2003 FORM 10-K ZIMMER HOLDINGS, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Continued) The following table summarizes information about stock options outstanding at December 31, 2003: Outstanding Exercisable Weighted Average Weighted Weighted Options Remaining Average Options Average Range of Exercise Prices (in thousands) Contractual Life Exercise Price (in thousands) Exercise Price $6.25 – $17.00 651 1.93 $10.76 651 $10.76 $17.01 – $27.50 2,512 5.93 24.82 1,802 24.56 $27.51 – $37.50 5,035 7.13 30.74 2,409 31.10 $37.51 – $50.50 2,272 9.23 43.17 4 48.00 10,470 4,866 17. SEGMENT DATA  Options exercisable at December 31, 2003, 2002 and 2001, were 4.9 million, 4.7 million and 4.0 million, respectively, with average exercise prices of $25.97, $22.81 and $19.85, respectively. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: The Company designs, develops, manufactures and markets reconstructive orthopaedic implants, including joint and dental, spinal implants, and trauma products and orthopaedic surgical products which include surgical supplies and instruments designed to aid in orthopaedic surgical procedures. Operations are managed through three major geographic segments – the Americas, which is comprised principally of the United States and includes other North, Central and South American markets; Europe, which is comprised principally of Europe and includes the Middle East and Africa; and Asia Pacific, which is comprised primarily of Japan and includes other Asian and Pacific markets. This structure is the basis for the Company’s reportable segment information discussed below. Company management evaluates operating segment performance based upon segment operating profit exclusive of operating expenses pertaining to global operations and corporate expenses, acquisition and integration expenses, inventory step-up, in-process research and development write-offs and Separation Costs from the Company’s former parent. Global operations include research, development engineering, medical education, brand management, corporate legal, finance, human resource functions, and operations and logistics. Medical education expenses and cost of capital charges had been previously reported within each respective geographic segment. For each year presented below, medical education expenses have been included in global operations and cost of capital charges have been eliminated. The weighted average fair value for options granted during 2003, 2002 and 2001 was $12.85, $10.63 and $14.10, respectively. See Note 2 for the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock based employee compensation. At the Distribution, certain members of management had restricted stock grants for Bristol-Myers Squibb stock which were converted into Company restricted stock grants at quantities and prices that maintained the intrinsic value that existed immediately prior to the Distribution. Total converted grants represented 106,560 shares at the Distribution. Subsequent to the Distribution, restrictions on 7,430, 32,578 and 20,361 shares were eliminated in 2003, 2002 and 2001, respectively. Restricted stock grants were made for 50,200 and 33,681 shares in 2002 and 2001, respectively. In addition, 9,902 restricted stock shares were forfeited in 2003. The awards are being expensed over the vesting period of five years from date of grant and the expense recorded by the Company for all periods presented was not significant. Restricted Stock 2003 2002 2001 Dividend Yield –% –% –% Volatility 27.1% 30.3% 41.7% Risk-free interest rate 3.1% 4.6% 4.8% Assumed forfeiture rate 3.0% 3.0% 3.0% Expected life (years) 5 5 7 53