Financial Instruments

6 Months Ended

Jun. 30, 2011

Financial Instruments

Financial Instruments

6. Financial Instruments

Foreign Exchange Derivative Instruments

The company enters into readily marketable forward and option contracts with financial institutions to help reduce its exposure to foreign currency exchange rate fluctuations. These contracts limit volatility because gains and losses associated with foreign currency exchange rate movements are generally offset by movements in the underlying hedged item. The notional value of the company's forward currency and option currency contracts was $209.7 million and $182.7 million at June 30, 2011 and December 31, 2010, respectively. For further discussion regarding the company's use of derivative instruments, see Note 1 of the consolidated financial statements in Bard's 2010 Annual Report on Form 10-K.

Interest Rate Derivative Instrument

The company's outstanding interest rate swap contract effectively converts its 2.875% fixed-rate notes due 2016 to a floating-rate instrument. The notional value of this interest rate swap contract is $250.0 million.

The location and fair values of derivative instruments segregated between those derivatives that are designated as hedging instruments and those that are not designated as hedging instruments recognized in the condensed consolidated balance sheets are as follows:

	Balance Sheet Location	Fair Value of Derivatives
Derivatives Designated as Hedging Instruments		June 30, 2011		December 31, 2010
(dollars in millions)
Forward currency contracts	Other current assets	$	3.5	$	2.8
Option currency contracts	Other current assets		1.6		1.5
Option currency contracts	Other assets		1.6		—
Interest rate swap contract	Other assets		4.7		0.7
		$	11.4	$	5.0
Forward currency contracts	Accrued expenses	$	1.3	$	1.1
		$	1.3	$	1.1
Derivatives Not Designated as Hedging Instruments
(dollars in millions)
Forward currency contracts	Other current assets	$	6.4	$	—
Forward currency contracts	Other assets		—		1.8
		$	6.4	$	1.8

The location and amounts of gains and losses on derivative instruments designated as cash flow hedges and the impact on the condensed consolidated statements of shareholders' investment are as follows:

	Gain/(Loss) Recognized in  Other Comprehensive Income						Location of Gain/(Loss) Reclassified from Accumulated Other Comp. Loss to Income	Gain/(Loss) Reclassified from Accumulated Other Comp. Loss to Income
	Quarter Ended June 30,							Quarter Ended June 30,
	2011			2010				2011			2010
(dollars in millions)
Forward currency contracts	$	—		$	(0.7	)	Costs of goods sold	$	0.3		$	—
Option currency contracts		0.5			1.8		Costs of goods sold		—			(0.3	)
	$	0.5		$	1.1			$	0.3		$	(0.3	)
	Gain/(Loss) Recognized in  Other Comprehensive Income						Location of Gain/(Loss) Reclassified from Accumulated Other Comp. Loss to Income	Gain/(Loss) Reclassified from Accumulated Other Comp. Loss to Income
	Six Months Ended June 30,							Six Months Ended June 30,
	2011			2010				2011			2010
(dollars in millions)
Forward currency contracts	$	0.1		$	0.6		Costs of goods sold	$	0.9		$	(1.1	)
Option currency contracts		(0.1	)		3.2		Costs of goods sold		—			(0.1	)
	$	—		$	3.8			$	0.9	(A)	$	(1.2	)(A)

(A) The tax effect of the amount reclassified from accumulated other comprehensive loss to income was $0.6 million and $0.7 million at June 30, 2011 and 2010, respectively.

 The location and amounts of gains and losses on the derivative instrument designated as a fair value hedge are as follows:

	Income Statement Location	Gain Recognized on Swap				(Loss) Recognized on Long-Term Debt
		Quarter Ended June 30,		Six Months Ended June 30,		Quarter Ended June 30,			Six Months Ended June 30,
		2011		2011		2011			2011
(dollars in millions) Interest rate swap contract	Interest expense	$	5.7	$	4.0	$	(5.7	)	$	(4.0	)

The location and amounts of gains and losses on derivative instruments not designated as hedging instruments are as follows:

		Gain Recognized in Earnings
	Income Statement Location	Quarter Ended June 30,		Six Months Ended June  30,
		2011		2011
(dollars in millions) Forward currency contracts(A)	Other (income) expense, net	$	2.7	$	4.6

^(A)  These derivative contracts mitigate changes in the value of remeasured foreign currency denominated monetary loans attributable to changes in foreign currency exchange rates.

Financial Instruments Measured at Fair Value on a Recurring Basis

Fair value is defined as the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. The fair value guidance establishes a three-level hierarchy to prioritize the inputs used in measuring fair value. The levels within the hierarchy range from Level 1 having the highest priority to Level 3 having the lowest.

The following table summarizes financial assets measured at fair value on a recurring basis:

	June 30, 2011		December 31, 2010
(dollars in millions)
Foreign government bonds	$	15.6	$	—
Forward currency contracts		8.6		3.5
Option currency contracts		3.2		1.5
Interest rate swap contract		4.7		0.7

The fair values were measured using significant other observable inputs and valued by reference to similar financial instruments, adjusted for restrictions and other terms specific to each instrument. All of these financial instruments are categorized as Level 2 under the fair value hierarchy.

Financial Instruments not Measured at Fair Value

There were no outstanding short-term borrowings, including commercial paper borrowings, at June 30, 2011. The fair value of commercial paper borrowings of $80.5 million at December 31, 2010 approximated its carrying value. The company maintains a committed syndicated bank credit facility with a $400 million five-year credit agreement that expires in June 2012. The credit facility supports the company's commercial paper program and can be used for general corporate purposes. The facility includes pricing based on the company's long-term credit rating and includes a financial covenant that limits the amount of total debt to total capitalization.

The estimated fair value of long-term debt including the effect of the related interest rate swap contract was $997.4 million and $937.7 million at June 30, 2011 and December 31, 2010, respectively. The fair value was estimated using dealer quotes for similarly-rated debt instruments over the remaining contractual term of the company's obligation. Long-term debt is categorized as Level 2 under the fair value hierarchy.

Concentration Risk

Accounts receivable balances include sales to government-supported healthcare systems outside the United States. The company continues to monitor sovereign debt issues and economic conditions in Greece, Spain, Portugal and other countries in southern Europe and evaluates accounts receivable in these countries for potential collection risks. Deteriorating credit and economic conditions and other factors in these countries have resulted in, and may continue to result in, an increase in the average length of time that it takes to collect these accounts receivable and may require the company to re-evaluate the collectability of these receivables in future periods.

The company is experiencing significant delays in the collection of accounts receivable associated with the national healthcare system in Greece, which amounted to $14.3 million and $32.8 million, at June 30, 2011 and December 31, 2010, respectively. The Greek government adopted as law in August 2010 a plan to settle its outstanding debts from 2007 through 2009, primarily by issuing non-interest bearing bonds with maturities of one to three years. In December 2010, the Greek government began the process of issuing these bonds. As of June 30, 2011, the company had received $16.6 million of bonds, net of discount, in settlement of 2007 through 2009 accounts receivable. These bonds are classified as available-for-sale investments and reported at fair value.