content_image/83160.jpg
## Notes to Consolidated Financial Statements (Continued) 

## 20. LEASES 

Future minimum rental commitments under non- cancelable operating leases in effect as of December 31, 2003 were $23.0 million for 2004, $18.3 million for 2005, $14.0 million for 2006, $5.4 million for 2007, $3.8 million for 2008 and $12.7 million thereafter. Total rent expense for the years ended December 31, 2003, 2002 and 2001 aggregated $15.7 million, $9.1 million and $5.7 million, respectively. 

## 21. COMMITMENTS AND CONTINGENCIES 

As a result of the Centerpulse transaction, on the Closing Date the Company acquired the entity involved in Centerpulse’s hip and knee implant litigation matter. The litigation was a result of a voluntary recall of certain hip and knee implants manufactured and sold by Centerpulse. On March 13, 2002, a U.S. Class Action Settlement Agreement (‘‘Settlement Agreement’’) was entered into by Centerpulse that resolved U.S. claims related to the affected products and a settlement trust (‘‘Settlement Trust’’) was established and funded for the most part by Centerpulse. The court approved the settlement arrangement on May 8, 2002. Under the terms of the Settlement Agreement, the Company will reimburse the Settlement Trust for each revision surgery over 4,000 and revisions on reprocessed shells over 64. As of February 20, 2004, the claims administrator has received 4,122 likely valid claims for hips (cut-off date June 5, 2003) and knees (cut-off date November 17, 2003) and 169 claims for reprocessed shells (cut-off date September 8, 2004). The Company believes the litigation liability recorded as of December 31, 2003 is adequate to provide for any future claims regarding the hip and knee implant litigation. 

## 22. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) 

(in millions, except per share amounts) 

The Company is also subject to product liability and other claims and lawsuits arising in the ordinary course of business, for which the Company maintains insurance, subject to self-insured retention limits. The Company establishes accruals for product liability and other claims in conjunction with outside counsel based on current information and historical settlement information for open claims, related fees and for claims incurred but not reported. While it is not possible to predict with certainty the outcome of these cases, it is the opinion of management that, upon ultimate resolution, these cases will not have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Company. 

On July 25, 2003, the Staff of the Securities and Exchange Commission informed Centerpulse that it was conducting an informal investigation of Centerpulse relating to certain accounting issues. The Company is cooperating with the Securities and Exchange Commission in this matter. 

On February 6, 2004, BTG International Limited (‘‘BTG’’) filed an action against the Company and two unrelated parties in the United States District Court for the District of Delaware alleging infringement by the defendants of U.S. Patent No. 6,352,559 (the‘‘ ” 559 Patent’’). The Company’s Trilogy  Acetabular System is specifically accused of infringement, as well as Centerpulse’s Converge  and Allofit TM Acetabular Systems. BTG’s complaint seeks unspecified damages and injunctive relief. On March 4, 2004, the Company filed an answer to the complaint denying infringement, and asserting a counterclaim alleging that the ” 559 Patent is invalid. The Company believes that its defenses are valid and meritorious and the Company intends to defend the BTG lawsuit vigorously. 

<img src='content_image/83160.jpg'>

(1) The three month period ended March 31, 2003 includes a cumulative effect of a change in accounting principle for instruments as discussed in Note 4 of these audited financial statements. 

(2) The three month period ended December 31, 2003 includes the results of Centerpulse subsequent to the Closing Date, as discussed in Note 3 of these audited financial statements. 

