## Notes to Consolidated Financial Statements (Continued) 

Maturities of all fixed long-term debt obligations outstanding at December 31, 2003, are $101.3 million, $23.8 million, $635.2 million, $205.2 million and $143.6 million for the years ended December 31, 2004 through 2008, respectively. 

The Company paid $6.3 million, $13.0 million and $4.6 million in interest during 2003, 2002 and 2001, respectively. 

## Fair Value 

The carrying value of the Company’s borrowings approximates fair value due to their short-term interest rates. 

## 12. DERIVATIVE FINANCIAL INSTRUMENTS 

The Company is exposed to market risk due to changes in currency exchange rates. As a result, the Company utilizes foreign exchange forward contracts to offset the effect of exchange rate fluctuations on anticipated foreign currency transactions, primarily intercompany sales and purchases expected to occur within the next twelve to twenty-four months. The Company does not hold financial instruments for trading or speculative purposes. For derivatives which qualify as hedges of future cash flows, the effective portion of changes in fair value is temporarily recorded in other comprehensive income, then recognized in earnings when the hedged item affects earnings. The ineffective portion of a derivative’s change in fair value, if any, is reported in earnings. The net amount recognized in earnings during the years ended December 31, 2003, 2002 and 2001, due to ineffectiveness and amounts excluded from the assessment of hedge effectiveness, was not significant. 

The notional amounts of outstanding foreign exchange forward contracts, principally Japanese Yen, Euro, Canadian Dollar and Australian Dollar, entered into with third parties, at December 31, 2003, was $506 million. The fair value of outstanding derivative instruments recorded on the balance sheet at December 31, 2003, together with settled derivatives where the hedged item has not yet affected earnings, was a net unrealized loss of $65.0 million, or $40.4 million net of taxes, and is deferred in other comprehensive income and is expected to be reclassified to earnings over the next two years, of which, $27.5 million, or $17.0 million, net of taxes, is expected to be reclassified to earnings over the next twelve months. 

## 13. RETIREMENT AND POSTRETIREMENT BENEFIT PLANS 

The Company has defined benefit pension plans covering substantially all U.S. and Puerto Rico employees. Plan benefits are primarily based on years of credited service and the participant’s compensation. In addition to the U.S. and Puerto Rico defined benefit pension plans, the Company sponsors various non-U.S. pension arrangements, including retirement and termination benefit plans required by local law or coordinated with government sponsored plans. As a result of the consummation of the Exchange Offers, the Company acquired the obligations and assets of certain Centerpulse defined benefit plans as of the Closing Date. 

The Company also provides comprehensive medical and group life insurance benefits to substantially all U.S. and Puerto Rico retirees who elect to participate in the Company’s comprehensive medical and group life plans. The medical plan is contributory, and the life insurance plan is non-contributory. No similar plans exist for employees outside the U.S. and Puerto Rico. 

In both the U.S. and jurisdictions outside of the U.S., the Company has adopted employee benefit plans that are comparable to those of its former parent. In general, for purposes of determining eligibility to participate, eligibility for benefits, benefit forms and vesting under Company plans, each active employee is credited with his or her service with the former parent to the extent the corresponding plans of the former parent gave credit for such service. 

In connection with the Distribution, the Company and its former parent entered into an Employee Benefits Agreement which allocated responsibilities relating to employee compensation, benefit plans and programs and other related matters. Under the agreement, as of a specified date, active employees of the Company ceased to be active participants in benefit plans maintained by the former parent and became eligible to participate in all applicable Company plans. 

The agreement provides that, as of the Distribution (as defined in Note 18), the Company assumed, retained and is liable for all wages, salaries, welfare, incentive compensation and other employee-related obligations and liabilities for all current and former employees of the Company, except as specifically provided otherwise. The former parent retained certain obligations for domestic pension benefits for services rendered through the Distribution. The former parent also retained obligations for medical and group life insurance benefits for all domestic retirees and those employees eligible to retire as of the Distribution. Substantially all assets funding its pension and postretirement benefit plans were retained by the former parent as of the Distribution Date. 

The Company uses a December 31 measurement date for the majority of its benefit plans. 

