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Zimmer Reports Fourth Quarter and 2009 Financial Results
Date:1/28/2010

WARSAW, Ind., Jan. 28 /PRNewswire-FirstCall/ --

  • Net Sales of $1.11 billion for the fourth quarter increased by 7.5% reported over the prior year period (an increase of 2.5% constant currency)

  • Diluted EPS for the fourth quarter were $0.74 reported, a decrease of 1.3% from the prior year period, and $1.12 adjusted, an increase of 12.0% over the prior year period

  • Net Sales of $4.10 billion for the full year represent a decrease of 0.6% reported from the prior year (an increase of 0.9% constant currency)

  • Diluted EPS for the full year were $3.32 reported, a decrease of 10.8% from the prior year, and $3.94 adjusted, a decrease of 2.7% from the prior year

Zimmer Holdings, Inc. (NYSE and SIX: ZMH) today reported financial results for the fourth quarter and year ended December 31, 2009.  The Company reported fourth quarter net sales of $1.11 billion, an increase of 7.5% reported and 2.5% constant currency over the fourth quarter of 2008.  Diluted earnings per share for the quarter were $0.74 reported and $1.12 adjusted, an increase of 12.0% adjusted over the prior year period.  Full-year net sales were $4.10 billion, a decrease of 0.6% reported and an increase of 0.9% constant currency.  Diluted earnings per share for the year were $3.32 reported and $3.94 adjusted, a decrease of 2.7% adjusted from the prior year.  

"A solid performance in the fourth quarter enabled us to accomplish our major objectives for the year," said David Dvorak, Zimmer President and CEO.  "We once again recorded year-over-year sales growth for the quarter in all three of our geographic reporting segments, driven by a 5.5% constant currency increase in our industry-leading knee replacement business.  The continued improvement in our Reconstructive sales performance, combined with recent new product clearances, forms a foundation for sustained sales growth and leveraged earnings in 2010."  

Net earnings for the fourth quarter were $155.2 million on a reported basis and $236.1 million on an adjusted basis, an increase of 5.1% adjusted over the prior year period.  Operating cash flow for the fourth quarter was $385.5 million.  Net earnings for the full year 2009 were $717.4 million on a reported basis and $849.9 million on an adjusted basis, a decrease of 8.1% adjusted from the prior year.  Operating cash flow for the full year was $1,117.5 million.  

In the fourth quarter, the Company utilized the proceeds from a $1.0 billion offering of senior unsecured notes to pay off its U.S. dollar senior credit facility debt of $471.0 million and acquired 9.0 million shares of its common stock for an aggregate purchase price of $519.1 million.  For the full year 2009, the Company purchased 19.8 million shares for a total of $923.2 million.  At the end of the year, $211.1 million of authorization remained under the Company's $1.25 billion repurchase program, which expires on December 31, 2010.

During the quarter, the Company recorded a goodwill impairment charge of $73.0 million net of tax or $0.35 per diluted share related to its U.S. Spine reporting unit.  A combination of factors has contributed to a decrease in the implied fair value of the U.S. Spine reporting unit compared with prior year.

Guidance

The Company expects full-year revenues for 2010 to increase between 3% and 5% on a constant currency basis.  Assuming foreign currency exchange rates remain near year-end 2009 levels, the Company estimates that foreign currency translation will increase revenues by approximately 1% for the full year 2010, resulting in reported revenue growth between 4% and 6%.  Full-year 2010 adjusted diluted earnings per share are projected to be in a range of $4.15 to $4.35.

Conference Call

The Company will conduct its fourth quarter 2010 investor conference call today, January 28, 2010, 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 (866) 530-8387.  International callers should dial (706) 634-6422.  A digital recording will be available two hours after the completion of the conference call from January 28, 2010 to February 11, 2010.  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, 49597507.  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 and full year 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 DECEMBER 31, 2009
                (in millions, unaudited)            
                                                    
                                                    
                                           Constant 
                           Net   Reported  Currency 
                          Sales  % Growth  % Growth 
                          ----- ---------  -------- 
    Geographic Segments                             
         Americas          $604         2%        2%
         Europe             331        12         1 
         Asia Pacific       172        19         7 
                          -----                     
             Total        1,107         7         2 
    Product Categories                              
      Reconstructive                                
         Americas           454         6         5 
         Europe             263        10         - 
         Asia Pacific       128        20         6 
                          -----                     
             Total          845         9         4 
                                                    
        Knees                                       
           Americas         283         7         6 
           Europe           127        12         2 
           Asia Pacific      66        26        10 
                          -----                     
               Total        476        10         6 
                                                    
        Hips                                        
           Americas         143         2         1 
           Europe           130         7        (3)
           Asia Pacific      60        14         2 
                          -----                     
               Total        333         6         - 
                                                    
        Extremities          36        19        15 
                                                    
      Dental                 57         -        (4)
                                                    
      Trauma                 63        11         7 
                                                    
      Spine                  63       (12)      (15)
                                                    
      OSP and other          79        15        11 
    
    
     NET SALES - TWELVE MONTHS ENDED DECEMBER 31, 2009 
                (in millions, unaudited)      
                                                      
                                                      
                                             Constant 
                           Net     Reported  Currency 
                          Sales    % Growth  % Growth 
                          -----   ---------  -------- 
    Geographic Segments                               
         Americas        $2,372           1%        1%
         Europe           1,119          (5)        1 
         Asia Pacific       604           3         - 
                          -----                       
             Total        4,095          (1)        1 
    Product Categories                                
      Reconstructive                                  
         Americas         1,771           1         1 
         Europe             902          (7)       (1)
         Asia Pacific       452           3         1 
                          -----                       
             Total        3,125          (1)        - 
                                                      
        Knees                                         
           Americas       1,102           1         1 
           Europe           429          (5)        1 
           Asia Pacific     230           4         4 
                          -----                       
               Total      1,761           -         2 
                                                      
        Hips                                          
           Americas         566          (2)       (1)
           Europe           448          (9)       (3)
           Asia Pacific     214           2        (2)
                          -----                       
               Total      1,228          (4)       (2)
                                                      
        Extremities         136          12        14 
                                                      
      Dental                205         (10)       (8)
                                                      
      Trauma                235           6         6 
                                                      
      Spine                 253          10        12 
                                                      
      OSP and other         277           -         - 

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 2009 sales were approximately $4.1 billion.  The Company is supported by the efforts of more than 8,000 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, the provision for certain Durom® Acetabular Component product claims in the U.S., goodwill impairment, acquisition, integration, realignment and other expenses, net curtailment and settlement, and the tax benefit related to the 2007 civil settlement with the U.S. government. The provision related to the Durom Acetabular Component is classified as a special item that is different from the Company's routine product liability claims for a number of reasons, including that the provision is limited to revisions associated with surgeries that predate the Company's voluntary suspension and which also occur within two years of the original surgery date. 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 success of our quality initiatives; the outcome of the investigation by the U.S. government 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; health care reform measures in the U.S., reductions in reimbursement levels from third-party payors and cost-containment efforts of health care 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 the putative class action securities litigation and related lawsuits 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 DECEMBER 31, 2009 and 2008         
               (in millions, except per share amounts, unaudited)           
                                                                            
                                                                     % Inc/ 
                                                     2009      2008   (Dec) 
                                                 --------  --------  ------ 
     Net Sales                                   $1,107.3  $1,030.2       7%
      Cost of products sold                         274.4     243.1      13 
                                                 --------  --------  
     Gross Profit                                   832.9     787.1       6 
                                                 --------  --------  
    Research and development                         51.6      48.3       7 
    Selling, general and administrative             460.2     434.5       6 
    Certain claims                                      -      21.5    (100)
    Goodwill impairment                              73.0         -     100 
    Acquisition, integration, realignment and                              
      other                                           9.6      43.1     (78)
                                                 --------  --------  
          Operating expenses                        594.4     547.4       9 
                                                 --------  --------  
    
     Operating Profit                               238.5     239.7      (1)
     Interest and other, net                         (8.7)     (4.2)    107 
                                                 --------  -------- 
     Earnings before income taxes                   229.8     235.5      (2)
     Provision for income taxes                      74.6      67.9      10 
                                                 --------  -------- 
     Net Earnings                                   155.2     167.6      (7)
                                                 ========  ======== 
                                                                            
    
     Less: Net earnings attributable to                                     
               noncontrolling interest                  -      (0.1)   (100)
                                                     ----      ---- 
     Net Earnings of Zimmer Holdings, Inc.         $155.2    $167.5      (7)
                                                   ======    ======      
                                                                            
    
     Earnings Per Common Share                                              
           Basic                                    $0.74     $0.75      (1)
           Diluted                                  $0.74     $0.75      (1)
                                                                            
    Weighted Average Common Shares Outstanding                             
         Basic                                      210.0     223.7         
         Diluted                                    211.2     224.2         
                                                                            
    Certain amounts in the 2008 consolidated statement of earnings have been
    reclassified to conform to the 2009 presentation.  
    
    
                              ZIMMER HOLDINGS, INC.                          
                       CONSOLIDATED STATEMENTS OF EARNINGS                   
              FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2009 and 2008         
                (in millions, except per share amounts, unaudited)           
                                                                             
                                                                     % Inc/  
                                                   2009      2008     (Dec)  
                                                --------  --------   -------
    Net Sales                                   $4,095.4  $4,121.1     (1)%
     Cost of products sold                         990.8     997.3     (1) 
                                                --------  --------   
     Gross Profit                                3,104.6   3,123.8     (1) 
                                                --------  --------   
     Research and development                      205.4     192.3       7  
     Selling, general and administrative         1,729.2   1,704.0       1  
     Certain claims                                 35.0      69.0     (49) 
     Goodwill impairment                            73.0         -     100  
    Acquisition, integration, realignment and                               
      other                                         75.3      68.5      10  
    Net curtailment and settlement                 (32.1)        -     100  
                                                --------  --------   
          Operating expenses                     2,085.8   2,033.8      3  
                                                --------  --------   
                                                                             
    Operating Profit                             1,018.8   1,090.0      (7) 
     Interest and other, net                       (20.6)     31.8    (165) 
                                                --------  --------   
     Earnings before income taxes                  998.2   1,121.8     (11) 
     Provision for income taxes                    280.8     272.3       3  
                                                --------  --------   
     Net Earnings                                  717.4     849.5     (16) 
                                                ========  ========
                                                                             
    
     Less: Net earnings attributable to                                      
               noncontrolling interest                 -      (0.9)   (100) 
                                                --------  --------   
     Net Earnings of Zimmer Holdings, Inc.        $717.4    $848.6     (15) 
                                                ========  ========
                                                                             
    Earnings Per Common Share                                               
           Basic                                   $3.34     $3.73     (10) 
           Diluted                                 $3.32     $3.72     (11) 
                                                                             
    Weighted Average Common Shares Outstanding                              
         Basic                                     215.0     227.3          
         Diluted                                   215.8     228.3          
    
     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, unaudited)                       
                                                                          
                                                   December 31,   December 31,
                                                      2009           2008
                                                   -----------    -----------
                                                                          
     Assets                                                               
     Current Assets:                                                      
       Cash and cash equivalents                     $691.7         $212.6
       Restricted cash                                  0.1            2.7
       Certificates of deposit                         66.4              -
       Receivables, net                               751.4          732.8
       Inventories, net                               913.2          928.3
       Other current assets                           315.2          302.2
                                                      -----          -----
           Total current assets                     2,738.0        2,178.6
                                                                          
     Property, plant and equipment, net             1,221.7        1,264.1
     Goodwill                                       2,783.5        2,774.8
     Intangible assets, net                           858.0          872.1
     Other assets                                     184.3          149.4
                                                      -----          -----
     Total Assets                                  $7,785.5       $7,239.0
                                                   ========       ========
                                                                          
     Liabilities and Shareholders' Equity                                 
                                                                          
     Current liabilities                             $690.7         $771.1
     Other long-term liabilities                      328.5          353.9
     Long-term debt                                 1,127.6          460.1
     Shareholders' equity                           5,638.7        5,653.9
                                                    -------        -------
     Total Liabilities and Shareholders' Equity    $7,785.5       $7,239.0
                                                   ========       ========
    
    
    
                             ZIMMER HOLDINGS, INC.                         
                     CONSOLIDATED STATEMENTS OF CASH FLOWS                 
             FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2009 and 2008        
                            (in millions, unaudited)                       
                                                                           
                                                             2009     2008 
                                                             ----     ---- 
                                                                           
     Cash flows provided by (used in) operating activities                 
     Net earnings of Zimmer Holdings, Inc.                 $717.4   $848.6 
     Depreciation and amortization                          337.4    275.1 
     Goodwill impairment                                     73.0        - 
     Gain on sale of investments                                -    (38.8)
     In-process research and development                        -     38.5 
     Net curtailment and settlement                         (32.1)       - 
     Share-based compensation                                75.3     69.9 
     Inventory step-up                                       12.5      7.0 
     Income tax benefits from employee stock compensation                  
      plans                                                   3.5     12.5 
     Excess income tax benefits from employee stock                        
      compensation plans                                     (0.4)    (6.5)
     Changes in operating assets and liabilities                           
         Income taxes                                       (12.7)   (75.3)
         Receivables                                         (4.6)   (44.4)
         Inventories                                         36.2   (148.1)
         Accounts payable and accrued expenses             (132.6)   119.3 
         Other assets and liabilities                        44.6    (19.7)
                                                             ----    ----- 
     Net cash provided by operating activities            1,117.5  1,038.1 
                                                          -------  ------- 
                                                                           
     Cash flows provided by (used in) investing activities                 
     Additions to instruments                              (123.7)  (237.9)
     Additions to other property, plant and equipment      (105.1)  (250.0)
     Acquisition of intellectual property rights            (35.8)  (109.4)
     Purchases of certificates of deposit                   (66.4)       - 
     Proceeds from sale of other assets                         -     54.9 
     Abbott Spine acquisition, net of acquired cash             -   (363.0)
     Investments in other assets                            (50.2)   (18.8)
                                                            -----    ----- 
     Net cash used in investing activities                 (381.2)  (924.2)
                                                           ------   ------ 
                                                                           
     Cash flows provided by (used in) financing activities                 
     Net proceeds (payments) under revolving credit                        
      facility                                             (330.0)   330.0 
     Proceeds from employee stock compensation plans          9.5     57.0 
     Excess income tax benefits from employee stock                        
      compensation plans                                      0.4      6.5 
     Repurchase of common stock                            (923.7)  (737.0)
     Proceeds from issuance of notes                        998.8        - 
     Debt issuance costs                                     (8.5)       - 
     Acquisition of noncontrolling interest                  (8.6)       - 
                                                             ----     ---- 
     Net cash used in financing activities                 (262.1)  (343.5)
                                                           ------   ------ 
                                                                           
     Effect of exchange rates on cash and cash                             
      equivalents                                             4.9    (21.7)
                                                              ---    ----- 
                                                                           
     Increase (decrease) in cash and cash equivalents       479.1   (251.3)
     Cash and cash equivalents, beginning of period         212.6    463.9 
                                                            -----    ----- 
     Cash and cash equivalents, end of period              $691.7   $212.6 
                                                           ======   ====== 
    
    
    
                            ZIMMER HOLDINGS, INC.                       
                       NET SALES BY GEOGRAPHIC SEGMENT                  
      FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2009 and 2008  
                          (in millions, unaudited)                      
                                                                        
                                                                        
                     Three Months Ended              Twelve Months Ended
                        December 31,                     December 31, 
                    -------------------        -----------------------------
                     2009     2008 % Inc          2009      2008   % Inc/(Dec)
                     ----     ---- -----          ----      ----   -----------
                                                                            
     Americas      $603.7   $589.0    2%      $2,372.4  $2,353.9        1%
     Europe         331.3    296.8   12        1,119.2   1,179.1       (5)
     Asia Pacific   172.3    144.4   19          603.8     588.1        3 
                    -----    -----               -----     -----          
     Total       $1,107.3 $1,030.2    7       $4,095.4  $4,121.1       (1)
                 ======== ========            ========  ========         
    
    
    
                                 ZIMMER HOLDINGS, INC.                        
                             NET SALES BY PRODUCT CATEGORY                    
           FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2009 and 2008   
                               (in millions, unaudited)                       
                                                                              
                                                                              
                     Three Months Ended                Twelve Months Ended 
                       December 31,                        December 31,
                  ----------------------------   -----------------------------
                                        % Inc/                         % Inc/
                      2009      2008     (Dec)     2009       2008      (Dec)
                      ----      ----     -----     ----       ----       ----
                                                                              
    Reconstructive   $844.9    $775.9       9%      $3,124.7   $3,163.5   (1)%
     Dental            56.6      56.6       -          204.7      227.5   (10)
     Trauma            63.6      57.1      11          234.8      222.3     6 
     Spine             63.1      71.7     (12)         253.6      229.7    10 
     OSP and other     79.1      68.9      15          277.6      278.1     - 
     Total         $1,107.3  $1,030.2       7       $4,095.4   $4,121.1    (1)
                   ========  ========               ========   ========
    
    
    
    
                   ZIMMER HOLDINGS, INC.               
           RECONCILIATION OF REPORTED % GROWTH TO      
                 CONSTANT CURRENCY % GROWTH            
                        (unaudited)                    
                                                       
                                                       
                           For the Three Months Ended  
                                December 31, 2009      
                                -----------------      
                                     Foreign  Constant 
                          Reported  Exchange  Currency 
                          % Growth   Impact   % Growth 
                          --------   ------   -------- 
    Geographic Segments                                
         Americas                2%        -%        2%
         Europe                 12        11         1 
         Asia Pacific           19        12         7 
             Total               7         5         2 
    Product Categories                                 
      Reconstructive                                   
         Americas                6         1         5 
         Europe                 10        10         - 
         Asia Pacific           20        14         6 
             Total               9         5         4 
                                                       
        Knees                                          
           Americas              7         1         6 
           Europe               12        10         2 
           Asia Pacific         26        16        10 
               Total            10         4         6 
                                                       
        Hips                                           
           Americas              2         1         1 
           Europe                7        10        (3)
           Asia Pacific         14        12         2 
               Total             6         6         - 
                                                       
        Extremities             19         4        15 
                                                       
      Dental                     -         4        (4)
                                                       
      Trauma                    11         4         7 
                                                       
      Spine                    (12)        3       (15)
                                                       
      OSP and other             15         4        11 
    
    
    
                   ZIMMER HOLDINGS, INC.               
           RECONCILIATION OF REPORTED % GROWTH TO      
                 CONSTANT CURRENCY % GROWTH            
                        (unaudited)                    
                                                       
                                                       
                           For the Twelve Months Ended 
                                December 31, 2009      
                                -----------------      
                                     Foreign  Constant 
                          Reported  Exchange  Currency 
                          % Growth   Impact   % Growth 
                          --------   ------   -------- 
    Geographic Segments                                
         Americas                1%        -%        1%
         Europe                 (5)       (6)        1 
         Asia Pacific            3         3         - 
             Total              (1)       (2)        1 
    Product Categories                                 
      Reconstructive                                   
         Americas                1         -         1 
         Europe                 (7)       (6)       (1)
         Asia Pacific            3         2         1 
             Total              (1)       (1)        - 
                                                       
        Knees                                          
           Americas              1         -         1 
           Europe               (5)       (6)        1 
           Asia Pacific          4         -         4 
               Total             -        (2)        2 
                                                       
        Hips                                           
           Americas             (2)       (1)       (1)
           Europe               (9)       (6)       (3)
           Asia Pacific          2         4        (2)
               Total            (4)       (2)       (2)
                                                       
        Extremities             12        (2)       14 
                                                       
      Dental                   (10)       (2)       (8)
                                                       
      Trauma                     6         -         6 
                                                       
      Spine                     10        (2)       12 
                                                       
      OSP and other              -         -         - 
    
    
    
                            ZIMMER HOLDINGS, INC.                        
           Reconciliation of Net Earnings and Adjusted Net Earnings      
            For the Three Months Ended December 31, 2009 and 2008        
                           (in millions, unaudited)                      
                                                                         
                                                            Three Months  
                                                               Ended     
                                                            December 31, 
                                                            ------------ 
                                                            2009    2008 
                                                            ----    ---- 
                                                                         
     Net Earnings                                         $155.2  $167.5 
     Inventory step-up                                       2.6     3.8 
     Certain claims                                            -    21.5 
     Goodwill impairment                                    73.0       - 
     Acquisition, integration, realignment and other         9.6    43.1 
     Taxes on inventory step-up, certain claims and                      
         acquisition, integration, realignment and other*   (4.3)  (11.3)
                                                            ----   ----- 
     Adjusted Net Earnings                                $236.1  $224.6 
                                                          ======  ====== 
    
    
    
                            ZIMMER HOLDINGS, INC.                        
           Reconciliation of Net Earnings and Adjusted Net Earnings      
            For the Twelve Months Ended December 31, 2009 and 2008       
                           (in millions, unaudited)                      
                                                                         
                                                           Twelve Months  
                                                               Ended     
                                                            December 31,      
                                                            ------------   
                                                            2009    2008 
                                                            ----    ---- 
                                                                         
     Net Earnings                                         $717.4  $848.6 
     Inventory step-up                                      12.5     7.0 
     Certain claims                                         35.0    69.0 
     Goodwill impairment                                    73.0       - 
     Acquisition, integration, realignment and other        75.3    68.5 
     Net curtailment and settlement                        (32.1)      - 
     Taxes on inventory step-up, certain claims,                         
         acquisition, integration, realignment and other                 
          and net curtailment and settlement*              (31.2)  (38.0)
     Tax benefit from civil settlement                         -   (30.8)
                                                            ----   ----- 
     Adjusted Net Earnings                                $849.9  $924.3 
                                                          ======  ====== 
                                                                         
                                                                         
     * The tax effect is calculated based upon the statutory rates for 
      the jurisdictions where the items were incurred.  
    
    
    
                           ZIMMER HOLDINGS, INC.                      
          Reconciliation of Diluted EPS and Adjusted Diluted EPS      
           For the Three Months Ended December 31, 2009 and 2008      
                                (unaudited)                           
                                                                      
                                                          Three Months   
                                                             Ended    
                                                          December 31, 
                                                          ------------  
                                                          2009   2008 
                                                          ----   ---- 
                                                                      
     Diluted EPS                                         $0.74  $0.75 
     Inventory step-up                                    0.01   0.01 
     Certain claims                                          -   0.10 
     Goodwill impairment                                  0.35      - 
     Acquisition, integration, realignment and other      0.04   0.19 
     Taxes on inventory step-up, certain claims and                   
         acquisition, integration, realignment and                    
         other*                                          (0.02) (0.05)
                                                         -----  ----- 
     Adjusted Diluted EPS                                $1.12  $1.00 
                                                         =====  ===== 
    
    
    
                           ZIMMER HOLDINGS, INC.                      
          Reconciliation of Diluted EPS and Adjusted Diluted EPS      
          For the Twelve Months Ended December 31, 2009 and 2008      
                                (unaudited)                           
                                                                      
                                                          Twelve Months   
                                                              Ended    
                                                          December 31, 
                                                          ----------- 
                                                          2009   2008 
                                                          ----   ---- 
                                                                      
     Diluted EPS                                         $3.32  $3.72 
     Inventory step-up                                    0.06   0.03 
     Certain claims                                       0.16   0.30 
     Goodwill impairment                                  0.34      - 
     Acquisition, integration, realignment and other      0.35   0.30 
     Net curtailment and settlement                      (0.15)     - 
     Taxes on inventory step-up, certain claims,                      
         acquisition, integration, realignment and other              
         and net curtailment and settlement*             (0.14) (0.17)
     Tax benefit from civil settlement                       -  (0.13)
                                                          ----  ----- 
     Adjusted Diluted EPS                                $3.94  $4.05 
                                                         =====  ===== 
                                                                      
                                                                      
     * The tax effect is calculated based upon the statutory rates for
      the jurisdictions where the items were incurred. 
    
    
    
                         ZIMMER HOLDINGS, INC.                     
    Reconciliation of Operating Profit to Adjusted Operating Profit 
         For the Three Months Ended December 31, 2009 and 2008     
                              (unaudited)                          
                                                                   
                                                        Three Months   
                                                           Ended   
                                                        December 31, 
                                                        -----------
                                                        2009   2008
                                                        ----   ----
                                                                   
     Operating Profit                                 $238.5 $239.7
     Inventory step-up                                   2.6    3.8
     Certain claims                                        -   21.5
     Goodwill impairment                                73.0      -
     Acquisition, integration, realignment and other     9.6   43.1
                                                         ---   ----
     Adjusted Operating Profit                        $323.7 $308.1
                                                      ====== ======
    
    
    
                            ZIMMER HOLDINGS, INC.                       
      Reconciliation of Operating Profit to Adjusted Operating Profit   
           For the Twelve Months Ended December 31, 2009 and 2008       
                                 (unaudited)                            
                                                                        
                                                         Twelve Months   
                                                       Ended December 31, 
                                                       ------------------  
                                                          2009      2008
                                                          ----      ----
                                                                        
     Operating Profit                                 $1,018.8  $1,090.0
     Inventory step-up                                    12.5       7.0
     Certain claims                                       35.0      69.0
     Goodwill impairment                                  73.0         -
     Acquisition, integration, realignment and other      75.3      68.5
     Net curtailment and settlement                      (32.1)        -
                                                         -----      ----
     Adjusted Operating Profit                        $1,182.5  $1,234.5
                                                      ========  ========
    
    
    
                            ZIMMER HOLDINGS, INC.                       
                Reconciliation of 2010 Projected Diluted EPS            
                     and Projected Adjusted Diluted EPS                 
                                 (unaudited)                            
                                                                        
                                                                        
     Projected Twelve Months Ended December 31, 2010:       Low    High 
                                                            ---    ---- 
                                                                        
     Diluted EPS                                           $4.08  $4.28 
     Inventory step-up                                      0.01   0.01 
     Acquisition, integration, realignment and other        0.09   0.09 
     Taxes on inventory step-up, acquisition, integration               
        realignment and other *                            (0.03) (0.03)
                                                           -----  ----- 
     Adjusted Diluted EPS                                  $4.15  $4.35 
                                                           =====  ===== 
                                                                        
                                                                        
     * The tax effect is calculated based upon the statutory rates for the
     jurisdictions where the items were incurred.  

SOURCE Zimmer Holdings, Inc.

RELATED LINKS
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SOURCE Zimmer Holdings, Inc.
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