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Zimmer Reports Third Quarter 2004 Financial Results

WARSAW, Ind., Oct 25, 2004 /PRNewswire-FirstCall via COMTEX/ --

Third Quarter Highlights

Zimmer Holdings, Inc. (NYSE: ZMH; SWX: ZMH) today reported net sales of $700 million and diluted EPS of $0.52 reported and $0.56 adjusted* for the quarter ended September 30, 2004. The Company's sales and diluted earnings per share results, on a reported and adjusted* basis, exceeded the high end of the Company's previous sales and adjusted earnings per share guidance and First Call estimates of $692 million and $0.53 adjusted*, respectively.

The Company's reported results reflect its acquisition of Centerpulse AG on October 2, 2003, and Implex Corp., on April 23, 2004. Reported results include acquisition and integration expenses, inventory step-up and the prior year cumulative effect of a change in accounting principle for instrumentation, as applicable.

"Our record gross profit margin of 77% adjusted* and earnings per share growth of 30% adjusted* drove operating cash flow to a record $206 million in the quarter," said Ray Elliott, Zimmer Chairman, President and Chief Executive Officer. "In the bellwether U.S. reconstructive market, we believe Zimmer outpaced the market during the third quarter by at least two percentage points of growth in knees and four percentage points of growth in hips."

On October 15, 2004, Zimmer announced that it had entered into a satisfactory financial agreement with CeramTec AG of Germany. The Company believes that, pending regulatory approvals, it will be able to enter the U.S. ceramic-on-ceramic hip replacement market in the second half of 2005. With the addition of a proven ceramic-on-ceramic option in the U.S., Zimmer will be able to offer surgeons a complete offering of alternate bearing surface options, including the successful Longevity(R) Highly Crosslinked Polyethylene, the Metasul(R) Metal-on-Metal Tribological Solution and the Trilogy(R) AB Ceramic-on-Ceramic System. Currently, no company is able to offer all three of these alternate bearing surface options.

Milestones in Zimmer's Minimally Invasive Solutions(TM) (MIS(TM)) Technologies and Procedures program continue to accelerate. Last week, the Company launched its Computer-Assisted Surgery solution for the MIS 2-Incision(TM) Hip Replacement Procedure, with the initial procedure performed by Dr. Mark Hartzband at the Hackensack University Medical Center in New Jersey. On a related MIS note, according to a recent report delivered at Harvard, in excess of $1 billion could be saved by the U.S. health care system if Zimmer's MIS 2-Incision and "mini" hip procedures were utilized in an estimated 57% of all hip replacement surgeries. At the Zimmer Institutes, during the quarter the Company completed its 100th MIS 2-Incision procedure training course since inception and trained its 1,000th surgeon in MIS techniques this year.

The Company is providing a comparison of sales to prior year on a combined* basis in the tables that follow, which includes sales of Centerpulse for the third quarter and the first nine months of 2003.



                Net Sales - Three Months Ended September 30, 2004

        ($ MM)                           Reported           Combined*

                                       Net      %           % Growth
                                      Sales   Growth   Combined* FX Impact***

    Geographic Segments
           Americas                   $430      56%       15%        0%
           Europe                      167     231         9         9
           Asia Pacific                103      44        13         6
        Total                          700      76        13         3
    Product Categories
        Reconstructive
           Americas                   $342      58%       20%        0%
           Europe                      151     248         9         8
           Asia Pacific                 81      52        13         7
        Total                          574      83        16         3

        Hips
           Americas                   $124      43%       17%        1%
           Europe                       84     426        11         9
           Asia Pacific                 42      61        14         7
        Total                          250      94        14         4

        Knees
           Americas                   $190      55%       21%        0%
           Europe                       57     119         6         8
           Asia Pacific                 34      30        10         6
        Total                          281      61        16         2

        Trauma                         $40      12%        2%        3%

        Spine                          $32      N/A**     -2%        2%

        Orthopaedic Surgical Products  $54      11%        7%        2%

        ** Prior year Spine sales were minimal for Zimmer standalone
        *** Effect of changes in foreign exchange rates on growth

Net earnings for the quarter were $128 million on a reported basis, and $140 million adjusted*, an increase of 62% adjusted* over the prior year. Diluted earnings per share for the quarter were $0.52 reported, and $0.56 adjusted*, an increase of 30% adjusted* over the prior year.



                Net Sales - Nine Months Ended September 30, 2004

        ($ MM)                          Reported            Combined*

                                      Net       %           % Growth
                                     Sales   Growth   Combined*  FX Impact***

    Geographic Segments
           Americas                 $1,285      57%       16%        0%
           Europe                      580     250        14        10
           Asia Pacific                315      45        15         9
        Total                        2,180      82        16         5
    Product Categories
        Reconstructive
           Americas                 $1,014      59%       20%        1%
           Europe                      528     261        15        11
           Asia Pacific                250      53        15         9
        Total                        1,792      89        18         5

        Hips
           Americas                   $372      46%       19%        1%
           Europe                      289     466        15        10
           Asia Pacific                132      60        15        10
        Total                          793     104        17         6

        Knees
           Americas                   $558      54%       20%        0%
           Europe                      206     127        13        11
           Asia Pacific                103      32        13         9
        Total                          867      63        18         4

        Trauma                        $129      21%        9%        4%

        Spine                         $100     N/A**       3%        2%

        Orthopaedic Surgical Products $159      12%        8%        3%

        ** Prior year Spine sales were minimal for Zimmer standalone
        *** Effect of changes in foreign exchange rates on growth

Net earnings for the nine months were $342 million on a reported basis, and $421 million adjusted*, an increase of 64% adjusted* over the prior year. Diluted earnings per share for the nine months were $1.38 reported, and $1.70 adjusted*, an increase of 32% adjusted* over the prior year.

Guidance

The Company is modifying its guidance for the fourth quarter, and is including guidance for 2005. Fourth quarter sales are expected to be within a range of $775 million to $780 million, representing growth of approximately 10% to 11% over the fourth quarter of 2003. This represents a reduction from the top end of the Company's previous guidance which included a range of $775 million to $790 million. Sales expectations are in line with the original post-Centerpulse acquisition sales growth expectations for the first one to two years communicated in October 2003. When developing its fourth quarter sales guidance, at the end of the second quarter, the Company utilized an incorrect fourth quarter assumption when determining the potential effect of foreign currency, resulting in a $9 million overstatement of constant currency sales expectations for the fourth quarter. The conversion of additional dealer relationships in parts of Scandinavia and Southeast Asia to a direct sales model that had originally been forecasted for the third quarter, were still being negotiated at the end of the quarter. Consequently, the $5 million in sales returns associated with these distributor changes contributed favorably to the Company's third quarter sales performance and is expected to shift into the fourth quarter. The Company's two smallest product categories, Spine and Trauma, are expected to continue growing at rates below their respective markets in the short term.

"As a result of improved gross profit and operating profit margins, we are increasing our earnings per share estimates for the fourth quarter to a range of $0.62 to $0.64 adjusted*," said Sam Leno, Zimmer Chief Financial Officer. "This represents an increase over prior year of approximately 25% adjusted* for the fourth quarter and continues to demonstrate our ability to gain positive leverage from every dollar of sales growth."

For the full year 2005, the Company estimates sales in the range of $3.325 billion to $3.345 billion, an increase of approximately 13% over 2004. The Company also estimates 2005 diluted earnings per share in a range of $2.68 to $2.73 reported, and $2.80 to $2.85 adjusted*. The 2005 guidance reaffirms the Company's expectations for the combination of Zimmer and Centerpulse to deliver a minimum of 10% sales growth in 2005, a 20% to 25% diluted earnings per share adjusted* growth in 2005, and the potential to exceed a 25% diluted earnings per share adjusted* growth in 2006. Earnings per share guidance for 2005 and 2006 excludes the impact of any potential changes in U.S. GAAP related to accounting for equity-based compensation.

Conference Call

The Company will conduct its third quarter sales and earnings conference call, which will be broadcast live over the Internet, on Tuesday, October 26, 2004, at 8:00 a.m. Eastern Time. The live audio webcast of Zimmer's conference call will be accessible through the Zimmer website at http://investor.zimmer.com . The webcast will be archived for future replay. 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 from October 26, 2004 to October 29, 2004. To access the recording, U.S./Canada callers should dial (800) 642-1687, or for International callers, dial (706) 645-9291, and enter the Conference ID, 1046523. A copy of this press release and any 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 .

About the Company

Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer is the worldwide #1 pure-play orthopaedic leader in the design, development, manufacture and marketing of reconstructive and spinal implants, trauma and related orthopaedic surgical products. In October 2003, the Company finalized its acquisition of Centerpulse AG, a Switzerland-based orthopaedics company and the leader in the European reconstructive market. The new Zimmer has operations in more than 24 countries around the world and sells products in more than 80 countries. As a result of the acquisition of Centerpulse, reported 2003 sales were $1.9 billion. Full-year 2003 pro forma worldwide sales of Zimmer and Centerpulse were approximately $2.6 billion. The new Zimmer is supported by the efforts of more than 6,500 employees.

    Visit Zimmer on the worldwide web at http://www.zimmer.com

*Note on Non-GAAP Financial Measures

As used in this press release, the term "combined" sales includes Centerpulse for the first, second and third quarters of 2003 in order to provide more meaningful year-to-year comparisons. The term "adjusted" refers to operating performance measures that exclude acquisition and integration expenses, inventory step-up and the cumulative effect of the change in accounting principle for instruments. 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 swccessfully integrate Centerpulse AG and Implex Corp., the outcome of 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 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.



                            ZIMMER HOLDINGS, INC.
                     CONSOLIDATED STATEMENTS OF EARNINGS
            FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
              (in millions, except per share amounts, unaudited)

                                                2004        2003     % Inc
     Net Sales                                $700.2      $398.2       76%
     Cost of products sold                     169.1        96.8       75
     Gross Profit                              531.1       301.4       76

     Research and development                   41.4        24.4       70
     Selling, general and administrative       286.2       146.8       95
     Acquisition and integration                11.5         1.7      N/A
          Operating expenses                   339.1       172.9       96

     Operating Profit                          192.0       128.5       49
     Interest expense                            7.7         0.7      N/A
     Earnings before income taxes and
      minority interest                        184.3       127.8       44
     Provision for income taxes                 56.4        42.8       32
     Minority interest                             -           -      N/A

     Net Earnings                             $127.9       $85.0       50

     Earnings Per Common Share
           Basic                               $0.52       $0.43       21
           Diluted                             $0.52       $0.43       21

     Weighted Average Common Shares
      Outstanding
         Basic                                 245.0       196.8
         Diluted                               248.2       199.6



                            ZIMMER HOLDINGS, INC.
                     CONSOLIDATED STATEMENTS OF EARNINGS
            FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
              (in millions, except per share amounts, unaudited)

                                                 2004         2003    % Inc/
                                                                       (Dec)
     Net Sales                               $2,179.8     $1,199.4       82%
     Cost of products sold                      590.5        292.1      102
     Gross Profit                             1,589.3        907.3       75

     Research and development                   119.4         68.5       74
     Selling, general and administrative        881.3        450.4       96
     Acquisition and integration                 67.0          3.2      N/A
          Operating expenses                  1,067.7        522.1      105

     Operating Profit                           521.6        385.2       35
     Interest expense                            25.8          3.0      N/A
     Earnings before income taxes,
      cumulative effect of
      change in accounting principle
      and minority interest                     495.8        382.2       30
     Provision for income taxes                 154.2        128.0       20
     Minority interest                            0.2            -
     Earnings before cumulative effect of
      change in accounting principle            341.8        254.2       34
     Cumulative effect of change in
      accounting principle, net of tax              -         55.1      N/A

     Net Earnings                              $341.8       $309.3       11

     Earnings Per Common Share - Basic
         Earnings before cumulative
          effect of change in
          accounting principle                  $1.40        $1.30        8
         Cumulative effect of change in
          accounting principle, net of tax          -         0.28      N/A
         Earnings Per Common Share - Basic      $1.40        $1.58      (11)

     Earnings Per Common Share - Diluted
         Earnings before cumulative
          effect of
           change in accounting principle       $1.38        $1.28        8
         Cumulative effect of change in
          accounting
            principle, net of tax                 -           0.27      N/A
         Earnings Per Common Share -
          Diluted                               $1.38        $1.55      (11)

     Weighted Average Common Shares
      Outstanding
         Basic                                  244.1        196.3
         Diluted                                247.3        199.1


                            ZIMMER HOLDINGS, INC.
                    CONDENSED CONSOLIDATED BALANCE SHEETS
                AS OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
                                (in millions)

                                              September 30,      December 31,
                                                   2004               2003
                                               (unaudited)
     Assets
       Current Assets:
         Cash and equivalents                     $45.3              $77.5
         Restricted cash                           17.0               14.5
         Receivables, net                         489.4              486.4
         Inventories, net                         506.4              527.7
         Other current assets                     244.9              232.6
             Total Current Assets               1,303.0            1,338.7
       Property, Plant and Equipment, net         584.1              525.2
       Intangible assets                          856.3              760.5
       Goodwill                                 2,342.5            2,291.8
       Other Assets                               184.6              239.8
       Total Assets                            $5,270.5           $5,156.0

     Liabilities and Shareholders' Equity

     Current Liabilities                         $520.9             $544.0
     Short-term Debt                               12.5              101.3
     Other Long-term Liabilities                  431.7              352.6
     Long-term Debt                               667.9            1,007.8
     Minority Interest                              6.8                7.0
     Shareholders' Equity                       3,630.7            3,143.3
     Total Liabilities and
      Shareholders' Equity                     $5,270.5           $5,156.0



                            ZIMMER HOLDINGS, INC.
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
            FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
                          (in millions, unaudited)

                                                              2004       2003
     Cash flows provided by (used in) operating activities
     Net earnings                                           $341.8     $309.3
     Depreciation and amortization                           134.6       62.7
     Inventory step-up                                        56.1          -
     Cumulative effect of change in accounting principle         -      (89.1)
     Changes in operating assets and liabilities, net of
       acquired assets and liabilities
         Income taxes                                        122.1       68.4
         Receivables                                          (4.2)     (30.2)
         Inventories                                         (32.0)     (29.0)
         Accounts payable and accrued expenses               (26.0)      47.6
         Other assets and liabilities                         11.9      (13.9)
     Net cash provided by operating activities               604.3      325.8

     Cash flows provided by (used) in investing activities
     Additions to instruments                               (106.7)     (85.2)
     Additions to other property, plant and equipment        (59.6)     (21.8)
     Centerpulse acquisition costs                           (18.2)      (3.4)
     Implex acquisition, net of acquired cash               (103.7)         -
     Proceeds from note receivable                            25.0          -
     Investments in other assets                              (1.1)     (15.4)
     Net cash used in investing activities                  (264.3)    (125.8)

     Cash flows provided by (used in) financing activities
     Proceeds from exercise of stock options                  58.7       46.4
     Net payments on lines of credit                        (425.1)     (82.4)
     Debt issuance costs                                      (0.6)      (2.5)
     Equity issuance costs                                    (5.0)      (1.2)
     Net cash used in financing activities                  (372.0)     (39.7)

     Effect of exchange rates on cash and equivalents         (0.2)       1.0

     Increase (decrease) in cash and equivalents             (32.2)     161.3
     Cash and equivalents, beginning of period                77.5       15.7
     Cash and equivalents, end of period                     $45.3     $177.0




                            ZIMMER HOLDINGS, INC.
                       NET SALES BY GEOGRAPHIC REGION
       FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
                          (in millions, unaudited)

                     Three Months Ended                Nine Months Ended
                         September 30,                    September 30,
                    2004    2003   % Increase       2004    2003   % Increase

    Americas      $430.1  $276.1       56%      $1,285.0    $815.9      57%
    Europe         167.3    50.5      231          580.1     165.9     250
    Asia Pacific   102.8    71.6       44          314.7     217.6      45
    Total         $700.2  $398.2       76       $2,179.8  $1,199.4      82



                            ZIMMER HOLDINGS, INC.
                        NET SALES BY PRODUCT CATEGORY
       FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
                          (in millions, unaudited)

                        Three Months Ended        Nine Months Ended
                           September 30,            September 30,
                                       %                            %
                      2004    2003  Increase     2004      2003  Increase

    Reconstructive   $573.4  $312.9     83%   $1,792.5    $949.4    89%
    Trauma             40.5    36.1     12       128.9     106.8    21
    Spine              32.3     0.4    N/A        99.6       1.2   N/A
    OSP                54.0    48.8     11       158.8     142.0    12
    Total            $700.2  $398.2     76    $2,179.8  $1,199.4    82


                              ZIMMER HOLDINGS, INC.
                              COMBINED* SALES GROWTH
                  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
                             (in millions, unaudited)


                          Combined* Net Sales             Three Months Ended
                          Three Months Ended              September 30, 2004
                          September 30, 2003             Reported    Combined*
                     Zimmer  Centerpulse  Combined*      Net Sales   % Growth
     Geographic Segments
         Americas     $276       $97        $373           $430         15%
         Europe         50       104         154            167          9
         Asia Pacific   72        19          91            103         13
       Total          $398      $220        $618           $700         13

     Product Categories
       Reconstructive
         Americas     $217       $68        $285           $342         20%
         Europe         43        95         138            151          9
         Asia Pacific   53        19          72             81         13
       Total          $313      $182        $495           $574         16

       Hips
         Americas      $87       $19        $106           $124         17%
         Europe         16        60          76             84         11
         Asia Pacific   26        11          37             42         14
       Total          $129       $90        $219           $250         14

       Knees
         Americas     $123       $33        $156           $190         21%
         Europe         26        28          54             57          6
         Asia Pacific   26         5          31             34         10
       Total          $175       $66        $241           $281         16

       Trauma          $36        $3         $39            $40          2%

       Spine           $ -       $33         $33            $32         -2%

       OSP             $49        $2         $51            $54          7%



                            ZIMMER HOLDINGS, INC.
                           COMBINED* SALES GROWTH
                FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
                          (in millions, unaudited)

                        Combined* Net Sales               Nine Months Ended
                         Nine Months Ended                September 30, 2004
                          September 30, 2003             Reported    Combined*
                     Zimmer  Centerpulse  Combined*      Net Sales   % Growth
    Geographic Segments
         Americas     $816      $291      $1,107         $1,285         16%
         Europe        166       341         507            580         14
         Asia Pacific  217        57         274            315         15
       Total        $1,199      $689      $1,888         $2,180         16

    Product Categories
      Reconstructive
         Americas     $639      $209        $848         $1,014         20%
         Europe        146       314         460            528         15
         Asia Pacific  164        54         218            250         15
      Total           $949      $577      $1,526         $1,792         18

      Hips
         Americas     $254       $60        $314           $372         19%
         Europe         51       200         251            289         15
         Asia Pacific   83        32         115            132         15
      Total           $388      $292        $680           $793         17

      Knees
        Americas      $362      $102        $464           $558         20%
        Europe          91        91         182            206         13
        Asia Pacific    78        14          92            103         13
      Total           $531      $207        $738           $867         18

      Trauma          $107       $11        $118           $129          9%

      Spine             $1       $96         $97           $100          3%

      OSP             $142        $5        $147           $159          8%



                            ZIMMER HOLDINGS, INC.
           RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
           FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
                          (in millions, unaudited)

                                                 Three Months
                                               Ended September 30,
                                             2004              2003

   Net Earnings                            $127.9             $85.0
   Acquisition and Integration               11.5               1.7
   Inventory Step-up                          6.5                 -
   Tax Benefit of Acquisition
    and Integration and Inventory Step-up    (6.1)             (0.6)
   Adjusted Net Earnings                   $139.8             $86.1



                            ZIMMER HOLDINGS, INC.
           RECONCILIATION OF NET EARNINGS TO ADJUSTED NET EARNINGS
            FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
                          (in millions, unaudited)

                                                 Nine Months
                                              Ended September 30,
                                            2004              2003

   Net Earnings                           $341.8            $309.3
   Acquisition and Integration              67.0               3.2
   Inventory Step-up                        56.1                 -
   Tax Benefit of Acquisition
    and Integration and Inventory Step-up  (43.7)             (1.1)
   Cumulative Effect of Change
    in Accounting Principle, net of tax        -             (55.1)
   Adjusted Net Earnings                  $421.2            $256.3



                            ZIMMER HOLDINGS, INC.
            RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS
           FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
                                 (unaudited)

                                                         Three Months
                                                      Ended September 30,
                                                    2004              2003

   Diluted EPS                                     $0.52             $0.43
   Acquisition and Integration                      0.04                 -
   Inventory Step-up                                0.03                 -
   Tax Benefit of Acquisition and
    Integration and Inventory Step-up              (0.03)                -
   Adjusted Diluted EPS                            $0.56             $0.43




                            ZIMMER HOLDINGS, INC.
            RECONCILIATION OF DILUTED EPS TO ADJUSTED DILUTED EPS
            FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 and 2003
                                 (unaudited)

                                                         Nine Months
                                                      Ended September 30,
                                                    2004              2003

   Diluted EPS                                     $1.38             $1.55
   Acquisition and Integration                      0.27              0.02
   Inventory Step-up                                0.23                 -
   Tax Benefit of Acquisition and
    Integration and Inventory Step-up              (0.18)            (0.01)
   Cumulative Effect of Change in
    Accounting Principle, net of tax                   -             (0.27)
   Adjusted Diluted EPS                            $1.70             $1.29



                            ZIMMER HOLDINGS, INC.
       RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
                FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2004
             (in millions, except per share amounts, unaudited)

                                             Reported               Adjusted
                                               2004    Adjustments    2004
    Net Sales                                $700.2        $ -      $700.2
    Cost of products sold                     169.1       (6.5)      162.6
    Gross Profit                              531.1        6.5       537.6

    Research and development                   41.4          -        41.4
    Selling, general and administrative       286.2          -       286.2
    Acquisition and integration                11.5      (11.5)          -
         Operating expenses                   339.1      (11.5)      327.6

    Operating Profit                          192.0       18.0       210.0
    Interest expense                            7.7          -         7.7
    Earnings before income taxes              184.3       18.0       202.3
    Provision for income taxes                 56.4        6.1        62.5

    Net Earnings                             $127.9      $11.9      $139.8

    Earnings Per Common Share
       Basic                                  $0.52      $0.05       $0.57
       Diluted                                $0.52      $0.04       $0.56

    Weighted Average Common Shares Outstanding
      Basic                                   245.0                  245.0
      Diluted                                 248.2                  248.2


                            ZIMMER HOLDINGS, INC.
       RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
                FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
             (in millions, except per share amounts, unaudited)


                                             Reported  Adjustments  Adjusted
                                               2004                   2004
    Net Sales                               $2,179.8       $ -     $2,179.8
    Cost of products sold                      590.5     (56.1)       534.4
    Gross Profit                             1,589.3      56.1      1,645.4

    Research and development                   119.4         -        119.4
    Selling, general and administrative        881.3         -        881.3
    Acquisition and integration                 67.0     (67.0)           -
         Operating expenses                  1,067.7     (67.0)     1,000.7

    Operating Profit                           521.6     123.1        644.7
    Interest expense                            25.8         -         25.8
    Earnings before income taxes and
     minority interest                         495.8     123.1        618.9
    Provision for income taxes                 154.2      43.7        197.9
    Minority interest                            0.2         -          0.2

    Net Earnings                              $341.8     $79.4       $421.2

    Earnings Per Common Share
       Basic                                   $1.40     $0.33        $1.73
       Diluted                                 $1.38     $0.32        $1.70

    Weighted Average Common Shares Outstanding
      Basic                                    244.1                  244.1
      Diluted                                  247.3                  247.3



                            ZIMMER HOLDINGS, INC.
       RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
                FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003
             (in millions, except per share amounts, unaudited)

                                            Reported  Adjustments  Adjusted
                                              2003                   2003
    Net Sales                                $398.2        $ -      $398.2
    Cost of products sold                      96.8          -        96.8
    Gross Profit                              301.4          -       301.4

    Research and development                   24.4          -        24.4
    Selling, general and administrative       146.8          -       146.8
    Acquisition and integration                 1.7       (1.7)          -
         Operating expenses                   172.9       (1.7)      171.2

    Operating Profit                          128.5        1.7       130.2
    Interest expense                            0.7          -         0.7
    Earnings before income taxes              127.8        1.7       129.5
    Provision for income taxes                 42.8        0.6        43.4

    Net Earnings                              $85.0       $1.1       $86.1

    Earnings Per Common Share
       Basic                                  $0.43      $0.01       $0.44
       Diluted                                $0.43        $ -       $0.43

    Weighted Average Common Shares Outstanding
      Basic                                   196.8                  196.8
      Diluted                                 199.6                  199.6




                            ZIMMER HOLDINGS, INC.
       RECONCILIATION OF REPORTED AND ADJUSTED STATEMENTS OF EARNINGS
                FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
             (in millions, except per share amounts, unaudited)

                                             Reported   Adjustments  Adjusted
                                               2003                    2003
    Net Sales                               $1,199.4        $ -     $1,199.4
    Cost of products sold                      292.1          -        292.1
    Gross Profit                               907.3          -        907.3

    Research and development                    68.5          -         68.5
    Selling, general and administrative        450.4          -        450.4
    Acquisition and integration                  3.2       (3.2)           -
         Operating expenses                    522.1       (3.2)       518.9

    Operating Profit                           385.2        3.2        388.4
    Interest expense                             3.0          -          3.0
    Earnings before income taxes and
     cumulative effect of change in
     accounting principle                      382.2        3.2        385.4
    Provision for income taxes                 128.0        1.1        129.1
    Earnings before cumulative effect of
     change in accounting principle            254.2        2.1        256.3
    Cumulative effect of change in
     accounting principle, net of tax           55.1      (55.1)           -

    Net Earnings                              $309.3     $(53.0)      $256.3

    Earnings Per Common Share
       Basic                                   $1.58     $(0.27)       $1.31
       Diluted                                 $1.55     $(0.26)       $1.29

    Weighted Average Common Shares Outstanding
      Basic                                    196.3                   196.3
      Diluted                                  199.1                   199.1



                            ZIMMER HOLDINGS, INC.
             RECONCILIATION OF NET MARGIN TO ADJUSTED NET MARGIN
           FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004
                                 (unaudited)


                                      Three Months Ended   Nine Months Ended
                                         September 30,       September 30,
                                             2004                2004

    Net Margin                               18.3%               15.7%
    Acquisition and Integration               1.6                 3.1
    Inventory Step-up                         1.0                 2.6
    Tax Benefit of Acquisition and
     Integration and Inventory Step-up       (0.9)               (2.1)
    Adjusted Net Margin                      20.0%               19.3%



                            ZIMMER HOLDINGS, INC.
       RECONCILIATION OF OPERATING MARGIN TO ADJUSTED OPERATING MARGIN
           FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004
                                 (unaudited)


                                      Three Months Ended   Nine Months Ended
                                         September 30,       September 30,
                                             2004                2004

    Operating Margin                         27.4%               23.9%
    Acquisition and Integration               1.6                 3.1
    Inventory Step-up                         1.0                 2.6
    Adjusted Operating Margin                30.0%               29.6%



                            ZIMMER HOLDINGS, INC.
           RECONCILIATION OF GROSS MARGIN TO ADJUSTED GROSS MARGIN
           FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004
                                 (unaudited)


                                      Three Months Ended   Nine Months Ended
                                         September 30,       September 30,
                                             2004                2004

    Gross Margin                             75.8%               72.9%
    Inventory Step-up                         1.0                 2.6
    Adjusted Gross Margin                    76.8%               75.5%




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

                                                    Projected Three Months
                                                    Ended December 31, 2004
                                                     Low               High

    Diluted EPS                                     $0.55             $0.57
    Acquisition and Integration, net of tax          0.06              0.06
    Inventory Step-up, net of tax                    0.01              0.01
    Adjusted Diluted EPS                            $0.62             $0.64

                                                     Projected Year Ended
                                                        December 31, 2005
                                                     Low               High
    Diluted EPS                                     $2.68             $2.73
    Acquisition and Integration, net of tax          0.11              0.11
    Inventory Step-up, net of tax                    0.01              0.01
    Adjusted Diluted EPS                            $2.80             $2.85

SOURCE Zimmer Holdings, Inc.

Media: Brad Bishop, +1-574-372-4291,
bradley.bishop@zimmer.com , Investors: Marc Ostermann, +1-574-371-8515,
marc.ostermann@zimmer.com , or Sam Leno, +1-574-372-4790,
sam.leno@zimmer.com , all of Zimmer Holdings, Inc.
http://www.zimmer.com

Copyright (C) 2004 PR Newswire. All rights reserved.

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