Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2013

Special Items - We recognize expenses resulting directly from our business combinations, employee termination benefits, certain contract terminations, consulting and professional fees and asset impairment charges connected with global restructurings and operational excellence initiatives, and other items as “Special items” in our condensed consolidated statement of earnings. “Special items” included (in millions):


	Three Months Ended March 31,
	2013			2012
Impairment/loss on disposal of assets	$	0.3		$	0.4
Consulting and professional fees		26.9			18.3
Employee severance and retention		(0.3	)		3.4
Dedicated project personnel		5.4			3.3
Relocated facilities		1.3			—
Certain litigation matters		(3.8	)		6.4
Contract terminations		0.5			1.5
Contingent consideration adjustments		0.3			(0.8	)
Accelerated software amortization		1.5			—
Other		1.4			1.0

Special items	$	33.5		$	33.5

In the first quarter of 2012, we announced our plans to outsource our Warsaw, Indiana distribution center to a third party service provider at a national transportation hub, among other organizational changes. Approximately 140 positions were affected by these actions.

As a result of these actions, we incurred expenses related to severance benefits, share-based compensation acceleration and other employee termination-related costs. The vast majority of these termination benefits were provided in accordance with our existing policies or local government regulations and are considered ongoing benefits. These costs were accrued when they became probable and estimable and were recorded as part of other current liabilities. The majority of these costs have been paid or will be paid in the year they were accrued.

Medical Device Excise Tax

Medical Device Excise Tax – As part of The Patient Protection and Affordable Care Act, in January 2013 we began paying a 2.3 percent medical device excise tax on a majority of our U.S sales. The excise tax is imposed on the first sale in the U.S. by the manufacturer, producer or importer of a medical device to either a third party or an affiliated distribution entity. We distribute a majority of our musculoskeletal products through an affiliated distribution entity. Under GAAP, excise taxes incurred to get inventory to its current location can be included in the cost of the inventory. Accordingly, we capitalize this excise tax as a part of inventory and recognize it as a cost of product sold when the inventory upon which the excise tax was assessed is sold to a third party on a first-in-first-out basis. Therefore, in the three month period ended March 31, 2013, the amount of medical device excise tax recognized in our condensed consolidated statement of earnings was not material.

Recent Accounting Pronouncements

Recent Accounting Pronouncements – Effective January 1, 2013, we adopted the Financial Accounting Standard Board’s Accounting Standard Updates (ASUs) requiring reporting of amounts reclassified out of accumulated other comprehensive income (OCI) and balance sheet offsetting between derivative assets and liabilities. These ASUs only change financial statement disclosure requirements and therefore do not impact our financial position, results of operations or cash flows. See Note 8 for disclosures relating to OCI. See Note 10 for disclosures relating to balance sheet offsetting.