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Zimmer Holdings, Inc. Reports First Quarter 2009 Financial Results
Date:4/23/2009

- Net Sales of $993 million represents a decrease of 6.3% reported (1.5% constant currency)

- Diluted EPS for the first quarter were $0.91 reported, a decrease of 10.8% from the prior year period, and $0.95 adjusted, a decrease of 8.7% from the prior year period

- Reaffirms full-year sales and adjusted EPS guidance

WARSAW, Ind., April 23 /PRNewswire-FirstCall/ -- Zimmer Holdings, Inc. (NYSE: ZMH; SWX: ZMH) today reported financial results for the quarter ended March 31, 2009. The Company reported first quarter net sales of $993 million, a decrease of 6.3% reported and 1.5% constant currency from the first quarter of 2008. Diluted earnings per share for the quarter were $0.91 reported and $0.95 adjusted, a decrease of 8.7% adjusted from the prior year period.

"Our performance for the first quarter was consistent with our expectations and we are reaffirming our 2009 sales and earnings guidance," said David Dvorak, Zimmer President and CEO. "We continue to make progress in our efforts to rebuild momentum in our business. Our success at the annual AAOS meeting was highlighted by the large number of surgeons who attended our booth. In addition, we showcased our Trabecular MetalTM Technology and other innovative products, as well as our enhanced medical education program. Moreover, we have now emerged from federal monitoring and the Deferred Prosecution Agreement with global business practices that position us for sustainable, long-term growth."

Net earnings for the first quarter were $202.2 million on a reported basis and $210.0 million on an adjusted basis, a decrease of 14.0% adjusted from the prior year period. Operating cash flow for the first quarter was $185 million.

During the quarter, the Company utilized $54 million of cash and $247 million in borrowings to acquire 8.6 million shares under its $1.25 billion repurchase program. At the end of the quarter, $833 million of share repurchase authorization remained available under this program, which expires on December 31, 2009.

Guidance

The Company reaffirmed its full year 2009 sales and earnings guidance. It expects full-year revenues for 2009 to increase between 1% and 3% on a constant currency basis, with revenues anticipated to be flat in the second quarter of the year and improving thereafter. Assuming foreign currency exchange rates remain consistent with current levels, the Company estimates that foreign currency translation will reduce revenue by approximately 4% for the full year 2009. Adjusted diluted earnings per share are expected to show negative growth in the second and third quarters with positive growth in the fourth quarter. Full-year 2009 adjusted diluted earnings per share are projected to be in a range of $3.85 to $4.00.

Conference Call

The Company will conduct its first quarter 2009 investor conference call today, April 23, 2009, at 8:00 a.m. Eastern Time. The live audio webcast can be accessed 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 (888) 881-6248. International callers should dial (706) 634-6422. A digital recording will be available two hours after the completion of the conference call from April 23, 2009 to May 7, 2009. To access the recording, U.S./Canada callers should dial (800) 642-1687, and International callers should dial (706) 645-9291, and enter the Conference ID, 93622112. 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.

Sales Tables

The following tables provide sales results by geographic segment and product category, as well as the percentage change compared to the prior year quarter on both a reported and constant currency basis. Beginning in 2009, the Company's Dental product category sales are no longer included within its Reconstructive products category. Prior year amounts related to Dental product category sales have been reclassified to conform to the 2009 presentation.

      NET SALES - THREE MONTHS ENDED MARCH 31, 2009
                  (in millions, unaudited)

                                            Constant
                           Net   Reported   Currency
                          Sales  % Growth   % Growth
                          ----- ---------   --------
    Geographic Segments
         Americas          $595       (2)%       (1)%
         Europe             265      (13)         1
         Asia Pacific       133       (9)        (7)
                            ---
             Total          993       (6)        (1)
    Product Categories
      Reconstructive
         Americas           443       (2)        (1)
         Europe             219      (14)        (1)
         Asia Pacific       100       (8)        (5)
                            ---
             Total          762       (7)        (1)

        Knees
           Americas         276       (1)        (1)
           Europe           105      (13)         2
           Asia Pacific      48      (10)        (3)
                             --
               Total        429       (5)         -

        Hips
           Americas         142       (5)        (3)
           Europe           108      (16)        (3)
           Asia Pacific      50       (6)        (7)
                             --
               Total        300       (9)        (4)

        Extremities          33        4          8

      Dental                 47      (15)       (11)

      Trauma                 57        2          5

      Spine                  65       20         24

      OSP and other          62      (21)       (19) 

About the Company

Founded in 1927 and headquartered in Warsaw, Indiana, Zimmer designs, develops, manufactures and markets orthopaedic reconstructive, spinal and trauma devices, dental implants, and related surgical products. Zimmer has operations in more than 25 countries around the world and sells products in more than 100 countries. Zimmer's 2008 sales were approximately $4.1 billion. The Company is supported by the efforts of approximately 8,500 employees worldwide.

For more information about Zimmer, visit 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 inventory step-up and acquisition, integration and other expenses. The term "constant currency" refers to any financial measure that excludes the effect of changes in foreign currency exchange rates. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measure are included in this press release.

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," "assumes," "guides," "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 compliance with the Corporate Integrity Agreement through 2012; the impact of our enhanced healthcare compliance global initiatives and business practices on our relationships with customers and consultants, our market share and our overall financial performance; the success of our quality initiatives; the outcome of the informal investigation by the U.S. Securities and Exchange Commission into Foreign Corrupt Practices Act matters announced in October 2007; price and product competition; changes in customer demand for our products and services caused by demographic changes or other factors; dependence on new product development, technological advances and innovation; shifts in the product category or regional sales mix of our products and services; supply and prices of raw materials and products; control of costs and expenses; our ability to obtain and maintain adequate intellectual property protection; our ability to successfully integrate acquired businesses; our ability to form and implement alliances; challenges relating to changes in and compliance with governmental laws and regulations affecting our U.S. and international businesses, including regulations of the U.S. Food and Drug Administration and foreign government regulators and tax obligations and risks; the impact of temporarily suspending U.S. distribution of one of our key hip replacement products; product liability and intellectual property litigation losses; reductions in reimbursement levels from third-party payors and cost-containment efforts of healthcare purchasing organizations; our ability to retain the independent agents and distributors who market our products; changes in general industry and market conditions, including domestic and international growth rates and general domestic and international economic conditions, including interest rate and currency exchange rate fluctuations; and the costs of defending or resolving putative class action securities litigation and lawsuits, investigations or other proceedings resulting from our September 2007 settlement with the U.S. government and other matters. For a further list and description of such risks and uncertainties, see our periodic reports filed with the U.S. Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be set forth in our periodic reports. Readers of this 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 MARCH 31, 2009 and 2008
               (in millions, except per share amounts, unaudited)

                                                                     % Inc/
                                                    2009      2008    (Dec)
                                                    ----      ----   ------
     Net Sales                                    $992.6  $1,059.2      (6)%
     Cost of products sold                         230.3     254.7     (10)
                                                   -----     -----
     Gross Profit                                  762.3     804.5      (5)
                                                   -----     -----

     Research and development                       51.8      47.8       8
     Selling, general and administrative           423.7     417.8       1
     Acquisition, integration and other expense      7.0       7.3      (4)
                                                     ---       ---
          Operating expenses                       482.5     472.9       2
                                                   -----     -----

     Operating Profit                              279.8     331.6     (16)
     Interest and other, net                        (3.7)      1.0    (482)
                                                    ----       ---
     Earnings before income taxes                  276.1     332.6     (17)
     Provision for income taxes                     73.9      93.1     (21)
                                                    ----      ----
     Net earnings                                  202.2     239.5     (16)


     Less: Net earnings attributable to
               noncontrolling interest                 -      (0.2)   (100)
                                                     ---      ----
     Net Earnings of Zimmer Holdings, Inc.        $202.2    $239.3     (16)
                                                  ======    ======


     Earnings Per Common Share
           Basic                                   $0.91     $1.03     (12)
           Diluted                                 $0.91     $1.02     (11)


     Weighted Average Common Shares Outstanding
         Basic                                     221.5     232.5
         Diluted                                   222.1     233.9

    Certain amounts in the 2008 consolidated statement of earnings have
    been reclassified to conform to the 2009 presentation.



                    ZIMMER HOLDINGS, INC.
            CONDENSED CONSOLIDATED BALANCE SHEETS
                        (in millions)

                                 March 31,      December 31,
                                   2009             2008
                                   ----             ----
                                (unaudited)
     Assets
     Current Assets:
       Cash and equivalents         $212.8         $212.6
       Restricted cash                 2.7            2.7
       Receivables, net              725.6          732.8
       Inventories, net              947.0          928.3
       Other current assets          307.6          302.2
                                     -----          -----
           Total current
            assets                 2,195.7        2,178.6

     Property, plant and
      equipment, net               1,257.2        1,264.1
     Goodwill                      2,754.1        2,774.8
     Intangible assets, net          857.8          872.1
     Other assets                    167.1          149.4
                                     -----          -----
     Total Assets                 $7,231.9       $7,239.0
                                  ========       ========

     Liabilities and Shareholders'
      Equity

     Current liabilities            $703.6         $771.1
     Other long-term
      liabilities                    312.5          353.9
     Long-term debt                  660.4          460.1
     Shareholders' equity          5,555.4        5,653.9
                                   -------        -------
     Total Liabilities and
      Shareholders' Equity        $7,231.9       $7,239.0
                                  ========       ========



                           ZIMMER HOLDINGS, INC.
                   CONSOLIDATED STATEMENTS OF CASH FLOWS
            FOR THE THREE MONTHS ENDED MARCH 31, 2009 and 2008
                         (in millions, unaudited)

                                                         2009    2008
                                                         ----    ----

     Cash flows provided by (used in) operating
      activities
     Net earnings of Zimmer Holdings, Inc.             $202.2  $239.3
     Depreciation and amortization                       79.6    61.8
     Share-based compensation                            17.1    14.9
     Inventory step-up                                    4.2     0.3
     Income tax benefits from employee stock
      compensation plans                                  0.1     2.6
     Excess income tax benefits from employee stock
      compensation plans                                    -    (1.6)
     Changes in operating assets and liabilities
         Income taxes                                    44.9     5.4
         Receivables                                     (6.3)  (53.1)
         Inventories                                    (32.2)  (14.3)
         Accounts payable and accrued expenses         (111.5)   12.7
         Other assets and liabilities                   (13.5)  (25.3)
                                                        -----   -----
     Net cash provided by operating activities          184.6   242.7
                                                        -----   -----

     Cash flows used in investing activities
     Additions to instruments                           (45.3)  (57.5)
     Additions to other property, plant and equipment   (30.9)  (53.4)
     Acquisition of intellectual property rights         (7.6)      -
     Investments in other assets                         (0.6)      -
                                                         ----     ---
     Net cash used in investing activities              (84.4) (110.9)
                                                        -----  ------

     Cash flows provided by (used in) financing
      activities
     Net borrowings under credit facilities             210.0       -
     Proceeds from employee stock compensation plans      3.3    16.8
     Excess income tax benefits from employee stock
      compensation plans                                    -     1.6
     Repurchase of common stock                        (301.4) (144.3)
     Other                                               (7.8)      -
                                                         ----     ---
     Net cash used in financing activities              (95.9) (125.9)
                                                        -----  ------

     Effect of exchange rates on cash and equivalents    (4.1)    6.2
                                                         ----     ---

     Increase in cash and equivalents                     0.2    12.1
     Cash and equivalents, beginning of period          212.6   463.9
                                                        -----   -----
     Cash and equivalents, end of period               $212.8  $476.0
                                                       ======  ======



                   ZIMMER HOLDINGS, INC.
              NET SALES BY GEOGRAPHIC SEGMENT
     FOR THE THREE MONTHS ENDED MARCH 31, 2009 and 2008
               (in millions, unaudited)

                       Three Months Ended March 31,
                       ---------------------------

                       2009     2008      % (Dec)
                       ----     ----      -------

     Americas        $594.6   $607.1          (2)%
     Europe           265.1    305.5         (13)
     Asia Pacific     132.9    146.6          (9)
                      -----    -----
     Total           $992.6 $1,059.2          (6)
                     ====== ========



                   ZIMMER HOLDINGS, INC.
               NET SALES BY PRODUCT CATEGORY
     FOR THE THREE MONTHS ENDED MARCH 31, 2009 and 2008
               (in millions, unaudited)

                        Three Months Ended March 31,
                        ---------------------------

                       2009     2008    % Inc/(Dec)
                       ----     ----    -----------

     Reconstructive  $761.6   $815.5          (7)%
     Dental            47.4     55.8         (15)
     Trauma            56.9     55.7           2
     Spine             64.6     54.0          20
     OSP and other     62.1     78.2         (21)
                       ----     ----
     Total           $992.6 $1,059.2          (6)
                     ====== ========




                     ZIMMER HOLDINGS, INC.
            RECONCILIATION OF REPORTED % GROWTH TO
                  CONSTANT CURRENCY % GROWTH
                          (unaudited)


                            For the Three Months Ended
                                  March 31, 2009
                                  --------------
                                       Foreign    Constant
                           Reported    Exchange   Currency
                           % Growth     Impact    % Growth
                           --------     ------     --------
    Geographic Segments
         Americas               (2)%       (1)%       (1)%
         Europe                (13)       (14)         1
         Asia Pacific           (9)        (2)        (7)
             Total              (6)        (5)        (1)
    Product Categories
      Reconstructive
         Americas               (2)        (1)        (1)
         Europe                (14)       (13)        (1)
         Asia Pacific           (8)        (3)        (5)
             Total              (7)        (6)        (1)

        Knees
           Americas             (1)         -         (1)
           Europe              (13)       (15)         2
           Asia Pacific        (10)        (7)        (3)
               Total            (5)        (5)         -

        Hips
           Americas             (5)        (2)        (3)
           Europe              (16)       (13)        (3)
           Asia Pacific         (6)         1         (7)
               Total            (9)        (5)        (4)

        Extremities              4         (4)         8

      Dental                   (15)        (4)       (11)

      Trauma                     2         (3)         5

      Spine                     20         (4)        24

      OSP and other            (21)        (2)       (19)



                        ZIMMER HOLDINGS, INC.
        Reconciliation of Net Earnings and Adjusted Net Earnings
          For the Three Months Ended March 31, 2009 and 2008
                      (in millions, unaudited)

                                            Three Months
                                           Ended March 31,
                                           --------------
                                            2009    2008
                                            ----    ----

     Net Earnings of Zimmer Holdings,
      Inc.                                $202.2  $239.3
     Inventory step-up                       4.2     0.3
     Acquisition, integration and other      7.0     7.3
     Taxes on inventory step-up
        and acquisition, integration and
        other                               (3.4)   (2.6)
                                            ----    ----
     Adjusted Net Earnings                $210.0  $244.3
                                          ======  ======


                      ZIMMER HOLDINGS, INC.
      Reconciliation of Diluted EPS and Adjusted Diluted EPS
      For the Three Months Ended March 31, 2009 and 2008
                         (unaudited)

                                           Three Months
                                           Ended March 31,
                                           --------------
                                            2009    2008
                                            ----    ----

     Diluted EPS                           $0.91   $1.02
     Inventory step-up                      0.02       -
     Acquisition, integration and other     0.03    0.03
     Taxes on inventory step-up
        and acquisition, integration and
        other                              (0.01)  (0.01)
                                           -----   -----
     Adjusted Diluted EPS                  $0.95   $1.04
                                           =====   =====





                         ZIMMER HOLDINGS, INC.
             Reconciliation of 2009 Projected Diluted EPS
                  and Projected Adjusted Diluted EPS
                              (unaudited)


     Projected Twelve Months Ended December 31, 2009:   Low   High
                                                        ---   ----

     Diluted EPS                                       $3.68 $3.83
     Inventory step-up, net of tax                      0.04  0.04
     Acquisition, integration and other, net of tax     0.13  0.13
                                                        ----  ----
     Adjusted Diluted EPS                              $3.85 $4.00
                                                       ===== =====


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SOURCE Zimmer Holdings, Inc.
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