUSTED* NET MARGIN
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(unaudited)

	Three Months Ended
	March 31,
	2005
Net Margin		21.0	%
Acquisition and integration		2.0
Inventory step-up		0.3
Tax benefit of acquisition and integration and inventory step-up		(0.7	)
Adjusted* Net Margin		22.6	%

ZIMMER HOLDINGS, INC.
RECONCILIATION OF OPERATING MARGIN
AND ADJUSTED* OPERATING MARGIN
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(unaudited)

	Three Months Ended
	March 31,
	2005
Operating Margin		31.1	%
Acquisition and integration		2.0
Inventory step-up		0.3
Adjusted* Operating Margin		33.4	%

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ZIMMER HOLDINGS, INC.
RECONCILIATION OF GROSS MARGIN
AND ADJUSTED* GROSS MARGIN
FOR THE THREE MONTHS ENDED MARCH 31, 2005
(unaudited)

	Three Months Ended
	March 31,
	2005
Gross Margin		77.0	%
Inventory step-up		0.3
Adjusted* Gross Margin		77.3	%

ZIMMER HOLDINGS, INC.
RECONCILIATION OF DEBT AND NET DEBT*
AS OF MARCH 31, 2005 and DECEMBER 31, 2004
(in millions, unaudited)

	March 31,		December 31,
	2005		2004
Short-term debt	$	—	$	27.5
Long-term debt		426.3		624.0
Total debt		426.3		651.5
Cash and equivalents		57.0		154.6
Restricted cash		18.0		18.9
Total cash		75.0		173.5
Net debt*	$	351.3	$	478.0

15

ZIMMER HOLDINGS, INC.
RECONCILIATION OF PROJECTED DILUTED EPS
AND PROJECTED ADJUSTED* DILUTED EPS
(unaudited)

Projected three months ended June 30, 2005:
Diluted EPS	$	0.71
Acquisition and Integration, net of tax		0.03
Inventory Step-up, net of tax		0.01
Adjusted* Diluted EPS	$	0.75
Projected twelve months ended December 31, 2005:
Diluted EPS	$	2.86
Acquisition and Integration, net of tax		0.12
Inventory Step-up, net of tax		0.02
Adjusted* Diluted EPS	$	3.00

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