UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2013
Commission File Number 1-6926
C. R. BARD, INC.
(Exact name of registrant as specified in its charter)
New Jersey | 730 Central Avenue Murray Hill, New Jersey 07974 |
22-1454160 | ||
(State of incorporation) | (Address of principal executive offices) | (I.R.S. Employer Identification No.) |
Registrants telephone number, including area code: (908) 277-8000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | x | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ (Do not check if smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class |
Outstanding at September 30, 2013 | |
Common Stock - $0.25 par value | 77,890,296 |
C. R. BARD, INC. AND SUBSIDIARIES
INDEX
Page | ||||||
Item 1. |
||||||
3 | ||||||
4 | ||||||
Condensed Consolidated Balance Sheets September 30, 2013 and December 31, 2012 |
5 | |||||
6 | ||||||
7 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
19 | ||||
Item 3. |
29 | |||||
Item 4. |
29 | |||||
Item 1. |
31 | |||||
Item 1A. |
34 | |||||
Item 2. |
34 | |||||
Item 5. |
34 | |||||
Item 6. |
34 | |||||
35 |
2
PART I FINANCIAL INFORMATION
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share amounts, unaudited)
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net sales |
$ | 758,000 | $ | 722,900 | $ | 2,258,200 | $ | 2,195,500 | ||||||||
Costs and expenses: |
||||||||||||||||
Cost of goods sold |
291,900 | 272,600 | 883,800 | 837,700 | ||||||||||||
Marketing, selling and administrative expense |
223,900 | 196,600 | 666,600 | 604,300 | ||||||||||||
Research and development expense |
99,400 | 52,200 | 224,800 | 150,500 | ||||||||||||
Interest expense |
11,200 | 9,700 | 33,700 | 28,900 | ||||||||||||
Other (income) expense, net |
12,600 | 13,600 | 338,600 | 19,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total costs and expenses |
639,000 | 544,700 | 2,147,500 | 1,640,400 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income from operations before income taxes |
119,000 | 178,200 | 110,700 | 555,100 | ||||||||||||
Income tax provision |
25,800 | 48,900 | 88,400 | 153,200 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 93,200 | $ | 129,300 | $ | 22,300 | $ | 401,900 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic earnings per share available to common shareholders |
$ | 1.17 | $ | 1.52 | $ | 0.28 | $ | 4.70 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Diluted earnings per share available to common shareholders |
$ | 1.15 | $ | 1.50 | $ | 0.27 | $ | 4.64 | ||||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands, unaudited)
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net income |
$ | 93,200 | $ | 129,300 | $ | 22,300 | $ | 401,900 | ||||||||
Other comprehensive income (loss): |
||||||||||||||||
Change in derivative instruments designated as cash flow hedges, net of tax |
(1,200 | ) | 100 | 1,600 | 2,100 | |||||||||||
Foreign currency translation adjustments |
8,000 | 14,900 | (700 | ) | (24,300 | ) | ||||||||||
Benefit plan adjustments, net of tax |
2,200 | 1,800 | 6,600 | 5,200 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss) |
9,000 | 16,800 | 7,500 | (17,000 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Comprehensive income |
$ | 102,200 | $ | 146,100 | $ | 29,800 | $ | 384,900 | ||||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands except share and per share amounts, unaudited)
September 30, 2013 |
December 31, 2012 |
|||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 781,700 | $ | 896,300 | ||||
Restricted cash |
19,000 | 25,000 | ||||||
Accounts receivable, less allowances of $13,500 and $12,400, respectively |
456,500 | 480,900 | ||||||
Inventories |
332,100 | 328,500 | ||||||
Short-term deferred tax assets |
33,800 | 42,600 | ||||||
Other current assets |
103,800 | 73,900 | ||||||
Assets held for sale |
24,400 | | ||||||
|
|
|
|
|||||
Total current assets |
1,751,300 | 1,847,200 | ||||||
|
|
|
|
|||||
Property, plant and equipment, at cost |
655,600 | 631,900 | ||||||
Less accumulated depreciation and amortization |
295,100 | 272,600 | ||||||
|
|
|
|
|||||
Net property, plant and equipment |
360,500 | 359,300 | ||||||
Goodwill |
971,000 | 961,600 | ||||||
Core technologies, net |
482,400 | 506,500 | ||||||
Other intangible assets, net |
358,600 | 368,100 | ||||||
Deferred tax assets |
10,100 | 10,000 | ||||||
Other assets |
231,100 | 98,600 | ||||||
|
|
|
|
|||||
Total assets |
$ | 4,165,000 | $ | 4,151,300 | ||||
|
|
|
|
|||||
LIABILITIES AND SHAREHOLDERS INVESTMENT |
||||||||
Current liabilities |
||||||||
Short-term borrowings |
$ | 97,500 | $ | | ||||
Accounts payable |
72,800 | 56,200 | ||||||
Accrued expenses |
208,200 | 242,900 | ||||||
Accrued compensation and benefits |
114,500 | 137,800 | ||||||
Income taxes payable |
8,800 | 10,700 | ||||||
Liabilities held for sale |
2,600 | | ||||||
|
|
|
|
|||||
Total current liabilities |
504,400 | 447,600 | ||||||
|
|
|
|
|||||
Long-term debt |
1,406,500 | 1,409,600 | ||||||
Other long-term liabilities |
731,700 | 342,400 | ||||||
Deferred income taxes |
18,300 | 26,000 | ||||||
Commitments and contingencies |
||||||||
Shareholders investment: |
||||||||
Preferred stock, $1 par value, authorized 5,000,000 shares; none issued |
| | ||||||
Common stock, $0.25 par value, authorized 600,000,000 shares; issued and outstanding 77,890,296 shares at September 30, 2013 and 81,697,409 shares at December 31, 2012 |
19,500 | 20,400 | ||||||
Capital in excess of par value |
1,648,000 | 1,513,300 | ||||||
Accumulated deficit / retained earnings |
(89,700 | ) | 473,200 | |||||
Accumulated other comprehensive loss |
(73,700 | ) | (81,200 | ) | ||||
|
|
|
|
|||||
Total shareholders investment |
1,504,100 | 1,925,700 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders investment |
$ | 4,165,000 | $ | 4,151,300 | ||||
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands, unaudited)
Nine Months Ended September 30, |
||||||||
2013 | 2012 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 22,300 | $ | 401,900 | ||||
Adjustments to reconcile net income to net cash provided by operating activities, net of acquired business: |
||||||||
Depreciation and amortization |
106,000 | 101,400 | ||||||
Litigation charges, net |
318,200 | | ||||||
Acquired in-process research and development |
30,000 | 2,000 | ||||||
Asset impairments |
12,300 | 22,200 | ||||||
Restructuring |
(1,400 | ) | (1,600 | ) | ||||
Deferred income taxes |
(16,800 | ) | 12,600 | |||||
Share-based compensation |
44,700 | 39,000 | ||||||
Inventory reserves and provision for doubtful accounts |
17,100 | 15,000 | ||||||
Other items |
1,600 | (5,800 | ) | |||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
10,200 | 31,600 | ||||||
Inventories |
(34,400 | ) | (34,000 | ) | ||||
Current liabilities |
(96,700 | ) | (153,900 | ) | ||||
Taxes |
6,000 | (2,500 | ) | |||||
Other, net |
(2,100 | ) | (700 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities |
417,000 | 427,200 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(47,300 | ) | (55,500 | ) | ||||
Change in restricted cash |
6,000 | 119,600 | ||||||
Payments made for purchases of businesses, net of cash acquired |
(35,000 | ) | | |||||
Payments made for intangibles |
(33,500 | ) | (14,100 | ) | ||||
Proceeds from sale of financial instruments |
| 10,000 | ||||||
Other |
1,900 | | ||||||
|
|
|
|
|||||
Net cash (used in) provided by investing activities |
(107,900 | ) | 60,000 | |||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Change in short-term borrowings, net |
97,500 | 77,000 | ||||||
Proceeds from exercises under share-based compensation plans, net |
74,400 | 70,200 | ||||||
Excess tax benefit relating to share-based compensation plans |
9,500 | 10,300 | ||||||
Purchases of common stock |
(546,900 | ) | (372,500 | ) | ||||
Dividends paid |
(49,800 | ) | (49,900 | ) | ||||
Other |
(500 | ) | (4,900 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities |
(415,800 | ) | (269,800 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
(7,900 | ) | (4,700 | ) | ||||
|
|
|
|
|||||
(Decrease) increase in cash and cash equivalents during the period |
(114,600 | ) | 212,700 | |||||
|
|
|
|
|||||
Balance at January 1 |
896,300 | 596,400 | ||||||
|
|
|
|
|||||
Balance at September 30 |
$ | 781,700 | $ | 809,100 | ||||
|
|
|
|
|||||
Supplemental cash flow information |
||||||||
Cash paid for: |
||||||||
Interest |
$ | 36,200 | $ | 31,600 | ||||
Income taxes |
89,700 | 132,800 | ||||||
Non-cash transactions: |
||||||||
Purchase of common stock not settled |
6,500 | 9,100 | ||||||
Purchase of business and related costs |
8,200 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of C. R. Bard, Inc. and its subsidiaries (the company or Bard) should be read in conjunction with the audited consolidated financial statements and notes thereto included in Bards 2012 Annual Report on Form 10-K. These financial statements have been prepared on a basis that is substantially consistent with the accounting principles applied in the financial statements in Bards 2012 Annual Report on Form 10-K. The preparation of these financial statements requires the company to make estimates and judgments that affect reported amounts of assets, liabilities, revenues and expenses and the related disclosure of contingent assets and liabilities at the date of the financial statements. These financial statements include all normal and recurring adjustments necessary for a fair presentation. The accounts of most foreign subsidiaries are consolidated as of and for the quarter and nine months ended August 31, 2013 and August 31, 2012 and as of November 30, 2012. No events occurred related to these foreign subsidiaries during the months of September 2013, September 2012 or December 2012 that materially affected the financial position or results of operations of the company. The results for the interim periods presented are not necessarily indicative of the results expected for the year.
2. Acquisitions and Divestiture
On October 1, 2013, the company acquired all of the outstanding shares of Medafor, Inc. (Medafor), a privately-held developer and supplier of plant-based hemostatic agents. The purchase consideration included an up-front cash payment of $203.7 million and future contingent payments of up to an additional $80 million based on specific revenue-based milestones through June 30, 2015. The company has not yet completed the initial purchase accounting due to the timing of this acquisition.
On September 4, 2013, the company entered into a definitive agreement to acquire Rochester Medical, Inc. (Rochester Medical), a publicly-held developer and supplier of silicone urinary incontinence and urine drainage products, for a purchase price of $20 per share, or approximately $262 million in the aggregate to be paid at closing. The transaction is expected to close in 2013, and is subject to customary closing conditions, including approval by the shareholders of Rochester Medical as well as regulatory approvals.
On August 29, 2013, the company acquired early stage technology from 3DT Holdings LLC (3DT), providing the company with rights to develop and commercialize a novel technology related to peripherally inserted central catheters (PICCs). 3DT received an up-front cash payment of $29.5 million and is eligible for milestone payments of up to $5 million based upon regulatory product approval. The company recorded the up-front payment as a research and development expense.
On July 29, 2013, the company acquired all of the outstanding shares of Loma Vista Medical, Inc., a privately-held company specializing in the development and commercialization of aortic valvuloplasty products, which use noncompliant fiber-based balloon technology. The total purchase consideration of $39.4 million included an up-front cash payment of $32.5 million and the fair value of contingent consideration of up to $8.0 million. The fair value of the assets acquired resulted in the recognition of core technologies of $20.6 million, deferred tax liabilities of $14.7 million, primarily consisting of intangible assets, goodwill of $8.6 million, and other net assets of $4.9 million. The goodwill is not deductible for tax purposes. An in process research and development (IPR&D) asset of $20.0 million was recorded for the development of a next generation valvuloplasty product. The fair value of the IPR&D asset was determined based upon the present value of expected future cash flows adjusted for the probability of technological and commercial risk, utilizing a risk-adjusted discount rate of 25%. The company has not yet finalized the purchase accounting, which may be adjusted as further information about conditions existing at the acquisition date become available.
On June 27, 2013, the company reached a definitive agreement to sell certain assets and liabilities of its electrophysiology division (BEP) to Boston Scientific Corporation (Boston Scientific) for $275 million in cash. The transaction is expected to be completed in 2013, subject to certain regulatory and customary closing conditions. The company expects to record a gain on the sale when the transaction is completed, which will include, among other things, assets and liabilities held for sale, and the de-recognition of a portion of goodwill.
Assets and liabilities held for sale associated with BEP include the following:
(dollars in millions) | September 30, 2013 |
|||
Inventories |
$ | 14.4 | ||
Other current assets |
0.4 | |||
Net property, plant and equipment |
2.6 |
7
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(dollars in millions) | September 30, 2013 |
|||
Other intangible assets, net |
7.0 | |||
|
|
|||
$ | 24.4 | |||
|
|
|||
Accrued expenses |
$ | 1.8 | ||
Accrued compensation and benefits |
0.8 | |||
|
|
|||
$ | 2.6 | |||
|
|
|||
$ | 21.8 | |||
|
|
The company has agreed to provide contract manufacturing and other transition services to Boston Scientific for up to five years following the closing date. Due to the companys continuing involvement in the operations of BEP, the criteria for reporting the results of BEP as a discontinued operation were not met.
3. Restructuring
During the fourth quarter of 2012, the company committed to a plan (the 2012 Restructuring Plan) to improve its overall cost structure and enhance operational effectiveness. At September 30, 2013, the remaining liability related to the 2012 Restructuring Plan was $2.3 million. Cash payments of $14.1 million and a reversal of $1.4 million of previously accrued restructuring costs were made during the nine months ended September 30, 2013. The company expects activities under this plan to be substantially complete by the end of 2013.
4. Earnings per Common Share
Earnings per share (EPS) is computed under the two-class method using the following common share information:
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(dollars and shares in millions) | ||||||||||||||||
EPS Numerator: |
||||||||||||||||
Net income |
$ | 93.2 | $ | 129.3 | $ | 22.3 | $ | 401.9 | ||||||||
Less: Income allocated to participating securities |
1.6 | 2.4 | 0.3 | 7.7 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income available to common shareholders |
$ | 91.6 | $ | 126.9 | $ | 22.0 | $ | 394.2 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
EPS Denominator: |
||||||||||||||||
Weighted average common shares outstanding |
78.5 | 83.4 | 79.9 | 83.8 | ||||||||||||
Dilutive common share equivalents from share-based compensation plans |
1.5 | 1.2 | 1.3 | 1.1 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average common and common equivalent shares outstanding, assuming dilution |
80.0 | 84.6 | 81.2 | 84.9 | ||||||||||||
|
|
|
|
|
|
|
|
5. Income Taxes
The effective tax rate for the quarter ended September 30, 2013 was approximately 22%, compared to approximately 27% for the prior year quarter. The effective tax rate for the quarter and nine months ended September 30, 2013 reflected the discrete tax effects of an IPR&D charge related to the acquisition of 3DT, which was incurred in a high tax jurisdiction, and a benefit associated with the remeasurement of an uncertain tax position as a result of the settlement of the Brachytherapy Matter. In addition, the effective tax rate for the nine months ended September 30, 2013 reflected the discrete tax effects of litigation charges, primarily related to product liability claims, which were substantially incurred in a low tax jurisdiction, and the write-down of an insurance receivable, which also was incurred in low tax jurisdiction. See Note 8 of the notes to condensed consolidated financial statements. The effective tax rate was also impacted by the American Taxpayer Relief Act of 2012, which was signed into law on January 2, 2013 and retroactively reinstated the research tax credit. Although the reinstatement of this tax credit is retroactive to January 1, 2012, the enactment of this legislation in 2013 precluded the company from recording the benefit in 2012. As a result, the companys income tax provision was reduced by approximately $3.7 million during the nine months ended September 30, 2013 to recognize the 2012 benefit of this tax credit that would
8
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
have been recorded in 2012. At September 30, 2013, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was $48.5 million (of which $40.4 million would impact the effective tax rate, if recognized) plus $6.3 million of accrued interest. At December 31, 2012, the liability for unrecognized tax benefits was $43.4 million plus $4.8 million of accrued interest. Depending upon the result of open tax examinations and/or the expiration of applicable statutes of limitation, the company believes it is reasonably possible that the total amount of unrecognized tax benefits may decrease by up to $18.4 million within the next 12 months.
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 companys forward currency and option currency contracts was $150.0 million and $128.1 million at September 30, 2013 and December 31, 2012, respectively. For further discussion regarding the companys use of derivative instruments, see Note 1 of the notes to consolidated financial statements in Bards 2012 Annual Report on Form 10-K.
Interest Rate Derivative Instrument
The companys outstanding interest rate swap contract effectively converts its 2.875% fixed-rate notes due 2016 to a floating-rate instrument. The notional value of the companys interest rate swap contract is $250.0 million.
The location and fair value of derivative instruments that are 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 |
September 30, 2013 |
December 31, 2012 |
||||||||
(dollars in millions) | ||||||||||
Forward currency contracts |
Other current assets |
$ | 1.7 | $ | 1.4 | |||||
Option currency contracts |
Other current assets |
1.4 | 0.6 | |||||||
Forward currency contracts |
Other assets |
0.2 | | |||||||
Interest rate swap contract |
Other assets |
9.8 | 13.3 | |||||||
|
|
|
|
|||||||
$ | 13.1 | $ | 15.3 | |||||||
|
|
|
|
|||||||
Forward currency contracts |
Accrued expenses |
$ | 0.3 | $ | 0.4 | |||||
Forward currency contracts |
Other long-term liabilities |
0.1 | | |||||||
|
|
|
|
|||||||
$ | 0.4 | $ | 0.4 | |||||||
|
|
|
|
The location and amounts of gains and losses on derivative instruments designated as cash flow hedges and the impact on shareholders investment are as follows:
Gain/(Loss) Recognized in Other Comprehensive Income (Loss) |
Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss to Income |
Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income |
||||||||||||||||
Quarter Ended September 30, |
Quarter Ended September 30, |
|||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||
(dollars in millions) | ||||||||||||||||||
Forward currency contracts |
$ | (0.5 | ) | $ | 1.5 | Cost of goods sold | $ | 1.7 | $ | (0.4 | ) | |||||||
Option currency contracts |
0.9 | (0.6 | ) | Cost of goods sold | (0.6 | ) | 0.6 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
$ | 0.4 | $ | 0.9 | $ | 1.1 | $ | 0.2 | |||||||||||
|
|
|
|
|
|
|
|
9
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Gain/(Loss) Recognized in Other Comprehensive Income (Loss) |
Location of Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss to Income |
Gain/(Loss) Reclassified from Accumulated Other Comprehensive Loss into Income |
||||||||||||||||
Nine Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||
(dollars in millions) | ||||||||||||||||||
Forward currency contracts |
$ | 4.1 | $ | 4.0 | Cost of goods sold | $ | 1.7 | $ | (0.4 | ) | ||||||||
Option currency contracts |
1.0 | 1.0 | Cost of goods sold | (1.1 | ) | 1.5 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
$ | 5.1 | $ | 5.0 | $ | 0.6 | $ | 1.1 | |||||||||||
|
|
|
|
|
|
|
|
The location and amounts of gains and losses on the derivative instrument designated as a fair value hedge are as follows:
Income Statement Location |
(Loss)/Gain Recognized on Swap | Gain/(Loss) Recognized on Long-Term Debt | ||||||||||||||||||||||||||||||||||
Quarter Ended September 30, |
Nine Months Ended September 30, |
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||||||
Interest rate swap contract |
Interest expense | $ | (0.3 | ) | $ | 1.0 | $ | (3.5 | ) | $ | 2.5 | $ | 0.3 | $ | (1.0 | ) | $ | 3.5 | $ | (2.5 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The location and amounts of gains on derivative instruments not designated as hedging instruments are as follows:
Income Statement Location |
Gain Recognized in Earnings | |||||||||||||||||
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||
(dollars in millions) | ||||||||||||||||||
Forward currency contracts(A) |
Other (income) expense, net |
$ | | $ | | $ | | $ | 3.0 | |||||||||
|
|
|
|
|
|
|
|
(A) | These derivative contracts mitigate changes in the value of remeasured foreign currency denominated intercompany 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 is determined using assumptions that market participants would use in pricing an asset or liability. The fair value guidance establishes a three-level hierarchy which maximizes the use of observable inputs and minimizes the use of unobservable inputs used in measuring fair value. The levels within the hierarchy range from Level 1 having observable inputs to Level 3 having unobservable inputs.
The following table summarizes certain financial instrument assets measured at fair value on a recurring basis:
September 30, 2013 |
December 31, 2012 |
|||||||
(dollars in millions) | ||||||||
Forward currency contracts |
$ | 1.5 | $ | 1.0 | ||||
Option currency contracts |
1.4 | 0.6 | ||||||
Interest rate swap contract |
9.8 | 13.3 |
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. These financial instruments are categorized as Level 2 under the fair value hierarchy.
The fair value of the liability for contingent consideration related to acquisitions was $86.8 million and $77.1 million at September 30, 2013 and December 31, 2012, respectively. The fair value was measured using significant unobservable inputs and is categorized as Level 3 under the fair value hierarchy.
10
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Financial Instruments not Measured at Fair Value
The fair value of commercial paper borrowings of $97.5 million at September 30, 2013 approximated the carrying value. There were no commercial paper borrowings outstanding at December 31, 2012. On September 26, 2013, the company amended its $600 million five-year committed syndicated bank credit facility that was scheduled to expire in October 2016. The amendment includes an increase of the aggregate principal amount of credit available under the syndicated bank credit facility to $750 million and extends the commitment termination date until September 26, 2018. The amended credit facility supports the companys commercial paper program and can be used for general corporate purposes. The facility includes pricing based on the companys long-term credit rating and includes a financial covenant that limits the amount of total debt to total capitalization. At September 30, 2013, the company was in compliance with this covenant.
The estimated fair value of long-term debt including the effect of the related interest rate swap contract was approximately $1,454.2 million and $1,532.2 million at September 30, 2013 and December 31, 2012, respectively. The fair value was estimated using dealer quotes for similarly-rated debt instruments over the remaining contractual term of the companys 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 Europe and evaluates accounts receivable in certain countries for potential collection risks. Economic conditions and other factors in certain countries in Europe 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 has experienced significant delays in the collection of accounts receivable associated with the national healthcare systems in Spain, Italy, Greece and Portugal. At September 30, 2013, the companys accounts receivable, net of allowances, from the national healthcare systems in these countries and amounts past due greater than 365 days are as follows:
Accounts receivable, net |
Greater than 365 days past due |
|||||||
(dollars in millions) | ||||||||
Spain |
$ | 23.0 | $ | 4.8 | ||||
Italy |
23.1 | 2.4 | ||||||
Greece |
10.5 | 3.2 | ||||||
Portugal |
4.0 | 1.7 | ||||||
|
|
|
|
|||||
$ | 60.6 | $ | 12.1 | |||||
|
|
|
|
7. Inventories
Inventories consisted of:
September 30, 2013 |
December 31, 2012 |
|||||||
(dollars in millions) | ||||||||
Finished goods |
$ | 199.4 | $ | 194.6 | ||||
Work in process |
23.0 | 19.1 | ||||||
Raw materials |
109.7 | 114.8 | ||||||
|
|
|
|
|||||
$ | 332.1 | $ | 328.5 | |||||
|
|
|
|
8. Contingencies
General
In the ordinary course of business, the company is subject to various legal proceedings, investigations and claims, including, for example, environmental matters, employment disputes, disputes on agreements and other commercial disputes. In addition, the company operates in an industry susceptible to significant product liability and patent legal claims. The company accounts for estimated losses with respect to legal proceedings and claims when such losses are probable and reasonably estimable. Legal costs associated with these matters are expensed as incurred. At any given time, in the ordinary course of business, the company is involved as either a plaintiff or defendant in a number of patent infringement actions. If a
11
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
third partys patent infringement claim were to be determined against the company, the company might be required to make significant royalty or other payments or might be subject to an injunction or other limitation on its ability to manufacture or distribute one or more products. If a patent owned by or licensed to the company is found to be invalid or unenforceable, the company might be required to reduce the value of certain intangible assets on the companys balance sheet and to record a corresponding charge, which could be significant in amount. Many of the companys legal proceedings and claims could have a material adverse effect on its business, results of operations, financial condition and/or liquidity.
Product Liability Matters
As of October 17, 2013, approximately 745 federal and 720 state lawsuits involving individual claims by approximately 1,575 plaintiffs, as well as two putative class actions in the United States are currently pending against the company with respect to its Composix® Kugel® and certain other hernia repair implant products (collectively, the Hernia Product Claims). The company voluntarily recalled certain sizes and lots of the Composix® Kugel® products beginning in December 2005. One of the U.S. class action lawsuits consolidated ten previously-filed U.S. class action lawsuits. The putative class actions, none of which has been certified, seek: (i) medical monitoring; (ii) compensatory damages; (iii) punitive damages; (iv) a judicial finding of defect and causation; and/or (v) attorneys fees. A settlement has been reached with respect to the three pending putative Canadian class actions within amounts previously recorded by the company. Approximately 685 of the state lawsuits, involving individual claims by approximately 785 plaintiffs, are pending in the Superior Court of the State of Rhode Island, with the remainder in various other jurisdictions. The Hernia Product Claims also generally seek damages for personal injury resulting from use of the products.
In June 2007, the Composix® Kugel® lawsuits and, subsequently, other hernia repair product lawsuits, pending in federal courts nationwide were transferred into one Multidistrict Litigation (MDL) for coordinated pre-trial proceedings in the United States District Court for the District of Rhode Island.
On June 30, 2011, the company announced that it had reached agreements in principle with various plaintiffs law firms to settle the majority of its existing Hernia Product Claims. Each agreement is subject to certain conditions, including requirements for participation in the proposed settlements by a certain minimum number of plaintiffs. In addition, the company continues to engage in discussions with other plaintiffs law firms regarding potential resolution of unsettled Hernia Product Claims, and intends to vigorously defend Hernia Product Claims that do not settle, including through litigation. The company cannot give any assurances that the resolution of the Hernia Product Claims that have not settled, including asserted and unasserted claims and the putative class action lawsuits, will not have a material adverse effect on the companys business, results of operations, financial condition and/or liquidity.
As of October 17, 2013, product liability lawsuits involving individual claims by approximately 9,635 plaintiffs have been filed or asserted against the company in various federal and state jurisdictions alleging personal injuries associated with the use of certain of the companys surgical continence products for women, including its Avaulta® line of products. In addition, five putative class actions in the United States and three putative class actions in Canada have been filed against the company (all lawsuits, collectively, the Womens Health Product Claims). The Womens Health Product Claims generally seek damages for personal injury resulting from use of the products. The putative class actions, none of which has been certified, seek: (i) medical monitoring; (ii) compensatory damages; (iii) punitive damages; (iv) a judicial finding of defect and causation; and/or (v) attorneys fees. With respect to certain of these claims, the company believes that one of its suppliers has an obligation to defend and indemnify the company. In October 2010, the Womens Health Product Claims involving solely Avaulta® products pending in federal courts nationwide were transferred into an MDL in the United States District Court for the Southern District of West Virginia, the scope of which was later expanded to include lawsuits involving all womens surgical continence products that are manufactured or distributed by the company. The company expects additional Womens Health Product Claims pending in federal courts to be transferred to the MDL in West Virginia, with the remainder of the Womens Health Product Claims in other jurisdictions. The first trial in the MDL commenced in July 2013 and resulted in a judgment against the company of approximately $2 million. The company intends to appeal the judgment. The next MDL trial is scheduled to occur in December 2013, with additional trials scheduled in 2014. The first trial in a state court was completed in July 2012 and resulted in a judgment against the company of approximately $3.6 million. The company has appealed this decision. During the third quarter, the company settled one MDL case and one New Jersey state case. The amounts of the settlements are subject to confidentiality requirements. In addition, during the third quarter, an MDL case was voluntarily dismissed with prejudice, and the company is currently seeking to recover attorneys fees for this case. The company does not believe that any verdicts or settlements entered to date are representative of potential outcomes of all Womens Health Product Claims. The case numbers set forth above do not include generic complaints involving womens health products where the company cannot, based on the allegations in such complaints, determine whether any of
12
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
such cases involve the companys womens health products. While the company intends to vigorously defend the Womens Health Product Claims, it cannot give any assurances that the resolution of these claims will not have a material adverse effect on the companys business, results of operations, financial condition and/or liquidity.
As of October 17, 2013, product liability lawsuits involving individual claims by 40 plaintiffs are currently pending against the company in various federal and state jurisdictions alleging personal injuries associated with the use of the companys vena cava filter products. In addition, three putative class actions were filed against the company in various state courts on behalf of plaintiffs who are alleged to have no present injury (all lawsuits, collectively, the Filter Product Claims). Two of these putative class actions were dismissed during the second quarter, and class certification was denied for the third putative class action in July 2013. The first Filter Product Claim trial was completed in June 2012 and resulted in a judgment for the company. The company expects additional trials of Filter Product Claims to take place over the next 12 months. During the second quarter of 2013, the company finalized settlement agreements with respect to more than 30 Filter Product Claims, and made payments with respect to such claims within the amounts previously recorded. While the company intends to vigorously defend the remaining unsettled Filter Product Claims, it cannot give any assurances that the resolution of these claims will not have a material adverse effect on the companys business, results of operations, financial condition and/or liquidity.
In most product liability litigations of this nature, plaintiffs allege a wide variety of claims, ranging from allegations of serious injury caused by the products to efforts to obtain compensation notwithstanding the absence of any injury. In many of these cases, the company has not yet received and reviewed complete information regarding the plaintiffs and their medical conditions, and consequently, is unable to fully evaluate the claims. The company expects that it will receive and review additional information regarding any remaining unsettled product liability matters.
The company believes that some settlements and judgments, as well as legal defense costs, relating to product liability matters are or may be covered in whole or in part under its product liability insurance policies with a limited number of insurance carriers. In certain circumstances, insurance carriers reserve their rights with respect to coverage, or contest or deny coverage, as has occurred with respect to certain claims. When this occurs, the company intends to vigorously contest disputes with respect to its insurance coverage and to enforce its rights under the terms of its insurance policies, and accordingly, will record receivables with respect to amounts due under these policies, when recovery is probable. Amounts recovered under the companys product liability insurance policies may be less than the stated coverage limits and may not be adequate to cover damages and/or costs relating to claims. In addition, there is no guarantee that insurers will pay claims or that coverage will otherwise be available.
The companys insurance coverage with respect to the Hernia Product Claims has been exhausted. In the first quarter of 2013 the company recorded a non-cash charge of $25.0 million ($24.5 million after tax) to other (income) expense, net, for the write-down of an insurance receivable related to a dispute with one of its excess insurance carriers in connection with these claims.
In connection with the Womens Health Product Claims, the company was in dispute with one of its excess insurance carriers relating to an aggregate of $50 million of insurance coverage. In June 2013, the company settled this dispute with no change to the amount of the insurance coverage or the related receivable.
Other Legal Matters
During the first half of 2013, the company received subpoenas or Civil Investigative Demands from a number of State Attorneys General seeking information related to the sales and marketing of certain of the companys products that are the subject of the Hernia Product Claims and the Womens Health Product Claims. The company is cooperating with these requests. Since it is not feasible to predict the outcome of these proceedings, the company cannot give any assurances that the resolution of these proceedings will not have a material adverse effect on the companys business, results of operations, financial condition and/or liquidity.
In November 2006, the company received a subpoena issued by the U.S. Department of Health and Human Services, Office of Inspector General (OIG), under the authority of the federal healthcare fraud and false claims statutes, seeking documents related to the companys brachytherapy business (the Brachytherapy Matter). In January 2012, the company reached a preliminary agreement with the civil and criminal divisions of the United States Attorneys Office for the Northern District of Georgia to resolve claims with respect to the Brachytherapy Matter and recorded a charge of approximately $51.0 million ($40.8 million after tax) in the fourth quarter of 2011. On May 2, 2013, the company settled this matter. The resolution includes agreements with the government that required the company to pay approximately the amount that was previously recorded.
13
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
In December 2007, a U.S. District Court jury in Arizona found that certain of W.L. Gore & Associates Inc.s (Gore) ePTFE vascular grafts and stent-grafts infringe the companys patent number 6,436,135 (the 135 patent). The jury upheld the validity of the patent and awarded the company $185 million in past damages. The jury also found that Gore willfully infringed the patent. In a second phase of the trial, the District Court ruled that Gore failed to prove that the patent is unenforceable due to inequitable conduct. In March 2009, the District Court doubled the jury award to approximately $371 million for damages through June 2007. The District Court also awarded the company attorneys fees of $19 million and prejudgment interest of approximately $20 million. In addition, the District Court denied Gores remaining motions, including its motions for a new trial and to set aside the jurys verdict. In July 2010, the District Court awarded the company approximately $109 million in additional damages for the period from July 2007 through March 2009. Gore has deposited or secured the foregoing amounts with the District Court. The District Court also assessed a royalty rate of between 12.5% and 20%, depending on the product, that will be used to calculate damages for Gores infringing sales from April 2009 through the expiration of the patent. Gore has made additional deposits with the District Court of approximately $542 million, representing Gores calculation of royalties for its infringing sales through July 2013. Gore appealed this matter to the Court of Appeals for the Federal Circuit (the Court of Appeals), which on February 10, 2012 affirmed the decision of the District Court. Gore filed a petition with the Court of Appeals for a rehearing of its appeal. On June 14, 2012, the Court of Appeals reaffirmed its February 10, 2012 decision, including the ongoing royalty rates as set by the District Court, with the exception of the issue of willfulness with respect to Gores infringement of the 135 patent, which was remanded to the District Court. On October 12, 2012, Gore filed a petition for a writ of certiorari to the U.S. Supreme Court requesting a review of the portion of the decision that the Court of Appeals reaffirmed. The U.S. Supreme Court denied Gores petition on January 14, 2013. The District Court heard oral argument on June 5, 2013 as to three pending motions before it, including the companys motion to execute on the judgment with respect to all amounts other than enhanced damages due to willfulness. In October 2013, the District Court granted Bards motion to execute on the judgment, denied Gores motion requesting a determination that Gores infringement was not willful and denied Gores motion for a new trial. The District Courts rulings on the motions are subject to appeal. On January 28, 2013, Gore filed with the U.S. District Court a Request for Judicial Notice that the U.S. Patent and Trademark Office (USPTO) granted Gores previously filed request for a re-examination of the 135 patent. On April 1, 2013, the USPTO issued a First Office Action initially rejecting all of the claims of the 135 patent that are the subject of the re-examination. On July 10, 2013, the USPTO issued a Notice of Intent to Issue an Ex Parte Reexamination Certificate upholding the patentability of all re-examined claims of the 135 patent. This action terminated the re-examination proceeding and upheld the claims involved in the re-examination. The timing of final resolution of this litigation remains uncertain. Since the company considers these matters a gain contingency, no amounts have been recorded. Even if the company is ultimately successful in this lawsuit, it cannot give any assurances that royalties for Gores future infringing sales will remain at or near historic levels.
The company is subject to numerous federal, state, local and foreign environmental protection laws governing, among other things, the generation, storage, use and transportation of hazardous materials and emissions or discharges into the ground, air or water. The company is or may become a party to proceedings brought under various federal laws including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as Superfund, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act and similar state or foreign laws. These proceedings seek to require the owners or operators of contaminated sites, transporters of hazardous materials to the sites and generators of hazardous materials disposed of at the sites to clean up the sites or to reimburse the government for cleanup costs. In most cases, there are other potentially responsible parties that may be liable for remediation costs. In these cases, the government alleges that the defendants are jointly and severally liable for the cleanup costs; however, these proceedings are frequently resolved so that the allocation of cleanup costs among the parties more closely reflects the relative contributions of the parties to the site contamination. The companys potential liability varies greatly from site to site. For some sites, the potential liability is de minimis and for others the costs of cleanup have not yet been determined. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study and are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. The company believes that the proceedings and claims described above will likely be resolved over an extended period of time. While it is not feasible to predict the outcome of these proceedings, based upon the companys experience, current information and applicable law, the company does not expect these proceedings to have a material adverse effect on its financial condition and/or liquidity. However, one or more of the proceedings could be material to the companys business and/or results of operations.
14
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Litigation Reserves
The company regularly monitors and evaluates the status of product liability and other legal matters, and may, from time-to-time, engage in settlement and mediation discussions taking into consideration developments in the matters and the risks and uncertainties surrounding litigation. These discussions could result in settlements of one or more of these claims at any time.
The company evaluated the product liability matters discussed above under the heading Product Liability Matters based on information currently available, including: the allegations and documentation supporting or refuting such allegations; publicly available information regarding similar medical device mass tort settlements; historical information regarding other product liability settlements involving the company; and the procedural posture and stage of litigation. Based on these, and other factors, the company recorded a charge, net of estimated recoveries to other (income) expense, net, of approximately $293.0 million ($276.0 million after tax) in the second quarter of 2013, which recognized the estimated costs for certain of these product liability matters, including (with respect to such matters) asserted and unasserted claims, and costs to administer the settlements related to such matters. The charge excludes any costs associated with all but one putative class action lawsuit. The company cannot give any assurances that the actual costs incurred with respect to these product liability matters will not exceed the related amounts accrued. With respect to product liability claims that are not resolved through settlement, the company intends to vigorously defend against such claims, including through litigation. The company cannot give any assurances that the resolution of any of its product liability matters, including asserted and unasserted claims and the putative class action lawsuits, will not have a material adverse effect on the companys business, results of operations, financial condition and/or liquidity.
Accruals for product liability and other legal matters amounted to $520.3 million and $158.1 million at September 30, 2013 and December 31, 2012, respectively. The company made total payments of $177.1 million to qualified settlement funds (QSFs), of which $19.5 million were made during the nine months ended September 30, 2013 subject to certain settlement conditions, for certain Hernia Product Claims. Payments to QSFs were recorded as a component of restricted cash. Total payments of $158.2 million from these QSFs have been made to qualified claimants, of which $25.6 million were made during the nine months ended September 30, 2013. In addition, other payments of $26.2 million have been made to qualified claimants, of which $15.6 million were made during the nine months ended September 30, 2013.
The company recorded receivables related to product liability matters amounting to $186.2 million and $45.6 million at September 30, 2013 and December 31, 2012, respectively. A substantial amount of the receivable at September 30, 2013 is the subject of a dispute with a supplier who has contested at least, in part, its obligation to defend and indemnify the company, which the company refutes. After considering the following factors (as appropriate): the nature of the claims, relevant contracts, relevant legal issues, the advice and judgment of outside legal counsel, and other pertinent factors, the company believes that it should collect these receivables.
The company is unable to estimate the reasonably possible losses or range of losses, if any, arising from certain existing product liability matters and other legal matters. Under U.S. generally accepted accounting principles, an event is reasonably possible if the chance of the future event or events occurring is more than remote but less than likely and an event is remote if the chance of the future event or events occurring is slight. With respect to all putative class action lawsuits relating to product liability matters, the company is unable to estimate a range of reasonably possible losses for the following reasons: (i) all or certain of the proceedings are in early stages; (ii) the company has not received and reviewed complete information regarding all or certain of the plaintiffs and their medical conditions; and/or (iii) there are significant factual issues to be resolved. In addition, there is uncertainty as to the likelihood of a class being certified or the ultimate size of the class.
9. Share-Based Compensation Plans
The company may grant a variety of share-based payments under the 2012 Long Term Incentive Plan of C. R. Bard, Inc., as amended and restated (the LTIP) and the 2005 Directors Stock Award Plan of C. R. Bard, Inc., as amended and restated (the Directors Plan) to certain directors, officers and employees. At the companys Annual Meeting of Shareholders on April 17, 2013, the shareholders authorized an additional 2,000,000 shares for issuance under the LTIP. The total number of remaining shares at September 30, 2013 that may be issued under the LTIP was 5,710,855 and under the Directors Plan was 39,843. Awards under the LTIP may be in the form of stock options, stock appreciation rights, limited stock appreciation rights, restricted stock, unrestricted stock and other stock-based awards. Awards under the Directors Plan may be in the form of stock awards, stock options or stock appreciation rights. The company also has two employee stock purchase programs.
15
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Amounts recognized for share-based compensation are as follows:
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(dollars in millions) | ||||||||||||||||
Total cost of share-based compensation plans |
$ | 16.0 | $ | 11.5 | $ | 44.6 | $ | 39.0 | ||||||||
Amounts capitalized in inventory and fixed assets |
(0.3 | ) | (0.4 | ) | (1.4 | ) | (1.2 | ) | ||||||||
Amounts recognized in income for amounts previously capitalized in inventory and fixed assets |
0.5 | 0.4 | 1.5 | 1.2 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Amounts charged against income |
$ | 16.2 | $ | 11.5 | $ | 44.7 | $ | 39.0 | ||||||||
|
|
|
|
|
|
|
|
In the first quarter of each of 2013 and 2012, the company granted performance restricted stock units to certain officers. These units have requisite service periods of three years and have no dividend rights. The actual payout of these units varies based on the companys performance over the three-year period based on pre-established targets over the period and a market condition modifier based on total shareholder return (TSR) compared to an industry peer group. The actual payout under these awards may exceed an officers target payout; however, compensation cost initially recognized assumes that the target payout level will be achieved and may be adjusted for subsequent changes in the expected outcome of the performance-related condition. The fair values of these units are based on the market price of the companys stock on the date of the grant and use a Monte Carlo simulation model for the TSR component. The fair values of the TSR components of the 2013 and 2012 grants were estimated based on the following assumptions: risk-free interest rate of 0.42% and 0.41%, respectively; dividend yield of 0.81% and 0.85%, respectively; and expected life of 2.88 and 2.83 years, respectively.
Anticipated purchases under the Management Stock Purchase Program (the MSPP) are approximately 0.2 million shares for the 2013 grant. Purchases under the MSPP were approximately 0.2 million shares for the 2012 grant. The fair value of the 2013 annual MSPP purchases was $37.20 per share and was estimated in July 2013. The fair value of the 2012 MSPP purchases was $38.33 per share. These fair value calculations used the Black-Scholes model based on the following assumptions: risk free interest rate of 0.10% and 0.16%, respectively; expected volatility of 15% and 20%, respectively; dividend yield of 0.8% and 0.9%, respectively; and expected life of 0.6 years for both valuations.
As of September 30, 2013, there were $79.3 million of unrecognized compensation expenses related to share-based payment arrangements. These costs are expected to be recognized over a weighted-average period of approximately two years. The company has sufficient shares to satisfy expected share-based payment arrangements in 2013.
10. Pension and Other Postretirement Benefit Plans
Defined Benefit Pension Plans - The company has both tax-qualified and nonqualified, noncontributory defined benefit pension plans, that together cover certain domestic and foreign employees. These plans provide benefits based upon a participants compensation and years of service.
The components of net periodic pension cost are as follows:
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(dollars in millions) | ||||||||||||||||
Service cost, net of employee contributions |
$ | 7.5 | $ | 7.0 | $ | 22.6 | $ | 20.8 | ||||||||
Interest cost |
4.6 | 4.9 | 13.7 | 14.6 | ||||||||||||
Expected return on plan assets |
(6.5 | ) | (6.2 | ) | (19.5 | ) | (17.9 | ) | ||||||||
Amortization |
3.4 | 2.8 | 10.2 | 7.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net periodic pension cost |
$ | 9.0 | $ | 8.5 | $ | 27.0 | $ | 25.3 | ||||||||
|
|
|
|
|
|
|
|
Other Postretirement Benefit Plan - The company does not provide subsidized postretirement healthcare benefits and life insurance coverage except for a limited number of former employees. As this plan is unfunded, contributions are made as benefits are incurred. The net periodic benefit cost was $0.1 million and $0.2 million for the quarters ended September 30, 2013 and 2012, respectively. The net periodic benefit cost was $0.4 million and $0.5 million for the nine month periods ended September 30, 2013 and 2012, respectively.
16
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
11. Shareholders Investment
The company repurchased approximately 5.2 million shares of common stock for $533.4 million in the nine months ended September 30, 2013 under its previously announced share repurchase authorizations.
Other Comprehensive Income (Loss)
During the first quarter of 2013, the company adopted new Financial Accounting Standards Board guidance that requires the company to present information about reclassification adjustments from accumulated other comprehensive loss. Under this guidance, the company presents the effect of amounts reclassified from each component of accumulated other comprehensive loss based on its source.
The changes in accumulated other comprehensive income (loss) by component are as follows:
Derivative Instruments Designated as Cash Flow Hedges |
Foreign Currency Translation |
Benefit Plans |
Total | |||||||||||||
(dollars in millions) | ||||||||||||||||
Balance at December 31, 2011 |
$ | (1.4 | ) | $ | 41.1 | $ | (106.3 | ) | $ | (66.6 | ) | |||||
Other comprehensive income (loss) before reclassifications |
5.2 | (24.3 | ) | | (19.1 | ) | ||||||||||
Tax (provision) benefit related to other comprehensive income (loss) before reclassifications(a) |
(2.2 | ) | | | (2.2 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss) before reclassifications, net of taxes |
3.0 | (24.3 | ) | | (21.3 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Amounts reclassified from accumulated other comprehensive income (loss) |
(1.1 | )(b) | | 8.0 | (c) | 6.9 | ||||||||||
Tax provision (benefit) related to amounts reclassified from accumulated other comprehensive income (loss) |
0.2 | | (2.8 | ) | (2.6 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reclassifications, net of tax |
(0.9 | ) | | 5.2 | 4.3 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss) |
2.1 | (24.3 | ) | 5.2 | (17.0 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at September 30, 2012 |
$ | 0.7 | $ | 16.8 | $ | (101.1 | ) | $ | (83.6 | ) | ||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at December 31, 2012 |
$ | (0.7 | ) | $ | 32.6 | $ | (113.1 | ) | $ | (81.2 | ) | |||||
Other comprehensive income (loss) before reclassifications |
2.3 | (0.7 | ) | | 1.6 | |||||||||||
Tax (provision) benefit related to other comprehensive income (loss) before reclassifications(a) |
(0.4 | ) | | | (0.4 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss) before reclassifications, net of taxes |
1.9 | (0.7 | ) | | 1.2 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Amounts reclassified from accumulated other comprehensive income (loss) |
(0.6 | )(b) | | 10.3 | (c) | 9.7 | ||||||||||
Tax provision (benefit) related to amounts reclassified from accumulated other comprehensive income (loss) |
0.3 | | (3.7 | ) | (3.4 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Reclassifications, net of tax |
(0.3 | ) | | 6.6 | 6.3 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Other comprehensive income (loss) |
1.6 | (0.7 | ) | 6.6 | 7.5 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at September 30, 2013 |
$ | 0.9 | $ | 31.9 | $ | (106.5 | ) | $ | (73.7 | ) | ||||||
|
|
|
|
|
|
|
|
(a) | Income taxes are not provided for foreign currency translation adjustment. |
(b) | See Note 6 of the notes to condensed consolidated financial statements. |
(c) | These components are included in the computation of net periodic pension cost. See Note 10 of the notes to condensed consolidated financial statements. |
17
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
12. Segment Information
The companys management considers its business to be a single segment entitythe manufacture and sale of medical devices. The companys products generally share similar distribution channels and customers. The company designs, develops, manufactures, packages, distributes and sells medical, surgical, diagnostic and patient care devices. The company sells a broad range of products to hospitals, individual healthcare professionals, extended care health facilities and alternate site facilities on a global basis. In general, the companys products are intended to be used once and then discarded or either temporarily or permanently implanted. The companys chief operating decision makers evaluate their various global product portfolios on a net sales basis and generally evaluate profitability and associated investment on an enterprise-wide basis due to shared geographic infrastructures.
Net sales based on the location of external customers by geographic region are:
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(dollars in millions) | ||||||||||||||||
United States |
$ | 500.3 | $ | 483.4 | $ | 1,496.4 | $ | 1,469.6 | ||||||||
Europe(a) |
116.7 | 108.9 | 356.5 | 349.4 | ||||||||||||
Japan |
43.4 | 41.6 | 123.4 | 122.2 | ||||||||||||
Other(a) |
97.6 | 89.0 | 281.9 | 254.3 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 758.0 | $ | 722.9 | $ | 2,258.2 | $ | 2,195.5 | |||||||||
|
|
|
|
|
|
|
|
(a) | Beginning in 2013, certain emerging markets in Europe are included in the other geographic region. Prior year amounts have been reclassified to conform to the current year presentation. |
Total net sales by product group category are:
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(dollars in millions) | ||||||||||||||||
Vascular |
$ | 209.9 | $ | 202.5 | $ | 625.3 | $ | 633.0 | ||||||||
Urology |
193.7 | 188.1 | 574.2 | 562.0 | ||||||||||||
Oncology |
215.5 | 203.9 | 636.7 | 601.9 | ||||||||||||
Surgical Specialties |
118.1 | 107.7 | 358.4 | 333.8 | ||||||||||||
Other |
20.8 | 20.7 | 63.6 | 64.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 758.0 | $ | 722.9 | $ | 2,258.2 | $ | 2,195.5 | |||||||||
|
|
|
|
|
|
|
|
18
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
This managements discussion and analysis provides a review of the results of operations, financial condition and the liquidity and capital resources of C. R. Bard, Inc. and its subsidiaries (the company or Bard). The following discussion should be read in conjunction with Bards 2012 Annual Report on Form 10-K, and the condensed consolidated financial statements and notes thereto included elsewhere in this Form 10-Q. Certain statements contained herein may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995; see Risks and Uncertainties; Cautionary Statement Regarding Forward-Looking Information below.
Overview
The company designs, develops, manufactures, packages, distributes and sells medical, surgical, diagnostic and patient care devices. The company sells a broad range of products to hospitals, individual healthcare professionals, extended care health facilities and alternate site facilities on a global basis. Outside the United States, Europe and Japan are the companys largest markets, while certain emerging markets in Asia, Latin America, and Europe are the companys fastest-growing markets. In general, the companys products are intended to be used once and then discarded or either temporarily or permanently implanted. The company reports sales in four major product group categories: vascular; urology; oncology; and surgical specialties. The company also has a product group category of other products.
The companys earnings are driven by its ability to continue to generate sales of its products and improve operating efficiency. Bards ability to increase sales over time depends upon its success in developing, acquiring and marketing differentiated products that meet the needs of clinicians and their patients. For the nine months ended September 30, 2013, the companys research and development (R&D) expense as a percentage of net sales was 10.0%. The company also makes selective acquisitions of businesses, products and technologies, generally focusing on small-to-medium sized transactions to provide ongoing growth opportunities. In addition, the company may from time-to-time consider acquisitions of larger, established companies. The company may also periodically divest lines of business in which it is not able to reasonably attain or maintain a leadership position in the market or for other strategic reasons.
Recent Developments
On October 1, 2013, the company acquired all of the outstanding shares of Medafor, Inc. (Medafor), a privately-held developer and supplier of plant-based hemostatic agents. The purchase consideration included an up-front cash payment of $203.7 million and future contingent payments of up to an additional $80 million based on specific revenue-based milestones through June 30, 2015.
On September 4, 2013, the company entered into a definitive agreement to acquire Rochester Medical, Inc. (Rochester Medical), a publicly-held developer and supplier of silicone urinary incontinence and urine drainage products, for a purchase price of $20 per share, or approximately $262 million in the aggregate to be paid at closing. The transaction is expected to close in 2013, and is subject to customary closing conditions, including approval by the shareholders of Rochester Medical as well as regulatory approvals.
On August 29, 2013, the company acquired early stage technology from 3DT Holdings LLC (3DT), providing the company with the rights to develop and commercialize a novel technology related to peripherally inserted central catheters (PICCs). 3DT received an up-front cash payment of $29.5 million and is eligible for milestone payments of up to $5 million based upon regulatory product approval. The company recorded the up-front payment as a research and development expense.
On July 29, 2013, the company acquired all of the outstanding shares of Loma Vista Medical, Inc., a privately-held company specializing in the development and commercialization of aortic valvuloplasty products, which use noncompliant fiber-based balloon technology. The total purchase consideration of $39.4 million included an up-front cash payment of $32.5 million and the fair value of contingent consideration of up to $8.0 million.
The purchases of these acquisitions were funded or are expected to be funded through a mixture of available cash and short-term debt. See Note 2 of the notes to condensed consolidated financial statements.
On June 27, 2013, the company reached a definitive agreement to sell certain assets and liabilities of its electrophysiology division (BEP) to Boston Scientific Corporation for $275 million in cash. The transaction is expected to be completed in 2013, subject to certain regulatory and customary closing conditions. The company expects to record a gain on the sale when the transaction is completed. See Note 2 of the notes to condensed consolidated financial statements.
During the second quarter of 2013, the company evaluated certain product liability matters based on information currently available, including: the allegations and documentation supporting or refuting such allegations; publicly available
19
information regarding similar medical device mass tort settlements; historical information regarding other product liability settlements involving the company; and the procedural posture and stage of litigation. Based on these, and other factors, the company determined to record a charge, net of estimated recoveries to other (income) expense, net of approximately $293.0 million ($276.0 million after tax) in the second quarter of 2013, which recognized the estimated costs for certain product liability matters, including (with respect to such matters) asserted and unasserted claims, as well as costs to administer the settlements related to such matters. The charge excludes any costs associated with all but one putative class action lawsuit against the company. See Note 8 of the notes to condensed consolidated financial statements.
Healthcare Reform
Significant reforms to the U.S. healthcare system were adopted in the form of the Patient Protection and Affordable Care Act of 2010 (the PPACA). The PPACA requires, among other things, the company to pay a 2.3% excise tax on most U.S. medical device sales beginning in 2013. During the quarter and nine months ended September 30, 2013, the company recorded to marketing, selling and administrative expense an excise tax of $7.0 million and $22.1 million, respectively.
Results of Operations
Net Sales
Bards consolidated net sales for the quarter ended September 30, 2013 increased 5% on a reported basis (4% on a constant currency basis) compared to the same period in the prior year. Bards consolidated net sales for the nine months ended September 30, 2013 increased 3% on both a reported basis and constant currency basis compared to the same period in the prior year. Net sales on a constant currency basis is a non-GAAP measure and should not be viewed as a replacement of GAAP results. See Managements Use of Non-GAAP Measures below. Price changes had the effect of decreasing consolidated net sales for the quarter and nine months ended September 30, 2013 by approximately 80 basis points and 110 basis points, respectively, as compared to the same periods in the prior year. Exchange rate fluctuations had the effect of increasing consolidated net sales for the quarter ended September 30, 2013 by approximately 1 percentage point as compared to the same period in the prior year. Exchange rate fluctuations had a nominal impact on consolidated net sales for the nine months ended September 30, 2013 as compared to the same period in the prior year. The primary exchange rate movement that impacts net sales is the movement of the Euro compared to the U.S. dollar. The impact of exchange rate movements on net sales is not indicative of the impact on net earnings due to the offsetting impact of exchange rate movements on operating costs and expenses, costs incurred in other currencies and the companys hedging activities.
Bards United States net sales of $500.3 million for the quarter ended September 30, 2013 increased 3% compared to $483.4 million in the prior year quarter. Net sales in the United States have moderated in recent quarters, a trend that may continue. International net sales of $257.7 million for the quarter ended September 30, 2013 increased 8% on a reported basis (6% on a constant currency basis) compared to $239.5 million in the prior year quarter. Bards United States net sales of $1,496.4 million for the nine months ended September 30, 2013 increased 2% compared to $1,469.6 million in the prior year. International net sales of $761.8 million for the nine months ended September 30, 2013 increased 5% on a reported basis (4% on a constant currency basis) compared to $725.9 million in the prior year period.
A summary of net sales by product group category is as follows:
Product Group Summary of Net Sales
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
2013 | 2012 | Change | Constant Currency |
2013 | 2012 | Change | Constant Currency |
|||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||||
Vascular |
$ | 209.9 | $ | 202.5 | 4 | % | 2 | % | $ | 625.3 | $ | 633.0 | (1 | )% | (2 | )% | ||||||||||||||||
Urology |
193.7 | 188.1 | 3 | % | 3 | % | 574.2 | 562.0 | 2 | % | 2 | % | ||||||||||||||||||||
Oncology |
215.5 | 203.9 | 6 | % | 6 | % | 636.7 | 601.9 | 6 | % | 6 | % | ||||||||||||||||||||
Surgical Specialties |
118.1 | 107.7 | 10 | % | 9 | % | 358.4 | 333.8 | 7 | % | 7 | % | ||||||||||||||||||||
Other |
20.8 | 20.7 | | 1 | % | 63.6 | 64.8 | (2 | )% | (2 | )% | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||
Total net sales |
$ | 758.0 | $ | 722.9 | 5 | % | 4 | % | $ | 2,258.2 | $ | 2,195.5 | 3 | % | 3 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
Vascular Products - Bard markets a wide range of products for the peripheral vascular market, including endovascular products, electrophysiology products and vascular graft products. Consolidated net sales of vascular products for the quarter ended September 30, 2013 increased 4% on a reported basis (2% on a constant currency basis) compared to the prior year quarter primarily due to an increase in sales of endovascular products. Consolidated net sales of vascular
20
products for the nine months ended September 30, 2013 decreased 1% on a reported basis (2% on a constant currency basis) compared to the prior year period primarily due to a decline in sales of endovascular products and vascular graft products. United States net sales of vascular products for the quarter ended September 30, 2013 were flat compared to the prior year quarter. International net sales of vascular products for the quarter ended September 30, 2013 increased 8% on a reported basis (6% on a constant currency basis) compared to the prior year quarter. United States net sales of vascular products for the nine months ended September 30, 2013 decreased 3% compared to the prior year period. International net sales of vascular products for the nine months ended September 30, 2013 increased 1% on a reported basis (flat on a constant currency basis) compared to the prior year period.
Consolidated net sales of endovascular products for the quarter ended September 30, 2013 increased 3% on a reported basis (2% on a constant currency basis) compared to the prior year quarter. Net sales in the product line were favorably impacted by growth in sales of biopsy products and percutaneous transluminal angioplasty (PTA) balloon catheters. This growth was partially offset by a decline in sales of stents. Consolidated net sales of endovascular products for the nine months ended September 30, 2013 decreased 1% on a reported basis (2% on a constant currency basis) compared to the prior year period. Declining sales of stents was the primary contributor to this decrease. This decline was partially offset by growth in sales of PTA balloon catheters and biopsy products. Net sales of stents for the quarter and nine months ended September 30, 2012 benefited from an issue with the availability of a competitors products.
Consolidated net sales of electrophysiology products for the quarter ended September 30, 2013 increased 9% on a reported basis (7% on a constant currency basis) compared to the prior year quarter. Net sales of electrophysiology systems were the primary contributor to the increase in sales of electrophysiology products for the quarter ended September 30, 2013. Consolidated net sales of electrophysiology products for the nine months ended September 30, 2013 increased 2% on a reported basis (1% on a constant currency basis) compared to the prior year period.
Consolidated net sales of vascular graft products for the quarter ended September 30, 2013 decreased 3% on a reported basis (4% on a constant currency basis) compared to the prior year quarter. Consolidated net sales of vascular graft products for the nine months ended September 30, 2013 decreased 6% on both a reported basis and constant currency basis compared to the prior year period. Declining sales of peripheral vascular grafts and dialysis access grafts were the primary contributors to the decrease in sales for vascular graft products for the nine months ended September 30, 2013.
Urology Products - Bard markets a wide range of products for the urology market, including basic drainage products, continence products and urological specialty products. Bard also markets StatLock® catheter stabilization products, which are used to secure many types of catheters sold by Bard and other companies. Bard also markets Targeted Temperature Management products for therapeutic hypothermia. Consolidated net sales of urology products for the quarter ended September 30, 2013 increased 3% on both a reported basis and constant currency basis compared to the prior year quarter. Consolidated net sales of urology products for the nine months ended September 30, 2013 increased 2% on both a reported basis and constant currency basis compared to the prior year period. These increases included sales growth of Targeted Temperature Management products, basic drainage products and urological specialty products. For the quarter and nine months ended September 30, 2013, this growth was partially offset by a decline in sales of continence products, a trend that may continue. In addition, the growth for the nine months ended September 30, 2013 was partially offset by a decline in sales of StatLock® catheter stabilization products, a trend that may continue. United States net sales of urology products for the quarter ended September 30, 2013 increased 2% compared to the prior year quarter. International net sales of urology products for the quarter ended September 30, 2013 increased 6% on both a reported basis and constant currency basis compared to the prior year quarter. United States net sales of urology products for the nine months ended September 30, 2013 were flat compared to the prior year period. International net sales of urology products for the nine months ended September 30, 2013 increased 7% on both a reported basis and constant currency basis compared to the prior year period.
Consolidated net sales of basic drainage products for the quarter and nine months ended September 30, 2013 increased 3% on both a reported basis and constant currency basis compared to the prior year periods. Consolidated net sales of infection control Foley catheter products for the quarter ended September 30, 2013 increased 1% on both a reported basis and constant currency basis compared to the prior year quarter. Consolidated net sales of infection control Foley catheter products for the nine months ended September 30, 2013 were flat on both a reported basis and constant currency basis compared to the prior year period.
Consolidated net sales of urological specialty products, which include brachytherapy products, for the quarter and nine months ended September 30, 2013 increased 1% on both a reported basis and constant currency basis compared to the prior year periods. Consolidated net sales of brachytherapy products for the quarter ended September 30, 2013 were flat on both a reported basis and constant currency basis compared to the prior year quarter. Consolidated net sales of brachytherapy products for the nine months ended September 30, 2013 decreased 2% on a reported basis (1% on a constant currency basis) compared to the prior year period. The brachytherapy market has been losing procedural share to alternative therapies, a trend that may continue.
21
Consolidated net sales of continence products for the quarter ended September 30, 2013 decreased 8% on a reported basis (9% on a constant currency basis) compared to the prior year quarter. Consolidated net sales of continence products for the nine months ended September 30, 2013 decreased 10% on both a reported basis and constant currency basis compared to the prior year period. The decrease was primarily due to a decline in sales of surgical continence products, a trend that may continue.
Consolidated net sales of the StatLock® catheter stabilization product line for the quarter ended September 30, 2013 were flat on a reported basis (increased 1% on a constant currency basis) compared to the prior year quarter. Consolidated net sales of the StatLock® catheter stabilization product line for the nine months ended September 30, 2013 decreased 3% on both a reported basis and constant currency basis compared to the prior year period.
Oncology Products - Bards oncology business includes specialty vascular access products and enteral feeding devices. Specialty vascular access products include PICCs used for intermediate to long-term central venous access, specialty access ports and accessories (Ports) used most commonly for chemotherapy, dialysis access catheters and vascular access ultrasound devices, which help facilitate the placement of PICCs. Consolidated net sales of oncology products for the quarter and nine months ended September 30, 2013 increased 6% on both a reported basis and constant currency basis compared to the prior year periods. These increases are due to growth in sales of PICCs, Ports and dialysis access catheters. United States net sales of oncology products for the quarter and nine months ended September 30, 2013 increased 4% compared to the prior year periods. International net sales of oncology products for the quarter ended September 30, 2013 increased 11% on both a reported basis and constant currency basis compared to the prior year quarter. International net sales of oncology products for the nine months ended September 30, 2013 increased 10% on both a reported basis and constant currency basis compared to the prior year period.
Consolidated net sales of PICCs for the quarter and nine months ended September 30, 2013 increased 7% on both a reported basis and constant currency basis compared to the prior year periods. Consolidated net sales of Ports for the quarter ended September 30, 2013 increased 5% on a reported basis (4% on a constant currency basis) compared to the prior year quarter. Consolidated net sales of Ports for the nine months ended September 30, 2013 increased 3% on both a reported basis and constant currency basis compared to the prior year period.
Consolidated net sales of dialysis access catheters for the quarter ended September 30, 2013 increased 10% on both a reported basis and constant currency basis compared to the prior year quarter. Consolidated net sales of dialysis access catheters for the nine months ended September 30, 2013 increased 8% on both a reported basis and constant currency basis compared to the prior year period. Consolidated net sales of vascular access ultrasound devices for the quarter ended September 30, 2013 increased 3% on both a reported basis and constant currency basis compared to the prior year quarter. Consolidated net sales of vascular access ultrasound devices for the nine months ended September 30, 2013 increased 7% on a reported basis (6% on a constant currency basis) compared to the prior year period.
Surgical Specialty Products - Surgical specialty products include soft tissue repair products, performance irrigation devices and sealant products. Consolidated net sales of surgical specialty products for the quarter ended September 30, 2013 increased 10% on a reported basis (9% on a constant currency basis) compared to the prior year quarter. This increase includes 7 percentage points of growth on a reported basis (6 percentage points on a constant currency basis) from the addition of surgical sealant products through the acquisition of Neomend, Inc. Consolidated net sales of surgical specialty products for the nine months ended September 30, 2013 increased 7% on both a reported basis and constant currency basis compared to the prior year period, which includes 5 percentage points of growth on a reported basis (6 percentage points on a constant currency basis) from the addition of the surgical sealant products. United States net sales of surgical specialty products for the quarter ended September 30, 2013 increased 12% compared to the prior year quarter. International net sales of surgical specialty products for the quarter ended September 30, 2013 increased 4% on a reported basis (3% on a constant currency basis) compared to the prior year quarter. United States net sales of surgical specialty products for the nine months ended September 30, 2013 increased 8% compared to the prior year period. International net sales of surgical specialty products for the nine months ended September 30, 2013 increased 6% on both a reported basis and constant currency basis compared to the prior year period.
The soft tissue repair product line includes synthetic and natural-tissue hernia repair implants, natural-tissue breast reconstruction implants and hernia fixation products. Consolidated net sales of soft tissue repair products for the quarter ended September 30, 2013 increased 5% on both a reported basis and constant currency basis compared to the prior year quarter. Consolidated net sales of soft tissue repair products for the nine months ended September 30, 2013 increased 4% on both a reported basis and constant currency basis compared to the prior year period. Net sales in this product line for the
22
quarter and nine months ended September 30, 2013 were favorably impacted by growth in sales of synthetic hernia repair products and natural-tissue hernia repair. This growth was partially offset by declines in hernia fixation products, a trend that may continue.
Other Products - The other product group includes irrigation, wound drainage and certain original equipment manufacturers products.
Costs and Expenses
A summary of costs and expenses as a percentage of net sales is as follows:
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012(A) | |||||||||||||
Cost of goods sold |
38.5 | % | 37.7 | % | 39.1 | % | 38.2 | % | ||||||||
Marketing, selling and administrative expense |
29.5 | % | 27.2 | % | 29.5 | % | 27.5 | % | ||||||||
Research and development expense |
13.1 | % | 7.2 | % | 10.0 | % | 6.9 | % | ||||||||
Interest expense |
1.5 | % | 1.3 | % | 1.5 | % | 1.3 | % | ||||||||
Other (income) expense, net |
1.7 | % | 1.9 | % | 15.0 | % | 0.9 | % | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Total costs and expenses |
84.3 | % | 75.3 | % | 95.1 | % | 74.7 | % | ||||||||
|
|
|
|
|
|
|
|
(A) | Amounts do not add due to rounding. |
Cost of goods sold - Cost of goods sold consists principally of the manufacturing and distribution costs of the companys products. The category also includes royalties, amortization of intangible assets and the impact of certain hedging activities. Cost of goods sold as a percentage of net sales for the quarter and nine months ended September 30, 2013 increased 80 basis points and 90 basis points, respectively, compared to the prior year periods. These costs as a percentage of net sales increased primarily due to decreases in selling prices and targeted investments. Incremental amortization of intangible assets acquired in 2013 and 2012 increased cost of goods sold as a percentage of net sales by approximately 20 basis points over both the prior year quarter and nine month period.
Marketing, selling and administrative expense - Marketing, selling and administrative expense consists principally of the costs associated with the companys sales and administrative organizations. These costs as a percentage of net sales for the quarter and nine months ended September 30, 2013 increased 230 basis points and 200 basis points, respectively, compared to the prior year periods. These costs as a percentage of net sales increased primarily due to the new excise tax on the U.S. sales of medical devices, targeted investments in this area including in emerging markets, and related costs from operations acquired in 2012.
Research and development expense - Research and development expense consists principally of costs related to internal research and development activities, milestone payments for third-party research and development activities, and acquired in-process R&D (IPR&D) costs arising from the companys business development activities. IPR&D payments may impact the comparability of the companys results of operations between periods. Research and development expense for the quarter ended September 30, 2013 was $99.4 million, an increase of approximately 90% compared to the prior year quarter. Research and development expense for the nine months ended September 30, 2013 was $224.8 million, an increase of approximately 49% compared to the prior year period. These increases in research and development expense reflect targeted investments in this area and costs from operations acquired in 2012. Included in research and development expense for the quarter and nine months ended September 30, 2013 were IPR&D charges of $29.5 million related to the acquisition of early stage technology and $3.4 million for an impairment charge related to an IPR&D project.
Interest expense - Interest expense was $11.2 million and $9.7 million for the quarters ended September 30, 2013 and 2012, respectively. Interest expense was $33.7 million and $28.9 million for the nine months ended September 30, 2013 and 2012, respectively. The increase in interest expense was partially due to the issuance of $500 million of senior unsecured notes in October 2012.
23
Other (income) expense, net - The components of other (income) expense, net, are as follows:
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
(dollars in millions) | ||||||||||||||||
Interest income |
$ | (0.3 | ) | $ | (1.0 | ) | $ | (0.9 | ) | $ | (4.6 | ) | ||||
Foreign exchange losses (gains) |
1.7 | (1.0 | ) | 4.5 | (0.6 | ) | ||||||||||
Litigation charges, net |
| | 318.2 | | ||||||||||||
Asset impairments |
| 13.2 | 6.4 | 22.2 | ||||||||||||
Restructuring |
| | (1.4 | ) | (1.6 | ) | ||||||||||
Divestiture-related charges |
9.7 | | 9.7 | | ||||||||||||
Other, net |
1.5 | 2.4 | 2.1 | 3.6 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total other (income) expense, net |
$ | 12.6 | $ | 13.6 | $ | 338.6 | $ | 19.0 | ||||||||
|
|
|
|
|
|
|
|
Litigation charges, net - For the nine months ended September 30, 2013, the amount reflects the estimated costs for product liability matters, net of recoveries, and a write-down of an insurance receivable. See Note 8 of the notes to condensed consolidated financial statements.
Asset impairments - For the nine months ended September 30, 2013, the amount reflects charges for the write-down of certain core technologies. For the quarter and nine months ended September 30, 2012, the amounts reflect a charge for the write-down of certain core technologies. In addition, the amount for the nine months ended September 30, 2012 reflects impairments of assets not related to operations.
Restructuring - For the nine months ended September 30, 2013, the amount reflects the reversal of certain restructuring costs recognized during the fourth quarter of 2012. For the nine months ended September 30, 2012, the amount reflects the reversal of certain restructuring costs recognized in the second half of 2011.
Divestiture-related charges - For the quarter and nine months ended September 30, 2013, the amounts reflect charges incurred in connection with the divestiture of the BEP business including transaction costs, primarily consisting of legal costs, and other separation costs, including employee termination and consulting costs.
Income Tax Provision
The effective tax rate for the quarter ended September 30, 2013 was approximately 22%, compared to approximately 27% for the prior year quarter. The effective tax rate for the quarter and nine months ended September 30, 2013 reflected the discrete tax effects of an IPR&D charge related to the acquisition of 3DT, which was incurred in a high tax jurisdiction, and a benefit associated with the remeasurement of an uncertain tax position as a result of the settlement of the Brachytherapy Matter. In addition, the effective tax rate for the nine months ended September 30, 2013 reflected the discrete tax effects of litigation charges, primarily related to product liability claims, which were substantially incurred in a low tax jurisdiction, and the write-down of an insurance receivable, which also was incurred in a low tax jurisdiction. See Note 8 of the notes to condensed consolidated financial statements. The effective tax rate was also impacted by the American Taxpayer Relief Act of 2012, which was signed into law on January 2, 2013 and retroactively reinstated the research tax credit. Although the reinstatement of this tax credit is retroactive to January 1, 2012, the enactment of this legislation in 2013 precluded the company from recording the benefit in 2012. As a result, the companys income tax provision was reduced by approximately $3.7 million during the nine months ended September 30, 2013 to recognize the 2012 benefit of this tax credit that would have been recorded in 2012.
Net Income and Earnings Per Share Available to Common Shareholders
The company reported net income and diluted earnings per share available to common shareholders for the quarter ended September 30, 2013 of $93.2 million and $1.15, respectively. Net income and diluted earnings per share available to common shareholders for the prior year quarter were $129.3 million and $1.50, respectively. The current year quarter reflects acquisition-related items (primarily consisting of an IPR&D charge, transaction costs, purchase accounting adjustments and integration costs) of $22.9 million, or $0.28 per diluted share, divestiture-related charges of $6.2 million, or $0.08 per diluted share, and an asset impairment of $2.2 million, or $0.03 per diluted share. The current year quarter also reflects a $2.2 million, or $0.03 per diluted share, benefit to the income tax provision associated with the remeasurement of an uncertain tax position as a result of the settlement of the Brachytherapy Matter. The prior year quarter reflects asset impairments of $8.0 million, or $0.09 per diluted share, and acquisition-related items (primarily consisting of an IPR&D charge and transaction costs) of $4.1 million, or $0.05 per diluted share.
24
The company reported net income and diluted earnings per share available to common shareholders for the nine months ended September 30, 2013 of $22.3 million and $0.27, respectively. Net income and diluted earnings per share available to common shareholders for the nine months ended September 30, 2012 was $401.9 million and $4.64, respectively. The current nine month period reflects net litigation charges of $300.1 million, or $3.63 per diluted share, acquisition-related items (primarily consisting of IPR&D charges, transaction costs, purchase accounting adjustments and integration costs) of $25.3 million, or $0.31 per diluted share, asset impairments of $9.5 million, or $0.12 per diluted share, divestiture-related charges of $6.2 million, or $0.08 per diluted share, and a reversal of certain restructuring costs of $1.0 million, or $0.01 per diluted share. The current nine month period also reflects a $2.2 million, or $0.03 per diluted share, benefit to the income tax provision associated with the remeasurement of an uncertain tax position as a result of the settlement of the Brachytherapy Matter. The prior nine month period reflects asset impairments of $13.8 million, or $0.16 per diluted share, acquisition-related items (primarily consisting of an IPR&D charge, transaction costs, purchase accounting adjustments and integration costs) of $5.7 million, or $0.07 per diluted share, and a reversal of certain restructuring costs of $1.1 million, or $0.01 per diluted share. The prior nine month period also reflects an increase to the income tax provision of $1.1 million, or $0.01 per diluted share, due to the write-down of a tax receivable in a foreign jurisdiction.
Liquidity and Capital Resources
The company assesses its liquidity in terms of its ability to generate cash to fund its operating, investing and financing activities. Significant factors affecting the management of liquidity are cash flows generated from operating activities, capital expenditures, acquisitions of businesses and technologies, cash dividends and common stock repurchases. Cash provided from operations continues to be a primary source of funds. The company believes that it could borrow adequate funds at competitive terms should it be necessary. The company also believes that its overall financial strength gives it sufficient financial flexibility. A summary of certain liquidity measures for Bard as of September 30 is as follows:
2013 | 2012 | |||||||
(dollars in millions) | ||||||||
Working capital |
$ | 1,246.9 | $ | 1,000.7 | ||||
|
|
|
|
|||||
Current ratio |
3.47/1 | 2.28/1 | ||||||
|
|
|
|
Cash and cash equivalents held by the companys foreign subsidiaries were $767.3 million and $786.1 million at September 30, 2013 and December 31, 2012, respectively. It is the companys intention to permanently reinvest the majority of these funds outside the United States to finance foreign operations, and the companys plans do not demonstrate a need to repatriate these funds. If these funds are needed for U.S. operations for currently unforeseen circumstances or can no longer be permanently reinvested outside the United States, the company would be required to accrue and pay U.S. taxes on the earnings associated with these funds. In the United States, ongoing operating cash flows and available borrowings under the companys committed syndicated bank credit facility provide it with sufficient liquidity.
For the nine months ended September 30, 2013 and 2012, net cash provided by operating activities was $417.0 million and $427.2 million, respectively. The decrease in net cash provided by operating activities reflects a settlement payment for the Brachytherapy Matter previously recorded in 2012, partially offset by lower payments to claimants for Hernia Product Claims previously recorded in 2011.
For the nine months ended September 30, 2013, net cash used by investing activities was $107.9 million compared to the $60.0 million net cash provided by investing activities in the prior year period. Capital expenditures were approximately $47.3 million and $55.5 million for the nine month periods ended September 30, 2013 and 2012, respectively. The company spent $68.5 million and $14.1 million for the acquisition of businesses, products and technology to augment existing product lines for the nine months ended September 30, 2013 and 2012, respectively. Net cash used by investing activities in the prior year reflected $119.6 million related to the release of restricted cash from qualified settlement funds to claimants pursuant to the settlement of certain Hernia Product Claims.
For the nine months ended September 30, 2013, the company used $415.8 million in cash for financing activities, compared to the $269.8 million used in the prior year period. Total debt was $1.5 billion and $1.4 billion at September 30, 2013 and December 31, 2012, respectively. Total debt to total capitalization was 50.0% and 42.3% at September 30, 2013 and December 31, 2012, respectively. Net cash used in financing activities reflects $546.9 million used to repurchase 5,110,235 shares of common stock in the nine months ended September 30, 2013 compared to approximately $372.5 million to repurchase 3,876,516 shares of common stock in the prior year period. The company paid cash dividends of $0.61 per share and $0.58 per share for the nine month periods ended September 30, 2013 and 2012, respectively.
25
On September 26, 2013, the company amended its $600 million five-year committed syndicated bank credit facility that was scheduled to expire in October 2016. The amendment includes an increase of the aggregate principal amount of credit available under the syndicated bank credit facility to $750 million and extends the commitment termination date until September 26, 2018. The amended credit facility supports the companys commercial paper program and can be used for general corporate purposes. The facility includes pricing based on the companys long-term credit rating and includes a financial covenant that limits the amount of total debt to total capitalization. At September 30, 2013, the company was in compliance with this covenant. The company had commercial paper borrowings outstanding of $97.5 million at September 30, 2013. There were no commercial paper borrowings outstanding at December 31, 2012.
Contingencies
In the ordinary course of business, the company is subject to various legal proceedings and claims, including product liability matters, environmental matters, employment disputes, contractual disputes on agreements and other commercial disputes. In addition, the company operates in an industry susceptible to significant patent legal claims. At any given time in the ordinary course of business, the company is involved as either a plaintiff or defendant in a number of patent infringement actions. See Note 8 of the notes to condensed consolidated financial statements.
Managements Use of Non-GAAP Measures
Net sales on a constant currency basis is a non-GAAP measure. The company analyzes net sales on a constant currency basis to better measure the comparability of results between periods. Because changes in foreign currency exchange rates have a non-operating impact on net sales, the company believes that evaluating growth in net sales on a constant currency basis provides an additional and meaningful assessment of net sales to both management and the companys investors. Constant currency growth rates are calculated by translating the prior years local currency sales by the current periods exchange rate. Constant currency growth rates are not indicative of changes in corresponding cash flows. The limitation of these non-GAAP measures is that they do not reflect results on a standardized reporting basis. Non-GAAP measures are intended to supplement the applicable GAAP disclosures and should not be viewed as replacements of GAAP results.
Critical Accounting Policies
The preparation of financial statements requires the companys management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Critical accounting policies are those that require application of managements most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Such policies are summarized in the Managements Discussion and Analysis of Financial Condition and Results of Operations section in Bards 2012 Annual Report on Form 10-K. There have been no significant changes to the companys critical accounting policies since December 31, 2012.
Risks and Uncertainties; Cautionary Statement Regarding Forward-Looking Information
Certain statements contained herein or in other company documents and certain statements that may be made by management of the company orally may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as anticipate, estimate, expect, project, intend, forecast, plan, believe and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to product approvals, future performance of current and anticipated products, sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. The companys forward-looking statements speak only as of the date of this report or as of the date they are made, and the company undertakes no obligation to update its forward-looking statements.
In addition, there are substantial risks inherent in the medical device business. The companys business involves the design, development, manufacture, packaging, distribution and sale of medical, surgical, diagnostic and patient care devices. These devices are often used on, or permanently or temporarily implanted in, patients in clinically demanding circumstances, such as operating rooms, emergency units, intensive care and critical care settings, among others. These circumstances, among other factors, can cause the products to become associated with adverse clinical events, including patient mortality and injury, and could lead to product liability claims (including lawsuits seeking class action status or seeking to establish multi-district litigation proceedings) and other litigation, product withdrawals, warning letters, recalls, field corrections or
26
regulatory enforcement actions relating to one or more of the companys products, any of which could have a material adverse effect on our business, results of operations, financial condition and/or liquidity. For further discussion of risks applicable to our business, see Risk Factors in Bards 2012 Annual Report on Form 10-K.
Because actual results are affected by these and other risks and uncertainties, the company cautions investors that actual results may differ materially from those expressed or implied. It is not possible to predict or identify all risks and uncertainties. In addition to the risks addressed above and those described in the Risk Factors in Bards 2012 Annual Report on Form 10-K, certain other risks could adversely affect our business or cause the actual results to differ materially from those expressed or implied including, but not limited to:
Effective management of and reaction to risks involved in our business, including:
| the ability to achieve manufacturing or administrative efficiencies, including gross margin benefits from our manufacturing processes and supply chain programs or in connection with the integration of acquired businesses; |
| the effects of negative publicity concerning our products, which could result in product withdrawals or decreased product demand and which could reduce market or governmental acceptance of our products; |
| the ability to identify appropriate companies, businesses and technologies as potential acquisition candidates, to consummate and successfully integrate such transactions or to obtain agreements for such transactions on favorable terms; |
| the reduction in the number of procedures using our devices caused by customers cost-containment pressures or preferences for alternate therapies; |
| the ability to implement, and realize the benefits of, our plans to invest in our business, including our plan to increase research and development expenditures with a focus on new market categories, increase growth in emerging and/or faster growing markets outside the United States and acquire growth platforms designed to change the mix of our portfolio towards faster, sustainable long-term growth; |
| the uncertainty of whether increased research and development expenditures and sales force expansion will result in increased sales; |
| the ability to reduce exposure and uncertainty related to tax audits, appeals and litigation; |
| internal factors, such as retention of key employees, including sales force employees; |
| the ability to achieve earnings forecasts, which are generated based, among other things, on projected volumes and sales of many product types, some of which are more profitable than others; |
| changes in factors and assumptions or actual results that differ from our assumptions on stock valuation and employee stock option exercise patterns, which could cause compensation expense recorded in future periods to differ significantly from the compensation expense recorded in the current period; |
| changes in factors and assumptions could cause pension cost recorded in future periods to differ from the pension cost recorded in the current period; |
| the effect of market fluctuations on the value of assets in the companys pension plans and the possibility that the company may need to make additional contributions to the plans as a result of any decline in the fair value of such assets; |
| damage to a facility where our products are manufactured or from which they are distributed, which could render the company unable to manufacture or distribute one or more products and may require the company to reduce the output of products at the damaged facility thereby making it difficult to meet product shipping targets; |
| the potential impairment of goodwill and intangible assets of the company resulting from insufficient cash flow generated from such assets specifically, or our business more broadly, so as to not allow the company to justify the carrying value of the assets; |
| the ability to obtain appropriate levels of product liability insurance on reasonable terms; |
| the ability to recover for claims made to our insurance companies; |
| the ability to maintain or protect our information technology systems and data integrity effectively or fail to anticipate, plan for or manage significant disruptions to these systems; and |
| the ability to realize the anticipated benefits of our restructuring activities, including our 2012 Restructuring Plan, to improve the companys overall cost structure and improve efficiency. |
27
Competitive factors, including:
| the trend of consolidation in the medical device industry as well as among our customers, resulting in potentially greater pricing pressures and more significant and complex contracts than in the past, both in the United States and abroad; |
| development of new products or technologies by competitors having superior performance compared to our current products or products under development which could negatively impact sales of our products or render one or more of our products obsolete; |
| technological advances, patents and registrations obtained by competitors that would have the effect of excluding the company from new market segments or preventing the company from selling a product or including key features in the companys products; |
| attempts by competitors to gain market share through aggressive marketing programs; and |
| reprocessing by third-party reprocessors of our products designed and labeled for single use. |
Difficulties and delays inherent in the development, manufacturing, marketing and sale of medical products, including:
| the ability to complete planned and/or ongoing clinical trials successfully, to develop and obtain regulatory approval for products on a timely basis and to launch products on a timely basis within cost estimates; |
| lengthy and costly regulatory approval processes, which may result in lost market opportunities and/or delayed product launches; |
| delays or denials of, or grants of low or reduced levels of reimbursement for, procedures using newly developed products; |
| the suspension or revocation of authority to manufacture, market or distribute existing products; |
| the imposition of additional or different regulatory requirements, such as those affecting manufacturing and labeling; |
| performance, efficacy, quality or safety concerns for existing products, whether scientifically justified or not, that may lead to product discontinuations, product withdrawals, recalls, field corrections, regulatory enforcement actions, litigation or declining sales, including adverse events and/or concerns relating to the companys vena cava filters, pelvic floor repair products and hernia repair products; |
| FDA inspections resulting in Form-483 notices and/or warning letters identifying deficiencies in the companys manufacturing practices and/or quality systems; warning letters identifying violations of FDA regulations that could result in product holds, recalls, restrictions on future clearances by the FDA and/or civil penalties; |
| the failure to obtain, limitations on the use of, or the loss of, patent and other intellectual property rights, and the failure of efforts to protect our intellectual property rights against infringement and legal challenges that can increase our costs; |
| difficulties obtaining necessary components or raw materials used in the companys products and/or price increases from the companys suppliers of critical components or raw materials, including oil-based resins, or other interruptions of the supply chain; and |
| customers that may limit the number of manufacturers or vendors from which they will purchase products, which can result in the companys inability to sell products to or contract with large hospital systems, integrated delivery networks or group purchasing organizations. |
Governmental action, including:
| the impact of continued healthcare cost containment; |
| new laws and judicial decisions related to healthcare availability, healthcare reform, payment for healthcare products and services or the marketing and distribution of products, including legislative or administrative reforms to the United States Medicare and Medicaid systems or other United States or international reimbursement systems in a manner that would significantly reduce or eliminate reimbursements for procedures that use the companys products; |
| changes in the FDA and/or foreign regulatory approval processes that may delay or prevent the approval of new products and result in lost market opportunity; |
28
| the impact of more vigorous compliance and enforcement activities affecting the healthcare industry in general or the company in particular; |
| changes in the tax laws affecting our business, such as the excise tax in Puerto Rico; |
| changes in the environmental laws or standards affecting our business; |
| changes in laws that could require facility upgrades or process changes and could affect production rates and output; and |
| compliance costs and potential penalties and remediation obligations in connection with environmental laws, including regulations regarding air emissions, waste water discharges and solid waste. |
Legal disputes, including:
| disputes over legal proceedings, including our patent infringement suit against W.L. Gore & Associates Inc. (Gore), the outcome of the Gore matters and the timing of final resolution of the Gore matters; |
| product liability claims, which may involve lawsuits seeking class action status or seeking to establish multi-district litigation proceedings, including the Hernia Product Claims, the Womens Health Product Claims and the Filter Product Claims; |
| claims asserting securities law violations; |
| claims asserting, and/or subpoenas seeking information regarding, violations of law in connection with federal and/or state healthcare programs such as Medicare or Medicaid; |
| derivative shareholder actions; |
| claims and subpoenas asserting antitrust violations; |
| environmental claims, including risks relating to accidental contamination or injury from the use of hazardous materials in the companys manufacturing, sterilization and research activities and the potential for the company to be held liable for any resulting damages; and |
| commercial disputes, including disputes over distribution agreements, license agreements, manufacturing/supply agreements, development/research agreements, acquisition or sale agreements, and insurance policies. |
General economic conditions, including:
| international and domestic business conditions; |
| political or economic instability in foreign countries; |
| interest rates; |
| foreign currency exchange rates; |
| changes in the rate of inflation; and |
| instability of global financial markets and economies including Greece, Italy, Spain, Portugal and other countries in Europe. |
Other factors beyond our control, including catastrophes, both natural and man-made, earthquakes, floods, fires, explosions, acts of terrorism or war.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The quantitative and qualitative disclosures about market risk are discussed in Part II, Item 7A. Quantitative and Qualitative Disclosures About Market Risk in Bards 2012 Annual Report on Form 10-K. There have been no material changes in the information reported since the year ended December 31, 2012.
Item 4. Controls and Procedures
The company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the companys reports under the Securities Exchange Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to the companys management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures. Any controls and procedures, no matter how well defined and operated, can provide only reasonable assurance of achieving the desired control objectives.
29
The companys management, with the participation of the companys Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the companys disclosure controls and procedures as of September 30, 2013. Based upon that evaluation, the companys Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2013, the design and operation of the companys disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective to accomplish their objectives at the reasonable assurance level. There have been no changes in internal control over financial reporting for the quarter ended September 30, 2013 that have materially affected, or are likely to materially affect, the companys internal control over financial reporting.
30
General
In the ordinary course of business, the company is subject to various legal proceedings, investigations and claims, including, for example, environmental matters, employment disputes, disputes on agreements and other commercial disputes. In addition, the company operates in an industry susceptible to significant product liability and patent legal claims. At any given time, in the ordinary course of business, the company is involved as either a plaintiff or defendant in a number of patent infringement actions. If a third partys patent infringement claim were to be determined against the company, the company might be required to make significant royalty or other payments or might be subject to an injunction or other limitation on its ability to manufacture or distribute one or more products. If a patent owned by or licensed to the company is found to be invalid or unenforceable, the company might be required to reduce the value of certain intangible assets on the companys balance sheet and to record a corresponding charge, which could be significant in amount. Many of the companys legal proceedings and claims could have a material adverse effect on its business, results of operations, financial condition and/or liquidity.
Product Liability Matters
As of October 17, 2013, approximately 745 federal and 720 state lawsuits involving individual claims by approximately 1,575 plaintiffs, as well as two putative class actions in the United States are currently pending against the company with respect to its Composix® Kugel® and certain other hernia repair implant products (collectively, the Hernia Product Claims). The company voluntarily recalled certain sizes and lots of the Composix® Kugel® products beginning in December 2005. One of the U.S. class action lawsuits consolidated ten previously-filed U.S. class action lawsuits. The putative class actions, none of which has been certified, seek: (i) medical monitoring; (ii) compensatory damages; (iii) punitive damages; (iv) a judicial finding of defect and causation; and/or (v) attorneys fees. A settlement has been reached with respect to the three pending putative Canadian class actions within amounts previously recorded by the company. Approximately 685 of the state lawsuits, involving individual claims by approximately 785 plaintiffs, are pending in the Superior Court of the State of Rhode Island, with the remainder in various other jurisdictions. The Hernia Product Claims also generally seek damages for personal injury resulting from use of the products.
In June 2007, the Composix® Kugel® lawsuits and, subsequently, other hernia repair product lawsuits, pending in federal courts nationwide were transferred into one Multidistrict Litigation (MDL) for coordinated pre-trial proceedings in the United States District Court for the District of Rhode Island.
On June 30, 2011, the company announced that it had reached agreements in principle with various plaintiffs law firms to settle the majority of its existing Hernia Product Claims. Each agreement is subject to certain conditions, including requirements for participation in the proposed settlements by a certain minimum number of plaintiffs. In addition, the company continues to engage in discussions with other plaintiffs law firms regarding potential resolution of unsettled Hernia Product Claims, and intends to vigorously defend Hernia Product Claims that do not settle, including through litigation. The company cannot give any assurances that the resolution of the Hernia Product Claims that have not settled, including asserted and unasserted claims and the putative class action lawsuits, will not have a material adverse effect on the companys business, results of operations, financial condition and/or liquidity.
As of October 17, 2013, product liability lawsuits involving individual claims by approximately 9,635 plaintiffs have been filed or asserted against the company in various federal and state jurisdictions alleging personal injuries associated with the use of certain of the companys surgical continence products for women, including its Avaulta® line of products. In addition, five putative class actions in the United States and three putative class actions in Canada have been filed against the company (all lawsuits, collectively, the Womens Health Product Claims). The Womens Health Product Claims generally seek damages for personal injury resulting from use of the products. The putative class actions, none of which has been certified, seek: (i) medical monitoring; (ii) compensatory damages; (iii) punitive damages; (iv) a judicial finding of defect and causation; and/or (v) attorneys fees. With respect to certain of these claims, the company believes that one of its suppliers has an obligation to defend and indemnify the company. In October 2010, the Womens Health Product Claims involving solely Avaulta® products pending in federal courts nationwide were transferred into an MDL in the United States District Court for the Southern District of West Virginia, the scope of which was later expanded to include lawsuits involving all womens surgical continence products that are manufactured or distributed by the company. The company expects additional Womens Health Product Claims pending in federal courts to be transferred to the MDL in West Virginia, with the remainder of the Womens Health Product Claims in other jurisdictions. The first trial in the MDL commenced in July 2013 and resulted in a judgment against the company of approximately $2 million. The company intends to appeal the judgment. The next MDL trial is scheduled to occur in December 2013, with additional trials scheduled in 2014. The first trial in a state
31
court was completed in July 2012 and resulted in a judgment against the company of approximately $3.6 million. The company has appealed this decision. During the third quarter, the company settled one MDL case and one New Jersey state case. The amounts of the settlements are subject to confidentiality requirements. In addition, during the third quarter, an MDL case was voluntarily dismissed with prejudice, and the company is currently seeking to recover attorneys fees for this case. The company does not believe that any verdicts or settlements entered to date are representative of potential outcomes of all Womens Health Product Claims. The case numbers set forth above do not include generic complaints involving womens health products where the company cannot, based on the allegations in such complaints, determine whether any of such cases involve the companys womens health products. While the company intends to vigorously defend the Womens Health Product Claims, it cannot give any assurances that the resolution of these claims will not have a material adverse effect on the companys business, results of operations, financial condition and/or liquidity.
As of October 17, 2013, product liability lawsuits involving individual claims by 40 plaintiffs are currently pending against the company in various federal and state jurisdictions alleging personal injuries associated with the use of the companys vena cava filter products. In addition, three putative class actions were filed against the company in various state courts on behalf of plaintiffs who are alleged to have no present injury (all lawsuits, collectively, the Filter Product Claims). Two of these putative class actions were dismissed during the second quarter, and class certification was denied for the third putative class action in July 2013. The first Filter Product Claim trial was completed in June 2012 and resulted in a judgment for the company. The company expects additional trials of Filter Product Claims to take place over the next 12 months. During the second quarter of 2013, the company finalized settlement agreements with respect to more than 30 Filter Product Claims, and made payments with respect to such claims within the amounts previously recorded. While the company intends to vigorously defend the remaining unsettled Filter Product Claims, it cannot give any assurances that the resolution of these claims will not have a material adverse effect on the companys business, results of operations, financial condition and/or liquidity.
In most product liability litigations of this nature, plaintiffs allege a wide variety of claims, ranging from allegations of serious injury caused by the products to efforts to obtain compensation notwithstanding the absence of any injury. In many of these cases, the company has not yet received and reviewed complete information regarding the plaintiffs and their medical conditions, and consequently, is unable to fully evaluate the claims. The company expects that it will receive and review additional information regarding any remaining unsettled product liability matters.
The company believes that some settlements and judgments, as well as legal defense costs, relating to product liability matters are or may be covered in whole or in part under its product liability insurance policies with a limited number of insurance carriers. In certain circumstances, insurance carriers reserve their rights with respect to coverage, or contest or deny coverage, as has occurred with respect to certain claims. When this occurs, the company intends to vigorously contest disputes with respect to its insurance coverage and to enforce its rights under the terms of its insurance policies, and accordingly, will record receivables with respect to amounts due under these policies, when recovery is probable. Amounts recovered under the companys product liability insurance policies may be less than the stated coverage limits and may not be adequate to cover damages and/or costs relating to claims. In addition, there is no guarantee that insurers will pay claims or that coverage will otherwise be available.
The companys insurance coverage with respect to the Hernia Product Claims has been exhausted. In the first quarter of 2013 the company recorded a non-cash charge of $25.0 million ($24.5 million after tax) to other (income) expense, net, for the write-down of an insurance receivable related to a dispute with one of its excess insurance carriers in connection with these claims.
In connection with the Womens Health Product Claims, the company was in dispute with one of its excess insurance carriers relating to an aggregate of $50 million of insurance coverage. In June 2013, the company settled this dispute with no change to the amount of the insurance coverage or the related receivable.
Other Legal Matters
During the first half of 2013, the company received subpoenas or Civil Investigative Demands from a number of State Attorneys General seeking information related to the sales and marketing of certain of the companys products that are the subject of the Hernia Product Claims and the Womens Health Product Claims. The company is cooperating with these requests. Since it is not feasible to predict the outcome of these proceedings, the company cannot give any assurances that the resolution of these proceedings will not have a material adverse effect on the companys business, results of operations, financial condition and/or liquidity.
In November 2006, the company received a subpoena issued by the U.S. Department of Health and Human Services, Office of Inspector General (OIG), under the authority of the federal healthcare fraud and false claims statutes, seeking documents related to the companys brachytherapy business (the Brachytherapy Matter). In January 2012, the company
32
reached a preliminary agreement with the civil and criminal divisions of the United States Attorneys Office for the Northern District of Georgia to resolve claims with respect to the Brachytherapy Matter and recorded a charge of approximately $51.0 million ($40.8 million after tax) in the fourth quarter of 2011. On May 2, 2013, the company settled this matter. The resolution includes agreements with the government that required the company to pay approximately the amount that was previously recorded.
In December 2007, a U.S. District Court jury in Arizona found that certain of W.L. Gore & Associates Inc.s (Gore) ePTFE vascular grafts and stent-grafts infringe the companys patent number 6,436,135 (the 135 patent). The jury upheld the validity of the patent and awarded the company $185 million in past damages. The jury also found that Gore willfully infringed the patent. In a second phase of the trial, the District Court ruled that Gore failed to prove that the patent is unenforceable due to inequitable conduct. In March 2009, the District Court doubled the jury award to approximately $371 million for damages through June 2007. The District Court also awarded the company attorneys fees of $19 million and prejudgment interest of approximately $20 million. In addition, the District Court denied Gores remaining motions, including its motions for a new trial and to set aside the jurys verdict. In July 2010, the District Court awarded the company approximately $109 million in additional damages for the period from July 2007 through March 2009. Gore has deposited or secured the foregoing amounts with the District Court. The District Court also assessed a royalty rate of between 12.5% and 20%, depending on the product, that will be used to calculate damages for Gores infringing sales from April 2009 through the expiration of the patent. Gore has made additional deposits with the District Court of approximately $542 million, representing Gores calculation of royalties for its infringing sales through July 2013. Gore appealed this matter to the Court of Appeals for the Federal Circuit (the Court of Appeals), which on February 10, 2012 affirmed the decision of the District Court. Gore filed a petition with the Court of Appeals for a rehearing of its appeal. On June 14, 2012, the Court of Appeals reaffirmed its February 10, 2012 decision, including the ongoing royalty rates as set by the District Court, with the exception of the issue of willfulness with respect to Gores infringement of the 135 patent, which was remanded to the District Court. On October 12, 2012, Gore filed a petition for a writ of certiorari to the U.S. Supreme Court requesting a review of the portion of the decision that the Court of Appeals reaffirmed. The U.S. Supreme Court denied Gores petition on January 14, 2013. The District Court heard oral argument on June 5, 2013 as to three pending motions before it, including the companys motion to execute on the judgment with respect to all amounts other than enhanced damages due to willfulness. In October 2013, the District Court granted Bards motion to execute on the judgment, denied Gores motion requesting a determination that Gores infringement was not willful and denied Gores motion for a new trial. The District Courts rulings on the motions are subject to appeal. On January 28, 2013, Gore filed with the U.S. District Court a Request for Judicial Notice that the U.S. Patent and Trademark Office (USPTO) granted Gores previously filed request for a re-examination of the 135 patent. On April 1, 2013, the USPTO issued a First Office Action initially rejecting all of the claims of the 135 patent that are the subject of the re-examination. On July 10, 2013, the USPTO issued a Notice of Intent to Issue an Ex Parte Reexamination Certificate upholding the patentability of all re-examined claims of the 135 patent. This action terminated the re-examination proceeding and upheld the claims involved in the re-examination. The timing of final resolution of this litigation remains uncertain. Since the company considers these matters a gain contingency, no amounts have been recorded. Even if the company is ultimately successful in this lawsuit, it cannot give any assurances that royalties for Gores future infringing sales will remain at or near historic levels.
The company is subject to numerous federal, state, local and foreign environmental protection laws governing, among other things, the generation, storage, use and transportation of hazardous materials and emissions or discharges into the ground, air or water. The company is or may become a party to proceedings brought under various federal laws including the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as Superfund, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act and similar state or foreign laws. These proceedings seek to require the owners or operators of contaminated sites, transporters of hazardous materials to the sites and generators of hazardous materials disposed of at the sites to clean up the sites or to reimburse the government for cleanup costs. In most cases, there are other potentially responsible parties that may be liable for remediation costs. In these cases, the government alleges that the defendants are jointly and severally liable for the cleanup costs; however, these proceedings are frequently resolved so that the allocation of cleanup costs among the parties more closely reflects the relative contributions of the parties to the site contamination. The companys potential liability varies greatly from site to site. For some sites, the potential liability is de minimis and for others the costs of cleanup have not yet been determined. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study and are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable. The company believes that the proceedings and claims described above will likely be resolved over an extended period of time. While it is not feasible to predict the outcome of these proceedings, based upon the companys experience, current information and applicable law, the company does not expect these proceedings to have a material adverse effect on its financial condition and/or liquidity. However, one or more of the proceedings could be material to the companys business and/or results of operations.
33
The company regularly monitors and evaluates the status of product liability and other legal matters, and may, from time-to-time, engage in settlement and mediation discussions taking into consideration developments in the matters and the risks and uncertainties surrounding litigation. These discussions could result in settlements of one or more of these claims at any time.
There have been no material changes to the risk factors disclosed in Part I, Item 1A. in Bards 2012 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information with respect to the shares of the companys common stock repurchased during the quarter ended September 30, 2013:
Issuer Purchases of Equity Securities | ||||||||||||||||
Period |
Total Number of Shares Purchased(1) |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Programs(2) |
Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under Plans or Programs(2) |
||||||||||||
July 1 July 31, 2013 |
781,221 | $ | 111.11 | 776,420 | $ | 377,129,352 | ||||||||||
August 1 August 31, 2013 |
843,942 | 115.06 | 805,500 | 284,505,631 | ||||||||||||
September 1 September 30, 2013 |
382,010 | 118.00 | 381,408 | 239,498,031 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
2,007,173 | $ | 114.08 | 1,963,328 | $ | 239,498,031 | ||||||||||
|
|
|
|
|
|
|
|
(1) | The company repurchased 43,845 shares during the three-month period ended September 30, 2013 that were not part of publicly-announced share repurchase authorizations. These shares were purchased from employees to satisfy tax withholding requirements on the vesting of restricted shares from equity-based awards. |
(2) | On June 12, 2013, the Board of Directors approved the repurchase of up to $500 million of common stock of the company. |
The companys policy governing transactions in its securities by the companys directors, executive officers and other specified employees permits such persons to adopt trading plans pursuant to Rule 10b5-1 of the Exchange Act. From time-to-time, the companys executive officers have established trading plans relating to the companys common stock under Rule 10b5-1, and the company anticipates additional trading plans may be established in the future. The company currently discloses details regarding individual trading plans on its website.
Number |
Description | |
10.34 | 2005 Directors Stock Award Plan of C. R. Bard, Inc. (as Amended and Restated)* | |
10.35 | Amendment No. 1, dated as of September 26, 2013, to Credit Agreement dated as of October 12, 2011, among C. R. Bard, Inc., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated (as Joint Lead Arrangers and Joint Bookrunners), JPMorgan Chase Bank, N.A. (as Administrative Agent), Bank of America, N.A. (as Syndication Agent) and Barclays Bank PLC, Goldman Sachs Bank USA, Wells Fargo Bank, National Association and Royal Bank of Canada (each as Documentation Agents)* | |
12.1 | Computation of Ratio of Earnings to Fixed Charges* | |
31.1 | Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer* | |
31.2 | Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer* | |
32.1 | Section 1350 Certification of Chief Executive Officer (furnished herewith) | |
32.2 | Section 1350 Certification of Chief Financial Officer (furnished herewith) | |
101.INS | XBRL Instance Document* | |
101.SCH | XBRL Taxonomy Extension Schema Document* | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document* | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document* | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document* | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document* |
* | Filed herewith. |
34
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
C. R. BARD, INC. | ||||||
(Registrant) | ||||||
Date: October 24, 2013 | ||||||
/s/ CHRISTOPHER S. HOLLAND | ||||||
Christopher S. Holland Senior Vice President and Chief Financial Officer | ||||||
/s/ FRANK LUPISELLA JR. | ||||||
Frank Lupisella Jr. Vice President and Controller |
35
INDEX TO EXHIBITS
Number |
Description | |
10.34 | 2005 Directors Stock Award Plan of C. R. Bard, Inc. (as Amended and Restated) | |
10.35 | Amendment No. 1, dated as of September 26, 2013, to Credit Agreement dated as of October 12, 2011, among C. R. Bard, Inc., J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated (as Joint Lead Arrangers and Joint Bookrunners), JPMorgan Chase Bank, N.A. (as Administrative Agent), Bank of America, N.A. (as Syndication Agent) and Barclays Bank PLC, Goldman Sachs Bank USA, Wells Fargo Bank, National Association and Royal Bank of Canada (each as Documentation Agents) | |
12.1 | Computation of Ratio of Earnings to Fixed Charges | |
31.1 | Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer | |
31.2 | Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer | |
32.1 | Section 1350 Certification of Chief Executive Officer (furnished herewith) | |
32.2 | Section 1350 Certification of Chief Financial Officer (furnished herewith) | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
36
Exhibit 10.34
2005 DIRECTORS STOCK AWARD PLAN
OF
C. R. BARD, INC.
(AS AMENDED AND RESTATED)
Effective as of October 9, 2013, the 2005 Directors Stock Award Plan of C. R. Bard, Inc. (the Plan) is hereby amended and restated by C. R. Bard, Inc., a New Jersey corporation (the Corporation), as set forth herein.
The Corporations objectives in maintaining the Plan are (a) to attract and retain highly qualified individuals to serve on the Board of Directors of the Corporation, (b) to relate non-employee directors compensation more closely to the Corporations performance and its shareholders interests, and (c) to increase non-employee directors stock ownership in the Corporation.
SECTION 1. DEFINITIONS.
For purposes of the Plan, the following terms shall have the indicated meanings:
1.01 Award shall mean an Option, Stock Award, SAR or other stock-based award granted pursuant to the Plan.
1.02 Board shall mean the Board of Directors of the Corporation.
1.03 Code shall mean the Internal Revenue Code of 1986, as amended (or any successor statute thereto).
1.04 Committee shall mean the Governance Committee of the Board or such other committee as may be designated by the Board.
1.05 Common Stock shall mean the Common Stock of the Corporation, par value $0.25 per share.
1.06 Corporation shall mean C. R. Bard, Inc., a New Jersey corporation.
1.07 Director shall mean a member of the Board.
1.08 Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
1.09 Fair Market Value shall mean on any given date: (a) the mean between the high and low sale price of the Common Stock on that day as reported on the New York Stock Exchange-Composite Transactions Tape or, if no sale of Common Stock shall have occurred on the New York Stock Exchange on that day, on the next preceding day on which there was a sale; or (b) in the case of a simultaneous exercise and sale, the actual price Optionee receives in the open market on the date of the exercise. If the Common Stock is not traded on the New York Stock Exchange, the Fair Market Value shall be the amount that is reasonably determined by the Committee.
1.10 Option shall mean a stock option granted pursuant to Section 5 of the Plan.
1.11 Option Price shall mean the purchase price per share of an Option, as determined pursuant to Section 5.04 of the Plan.
1.12 Option Period shall mean the period from the date of the grant of an Option to the date of its expiration as provided in Section 5.
1.13 Optionee shall mean a Participant who has been granted an Option under the Plan.
1.14 Participant shall mean any non-employee Director who receives an Award.
1.15 Permanent Disability shall mean any disability which prevents a Director from performing all duties as a Director.
1.16 Plan shall mean the C. R. Bard, Inc. 2005 Directors Stock Award Plan (as amended and restated).
1.17 Retirement shall mean the voluntary cessation of service as a director by a director who is 55 years of age or older and who has served on the Board for at least five years.
1.18 SAR shall mean stock appreciation right granted pursuant to Section 6 of the Plan.
1.19 Stock Award shall mean Common Stock awards granted pursuant to Section 4 of the Plan.
1.20 Term shall mean the number of years that the Participant is appointed or elected to serve as a Director.
1.21 Transfer Restriction Period shall mean the period of time during which a Stock Award will remain subject to the transfer restrictions set forth in Section 4.05 of the Plan.
1.22 Unrestricted Stock shall mean Common Stock awarded to a Participant which Common Stock is not subject to a vesting period or installment delivery specified by the Committee.
1.23 Vesting Restriction Period shall mean the period of time during which a Stock Award will remain subject to vesting restrictions as described in Section 4.01(b) of the Plan.
SECTION 2. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 11, the total number of shares of Common Stock which may be issued under the Plan is 350,000. The shares may consist, in whole or in part, of unissued shares or treasury shares. The issuance of shares or the payment of cash upon the exercise of an Award or in consideration of the cancellation or termination of an Award shall reduce the total number of shares available under the Plan, as applicable. Shares subject to Awards which are forfeited, terminate or otherwise lapse will be added back to the aggregate number of shares available under the Plan.
SECTION 3. ADMINISTRATION.
3.01 Determination of Awards. Subject to the provisions of the Plan, the Committee shall have exclusive power to select the Participants and to determine the amount of, or method of determining, the Awards to be made to Participants. All Awards granted to Participants under the Plan shall be evidenced by an Award agreement which specifies the type of Award granted pursuant to the Plan, the number of shares of Common Stock underlying the Award and all terms governing the Award, including, without limitation, terms regarding vesting, exercisability and expiration of the Award.
3.02 Interpretation of Plan. The Committee is authorized to interpret the Plan, to establish, amend or rescind any rules and regulations relating to the Plan and to make any other determinations that it deems necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent the Committee deems necessary or desirable. Any decision of the Committee in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned (including, but not limited to, Participants and their beneficiaries or successors). The Committee shall have the full power and authority, consistent with the provisions of the Plan, to establish the terms and conditions of any Award and to waive any such terms or conditions at any time (including, without limitation, accelerating or waiving any vesting conditions).
3.03 Tax Withholding. The Committee shall require payment of any amount it may determine to be necessary to withhold for federal, state, local or other taxes as a result of the exercise, grant or vesting of an Award as a condition to such exercise, grant or vesting. Unless the Committee specifies otherwise, the Participant may elect to pay a portion or all of such withholding taxes by (a) delivery in shares of Common Stock or (b) having shares of Common Stock withheld by the Corporation from any shares of Common Stock that would have otherwise been received by the Participant.
SECTION 4. STOCK AWARDS.
4.01 Formula Grant of Stock Award. For Directors elected prior to April 18, 2012, the following shall apply:
(a) Grant. On the first business day in October following the appointment or election of an individual as a Director (the Formula Grant Date), each nonemployee Director shall receive a Stock Award of 400 shares of Common Stock for each year or partial year remaining in his or her Term (other than a partial year resulting from the appointment or election of a Director subsequent to the October 1st immediately preceding the annual meeting at which the term of office of such Director will expire).
(b) Formula Grant Vesting Restriction Period. Unless otherwise determined by the Committee, each Stock Award granted pursuant to Section 4.01 shall vest with respect to the first 400 shares of Common Stock on the Formula Grant Date and, with respect to the remaining shares of Common Stock included in such Stock Award, on each October 1 following the date on which the Stock Award was granted. If for any reason, the Participant ceases to serve as a Director prior to the date on which he or she is fully vested in the Stock Award granted under this Section 4.01, he or she shall forfeit all of the unvested shares underlying such Stock Award.
- 2 -
(c) Formula Grant Transfer Restriction Period. The transfer restrictions set forth in Section 4.05 of this Plan shall apply to shares of Common Stock underlying grants of Stock Awards made pursuant to this Section 4.01 until the second anniversary of the end of the Vesting Restriction Period applicable to such shares. Notwithstanding the foregoing sentence, however, the Transfer Restriction Period shall end upon the death or Permanent Disability of the Participant.
4.02 Value-Based Stock Awards.
(a) Grant. Subject to Section 7 below, on or about the date on which the annual management stock grants are made pursuant to the 2012 Long Term Incentive Plan of C. R. Bard, Inc. (as amended and restated) or a similar plan then in effect (the Value-Based Grant Date), each nonemployee Director shall receive a Stock Award based on the target equity value established by the Board that year prior to the Value-Based Grant Date (the Target Equity Value). To determine the appropriate number of shares granted for a value-based Stock Award, the Board shall (i) first subtract from the Target Equity Value the value of any formula Stock Award (or portion thereof) granted pursuant to Section 4.01 of the Plan with respect to the same year of such Directors term for which a value-based Stock Award is being granted (the Applicable Formula Award) and (ii) then divide the remaining Target Equity Value by the average price of Common Stock during the month of October in the year in which the value-based Stock Award is made. The value of the Applicable Formula Award shall be calculated by multiplying the Applicable Formula Award times such average price of Common Stock.
(b) Value-Based Grant. Except as otherwise provided by the Committee, Stock Awards granted pursuant to this Section 4.02 shall not vest earlier than the third anniversary of the date on which they are granted.
4.03 Additional Stock Awards. Subject to Section 7 below, the Committee may grant Stock Awards in addition to those provided in Sections 4.01 and 4.02 of the Plan in such form, and dependent on such conditions and restrictions (or without conditions and restrictions), as the Committee, in its sole discretion, shall determine and as set forth in the Stock Award agreement, including, without limitation, the right to receive, or vest with respect to the Stock Award upon the completion of a specified period of service as a Director, the occurrence of an event and/or the attainment of performance objectives, and all other terms and conditions of such Stock Award. Except as otherwise provided by the Committee, Stock Awards granted pursuant to this Section 4.03 shall not vest earlier than the third anniversary of the date on which they are granted. Restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as set forth in the Stock Award agreement. Notwithstanding anything else to the contrary, a Stock Award that is not subject to vesting shall be made only in lieu of the payment of a cash retainer to the Director.
4.04 Termination of Director, Death, Permanent Disability, or Retirement.
(a) With respect to formula based Stock Awards (granted pursuant to Section 4.01) of the Plan, if for any reason, the Participant ceases to serve as a Director prior to the end of the Vesting Restriction Period applicable to such shares, he or she shall forfeit all unvested shares underlying such Stock Award.
(b) With respect to value-based and additional Stock Awards (granted pursuant to Sections 4.02 and 4.03 of the Plan), except as otherwise provided herein, in the event that a Participant ceases during the Vesting Restriction Period to be a Director for any reason other than death or Retirement, the Participant shall forfeit the Stock Award as to all shares of Common Stock covered by the Award with respect to which such Vesting Restriction Period has not ended, and those shares of Common Stock must be immediately returned to the Corporation. The Committee may, however, provide for complete or partial exceptions to this requirement as it deems appropriate.
(c) With respect to value-based and additional Stock Awards (granted pursuant to Sections 4.02 and 4.03 of the Plan), in the event the Participant ceases to be a Director during the Vesting Restriction Period due to death or Retirement, the Vesting Restriction Period shall terminate and all of the shares of Common Stock covered by the Award shall be free of all restrictions.
- 3 -
4.05 Restrictions on Transfer and Legend on Stock Certificate.
(a) During the Transfer Restriction Period set forth in Section 4.01(c) or in the applicable grant Agreement governing a Stock Award granted pursuant to Sections 4.02 or 4.03 of the Plan, a Participant may not sell, assign, transfer, pledge, or otherwise dispose of the shares of Common Stock of the Stock Award except as provided under Section 8. Shares of Common Stock related to a Stock Award shall be held at the Corporations transfer agent in book entry form and shall contain a legend giving appropriate notice of the restrictions in the Stock Award agreement. The Participant shall be entitled to have the legend removed from the book entry covering the shares of Common Stock subject to restrictions when all restrictions on such shares of Common Stock have lapsed.
(b) Each share of Common Stock representing a Stock Award subject to restrictions shall be registered in the name of the Participant to whom the Stock Award was granted and bear the following, or a substantially similar, legend:
The transferability of this Certificate and the Common Stock represented hereby is subject to the terms and conditions, including forfeiture, contained in Section 4 of the C. R. Bard, Inc. 2005 Directors Stock Award Plan, as amended from time to time, and an agreement entered into between the registered owner and C. R. Bard, Inc. Copies of the Plan and Stock Award agreement are on file in the executive office of C. R. Bard, Inc., 730 Central Avenue, Murray Hill, New Jersey 07974.
4.06 Right to Vote and to Receive Dividends. During the Vesting Restriction Period and Transfer Restriction Period, the Participant shall have the right to vote shares of Common Stock subject to Stock Awards and to receive any dividends or other distributions paid on such shares of Common Stock.
4.07 Delivery of Certificates. When each of the Vesting Restriction Period and Transfer Restriction Period have lapsed with regard to shares of Common Stock related to a Stock Award, the Corporation shall direct the transfer agent to remove the restrictions relating to the Award or, at the Participants request, (or at the request of the Participants legal representative, beneficiary or heir) shall deliver within 60 days after such vesting to the Participant, or to the Participants legal representative, beneficiary or heir, a certificate or certificates without the legend referred to in Section 4.05 above, for such shares of Common Stock.
SECTION 5. OPTIONS.
5.01 Grant of Options. Subject to Section 7 below, the Committee, in its sole discretion, may grant Options to any Director under the Plan.
5.02 Term of Option. The term of any Option shall not exceed ten years from the date of grant.
5.03 Conditions of Option. Except to the extent otherwise provided in the Plan, Options shall be in such form, and dependent on such conditions, as the Committee shall determine and as set forth in the Option agreement, including, without limitation, the right to receive, or vest with respect to the Option upon the completion of a specified period of service as a Director, the occurrence of an event and/or the attainment of performance objectives, and all other terms and conditions of such Option.
5.04 Option Price. The Option Price per share of Common Stock shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted. Notwithstanding any provision in this Plan to the contrary other than the last sentence of this paragraph, no Option may be amended to reduce the per share Option Price of any outstanding Option below the Option Price determined as of the date the Option is granted without the approval of the Corporations shareholders, nor may an Option or other Award be granted in exchange for, or in connection with, the cancellation or surrender of an Option or other Award having a higher Option Price or exercise price without the approval of the Corporations shareholders. The restrictions set forth in this Section 5.04 shall not apply to the assumption of, substitution for, or adjustment of outstanding Options that are assumed, substituted, or adjusted in connection with a transaction described in Section 11, provided that the aggregate Option Price times the number of shares underlying the Option immediately before the transaction equals or exceeds the aggregate Option Price times the number of shares underlying the Option (or substituted Option) immediately following the transaction.
5.05 Exercisability. Except as determined by the Committee and set forth in the Option agreement, an Option shall become exercisable with regard to twenty-five percent of the Option on the date of the four successive anniversary dates of the grant date. Further, all Options shall become immediately exercisable upon the death of a Participant if as of the date of the Participants death, the Participant had not otherwise ceased to be a Director. In no event shall an Option be exercisable at any time after the expiration of the term of the Option.
- 4 -
5.06 Exercise of Options. Except as otherwise provided in the Plan or in an Option agreement, an Option may be exercised for all, or from time to time any part, of the shares of Common Stock for which it is then vested and exercisable.
(a) The exercise date of an Option shall be the later of the date a notice of exercise is received by the Corporation and, if applicable, the date payment is received by the Corporation pursuant to (b) below.
(b) The purchase price for the shares of Common Stock as to which an Option is exercised shall be paid to the Corporation in full at the time of exercise at the election of the Participant (i) in cash or its equivalent (e.g., by check), (ii) to the extent permitted by the Committee, in shares of Common Stock having a Fair Market Value equal to the aggregate Option Price for the shares of Common Stock being purchased and satisfying such other requirements as may be imposed by the Committee; provided, that such shares of Common Stock have been held by the Participant for no less than six months (or such other period as established from time to time by the Committee in order to avoid adverse accounting treatment applying generally accepted accounting principles), (iii) partly in cash and, to the extent permitted by the Committee, partly in such shares of Common Stock or (iv) subject to rules and limitations established by the Committee, through the delivery of irrevocable instructions to a broker to sell shares of Common Stock obtained upon the exercise of the Option and to deliver promptly to the Corporation an amount out of the proceeds of such sale equal to the aggregate Option Price for the shares of Common Stock being purchased.
(c) No Participant shall have any rights to dividends or other rights of a stockholder with respect to shares of Common Stock subject to an Option until the Participant has given written notice of exercise of the Option, paid in full for such shares of Common Stock, received such shares of Common Stock from the Corporation and, if applicable, has satisfied any other conditions imposed by the Committee pursuant to the Plan.
(d) If a Participant pays the exercise price of an Option or taxes relating to the exercise of an Option by delivering shares of Common Stock, the Participant may, subject to procedures established by the Committee, satisfy such delivery requirement by presenting proof that he or she is the beneficial owner (as such term is defined in Rule 13d-3 under the Act (or any successor rule thereto)) of such shares of Common Stock, in which case the Corporation shall treat the Option as exercised without further payment and shall withhold such number of shares of Common Stock from the shares of Common Stock acquired by the exercise of the Option.
5.07 Cessation of Service as a Director.
(a) Except as provided below, an Option may be exercised at anytime during the term of the Option.
(b) Except as provided in Sections (c), (d) and (e) below, any of the Participants Options that are not otherwise exercisable as of the date on which the Participant ceases to be a Director for any reason shall terminate as of such date.
(c) Any of the Participants Options that are exercisable as of the date on which the Participant ceases to be a Director for any reason other than death or Retirement shall terminate sixty (60) days from the date the Participant ceases to be a Director; but in no event beyond the term of the Option.
(d) If a Participant ceases to be a Director by reason of his or her death, his or her personal representative shall be permitted to exercise his or her outstanding vested and unvested Option for a period of one (1) year from the date of the Directors death, but in no event beyond the term of the Option.
(e) If a Participant ceases to be a Director by reason of his or her Retirement, his or her outstanding vested Option shall remain exercisable for the remaining term of the Option and the portion of his or her Option that was not vested on the date of his or her Retirement shall be forfeited. Notwithstanding the foregoing, if a Participant ceases to be a Director by reason of his or her Retirement, any of his or her outstanding vested Option issued on or prior to April 18, 2001 shall remain exercisable only for a period of three years from the last day of the month in which he or she retired and the portion of his or her Option that was not vested on the date of his or her Retirement shall be forfeited.
- 5 -
SECTION 6. STOCK APPRECIATION RIGHTS.
Subject to Section 7 below, the Committee, in its sole discretion, may grant SARs in connection with an Option, or a portion thereof. An SAR represents a right to receive appreciation on the Corporations Common Stock in cash or stock as the Committee shall determine. An SAR may be granted at the time the related Option is granted or at any time prior to the exercise or cancellation of the related Option, shall cover the same number of shares of Common Stock covered by an Option (or such lesser number of shares of Common Stock as the Committee may determine), and shall be subject to the same terms and conditions as such Option except for such additional limitations as are contemplated by this Section 6 (or such additional limitations as may be included in an Award agreement). Notwithstanding any provision in this Plan to the contrary other than the last sentence of this Section 6, no Stock Appreciation Right may be amended to reduce the exercise price per share of the shares subject to such Stock Appreciation Right below the exercise price determined as of the date the Stock Appreciation Right is granted, nor may a Stock Appreciation Right be granted in exchange for, or in connection with, the cancellation or surrender of a Stock Appreciation Right or other Award having a higher exercise price. The restrictions set forth in this Section 6 shall not apply to the assumption of, substitution for, or adjustment of outstanding Stock Appreciation Rights that are assumed, substituted, or adjusted in connection with a transaction described in Section 11, provided that the aggregate exercise price times the number of shares underlying the Stock Appreciation Right immediately before the transaction equals or exceeds the aggregate exercise price times the number of shares underlying the Stock Appreciation Right (or substituted Stock Appreciation Right) immediately following the transaction.
SECTION 7. LIMITATIONS ON AWARDS.
Notwithstanding any provision of this Plan to the contrary, the maximum aggregate grant date Fair Market Value of Awards granted to a Director during a calendar year shall not exceed $150,000; provided that Stock Awards that are granted in lieu of the payment of a cash retainer to a Director shall not be included in these limitations.
SECTION 8. TRANSFERABILITY OF AWARDS.
8.01 Limits on Transferability. Except as otherwise provided, Stock Awards (prior to the end of their Transfer Restriction Period), Options or SARs may not be assigned, alienated, attached, sold or transferred, pledged or otherwise disposed or encumbered by the Participant, other than by will or by the laws of descent and distribution. Any attempt to assign, transfer, pledge or otherwise dispose of an Award contrary to the provisions hereof, and the levy of any execution, attachment or similar process upon the Award, shall be null, void and without effect; provided, however, that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance. A Participant may designate a beneficiary, on a form supplied by the Committee, who may possess all rights with respect to an Award in the event of Employees death. No such permitted transfer of an Award to heirs or legatees of a Participant shall be effective to bind the Corporation unless the Committee shall have been furnished with written notice thereof and a copy of such evidence as the Committee may deem necessary to establish the validity of the transfer and the acceptance by the transferee or transferees of the terms and conditions hereof.
8.02 Transferability of Certain Awards. Notwithstanding the foregoing, an Award agreement may provide that a Participant may transfer certain Awards to family members, or one or more trusts or other entities for the benefit of or owned by family members, consistent with applicable securities laws, provided that the Participant receives no consideration for the transfer of the Award and the transferred Award shall continue to be subject to the same terms and conditions as were applicable to the Award immediately before the transfer.
SECTION 9. NO LIMITATION ON RIGHTS OF THE CORPORATION.
The granting of any Awards under this Plan shall not in any way affect the right or power of the Corporation to make adjustments, reclassification or changes in its capital or business structure, or to merge, consolidate, dissolve, liquidate, sell or transfer all or any part of its business or assets.
SECTION 10. SHARE OF COMMON STOCK ISSUANCE AND DELIVERY IN COMPLIANCE WITH SECURITIES LAWS.
If in the opinion of counsel for the Corporation (who may be an employee of the Corporation or independent counsel employed by the Corporation), any issuance or delivery of shares of Common Stock to a Participant will violate the requirements of any applicable federal or state laws, rules or regulations (including, without limitation, the provisions of the Securities Act of 1933, as amended, or the Act), such issuance or delivery may be postponed until the Corporation is satisfied that the distribution will not violate such laws, rules or regulations. The transfer agents book entry relating to a Stock Award (and, if requested in accordance with Section 4.07 above, certificates delivered to Participants pursuant to the Plan) may bear such legends as the Corporation may deem advisable.
- 6 -
SECTION 11. ADJUSTMENT UPON CERTAIN EVENTS.
In the event after the Effective Date there is any share of Common Stock dividend or split, reorganization, recapitalization, merger, consolidation, spin-off, combination, combination or transaction or exchange of shares of Common Stock or other corporate exchange, or any distribution to shareholders of shares of Common Stock or other property or securities (other than regular cash dividends) or any transaction similar to the foregoing or other transaction that results in a change to the Corporations equity capitalization, the Committee in its sole discretion and without liability to any person may make such substitution or adjustment, if any, as it deems to be equitable or appropriate, as to (i) the number or kind of shares of Common Stock or other securities issued or reserved for issuance pursuant to the Plan or pursuant to outstanding Awards, (ii) the maximum number of shares of Common Stock for which Stock Awards, Options and Stock Appreciation Rights may be granted (ii) the Option Price, exercise price of any Stock Appreciation Right or purchase price of any Award and/or (iii) any other affected terms of an Award or the Plan.
SECTION 12. AMENDMENTS OR TERMINATION.
The Board may amend the Plan at any time, provided that no amendment shall be made without the approval of the shareholders of the Corporation that would (a) increase the maximum number of shares of Common Stock which may be acquired under the Plan, (b) extend the term during which Options may be granted under the Plan, (c) permit the Option Price or exercise price per share of Common Stock to be less than 100% of the Fair Market Value of the shares of Common Stock on the date an Option or Stock Appreciation Right is granted (other than as specifically provided in Sections 5.04 and 6), (d) terminate restrictions applicable to Awards (except in connection with a Participants death, Disability or termination of employment or in connection with a Change of Control) or (e) provide for Awards not permitted pursuant to the terms of the Plan. The Board shall also have the right to terminate the Plan at any time. Without the consent of a Participant (except as otherwise provided for in Section 11), no amendment shall materially diminish any of the rights of such Participant under any Award theretofore granted to such Participant under the Plan; provided, however, that the Committee may amend the Plan in such manner as it deems necessary to permit the granting of Awards meeting the requirements of the Code or other applicable laws.
SECTION 13. NO RIGHTS TO CONTINUED DIRECTORSHIP.
Nothing in this Agreement shall confer upon a Director any right to continue to service as a member of the Board of Directors or any committee of the Board of Directors, to be retained by the Corporation as a consultant or to be employed by the Corporation as an employee and shall not interfere in any way with the right of the Corporation to terminate the Directors service as a member of the Board of Directors or any committee of the Board of Directors as set forth in the by-laws of the Corporation or the Directors consulting or employment relationship with the Corporation, if any, at any time.
SECTION 14. CHOICE OF LAW.
The Plan shall be governed by and construed in accordance with the laws of the State of New Jersey without regard to conflicts of laws.
SECTION 15. EFFECTIVE DATE.
The Plan was originally effective as of July 13, 1988, was subsequently amended from time-to-time, and was amended and restated as of December 12, 2012. The Plan was initially approved by the shareholders of the Corporation on April 19, 1989. The effective date of the Plan as amended and restated herein is October 9, 2013, provided, however that the version of the Plan that was last approved by the Corporations shareholders was effective as of April 19, 2006.
- 7 -
Exhibit 10.35
EXECUTION COPY
AMENDMENT NO. 1
Dated as of September 26, 2013
to
CREDIT AGREEMENT
Dated as of October 12, 2011
THIS AMENDMENT NO. 1 (this Amendment) is made as of September 26, 2013 by and among C. R. Bard, Inc., a New Jersey corporation (the Borrower), the financial institutions listed on the signature pages hereof and JPMorgan Chase Bank, N.A., as Administrative Agent (the Administrative Agent), under that certain Credit Agreement dated as of October 12, 2011 by and among the Borrower, the Lenders from time to time party thereto and the Administrative Agent (as amended, restated, supplemented or otherwise modified from time to time, the Credit Agreement). Capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Credit Agreement.
WHEREAS, the Borrower has requested that the requisite Lenders and the Administrative Agent agree to provide additional commitments under and make certain amendments to the Credit Agreement;
WHEREAS, the Borrower, the Lenders party hereto and the Administrative Agent have so agreed on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders party hereto and the Administrative Agent hereby agree to enter into this Amendment.
1. Amendments to the Credit Agreement. Effective as of the Amendment No. 1 Effective Date (as defined below), the parties hereto agree that the Credit Agreement shall be amended as follows:
(a) The definition of Commitment appearing in Section 1.01 of the Credit Agreement is amended to restate the final two sentences thereof in their entirety to read as follows:
The amount of each Lenders Commitment as of the Amendment No. 1 Effective Date is set forth on Schedule 1.01, or in the Assignment and Assumption or other agreement pursuant to which such Lender shall have assumed its Commitment, as applicable. As of the Amendment No. 1 Effective Date, the aggregate amount of the Commitments is $750,000,000.
(b) The definition of Commitment Termination Date appearing in Section 1.01 of the Credit Agreement is amended to delete the reference to October 12, 2016 appearing therein and to replace such reference with September 26, 2018.
(c) The definition of Swingline Sublimit appearing in Section 1.01 of the Credit Agreement is amended to delete the reference to $25,000,000 appearing therein and to replace such reference with $50,000,000.
(d) Section 1.01 of the Credit Agreement is amended to add the following definitions thereto in proper alphabetical order and, where applicable, replace the corresponding previously existing definitions:
Amendment No. 1 Effective Date means September 26, 2013.
Interpolated Rate means, at any time, the rate per annum determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBOR Screen Rate for the longest period (for which the LIBOR Screen Rate is available) that is shorter than the Impacted Interest Period and (b) the LIBOR Screen Rate for the shortest period (for which the LIBOR Screen Rate is available) that exceeds the Impacted Interest Period, in each case, at such time.
LIBO Rate means, with respect to any Eurodollar Borrowing for any applicable Interest Period, the London interbank offered rate administered by the British Bankers Association (or any other Person that takes over the administration of such rate) for Dollars for a period equal in length to such Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen or, in the event such rate does not appear on either of such Reuters pages, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate as shall be selected by the Administrative Agent, with written notice to the Borrower, from time to time in its reasonable discretion; in each case the LIBOR Screen Rate) at approximately 11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period; provided that, if the LIBOR Screen Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement; provided, further, that if a LIBOR Screen Rate shall not be available at such time for such Interest Period (the Impacted Interest Period), then the LIBO Rate for such Interest Period shall be the Interpolated Rate; provided, that, if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement. It is understood and agreed that all of the terms and conditions of this definition of LIBO Rate shall be subject to Section 2.11.
LIBOR Screen Rate has the meaning assigned to such term in the definition of LIBO Rate.
(e) Section 2.06(c) of the Credit Agreement is amended to delete the reference to $850,000,000 appearing in subclause (ii) thereof and to replace such reference with $1,000,000,000.
(f) Section 6.04 of the Credit Agreement is amended to delete the reference to 0.60 to 1.00 appearing therein and to replace such reference with 0.65 to 1.00.
(g) Schedule 1.01 to the Credit Agreement is amended and restated in its entirety in the form of Schedule 1.01 attached hereto.
2
2. Departing Lenders. The parties hereto hereby acknowledge and agree that:
(a) Each of PNC Bank National Association, The Royal Bank of Scotland plc, SunTrust Bank and Banca Monte dei Paschi di Siena S.p.A. (each a Departing Lender and collectively the Departing Lenders) is entering into this Amendment solely to evidence its exit from the Credit Agreement and shall have absolutely no obligation hereunder. Upon the effectiveness hereof and the payment described in Section 2(b)(ii), each Departing Lender shall no longer (i) constitute a Lender for all purposes under the Loan Documents, (ii) be a party to the Credit Agreement and (iii) have any obligations under any of the Loan Documents, in each case, without further action required on the part of any Person; and
(b) Upon the effectiveness hereof: (i) each Departing Lenders Commitment under the Credit Agreement shall be terminated, (ii) each Departing Lender shall have received payment in full in immediately available funds of all of its Loans, all interest thereon and all other amounts payable to it under the Credit Agreement, (iii) each Departing Lender shall not be a Lender hereunder as evidenced by its execution and delivery of its signature page hereto and (iv) the defined term Lenders in the Credit Agreement shall exclude the Departing Lenders.
3. Conditions of Effectiveness. The effectiveness of this Amendment (the Amendment No. 1 Effective Date) is subject to the satisfaction of the following conditions precedent:
(a) The Administrative Agent shall have received counterparts of this Amendment duly executed by the Borrower, the Lenders (including the Departing Lenders), the Issuing Bank and the Administrative Agent.
(b) The Administrative Agent shall have received favorable written opinions (addressed to the Administrative Agent and the Lenders and dated the Amendment No. 1 Effective Date) of (i) Drinker Biddle & Reath LLP, special New Jersey counsel for the Borrower and (ii) Weil, Gotshal & Manges LLP, special New York counsel for the Borrower, each covering such matters relating to the Borrower, this Amendment or the Credit Agreement as amended hereby as the Administrative Agent shall reasonably request (and the Borrower hereby instructs such counsels to deliver such opinions to the Lenders and the Administrative Agent).
(c) The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing of the Borrower, the authorization of this Amendment and the Credit Agreement as amended hereby, and any other matters relevant hereto, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel.
(d) The Administrative Agent shall have received a certificate, dated the Amendment No. 1 Effective Date and signed by the President, a Vice President or a Financial Officer of the Borrower, confirming compliance with the conditions set forth in clauses (a) and (b) of the first sentence of Section 4.02 of the Credit Agreement (excluding, however, the first parenthetical clause in such clause (a)).
(e) The Administrative Agent shall have received, for the account of each Lender (excluding any Departing Lender) party hereto that delivers its executed signature page to this Amendment by no later than the date and time specified by the Administrative Agent, an upfront fee in an amount equal to the amount previously disclosed to the Lenders.
(f) The Administrative Agent shall have received payment of the Administrative Agents and its affiliates fees and reasonable out-of-pocket expenses (including the reasonable fees and expenses of Sidley Austin LLP, counsel to the Administrative Agent, that are due and payable on or prior to the Amendment No. 1 Effective Date and for which an invoice has been presented to the Borrower at least one Business Day prior to the Amendment No. 1 Effective Date) in connection with this Amendment.
3
4. Representations and Warranties of the Borrower. The Borrower hereby represents and warrants as follows:
(a) This Amendment and the Credit Agreement as modified hereby constitute legal, valid and binding obligations of the Borrower, enforceable in accordance with their terms, except as such enforceability may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws of general applicability affecting the enforcement of creditors rights and (b) the application of general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).
(b) As of the date hereof and after giving effect to the terms of this Amendment, (i) no Default has occurred and is continuing and (ii) the representations and warranties of the Borrower set forth in the Credit Agreement are true and correct in all material respects (or, in the case of any such representations and warranties qualified as to materiality, in all respects) on and as of the date hereof (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
5. Reference to and Effect on the Credit Agreement.
(a) Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Credit Agreement as amended hereby.
(b) The Credit Agreement and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.
(c) Except as expressly set forth herein, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith.
(d) On the Amendment No. 1 Effective Date, the Administrative Agent shall make such reallocations of each Lenders Applicable Percentage of the Revolving Credit Exposure under the Credit Agreement as are necessary in order that the Revolving Credit Exposure with respect to such Lender reflects such Lenders Applicable Percentage of the Revolving Credit Exposure under the Credit Agreement as amended hereby. Each Departing Lender and each Lender hereby waives any compensation by the Borrower of any and all losses, costs and expenses incurred by such Departing Lender or Lender solely in connection with the sale and assignment of any Eurodollar Loans and the reallocation described in this clause (d) and occurring on the Amendment No. 1 Effective Date that would otherwise be due to such Departing Lender or Lender pursuant to Section 2.13 of the Credit Agreement.
(e) This Amendment is a Loan Document under (and as defined in) the Credit Agreement.
6. Governing Law. This Amendment shall be construed in accordance with and governed by the law of the State of New York.
4
7. Submission to Jurisdiction. The Borrower hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Amendment, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Amendment shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Amendment against the Borrower or its properties in the courts of any jurisdiction.
8. Headings. Section headings used in this Amendment are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.
9. Counterparts. This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by fax or other electronic transmission (including, without limitation, PDF) shall be effective as delivery of a manually executed counterpart of this Agreement.
[Signature Pages Follow]
5
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.
C.R. BARD, INC., as the Borrower | ||
By: | /s/ Christopher S. Holland | |
Name: Christopher S. Holland | ||
Title: Senior Vice President and Chief Financial Officer | ||
By: | /s/ Scott T. Lowry | |
Name: Scott T. Lowry | ||
Title: Vice President and Treasurer |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
JPMORGAN CHASE BANK, N.A., individually as a Lender, as the Issuing Bank and as Administrative Agent | ||
By: | /s/ James A. Knight | |
Name: James A. Knight | ||
Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
BANK OF AMERICA, N.A., individually as a Lender and as Syndication Agent | ||
By: | /s/ David J. Bardwil | |
Name: David J. Bardwil | ||
Title: SVP |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
WELLS FARGO BANK, NATIONAL ASSOCIATION, as a Lender | ||
By: | /s/ Monique Gasque | |
Name: Monique Gasque | ||
Title: Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
GOLDMAN SACHS BANK USA, as a Lender | ||
By: | /s/ Mark Walton | |
Name: Mark Walton | ||
Title: Authorized Signatory |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
BARCLAYS BANK PLC, as a Lender | ||
By: | /s/ Christopher R. Lee | |
Name: Christopher R. Lee | ||
Title: Assistant Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
ROYAL BANK OF CANADA, as a Lender | ||
By: | /s/ Scott MacVicar | |
Name: Scott MacVicar | ||
Title: Authorized Signatory |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
TD BANK, N.A., as a Lender | ||
By: | /s/ Todd Antico | |
Name: Todd Antico | ||
Title: Senior Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as a Lender | ||
By: | /s/ B. McNany | |
Name: | B. McNany | |
Title: | Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
U.S. BANK NATIONAL ASSOCIATION, as a Lender | ||
By: | /s/ Jennifer Hwang | |
Name: | Jennifer Hwang | |
Title: | Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
SOVEREIGN BANK, N.A. as a Lender | ||
By: | /s/ William R. Rogers | |
Name: | William R. Rogers | |
Title: | Senior Vice President |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
HSBC BANK USA, NATIONAL ASSOCIATION, as a Lender | ||
By: | /s/ Robert Moravec | |
Name: | Robert Moravec | |
Title: | Sr. Relationship Manager |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
The undersigned Departing Lender hereby acknowledges and agrees that, form and after the Amendment No. 1 Effective Date, it is no longer a party to the Credit Agreement | ||
PNC BANK, NATIONAL ASSOCIATION, as a Departing Lender | ||
By: | /s/ Edward M. Tessalone | |
Name: | Edward M. Tessalone | |
Title: | Senior Vice President PNC Bank, N.A. |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
The undersigned Departing Lender hereby acknowledges and agrees that, from and after the Amendment No. 1 Effective Date, it is no longer a party to the Credit Agreement | ||
THE ROYAL BANK OF SCOTLAND PLC, as a Departing Lender | ||
By: | /s/ William McGinty | |
Name: | William McGinty | |
Title: | Director |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
The undersigned Departing Lender hereby acknowledges and agrees that, form and after the Amendment No. 1 Effective Date, it is no longer a party to the Credit Agreement | ||
SUNTRUST BANK, as a Departing Lender | ||
By: | /s/ John Cappellari | |
Name: | John Cappellari | |
Title: | Director |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
The undersigned Departing Lender hereby acknowledges and agrees that, from and after the Amendment No. 1 Effective Date, it is no longer a party to the Credit Agreement | ||
BANCA MONTE DEI PASCHI DI SIENA S.P.A., as a Departing Lender | ||
By: | /s/ Enrico Vignoli | |
Name: | Enrico Vignoli | |
Title: | Senior Vice President & General Manager | |
By: | /s/ Victor DiIorio | |
Name: | Victor DiIorio | |
Title: | VP & Credit Manager |
Signature Page to Amendment No. 1 to
Credit Agreement dated as of October 12, 2011
C. R. Bard, Inc.
SCHEDULE 1.01
Commitments
Name of Lender |
Commitment ($) | |||
JPMorgan Chase Bank, N.A. |
$ | 116,250,000 | ||
Bank of America, N.A. |
$ | 116,250,000 | ||
Wells Fargo Bank, National Association |
$ | 62,500,000 | ||
Goldman Sachs Bank USA |
$ | 62,500,000 | ||
Barclays Bank PLC |
$ | 62,500,000 | ||
Royal Bank of Canada |
$ | 62,500,000 | ||
TD Bank, N.A. |
$ | 62,500,000 | ||
The Bank of Tokyo-Mitsubishi UFJ, Ltd. |
$ | 62,500,000 | ||
U.S. Bank National Association |
$ | 62,500,000 | ||
Sovereign Bank, N.A. |
$ | 40,000,000 | ||
HSBC Bank USA, National Association |
$ | 40,000,000 | ||
Total: |
$ | 750,000,000 |
EXHIBIT 12.1
C. R. BARD, INC. AND SUBSIDIARIES
Exhibit 12.1 - Computation of Ratio of Earnings to Fixed Charges
Nine Months Ended September 30, 2013 |
Years Ended December 31, | |||||||||||||||||||||||
2012 | 2011 | 2010 | 2009 | 2008 | ||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||
Earnings from operations before taxes |
$ | 110.7 | $ | 732.4 | $ | 510.8 | $ | 717.7 | $ | 671.5 | $ | 552.7 | ||||||||||||
Add (Deduct): |
||||||||||||||||||||||||
Fixed charges |
38.6 | 46.1 | 42.7 | 18.4 | 17.5 | 17.4 | ||||||||||||||||||
Undistributed earnings of equity investments |
(1.5 | ) | (9.6 | ) | (3.8 | ) | (3.6 | ) | (2.3 | ) | (1.9 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Earnings available for fixed charges |
$ | 147.8 | $ | 768.9 | $ | 549.7 | $ | 732.5 | $ | 686.7 | $ | 568.2 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Fixed charges: |
||||||||||||||||||||||||
Interest, including amounts capitalized(1) |
$ | 33.7 | $ | 39.6 | $ | 36.4 | $ | 12.7 | $ | 11.8 | $ | 12.1 | ||||||||||||
Proportion of rent expense deemed to represent interest factor |
4.9 | 6.5 | 6.3 | 5.7 | 5.7 | 5.3 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Fixed charges |
$ | 38.6 | $ | 46.1 | $ | 42.7 | $ | 18.4 | $ | 17.5 | $ | 17.4 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Ratio of earnings to fixed charges |
3.83 | 16.68 | 12.87 | 39.81 | 39.24 | 32.66 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Interest related to unrecognized tax benefits is included as income tax expense and not included in fixed charges. |
EXHIBIT 31.1
Certification of Chief Executive Officer
I, Timothy M. Ring, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of C. R. Bard, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: October 24, 2013 |
/s/ Timothy M. Ring |
Timothy M. Ring |
Chief Executive Officer |
EXHIBIT 31.2
Certification of Chief Financial Officer
I, Christopher S. Holland, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of C. R. Bard, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: October 24, 2013 |
/s/ Christopher S. Holland |
Christopher S. Holland |
Senior Vice President and Chief Financial Officer |
EXHIBIT 32.1
SECTION 1350 CERTIFICATIONS
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of C. R. Bard, Inc. on Form 10-Q for the period ended September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Timothy M. Ring, Chairman and Chief Executive Officer of C. R. Bard, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of C. R. Bard, Inc. |
/s/ Timothy M. Ring |
Name: Timothy M. Ring |
Date: October 24, 2013 |
EXHIBIT 32.2
SECTION 1350 CERTIFICATIONS
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of C. R. Bard, Inc. on Form 10-Q for the period ended September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Christopher S. Holland, Senior Vice President and Chief Financial Officer of C. R. Bard, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of C. R. Bard, Inc. |
/s/ Christopher S. Holland |
Name: Christopher S. Holland |
Date: October 24, 2013 |
Shareholders' Investment
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Investment | 11. Shareholders’ Investment The company repurchased approximately 5.2 million shares of common stock for $533.4 million in the nine months ended September 30, 2013 under its previously announced share repurchase authorizations. Other Comprehensive Income (Loss) During the first quarter of 2013, the company adopted new Financial Accounting Standards Board guidance that requires the company to present information about reclassification adjustments from accumulated other comprehensive loss. Under this guidance, the company presents the effect of amounts reclassified from each component of accumulated other comprehensive loss based on its source. The changes in accumulated other comprehensive income (loss) by component are as follows:
|
.5^8.Y^7?_\T_)&V2N_8"P<4*CXRKT(44>^S[,+
M+A'W:(TK>'.BK$0"'MG9YS7#*&^,RL(/1Z.97R)2N4HA8H]HT-.)9#BFV;7$
ME5`B#!=(@/_\0FJNU M0XC(T9R4X.V9E00:H#V9+3J5:R\HV>"DX@M0,=3BR?)_20`/&-OMC<
MXEM]`2^CH->&!G#`>$D/Y(^T.N3G6CF1/70U'DVA3*_8$26[:,I+>T+U4C9P
MM-A^/<)1,H&WU_$(Q/NR;/H+VL%P.+W^'P``__\#`%!+`P04``8`"````"$`
MLS+5_9T#``"+"P``&0```'AL+W=O P2-&=W=:,3=[S`P-Y&1
M_)S(J+!QFQ0C6!-`L9@VN+^[\RAN<+M=,TY]:#VZ]Z`QK%1Q<9$(Z9I`1ESE
ML28S%1:X;5TZJJK:A$_2^<1R+Y0H31PVI+D>[#R-J_+MJ]/'QD`!Y8*A%T"_
M55G-O5(WRWJ)`UC@1!S.)5](R+5Y6T.%EV_?_??\;/&;YT(&7T&D2\V`[-P`
M-6AC].92T67)`%7Q:97!U"@_@_*ZB9GU.L(:-.58X(6UAZ4)?HCU"W=)O9:G
M]=8&:!*<'>5R/(?OK1Z,$1<.78Z],DSJ'3>B+FMCSSL(G"VG%9UIZQ6FV=06
MR.&3>_68BL44TV663&*T_8>_\BU&K4\='D6N0G6'M%KM&D Z"^R$PU>7P@6R/$U]H;5QMV/QJJ)@I/&W/<\
M_SCEV+3@G]$@`V)2\3'?EGZ$FD*N6G_Y,/[+`E[D-Y:[$6^/'@&<&!W$9P<:
MZB(L>8>Y`PTZP+'Y-5$F9TK7U0B/W9LN%-4V07&_]TVZ14LMRP\$\0VW;5*M
MX#(,C7<0ZOSF18'3*F0+LGN$=>?3FNS(G]"&4JV)B6.7`":297%^2M=[LAH!
M?.@=\:GX`F_`N!5N<>ZC'>P/M#<(",EE2VS!.57CQH9G:MHZ42.^&0J=#39`
M^AQ10DAT/,+&+FC"`(/L(`&NW71"G\U26367@'M7'HDU-M^0FH#D(*98. =:AP8T2,.3A1E,(%!8\X9`I\RL@@*@OSKV%.
M;\LY:B?=JBY3DD4"'"^)&I'T9?T48Y"`9.CSY>3[FCUTBFUV_V@:RXMK7N<-
M9A$_Z']^6RTMBAA&*E3@OQY<')SU3,_48/_]=YS=<[VI:H%%2`9'"R*R#+RO
M1_8^!#>N&;*^I[TBA6A0,U1PM;<'B!<`LKXT"#FI:3D`O:.=NTA$]GZ*P7HN
M?Y6<39F-8.:;<=F0G`?K%Y?C1A+=\J;,P8];[8HR>PI4Z:&HOX4"F]W3NGKV
MX^7YZ?F'F_KG=Z`R?;_OQ8=E]_"*4<%'S*QNNWE(C098&L3MC&X;$QYVK)LT
M6MBWN/>@<&?1ONG9S>*+,3=1?/('.8R%8NU)1O%1O."6#/;BE"`\;L+'&QBO
MIDM1;R?P,7KJQ9O(L586"/)>W<2F:]QMPJYK+-3';-]+RVG8
MJ2ZN23C4="EYF]K:5;Q(!WJ$4PR
VUP/K/Y9*;`BKNS
MLJJ^Z`OR:3X',*;S#!I-/\)%%C>=@WUFL2H^KJ8G76:36;E>79:
MC$\*-!@1DB+`S2Z!7R`(_#0;&<:-+C+A:34S04$/?EI7*\.,[N^^+N;%9+K*
M%K-\GCYWW5PW;KP[29L;PZ*V@:U?YRQL5`!8N`/5)IQ[7HPPTWMFIGO0$V$_
MKRJ&Z*U-1!98&+6+/ZSARTSHVGT0F%@MIR-)L1[M?HT5D"]29
=EX^=FCQ]O/WFZN[W_
M]%%8@O"`2`NW]A@/(X9;]KLG>]N/GCX&)9\FSP+WX=%-D)\OIO*LL+1R>N7=
M3IIU=S>)Z">(,YF.L(?WP>153BC7^"S7_:PTGT^RWW@=\@&ZOW%-3CVEE*O#
M3R=":"2Y[:]O:5'?XL\1`.,^$QM^LRS5``.7
M;#`J[/U6'E,V/5ODT^6@AVU^XWJT6B]!_NZO38/N'>>*\H4>T7)VGXM.X`6T
MKHHE9L"@P.BJD,Z
$!>/'0]5Q/1(N[$6411XA1Q!73
M0@CD#"E#_IOS1G/)
MZO*3)S8&_UCSJ]\=J%%8-]'^],JRB":*HE+(O^'MBO`&VIX)]9THKW;"F\51
M"7RSMQ.40,D?9'W.J5DIX3*[I:X#B1:-71IC!*T+?7