The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
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 2015 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 2015 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 quarters ended August 31,
2016 and August 31, 2015 and as of November 30, 2015. No events occurred related to these foreign subsidiaries during the months of September 2016, September 2015 or December 2015 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.
Recently
Adopted Accounting Pronouncement
In April 2015, the Financial Accounting Standards Board (FASB) issued an accounting
standard update that requires debt issuance costs to be presented as a direct deduction from the carrying amount of the related debt rather than as an asset. In 2016, the company retrospectively adopted this update, as required, and the amounts
reclassified from other assets to long-term debt on the consolidated balance sheets were not material.
New Accounting Pronouncements Not Yet Adopted
In March 2016, the FASB issued an accounting standard update that includes multiple provisions intended to simplify various aspects of
the accounting for share-based payments, including the income tax items and the classification of these items on the statement of cash flows. This update will be effective as of the beginning of Bards 2017 fiscal year. The company is assessing
this update and has not yet determined the impact to the consolidated financial statements.
In February 2016, the FASB issued a new
accounting standard to use in the accounting for leases. The new standard will require, among other items, lessees to recognize most leases on the balance sheet by recording a right-of-use asset and a lease liability. This standard will be effective
as of the beginning of Bards 2019 fiscal year. The company is assessing the new standard and has not yet determined the impact to the consolidated financial statements.
In November 2015, the FASB issued an accounting standard update that simplifies the balance sheet classification of deferred taxes. This
update requires all deferred tax assets and liabilities to be reported as non-current in the balance sheet. This update will be effective as of the beginning of Bards 2017 fiscal year. Other than the reclassification to non-current of the
short-term deferred tax assets and liabilities recognized in the consolidated balance sheets, this update is not expected to have a material impact on the companys consolidated financial statements.
In May 2014, the FASB issued a new accounting standard that provides for a comprehensive model to use in the accounting for revenue arising
from contracts with customers. Under this standard, revenue will be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for
those goods or services. The company continues to assess the new standard, as well as updates to the standard that have been proposed by the FASB, and has not yet determined the impact to the consolidated financial statements. The company will adopt
the new standard beginning with Bards 2018 fiscal year.
2. Acquisitions
On January 21, 2016, the company acquired all of the outstanding shares of Liberator Medical Holdings, Inc. (Liberator), a
publicly-held direct-to-consumer distributor of urological catheters, ostomy supplies, mastectomy fashions and diabetic medical supplies for a purchase price of $181.1 million. This acquisition enhanced the companys position in the home
healthcare market in the United States. The acquisition was accounted for as a business combination, and the results of operations have been included in the companys results since the acquisition date. The fair value of the assets acquired and
the liabilities assumed results in the recognition of: customer relationships of $53.0 million; other intangibles of $26.0 million, primarily consisting of a trade name and non-compete agreements; deferred tax liabilities of $31.6 million, primarily
associated with intangible assets; and other net assets of $11.9 million. The excess of the purchase price over fair value of the acquired net assets was recorded as goodwill of $121.8 million. The goodwill recognized includes the value of expected
market expansion in the home healthcare market through Liberators direct-to-consumer capabilities that provide additional opportunity for market penetration. Additionally, synergies are expected to result from the alignment of sales call
points
7
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
within the companys sales organization. The goodwill is not deductible for tax purposes. Customer relationships and other intangible assets are being amortized over their weighted average
estimated useful lives of approximately 12 years and 8 years, respectively. 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 December 3, 2015, the company, through a wholly-owned foreign subsidiary, acquired all of the outstanding shares of Embo Medical
Limited (Embo), a privately-held company headquartered in Galway, Ireland, specializing in the development of peripheral embolization devices. The total purchase consideration included an up-front cash payment of $21.0 million and the
fair value of future additional milestone payments of up to $22.5 million that are contingent upon specific regulatory and revenue-related milestones being achieved, which had a fair value of $16.6 million as of the acquisition date. The acquisition
was recognized in the first quarter of 2016 for this foreign subsidiary. The fair value of the assets acquired and the liabilities assumed resulted in the recognition of: an acquired in-process research and development asset (IPR&D)
of $36.1 million related to the development of the Caterpillar
TM
vascular plug device; goodwill of $4.4 million; and other net liabilities of $2.9 million. The goodwill is not deductible for tax
purposes. 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 regulatory success, utilizing a risk-adjusted discount rate of 17.5%. The
fair value of the future contingent consideration was determined utilizing a probability weighted cash flow estimate adjusted for the expected timing of the payment. 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.
3. 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,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
(dollars and shares in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
96.4
|
|
|
$
|
(86.0
|
)
|
|
$
|
371.8
|
|
|
$
|
(0.9
|
)
|
Less: Income allocated to participating securities
|
|
|
0.4
|
|
|
|
|
|
|
|
1.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$
|
96.0
|
|
|
$
|
(86.0
|
)
|
|
$
|
370.0
|
|
|
$
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
74.1
|
|
|
|
74.1
|
|
|
|
74.0
|
|
|
|
74.2
|
|
Dilutive common share equivalents from share-based compensation plans
|
|
|
1.2
|
|
|
|
|
|
|
|
1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common and common equivalent shares outstanding, assuming dilution
|
|
|
75.3
|
|
|
|
74.1
|
|
|
|
75.2
|
|
|
|
74.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For both the quarter and nine months ended September 30, 2015, common share equivalents of approximately 1.3
million were not included in the computation of diluted weighted average shares outstanding. Common share equivalents primarily from share-based compensation plans were not included in these periods because their effect would have been
anti-dilutive.
4. Income Taxes
The
companys effective tax rate for the quarter and nine months ended September 30, 2016 was 14.1% and 19.7%, respectively. The effective tax rate for the quarter and nine months ended September 30, 2016 reflected the discrete tax effects of
litigation charges related to product liability claims, which were substantially incurred in a high tax jurisdiction and a benefit of $2.6 million related to the completion of certain U.S. Internal Revenue Service examinations. See Note 7 of the
notes to condensed consolidated financial statements.
The effective tax rate for the quarter and nine months ended September 30, 2015
reflected the discrete tax effects of litigation charges, primarily related to product liability claims, which were substantially incurred in a low tax jurisdiction. The effective tax rate for the nine months ended September 30, 2015 also reflected
the discrete tax effects of the gain related to the proceeds received from W. L. Gore & Associates, Inc. (Gore), which was incurred in a high tax jurisdiction. See Note 7 of the notes to condensed consolidated financial statements.
At September 30, 2016, the total amount of liability for unrecognized tax benefits related to federal, state and foreign taxes was $21.8
million (of which $18.2 million would impact the effective tax rate, if recognized) plus $3.3 million of
8
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
accrued interest. At December 31, 2015, the liability for unrecognized tax benefits was $22.3 million plus $2.8 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 $3.0 million within the next 12 months.
5. Financial Instruments
For further
discussion regarding the companys use of derivative instruments, see Note 1 of the notes to consolidated financial statements in Bards 2015 Annual Report on Form 10-K.
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 $321.4 million and $191.6 million at September 30, 2016 and December 31, 2015, respectively.
Interest Rate Derivative Instruments
In
January 2016, the companys outstanding interest rate swap contract was terminated concurrent with the maturity of the underlying 2.875% fixed-rate notes. The notional value of the companys interest rate swap contract was $250 million and
effectively converted these fixed-rate notes to a floating-rate instrument.
In May 2016, the companys forward starting interest
rate swap contract was settled concurrent with the issuance of 3.000% fixed-rate notes due 2026. The fair value of the forward starting interest rate swap contract at settlement recorded in accumulated other comprehensive loss was a loss of $23.3
million. This loss will be recognized as interest expense over the term of these notes. The notional value of the companys forward swap contract was $250 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,
2016
|
|
|
December 31,
2015
|
|
(dollars in millions)
|
|
|
|
|
|
|
|
|
|
Forward currency contracts
|
|
|
Other current assets
|
|
|
$
|
1.3
|
|
|
$
|
2.9
|
|
Option currency contracts
|
|
|
Other current assets
|
|
|
|
0.2
|
|
|
|
3.8
|
|
Interest rate swap contract
|
|
|
Other current assets
|
|
|
|
|
|
|
|
0.2
|
|
Forward currency contracts
|
|
|
Other assets
|
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.8
|
|
|
$
|
6.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency contracts
|
|
|
Accrued expenses
|
|
|
$
|
11.4
|
|
|
$
|
6.2
|
|
Interest rate swap contract
|
|
|
Accrued expenses
|
|
|
|
|
|
|
|
8.0
|
|
Forward currency contracts
|
|
|
Other long-term liabilities
|
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13.9
|
|
|
$
|
14.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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 into
Income
|
|
|
Gain/(Loss) Reclassified
from Accumulated
Other Comprehensive Loss
into Income
|
|
|
|
Quarter Ended
September 30,
|
|
|
|
Quarter Ended
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
2016
|
|
|
2015
|
|
(dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency contracts
|
|
$
|
(3.5
|
)
|
|
$
|
(3.6
|
)
|
|
|
Cost of goods sold
|
|
|
$
|
(1.2
|
)
|
|
$
|
(1.6
|
)
|
Option currency contracts
|
|
|
(0.3
|
)
|
|
|
(2.4
|
)
|
|
|
Cost of goods sold
|
|
|
|
(0.8
|
)
|
|
|
4.5
|
|
Interest rate swap contract
|
|
|
|
|
|
|
(12.9
|
)
|
|
|
Interest expense
|
|
|
|
(0.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3.8
|
)
|
|
$
|
(18.9
|
)
|
|
|
|
|
|
$
|
(2.5
|
)
|
|
$
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(Loss)
Recognized in Other
Comprehensive
Income (Loss)
|
|
|
Location of
Gain/(Loss) Reclassified
from Accumulated
Other Comprehensive
Loss into
Income
|
|
|
Gain/(Loss) Reclassified
from Accumulated
Other Comprehensive Loss
into Income
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
2016
|
|
|
2015
|
|
(dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward currency contracts
|
|
$
|
(15.3
|
)
|
|
$
|
(5.4
|
)
|
|
|
Cost of goods sold
|
|
|
$
|
(5.9
|
)
|
|
$
|
(1.0
|
)
|
Option currency contracts
|
|
|
(3.3
|
)
|
|
|
8.0
|
|
|
|
Cost of goods sold
|
|
|
|
0.2
|
|
|
|
9.0
|
|
Interest rate swap contract
|
|
|
(15.3
|
)
|
|
|
(10.7
|
)
|
|
|
Interest expense
|
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(33.9
|
)
|
|
$
|
(8.1
|
)
|
|
|
|
|
|
$
|
(6.6
|
)
|
|
$
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and (liabilities) measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
(dollars in millions)
|
|
|
|
|
|
|
Forward currency contracts
|
|
$
|
(12.3
|
)
|
|
$
|
(3.3
|
)
|
Option currency contracts
|
|
|
0.2
|
|
|
|
3.8
|
|
Interest rate swap contracts
|
|
|
|
|
|
|
(7.8
|
)
|
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 $19.7 million and $11.2 million at September 30, 2016
and December 31, 2015, respectively. The increase in the fair value of the liability for contingent consideration was primarily related to the addition of contingent consideration due to the acquisition of Embo and was partly offset by a reduction
in the probability of the achievement of other unrelated revenue-based and manufacturing-related milestones. See Note 2 of the notes to condensed consolidated financial statements. The fair value was measured using significant unobservable inputs
and is categorized as Level 3 under the fair value hierarchy.
Financial Instruments Not Measured at Fair Value
The company maintains a $1 billion five-year committed syndicated bank credit facility that expires in November 2020. The credit facility
supports the companys commercial paper program and can be used for general corporate purposes.
10
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The facility includes pricing based on the companys long-term credit ratings and includes a financial covenant that limits the amount of total debt to total capitalization. At September 30,
2016 the company was in compliance with this covenant. There were no commercial paper borrowings outstanding at September 30, 2016 or December 31, 2015.
On May 9, 2016, the company issued $500 million aggregate principal amount of 3.000% senior unsecured notes due 2026. Interest on the notes is
payable semi-annually. Net proceeds from this offering were approximately $495.6 million, after deducting debt offering costs, consisting of underwriting commissions and offering expenses of $4.3 million and a debt issuance discount of $0.1 million,
which were both recorded to long-term debt. The debt offering costs and debt issuance discount will be amortized over the term of the notes. Net proceeds from the issuance of the notes were used for general corporate purposes, including repayment of
outstanding commercial paper.
The estimated fair value of long-term debt (including current maturities and the effect of the related
interest rate swap contract for the prior year period) was approximately $1,748.7 million and $1,449.8 million at September 30, 2016 and December 31, 2015, respectively. The fair value was estimated using dealer quotes for similarly-rated
debt instruments over the remaining contractual term of the companys obligation and is categorized as Level 2 under the fair value hierarchy.
The fair value of the non-contingent future payments related to the Medicon, Inc. acquisition of $79.1 million and $66.0 million at September
30, 2016 and December 31, 2015, respectively, approximated the carrying value. At September 30, 2016 and December 31, 2015, future payments of $60.3 million and $50.3 million, respectively, were recorded to other long-term liabilities. These
payments will be paid in Japanese Yen and are subject to exchange rate fluctuations. The fair value was estimated by discounting the future payments based upon the timing of such payments and 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 monitors economic conditions and evaluates accounts receivable in certain countries for potential collection risks. Economic
conditions and other factors in certain countries, particularly in Spain, Italy, Greece and Portugal, 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. At September 30, 2016, the companys accounts receivable, net of allowances, from the national healthcare systems and private sector customers in
these four countries was $45.9 million, of which $4.2 million was greater than 365 days past due.
6. Inventories
Inventories consisted of:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
(dollars in millions)
|
|
|
|
|
|
|
Finished goods
|
|
$
|
293.3
|
|
|
$
|
252.3
|
|
Work in process
|
|
|
32.9
|
|
|
|
23.8
|
|
Raw materials
|
|
|
161.5
|
|
|
|
137.6
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
487.7
|
|
|
$
|
413.7
|
|
|
|
|
|
|
|
|
|
|
7. Contingencies
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. If the estimate of a probable loss is a range and no amount within the range is more likely, the company accrues the minimum amount
of the range. 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
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.
11
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Product Liability Matters
Hernia Product Claims
As
of September 30, 2016, approximately 30 federal and 80 state lawsuits involving individual claims by approximately 105 plaintiffs, as well as one putative class action 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. 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. The MDL stopped accepting new cases in the second quarter of 2014. As of
September 30, 2016, all but one of the putative class actions pending against the company were dismissed. The remaining putative class action pending against the company has not been certified and seeks: (i) medical monitoring; (ii) compensatory
damages; (iii) punitive damages; (iv) a judicial finding of defect and causation; and/or (v) attorneys fees. In April 2014, a settlement was reached with respect to the three putative Canadian class actions within amounts previously recorded
by the company. Approximately 60 of the state lawsuits, involving individual claims by approximately 60 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.
The company has resolved the majority of its
historical Hernia Product Claims, including through agreements or agreements in principle with various plaintiffs law firms to settle their respective inventories of cases. Each agreement involving the settlement of a firms inventory of
claims was 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 expects additional trials of Hernia Product Claims to take
place over the next 12 months. 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 lawsuit, will not have a material
adverse effect on the companys business, results of operations, financial condition and/or liquidity.
Womens Health
Product Claims
As of September 30, 2016, product liability lawsuits involving individual claims by approximately 10,110 plaintiffs are
currently pending 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, which includes products manufactured by both
the company and two subsidiaries of Medtronic plc (as successor in interest to Covidien plc) (Medtronic), each a supplier of the company. Medtronic has an obligation to defend and indemnify the company with respect to any product defect
liability. As described below, in July 2015 the company reached an agreement with Medtronic regarding certain aspects of Medtronics indemnification obligation. In addition, five putative class actions in the United States and five putative
class actions in Canada have been filed against the company, and a limited number of other claims have been filed or asserted in various non-U.S. jurisdictions. The foregoing lawsuits, unfiled or unknown claims, putative class actions and other
claims, together with claims that have settled or are the subject of agreements or agreements in principle to settle, are referred to collectively as 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. In April 2015, the Ontario Superior Court of Justice dismissed the plaintiffs motion for class certification in one Canadian putative class action. In March 2016, the company reached an
agreement in principle to resolve all Canadian putative class actions, with the exception of a Quebec class action, within amounts previously recorded by the company. The company expects administration of those settlements to take place over the
next several quarters.
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 WV District Court), 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 first trial in a state court was completed in California in July 2012 and resulted
in a judgment against the company of approximately $3.6 million. On appeal the decision was affirmed by the appellate court in November 2014. The company filed a petition for review to the California Supreme Court
12
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
on December 24, 2014, which was denied on February 18, 2015. The judgment in this matter, including interest and costs, was paid on March 20, 2015 within the amounts previously recorded by the
company. The first trial in the MDL commenced in July 2013 and resulted in a judgment against the company of approximately $2 million, which was upheld by the Fourth Circuit on January 14, 2016. The company does not believe that any verdicts entered
to date are representative of potential outcomes of all Womens Health Product Claims. On January 16, 2014 and July 31, 2014, the WV District Court ordered that the company prepare 200 and then an additional 300 individual cases, respectively,
for trial (the WHP Pre-Trial Orders) (the timing for which is currently unknown). The WHP Pre-Trial Orders resulted in significant additional litigation-related defense costs beginning in the second quarter of 2014 and continuing through
the second quarter of 2015. In February 2015, the WV District Court appointed a Special Master to assist with settlement resolution. In June 2015, the WV District Court issued an order staying the requirement to prepare a significant portion of the
cases covered by the WHP Pre-Trial Orders, which stay could be modified at the courts discretion. The WHP Pre-Trial Orders may result in material additional cost in future periods in defending Womens Health Product Claims. The WV
District Court may also order that the company prepare additional cases for trial, which could result in material additional costs in future periods.
As of September 30, 2016, the company reached agreements or agreements in principle with various plaintiffs law firms to settle their
respective inventories of cases totaling approximately 9,860 Womens Health Product Claims, including approximately: 560 during 2014, 6,285 during 2015 and 3,015 during 2016. The company believes that these Womens Health Product Claims
are not the subject of Medtronics indemnification obligation. These settlement agreements and agreements in principle include unfiled and previously unknown claims held by various plaintiffs law firms, which have not been included in the
approximate number of lawsuits set forth in the first paragraph of this section. Each agreement is subject to certain conditions, including requirements for participation in the proposed settlements by a certain minimum number of plaintiffs. The
company continues to engage in discussions with other plaintiffs law firms regarding potential resolution of unsettled Womens Health Product Claims, which may include additional inventory settlements. Notwithstanding these settlement
efforts, the company anticipates additional trials over the next 12 months. In addition, one or more possible consolidated trials may occur in the future.
In July 2015, as part of the agreement noted above, Medtronic agreed to take responsibility for pursuing settlement of certain of the
Womens Health Product Claims that relate to products distributed by the company under supply agreements with Medtronic and the company has paid Medtronic $121 million towards these potential settlements. The company also may, in its sole
discretion, transfer responsibility for settlement of additional Womens Health Product Claims to Medtronic on similar terms. The agreement does not resolve the dispute between the company and Medtronic with respect to Womens Health
Product Claims that do not settle, if any. As part of the agreement, Medtronic and the company agreed to dismiss without prejudice their previously filed litigation with respect to Medtronics obligation to defend and indemnify the company.
The approximate number of lawsuits set forth in the first paragraph of this section does not include approximately 655 generic complaints
involving womens health products where the company cannot, based on the allegations in the complaints, determine whether any of those cases involve the companys womens health products. In addition, the approximate number of
lawsuits set forth in the first paragraph of this section does not include approximately 980 claims that have been threatened against the company but for which complaints have not yet been filed. In addition, the company has limited information
regarding the nature and quantity of these and other unfiled or unknown claims. During the course of engaging in settlement discussions with plaintiffs law firms, the company has learned, and may in future periods learn, additional
information regarding these and other unfiled or unknown claims, or other lawsuits, which could materially impact the companys estimate of the number of claims or lawsuits against the company. While the company continues to engage in
discussions with other plaintiffs law firms regarding potential resolution of unsettled Womens Health Product Claims and intends to vigorously defend the Womens Health Product Claims that do not settle, including through
litigation, 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.
Filter Product Claims
As
of September 30, 2016, product liability lawsuits involving individual claims by approximately 1,055 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 (all lawsuits, collectively, the Filter Product Claims). In August 2015, the Judicial Panel for Multi-District Litigation (JPML) ordered the creation of a Multi-District
Litigation for all federal Filter Product Claims (the IVC Filter MDL) in the District of Arizona. There are approximately 1,005 Filter Product Claims that have been, or shortly will be, transferred to the IVC Filter MDL. The remaining
approximately 50 Filter Product Claims are pending in various state courts. In March 2016, a Canadian class action was filed against the company in Quebec. In April 2016 and May 2016, Canadian class actions were filed in Ontario and British
Columbia, respectively. The approximate
13
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
number of lawsuits set forth above does not include approximately 40 claims that have been threatened against the company but for which complaints have not yet been filed. In addition, the
company has limited information regarding the nature and quantity of these and other unfiled or unknown claims. The company continues to receive claims and lawsuits and may in future periods learn additional information regarding other unfiled
or unknown claims, or other lawsuits, which could materially impact the companys estimate of the number of claims or lawsuits against the company. The company expects that additional trials of Filter Product Claims may take place over the
next 12 months. While the company intends to vigorously defend Filter Product Claims that do not settle, including through litigation, 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.
General
In most product liability litigations (like those described above), 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 some 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, or, in some circumstances, indemnification obligations to the company from other parties. 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. In addition, other parties may dispute their indemnification obligations to the company with respect to
certain claims. When either of these occur, the company intends to vigorously contest disputes with respect to its insurance coverage or indemnification and to enforce its rights, and accordingly, will record expected recoveries with respect to
amounts due under these policies or arrangements, when recovery is probable. Amounts recovered under the companys product liability insurance policies or indemnification arrangements may be less than the stated coverage limits or less than
otherwise expected and may not be adequate to cover damages and/or costs relating to claims. In addition, there is no guarantee that insurers or other parties will pay claims or that coverage or indemnity will be otherwise available.
The companys insurance coverage with respect to the Hernia Product Claims has been exhausted. The company continues to evaluate its
available insurance coverage as it relates to Womens Health Product Claims and Filter Product Claims.
Other Legal Matters
Since early 2013, the company has 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 2015, the Department of Defense Inspector General issued an investigative subpoena to the company. The
Department of Health and Human Services is also participating in this investigation. The subpoena seeks documents related to the companys sales and marketing of certain filter products, drug coated balloon catheters, and peripheral
arterial disease detection products. 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 June 2011,
Gore filed suit in the U.S. District Court in Delaware alleging the company had infringed on several of Gores patents. Fact and expert discovery have been completed and in the fourth quarter of 2014, the parties both filed a number of motions,
including motions for summary judgment. Oral arguments on the motions occurred on January 30, 2015. In December 2015, the Delaware District Court granted the companys summary judgment motion of no willful infringement. However, that decision
was vacated in June 2016 due to a United States Supreme Court ruling that changed the test for willful infringement historically applied by the lower courts. In July 2016, the companys summary judgment motion of laches (undue delay) was
denied, at least in part because the Supreme Court will be hearing a case on this issue during the Fall 2016 term. In the third quarter of 2015, the company filed a motion to dismiss a significant portion of Gores damages claim on the grounds
that Gore lacks proper standing. This motion was converted to a motion for summary judgment and was granted in July 2016. The trial on this matter has been set for March 2017. The company intends to vigorously defend the allegations asserted by
Gore. The company cannot give any assurances that an adverse resolution of this matter will not have a material adverse effect on the companys business, results of operations, financial condition and/or liquidity.
14
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
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.
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.
In the second quarter of 2014, the company recorded a charge, net of estimated recoveries to other (income) expense, net, of
approximately $259 million ($238 million after tax) related to certain of the product liability matters discussed above under the heading Product Liability Matters. The company recorded this charge based on additional information
obtained during the quarter, including but not limited to: 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. Specifically, the company considered its discussions with plaintiffs counsel, the increase in the rate of claims being
filed (which led the company to increase its estimate of future Womens Health Product Claims), and the value, number of cases and nature of the inventory of cases with respect to the recent settlements of claims by the company and other
manufacturers.
In the second quarter of 2015, the company recorded an additional charge related to these matters, net of estimated
recoveries to other (income) expense, net, of approximately $337 million ($325 million after tax). The company recorded this charge based on additional information obtained during the quarter, including with respect to the factors noted above.
Specifically the company considered the agreement and the agreement in principle by the company to settle approximately 2,880 Womens Health Product Claims, the involvement of the Special Master in settlement resolution, additional settlements
by other manufacturers subject to product liability claims with respect to similar products, and the continued rate of claims being filed (which led the company to increase its estimate of future Womens Health Product Claims).
In the third quarter of 2015, the company recorded an additional charge related to these matters to other (income) expense, net, of
approximately $241 million ($228 million after tax). The company recorded this charge based on additional information obtained with respect to the quarter, including with respect to the factors noted above. Specifically, the company considered the
agreements and the agreement in principle by the company to settle approximately 3,030 Womens Health Product Claims, discussions with plaintiffs counsel, additional information learned regarding the nature and quantity of unfiled and
unknown claims (which led the company to increase its estimate of future Womens Health Product Claims), a reconciliation of claims in connection with settlements, additional settlements by other manufacturers subject to product liability
claims with respect to similar products, the rate of claims being filed, and the creation of the IVC Filter MDL.
In the first quarter of
2016, the company recorded an additional charge related to these matters to other (income) expense, net, of approximately $49 million ($31 million after tax). The company recorded this charge based on additional information obtained with respect to
the quarter. Specifically, the company considered, among other factors, additional
15
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
information learned regarding the nature and quantity of unfiled and filed claims, the increase in advertising by plaintiffs counsel with respect to IVC filters and an increase in the rate
of claims being filed in Filter Product Claims (which led the company to increase its estimate of future Filter Product Claims).
In the
third quarter of 2016, the company recorded an additional charge related to these matters to other (income) expense, net, of approximately $111 million ($77 million after tax). The company recorded this charge based on additional information
obtained with respect to the quarter, including with respect to the factors noted above. Specifically, the company considered, among other factors, additional information learned regarding Product Liability Matters, including regarding the nature
and quantity of unfiled and filed claims and the continued rate of claims being filed in certain Product Liability Matters (which led the company to increase its estimate of future claims for certain Product Liability Matters, including Filter
Product Claims).
These charges recognized the estimated costs for the product liability matters discussed above, including (with respect
to such matters) filed and an estimate of unfiled and unknown claims, and costs to administer the settlements related to such matters. These charges exclude any costs associated with the putative class action lawsuits in the United States.
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 filed, unfiled and unknown 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 $1,066.4 million, of which $404.3 million
was recorded to accrued expenses, and $1,174.3 million, of which $516.5 million was recorded to accrued expenses, at September 30, 2016 and December 31, 2015, respectively. The company has made total payments of $676.5 million to qualified
settlement funds (QSFs), subject to certain settlement conditions, for certain product liability matters since 2011, of which $289.3 million were made to QSFs during the nine months ended September 30, 2016. Payments to QSFs are recorded
as a component of restricted cash. Total payments of $524.8 million from these QSFs have been made to qualified claimants, of which $216.1 million were made during the nine months ended September 30, 2016. In addition, other payments of $71.6
million have been made to qualified claimants, of which $9.1 million were made during the nine months ended September 30, 2016.
The
company recorded expected recoveries related to product liability matters amounting to $135.4 million, all of which was recorded to other assets, and $132.8 million, of which $132.1 million was recorded to other assets, at September 30, 2016 and
December 31, 2015, respectively. The terms of the companys agreement with Medtronic are substantially consistent with the assumptions underlying, and the manner in which, the company has recorded expected recoveries related to the
indemnification obligation. The expected recoveries at September 30, 2016 and December 31, 2015 related to the indemnification obligation are not in dispute with respect to claims that Medtronic settles pursuant to the agreement. As described above,
the agreement does not resolve the dispute between the company and Medtronic with respect to Womens Health Product Claims that do not settle, if any, and the company also may, in its sole discretion, transfer responsibility for settlement of
additional Womens Health Product Claims to Medtronic on similar terms.
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 putative class action lawsuits in the United
States and certain of the Canadian 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. In addition, with respect to the investigative subpoenas issued by various state and federal government agencies and other legal 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; and/or (ii) there are significant factual issues to be resolved. With respect to Gores suit against the company alleging
infringement of certain of Gores patents, the company is unable to estimate a range of reasonably possible losses for the following reasons: (i) the stage of the proceedings; (ii) the company has not received and reviewed complete information
in discovery; and/or (iii) there are significant factual and legal issues to be resolved.
16
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
8. 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. The total number of
remaining shares at September 30, 2016 that may be issued under the LTIP was 4,670,191 and under the Directors Plan was 26,102. 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.
For the quarters ended September 30, 2016 and 2015, amounts charged against income for share-based payment arrangements were
$19.0 million and $17.0 million, respectively. For the nine months ended September 30, 2016 and 2015, amounts charged against income for share-based payment arrangements were $68.3 million and $61.1 million, respectively.
In the first quarter of each of 2016 and 2015, 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 2016 and 2015 grants were estimated based on the following assumptions: risk-free interest rate of 0.83% and 0.86%, respectively; dividend
yield of 0.52% and 0.51%, respectively; and expected life of 2.89 and 2.78 years, respectively.
Anticipated purchases under the
Management Stock Purchase Program (the MSPP) are approximately 0.1 million shares for the 2016 grant. Purchases under the MSPP were approximately 0.2 million shares for the 2015 grant. The fair value of the 2016 annual MSPP purchases was
$83.23 per share and was estimated in July 2016. The fair value of the 2015 annual MSPP purchases was $60.47 per share. These fair value calculations used the Black-Scholes model based on the following assumptions: risk free interest rate of 0.39%
and 0.16%, respectively; expected volatility of 18% and 17%, respectively; dividend yield of 0.5% and 0.6%, respectively; and expected life of 0.6 years for both valuations.
As of September 30, 2016, there were $109.9 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 2016.
9. 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,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
(dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost, net of employee contributions
|
|
$
|
7.5
|
|
|
$
|
7.1
|
|
|
$
|
22.0
|
|
|
$
|
22.1
|
|
Interest cost
|
|
|
4.8
|
|
|
|
5.2
|
|
|
|
14.2
|
|
|
|
15.1
|
|
Expected return on plan assets
|
|
|
(8.0
|
)
|
|
|
(7.9
|
)
|
|
|
(24.2
|
)
|
|
|
(23.5
|
)
|
Amortization
|
|
|
2.6
|
|
|
|
3.1
|
|
|
|
7.8
|
|
|
|
8.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension cost
|
|
$
|
6.9
|
|
|
$
|
7.5
|
|
|
$
|
19.8
|
|
|
$
|
22.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2016, the company changed its method used to estimate the service and interest cost components of net
periodic benefit cost for defined benefit plans from a single weighted-average discount rate to a full yield curve approach. The reduction in service and interest cost for the quarter and nine months ended September 30, 2016 associated with this
change in estimate was approximately $1.2 million and $3.8 million, respectively.
17
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
10. Shareholders Investment
The company repurchased approximately 1.2 million shares of common stock for $231.8 million in the nine months ended September 30, 2016 under
its previously announced share repurchase authorizations.
Other Comprehensive Income (Loss)
The changes in accumulated other comprehensive income (loss) by component are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
Instruments
Designated as
Cash Flow Hedges
|
|
|
Foreign Currency
Translation
Adjustments
|
|
|
Benefit
Plans
|
|
|
Total
|
|
(dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
$
|
0.9
|
|
|
$
|
(3.1
|
)
|
|
$
|
(86.6
|
)
|
|
$
|
(88.8
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
(8.3
|
)
|
|
|
(61.4
|
)
|
|
|
|
|
|
|
(69.7
|
)
|
Tax (provision) benefit
(a)
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications, net of taxes
|
|
|
(5.9
|
)
|
|
|
(61.4
|
)
|
|
|
|
|
|
|
(67.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications
|
|
|
(8.0
|
)
(b)
|
|
|
|
|
|
|
8.9
|
(c)
|
|
|
0.9
|
|
Tax provision (benefit)
|
|
|
2.4
|
|
|
|
|
|
|
|
(3.1
|
)
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications, net of tax
|
|
|
(5.6
|
)
|
|
|
|
|
|
|
5.8
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
(11.5
|
)
|
|
|
(61.4
|
)
|
|
|
5.8
|
|
|
|
(67.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2015
|
|
$
|
(10.6
|
)
|
|
$
|
(64.5
|
)
|
|
$
|
(80.8
|
)
|
|
$
|
(155.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
$
|
(8.7
|
)
|
|
$
|
(94.2
|
)
|
|
$
|
(105.1
|
)
|
|
$
|
(208.0
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
(31.1
|
)
|
|
|
8.2
|
|
|
|
|
|
|
|
(22.9
|
)
|
Tax (provision) benefit
(a)
|
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications, net of taxes
|
|
|
(22.6
|
)
|
|
|
8.2
|
|
|
|
|
|
|
|
(14.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications
|
|
|
6.6
|
(b)
|
|
|
|
|
|
|
7.8
|
(c)
|
|
|
14.4
|
|
Tax provision (benefit)
|
|
|
0.1
|
|
|
|
|
|
|
|
(2.7
|
)
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassifications, net of tax
|
|
|
6.7
|
|
|
|
|
|
|
|
5.1
|
|
|
|
11.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
|
(15.9
|
)
|
|
|
8.2
|
|
|
|
5.1
|
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2016
|
|
$
|
(24.6
|
)
|
|
$
|
(86.0
|
)
|
|
$
|
(100.0
|
)
|
|
$
|
(210.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Income taxes are not provided for foreign currency translation adjustment.
|
(b)
|
See Note 5 of the notes to condensed consolidated financial statements.
|
(c)
|
These components are included in the computation of net periodic pension cost. See Note 9 of the notes to condensed consolidated financial statements.
|
11. Segment Information
The
companys management considers its business to be a single segment entity the 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.
18
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Net sales based on the location of external customers by geographic region are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
(dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
646.0
|
|
|
$
|
606.5
|
|
|
$
|
1,904.5
|
|
|
$
|
1,772.6
|
|
Europe
|
|
|
108.6
|
|
|
|
107.4
|
|
|
|
328.6
|
|
|
|
322.6
|
|
Japan
|
|
|
60.1
|
|
|
|
41.6
|
|
|
|
150.5
|
|
|
|
125.8
|
|
Other
|
|
|
127.2
|
|
|
|
110.2
|
|
|
|
363.3
|
|
|
|
324.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
941.9
|
|
|
$
|
865.7
|
|
|
$
|
2,746.9
|
|
|
$
|
2,545.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales by product group category are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
September 30,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
(dollars in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
Vascular
|
|
$
|
258.1
|
|
|
$
|
250.5
|
|
|
$
|
752.9
|
|
|
$
|
731.0
|
|
Urology
|
|
|
242.1
|
|
|
|
212.3
|
|
|
|
698.8
|
|
|
|
627.1
|
|
Oncology
|
|
|
258.4
|
|
|
|
239.3
|
|
|
|
752.7
|
|
|
|
699.1
|
|
Surgical Specialties
|
|
|
158.8
|
|
|
|
139.8
|
|
|
|
470.1
|
|
|
|
419.5
|
|
Other
|
|
|
24.5
|
|
|
|
23.8
|
|
|
|
72.4
|
|
|
|
68.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
941.9
|
|
|
$
|
865.7
|
|
|
$
|
2,746.9
|
|
|
$
|
2,545.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19