Edgar Filing: BARD C R INC /NJ/

Form 10-Q

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 March 31, 2010

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.)

Registrant’s 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. (Check one):


Large accelerated filer x		Accelerated filer ¨

Non-accelerated filer ¨		Smaller reporting company ¨

(Do not check if 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 issuer’s classes of common stock, as of the latest practicable date.


Class		Outstanding at March 31, 2010
Common Stock - $0.25 par value		95,097,102

C. R. BARD, INC. AND SUBSIDIARIES

INDEX


		PAGE NO.
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2010 and 2009	3

	Condensed Consolidated Balance Sheets – March 31, 2010 and December 31, 2009	4

	Condensed Consolidated Statements of Shareholders’ Investment for the Three Months Ended March 31, 2010 and 2009	5

	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27

Item 4.	Removed and Reserved	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

Signatures		29

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands except per share amounts, unaudited)


	Three Months Ended March 31,
	2010			2009
Net sales	$	650,800		$	596,400

Costs and expenses:
Cost of goods sold		252,700			224,300
Marketing, selling and administrative expense		179,700			164,300
Research and development expense		40,600			36,400
Interest expense		2,900			3,000
Other (income) expense, net		(100	)		9,300

Total costs and expenses		475,800			437,300

Income from operations before income taxes		175,000			159,100

Income tax provision		53,800			45,900


Net income		121,200			113,200
Net income attributable to noncontrolling interest		300			700

Net income attributable to common shareholders	$	120,900		$	112,500


Basic earnings per share available to common shareholders	$	1.25		$	1.12


Diluted earnings per share available to common shareholders	$	1.24		$	1.10

The accompanying notes are an integral part of these condensed consolidated financial statements.

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands except share and per share amounts, unaudited)


	March 31, 2010			December 31, 2009
ASSETS
Current assets:
Cash and cash equivalents	$	720,400		$	674,400
Short-term investments		13,400			—
Accounts receivable, less allowances of $8,600 and $9,700, respectively		430,800			442,100
Inventories		279,100			295,400
Short-term deferred tax assets		48,600			46,500
Other current assets		33,300			33,400

Total current assets		1,525,600			1,491,800

Property, plant and equipment, at cost		602,700			607,000
Less accumulated depreciation and amortization		277,500			273,900

Net property, plant and equipment		325,200			333,100
Goodwill		500,600			507,400
Other intangibles assets, net		392,800			406,400
Deferred tax assets		104,900			97,400
Other assets		73,100			70,800

Total assets	$	2,922,200		$	2,906,900

LIABILITIES AND SHAREHOLDERS’ INVESTMENT
Current liabilities:
Accounts payable	$	54,900		$	50,800
Accrued compensation and benefits		67,900			98,000
Accrued expenses		91,400			117,500
Income taxes payable		50,000			15,400

Total current liabilities		264,200			281,700

Long-term debt		149,800			149,800
Other long-term liabilities		259,100			249,500
Deferred income taxes		20,200			20,000
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 95,097,102 shares at March 31, 2010 and 95,917,095 shares at December 31, 2009		23,800			24,000
Capital in excess of par value		1,095,000			1,060,900
Retained earnings		1,156,700			1,133,400
Accumulated other comprehensive loss		(59,200	)		(24,700	)
Noncontrolling interest		12,600			12,300

Total shareholders’ investment		2,228,900			2,205,900

Total liabilities and shareholders’ investment	$	2,922,200		$	2,906,900

The accompanying notes are an integral part of these condensed consolidated financial statements.

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ INVESTMENT

(dollars in thousands except share amounts, unaudited)


	Common Stock					Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comp. (Loss)/Inc.			Noncontrolling Interest		Total
	Shares		Amount			Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comp. (Loss)/Inc.			Noncontrolling Interest		Total
Balance at December 31, 2009	95,917,095		$	24,000		$	1,060,900	$	1,133,400		$	(24,700	)	$	12,300	$	2,205,900
Net income									120,900						300		121,200
Change in derivative instruments designated as cash flow hedges (net of $1,200 taxes)												2,700					2,700
Foreign currency translation adjustment												(38,400	)				(38,400	)
Amortization of items included in net periodic benefit cost (net of $600 taxes)												1,200					1,200

Total comprehensive income																	86,700
Issuance of common stock	380,007			100			15,200										15,300
Share-based compensation							14,600										14,600
Purchase of common stock	(1,200,000	)		(300	)				(97,600	)							(97,900	)
Tax benefit relating to share-based compensation plans							4,300										4,300

Balance at March 31, 2010	95,097,102		$	23,800			1,095,000	$	1,156,700		$	(59,200	)	$	12,600	$	2,228,900


Balance at December 31, 2008	99,393,020		$	24,800		$	966,600	$	1,080,200		$	(94,400	)	$	11,000	$	1,988,200
Net income									112,500						700		113,200
Change in derivative instruments designated as cash flow hedges (net of $— taxes)												(1,000	)				(1,000	)
Foreign currency translation adjustment												(9,600	)				(9,600	)
Amortization of items included in net periodic benefit cost (net of $400 taxes)												500					500

Total comprehensive income																	103,100
Issuance of common stock	334,027			100			7,900										8,000
Share-based compensation							14,100										14,100
Purchase of common stock	(425,000	)		(100	)				(36,300	)							(36,400	)
Tax benefit relating to share-based compensation plans							4,600										4,600

Balance at March 31, 2009	99,302,047		$	24,800		$	993,200	$	1,156,400		$	(104,500	)	$	11,700	$	2,081,600

The accompanying notes are an integral part of these condensed consolidated financial statements.

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands, unaudited)


	Three Months Ended March 31,
	2010			2009
Cash flows from operating activities:
Net income	$	121,200		$	113,200
Adjustments to reconcile income to derive net cash provided from operating activities, net of acquired businesses:
Depreciation and amortization		24,300			22,500
Restructuring charge, net of payments		—			9,800
Deferred income taxes		(9,700	)		400
Share-based compensation		14,700			14,200
Inventory reserves and provision for doubtful accounts		3,100			4,100
Other noncash items		(500	)		(200	)
Changes in assets and liabilities, net of acquired businesses:
Accounts receivable		(2,700	)		17,300
Inventories		3,600			(19,500	)
Current liabilities		(20,700	)		(34,400	)
Taxes		39,200			35,800
Other, net		8,900			7,700

Net cash provided by operating activities		181,400			170,900

Cash flows from investing activities:
Capital expenditures		(9,200	)		(11,100	)
Change in short-term investments, net		(13,400	)		—
Payments made for purchases of businesses, net of cash acquired		—			(27,000	)
Payments made for intangibles		(500	)		(2,200	)

Net cash used in investing activities		(23,100	)		(40,300	)

Cash flows from financing activities:
Proceeds from exercises under share-based compensation plans, net		6,700			—
Excess tax benefit relating to share-based compensation plans		4,100			3,500
Purchase of common stock		(97,900	)		(36,400	)
Dividends paid		(16,500	)		(16,100	)

Net cash used in financing activities		(103,600	)		(49,000	)

Effect of exchange rate changes on cash and cash equivalents		(8,700	)		(6,500	)

Increase in cash and cash equivalents during the period		46,000			75,100

Balance at January 1		674,400			592,100

Balance at March 31	$	720,400		$	667,200


Supplemental cash flow information
Cash paid for:
Interest	$	400		$	500
Income taxes		20,000			6,300

The accompanying notes are an integral part of these condensed consolidated financial statements.

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 C. R. Bard, Inc.’s 2009 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 C. R. Bard, Inc.’s 2009 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 February 28, 2010 and February 28, 2009 and as of November 30, 2009. No events occurred related to these foreign subsidiaries during the months of March 2010, March 2009 (other than the impact of the restructuring activities outside the United States), or December 2009 that materially affected the financial position or results of operations of the company. The results for the interim period presented are not necessarily indicative of the results expected for the year.

2. Acquisition

On April 12, 2010, the company acquired all of the outstanding stock of FlowCardia, Inc. (“FlowCardia”), a privately-held company engaged in the design and manufacture of endovascular products used in the treatment of chronic total occlusions (“CTOs”), for total consideration of approximately $80 million. FlowCardia’s products will complement Bard’s percutaneous transluminal angioplasty products and peripheral stents. FlowCardia’s Crosser^® product line of clinically-proven catheters deliver vibrational energy, enabling physicians to cross CTOs and allow for subsequent therapies, such as balloon angioplasty and stent implantation. Due to the timing of the acquisition, the company has not yet completed the initial purchase accounting for this business combination.

3. Restructuring

In April 2009, the company announced a plan (the “Plan”) to reduce its overall cost structure and improve efficiency. The Plan included the consolidation of certain businesses in the United States and the realignment of certain sales and marketing functions outside the United States. The Plan resulted in the elimination of certain positions and other employee terminations worldwide. The company recorded employee separation costs under the company’s existing severance programs and other costs primarily related to one-time termination benefits offered under the Plan. The total pre-tax cost of the plan was $15.4 million ($10.2 million after tax) of which $9.8 million ($6.5 million after tax) was recorded to other (income), expense, net, as of March 31, 2009. Substantially all of these costs were cash expenditures. At March 31, 2010, no liability remains for this restructuring charge.

C. R. BARD, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4. Earnings per Common Share

Earnings per share (“EPS”) is computed under the two-class method using the following common share information:


	Three Months Ended March 31,
	2010		2009
(dollars and shares in millions)
EPS Numerator:
Net income attributable to common shareholders	$	120.9	$	112.5
Less: Income allocated to participating securities		1.4		1.2

Net income available to common shareholders	$	119.5	$	111.3

EPS Denominator:
Weighted average common shares outstanding		95.4		99.3
Dilutive common share equivalents from share-based compensation plans		1.3		1.6

Weighted average common and common equivalent shares outstanding, assuming dilution		96.7		100.9

5. Income Taxes

The company’s effective tax rate for the quarter ended March 31, 2010 was approximately 31% compared to approximately 29% for the same period in 2009. At March 31, 2010, the total amount of liability for unrecognized tax benefits was $53.6 million (of which $45.5 million would impact the effective tax rate if recognized) plus $11.9 million of accrued interest. At December 31, 2009, the liability for unrecognized tax benefits was $53.2 million plus $11.3 million of accrued interest. Depending upon the outcome of the administrative appeals process related to two tax positions under review for the tax years 2003 and 2004 and/or the expiration of statutes of limitations, the company believes it is reasonably possible that the total amount of unrecognized tax benefits may decrease by up to $9.0 million over the next twelve-month period.

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 exchange rate movements are generally offset by movements in the underlying hedged item. All of the company’s derivative instruments are designated and qualify as cash flow hedges. For further discussion regarding the company’s use of derivative instruments, see Notes 1 and 6 to the consolidated financial statements in C. R. Bard, Inc.’s 2009 Annual Report on Form 10-K.

A roll forward of the notional value of the company’s forward currency and option contracts is as follows:


	Forwards			Options
(dollars in millions)
Balance, December 31, 2009	$	52.1		$	59.6
New contracts		13.8			—
Expired/cancelled contracts		(12.8	)		(14.9	)

Balance, March 31, 2010	$	53.1		$	44.7

C. R. BARD, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The location and fair values of derivative instruments recognized in the condensed consolidated balance sheet are as follows:


		Fair Value of Derivatives
	Location	March 31, 2010		December 31, 2009
(dollars in millions)
Forward currency contracts	Other current assets	$	4.1	$	1.5
Option contracts	Other current assets		2.0		0.9

		$	6.1	$	2.4

Forward currency contracts	Accrued expenses	$	0.6	$	—

		$	0.6	$	—

The following table includes information about gains and losses on derivative instruments and the impact on the condensed consolidated statement of shareholders’ investment:


	Gain/(Loss) Recognized in Other Comprehensive Income					Location of Gain/(Loss) Reclassified from Accumulated Other Comp. Loss to Income	Gain/(Loss) Reclassified from Accumulated Other Comp. Loss to Income
	Three Months Ended March 31,						Three Months Ended March 31,
	2010		2009				2010			2009
(dollars in millions)
Forward currency contracts	$	1.3	$	0.4		Costs of goods sold	$	(1.1	)	$	0.1
Option contracts		1.4		(1.4	)	Costs of goods sold		0.2			1.1

	$	2.7	$	(1.0	)		$	(0.9	) ^(A)	$	1.2	^(A)

(A)	The tax effect of the amount reclassified from accumulated other comprehensive loss to income was $0.6 million and $0.5 million at March 31, 2010 and 2009, respectively.

Fair Value of Financial Instruments Measured at Fair Value on a Recurring Basis

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

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


	March 31, 2010		December 31, 2009
(dollars in millions)
Forward currency contracts	$	3.5	$	1.5
Option contracts		2.0		0.9

The fair values of forward currency and option contracts were measured using significant other observable inputs and valued by reference to similar financial instruments, adjusted for restrictions and other terms specific to each contract (Level 2 under the fair value hierarchy).

C. R. BARD, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Financial Instruments not Measured at Fair Value

The estimated fair value of the company’s long-term debt was $164.3 million and $163.1 million at March 31, 2010 and December 31, 2009, respectively. The fair value was estimated using dealer quotes for similarly-rated debt instruments over the remaining contractual term of the company’s obligation (Level 2 under the fair value hierarchy).

Short-Term Investments

At March 31, 2010, short-term investments consist of a time deposit purchased with an original maturity of less than six months. Short-term investments are carried at cost, which approximates fair value.

Concentration Risk

The company is currently experiencing delays in the collection of accounts receivable associated with the national healthcare system in Greece, which amounted to $29.3 million and $36.7 million of net receivables at March 31, 2010 and December 31, 2009, respectively. Although the company does not currently foresee a credit risk associated with these net receivables, payment is dependent upon the financial stability and creditworthiness of Greece.

7. Inventories

Inventories consisted of:


	March 31, 2010		December 31, 2009
(dollars in millions)
Finished goods	$	156.4	$	176.2
Work in process		23.9		27.1
Raw materials		98.8		92.1

	$	279.1	$	295.4

8. Contingencies

In the ordinary course of business, the company is subject to various legal proceedings and claims, including, for example, product liability matters, environmental matters, employment disputes, disputes on agreements and other commercial disputes. In addition, the company operates in an industry susceptible to significant patent legal claims. The company accounts for estimated losses with respect to these proceedings when such losses are probable and 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 third party’s 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 were to be determined to be invalid or unenforceable, the company might be required to reduce the value of the patent on the company’s balance sheet and to record a corresponding charge, which could be significant in amount. The company believes that any of these proceedings and claims could have a material adverse effect on its business, results of operations, financial condition and/or liquidity.

C. R. BARD, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

commonly known as Superfund, the Resource Conservation and Recovery Act, the Clean Water Act, the Clean Air Act and similar state 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 any 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 company’s 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. 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 company’s 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 company’s business and/or results of operations.

On November 27, 2006, the company received a subpoena issued by the U.S. Department of Health and Human Services, Office of Inspector General, under the authority of the federal healthcare fraud and false claims statutes. The subpoena seeks documents related to the company’s brachytherapy business. The company is cooperating with the government’s request and has responded to the subpoena. At this stage of the inquiry, the likelihood of an adverse outcome cannot be assessed. The company cannot give any assurances that this matter will not have a material adverse effect on the company’s business, results of operations, financial condition and/or liquidity.

As of April 22, 2010, approximately 1,595 federal and 1,505 state lawsuits involving individual claims by approximately 3,210 plaintiffs, as well as two putative class actions in the United States and three putative class actions in various Canadian provinces, have been filed or asserted against the company with respect to its Composix^® Kugel^® and certain other hernia repair implant products (collectively, the “Hernia Product Claims”). One of the U.S. class action lawsuits consolidates nine 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. The Hernia Product Claims also generally seek damages for personal injury resulting from use of the products. The company and certain plaintiffs have agreed to the dismissal of approximately 330 lawsuits in the Superior Court of the State of Rhode Island. As a result, these lawsuits are not included in the above figures. The company voluntarily recalled certain sizes and lots of the Composix^® Kugel^® product beginning in December 2005.

On June 22, 2007, the Judicial Panel on Multidistrict Litigation transferred Composix^® Kugel^® lawsuits pending in federal courts nationwide into one Multidistrict Litigation (“MDL”) for coordinated pre-trial proceedings in the United States District Court for the District of Rhode Island. The MDL court subsequently determined to include other hernia repair products in the MDL proceeding. Approximately 1,475 of the state lawsuits, involving individual claims by a substantially equivalent number of plaintiffs, are pending in the Superior Court of the State of Rhode Island, with the remainder in various other jurisdictions. The company completed its first MDL trial in April 2010 which resulted in a judgment that the company was not liable for the plaintiff’s damages. The plaintiff has the right to appeal this judgment. The company expects additional trials of a limited number of the Hernia Product Claims to take place during the remainder of 2010.

As in most litigations of this nature, the Hernia Product Claims present 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 the majority of these cases, the company has not yet received and reviewed complete information regarding the plaintiffs and their medical conditions, and consequently, it is unable to fully evaluate the claims. The company expects that it will receive and review additional information regarding the Hernia Product Claims and related matters as these cases progress.

C. R. BARD, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The company believes that many settlements and judgments, as well as legal defense costs, relating to the Hernia Product Claims are covered in whole or in part under its product liability insurance policies with a limited number of insurance companies, certain of which have reserved their rights with respect to coverage, or have contested or denied coverage. 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, has recorded receivables with respect to amounts due under these policies. Amounts recovered under these policies may be less than the stated coverage limits and may not be adequate to cover damages and/or costs relating to the Hernia Product Claims. In addition, there is no guarantee that insurers will pay claims or that coverage will otherwise be available. While the company intends to vigorously defend the Hernia Product Claims, it cannot give any assurances that the resolution of these claims will not have a material adverse effect on the company’s business, results of operations, financial condition and/or liquidity.

On February 21, 2007, Southeast Missouri Hospital (“Southeast”) filed a putative class action complaint on behalf of itself and all others similarly situated against the company and another manufacturer, Tyco International, Inc. (“Tyco”) which was subsequently dismissed from the action. The complaint was later amended to add St. Francis Medical Center (“St. Francis”) as an additional named plaintiff. The action was re-named as St. Francis Medical Center, et al. v. C. R. Bard, Inc., et al. (Civil Action No. 1:07-cv-00031, United States District Court, Eastern District of Missouri, Southeastern District) when the court denied Southeast’s motion to serve as a class representative and dismissed Southeast from the lawsuit. In September 2008, the court granted St. Francis’s motion for class certification and determined the measurement period for any potential damages. St. Francis alleges that the company conspired to exclude competitors from the urological catheter market and that the company sought to maintain market share by engaging in conduct in violation of state and federal antitrust laws. St. Francis seeks injunctive relief and has presented an expert report that calculates damages of up to approximately $320 million, a figure that the company believes is unsupported by the facts. The company’s expert report establishes that, even assuming a determination adverse to the company, the plaintiffs suffered no damages. In September 2009, the District Court granted Bard’s summary judgment motion and dismissed with prejudice all counts in this action. St. Francis has appealed the court’s decision to the Eighth Circuit Court of Appeals. The company intends to defend this matter vigorously. If, however, St. Francis is ultimately successful, any damages awarded under the federal antitrust laws will be subject to statutory trebling and St. Francis’s attorneys would be entitled to an award of reasonable fees and costs. At this time, it is not possible to assess the likelihood of an adverse outcome or determine an estimate, or a range of estimates, of potential damages. The company cannot give any assurances that this matter will not have a material adverse effect on the company’s business, results of operations, financial condition and/ or liquidity.

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 company’s patent number 6,436,135. 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 court ruled that Gore failed to prove that the patent is unenforceable due to inequitable conduct. On March 31, 2009, the U. S. District Court doubled the jury award to approximately $371 million for damages through June 2007. The Court is still assessing damages for Gore’s infringing sales from July 2007 to the present date and is also expected to set a royalty rate for future infringing sales. The Court also awarded Bard attorneys’ fees of $19 million and prejudgment interest of approximately $20 million. In addition, the Court denied Gore’s remaining motions, including its motions for a new trial and to set aside the jury’s verdict. After a final judgment is entered, Gore may appeal this matter to the Court of Appeals for the Federal Circuit. Because the company considers this matter a gain contingency, no amounts have been recorded as of March 31, 2010.

Accruals for product liability and other legal matters amounted to $51.7 million and $47.1 million at March 31, 2010 and December 31, 2009, respectively. The company also has recorded receivables from insurance companies for unresolved matters amounting to $39.3 million and $33.1 million at March 31, 2010 and December 31, 2009, respectively.

C. R. BARD, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. Share-Based Compensation Plans

The company may grant a variety of share-based payments under the 2003 Long Term Incentive Plan of C. R. Bard, Inc., as amended and restated, (the “2003 Plan”) and the 2005 Directors’ Stock Award Plan of C. R. Bard, Inc. (the “Directors’ Plan”) to certain directors, officers and employees. The total number of remaining shares at March 31, 2010 that may be issued under the 2003 Plan was 2,807,787 and under the Directors’ Plan was 70,366. At the company’s Annual Meeting of Shareholders on April 21, 2010, the shareholders authorized an additional 3,150,000 shares for issuance under the 2003 Plan. Awards under the 2003 Plan 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 has two employee stock purchase programs.

Amounts recognized for share-based compensation are as follows:


	Three Months Ended March 31,
	2010			2009
(dollars in millions)
Total cost of share-based compensation plans	$	14.6		$	14.1
Amounts capitalized in inventory and fixed assets		(0.4	)		(0.4	)
Amounts recognized in income for amounts previously capitalized in inventory and fixed assets		0.5			0.5

Amounts charged against income	$	14.7		$	14.2

As of March 31, 2010, there were approximately $83.6 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 three years. The company repurchases shares from time-to-time on the open market to satisfy share-based payment arrangements. The company has sufficient treasury shares to satisfy expected share-based payment arrangements in 2010.

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 substantially all domestic and certain foreign employees. These plans provide benefits based upon a participant’s compensation and years of service. The components of net periodic pension expense are as follows:


	Three Months Ended March 31,
	2010			2009
(dollars in millions)
Service cost net of employee contributions	$	6.2		$	4.9
Interest cost		4.7			4.3
Expected return on plan assets		(5.5	)		(5.0	)
Amortization		1.7			0.8

Net periodic pension expense	$	7.1		$	5.0

C. R. BARD, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Postretirement Benefit Plan - The company does not provide subsidized postretirement healthcare benefits and life insurance coverage except to a limited number of former employees. As this plan is unfunded, contributions are made as benefits are incurred. The net periodic benefit expense was $0.2 million for both quarters ended March 31, 2010 and 2009.

11. Segment Information

The company’s management considers its business to be a single segment entity—the manufacture and sale of medical devices. The company’s products generally share similar distribution channels and customers. The company designs, manufactures, packages, distributes and sells medical, surgical, diagnostic and patient care devices. The company sells a broad, diversified portfolio of products to hospitals, individual healthcare professionals, extended care health facilities and alternate site facilities. In general, the company’s products are intended to be used once and then discarded or implanted either temporarily or permanently. The company’s 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 infrastructures.

Net sales based on the location of the external customer by geographic region are:


	Three Months Ended March 31,
	2010		2009
(dollars in millions)
United States	$	454.5	$	422.5
Europe		117.2		106.5
Japan		28.6		29.6
Rest of world		50.5		37.8

	$	650.8	$	596.4

Total net sales by disease state are:


	Three Months Ended March 31,
	2010		2009
(dollars in millions)
Vascular	$	172.4	$	157.4
Urology		174.3		162.8
Oncology		174.0		161.0
Surgical Specialties		109.2		94.1
Other products		20.9		21.1

	$	650.8	$	596.4

Other information is:


	Three Months Ended March 31,
	2010		2009
(dollars in millions)
Depreciation	$	12.8	$	12.5

Amortization	$	11.5	$	10.0

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

The company designs, manufacturers, packages, distributes and sells medical, surgical, diagnostic and patient care devices. The company sells a broad, diversified portfolio of products to hospitals, individual healthcare professionals, extended care health facilities and alternate site facilities in the United States and abroad, principally in Europe and Japan. In general, the company’s products are intended to be used once and then discarded, or implanted either temporarily or permanently. The company reports sales in four major product group categories: vascular, urology, oncology and surgical specialties. The company also has a product group of other products.

The company’s earnings are driven by its ability to continue to generate sales of its products and improve operating efficiency. Bard’s ability to increase sales over time depends upon its success in developing, acquiring and marketing innovative and differentiated products that meet the needs of clinicians and their patients. For the three months ended March 31, 2010, the company’s research and development (“R&D”) expense, excluding purchased R&D, as a percentage of sales was 6.2%. The company expects R&D expense as a percentage of net sales to increase up to a range of 9% to 10% over the next three to five years. 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 under appropriate circumstances. The company may also periodically divest lines of business in which it is not able to reasonably attain or maintain a leadership position or for other strategic reasons.

Recent Development

Results of Operations

Net Sales

Bard’s consolidated net sales for the quarter ended March 31, 2010 increased 9% on a reported basis (6% on a constant currency basis) compared to the prior year quarter. Net sales “on a constant currency basis” is a non-GAAP financial measure and should not be viewed as a replacement of GAAP results. See “Management’s Use of Non-GAAP Measures” below. Price changes had the effect of decreasing consolidated net sales for the quarter ended March 31, 2010 by 0.3% compared to the same period in the prior year. Exchange rate fluctuations had the effect of increasing consolidated net sales for the quarter ended March 31, 2010 by approximately 3% 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 company’s hedging activities.

Bard’s United States net sales for the quarter ended March 31, 2010 of $454.5 million increased 8% compared to $422.5 million in the prior year quarter. International net sales for the quarter ended March 31, 2010 of $196.3 million increased 13% on a reported basis (4% on a constant currency basis) compared to $173.9 million in the prior year quarter.

Presented below is a summary of consolidated net sales by disease state.

Product Group Summary of Net Sales


	For the Quarters Ended March 31,
	2010		2009		Change		Constant Currency
(dollars in millions)
Vascular	$	172.4	$	157.4	10	%	6	%
Urology		174.3		162.8	7	%	5	%
Oncology		174.0		161.0	8	%	6	%
Surgical Specialties		109.2		94.1	16	%	14	%
Other		20.9		21.1	(1	)%	(2	)%

Total net sales	$	650.8	$	596.4	9	%	6	%

Vascular Products - Bard markets a wide range of products for the peripheral vascular market, including endovascular products, electrophysiology products and surgical graft products. The increase in consolidated net sales for the quarter ended March 31, 2010 of vascular products compared to the prior year quarter was due to growth in endovascular and electrophysiology products, partially offset by a decline in surgical graft products. United States net sales for the quarter ended March 31, 2010 of vascular products increased 5% compared to the prior year quarter. International net sales for the quarter ended March 31, 2010 increased 16% on a reported basis (7% on a constant currency basis) compared to the prior year quarter. The vascular group is the company’s most global business, with international net sales comprising 45% and 43% of consolidated net sales of vascular products for the quarters ended March 31, 2010 and 2009, respectively.

Consolidated net sales for the quarter ended March 31, 2010 of endovascular products increased 12% on a reported basis (9% on a constant currency basis) compared to the prior year period. Percutaneous transluminal angioplasty balloon catheters, stents and biopsy products were the primary contributors to the growth in this category for the quarter ended March 31, 2010.

Consolidated net sales for the quarter ended March 31, 2010 of electrophysiology products increased 13% on a reported basis (7% on a constant currency basis) compared to the prior year quarter. The company’s electrophysiology laboratory systems and steerable diagnostic catheters were the primary contributors to the increase in the quarter.

Consolidated net sales for the quarter ended March 31, 2010 of surgical graft products decreased 5% on a reported basis (8% on a constant currency basis) compared to the prior year quarter.

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. The majority of basic drainage products, StatLock^® catheter stabilization devices and certain urological specialty products are sold through distributors. The increase in consolidated net sales for the quarter ended March 31, 2010 of urology products compared to the prior year quarter was due to growth of sales of basic drainage products and StatLock^® products, partially offset by a decline in sales of continence products. Net sales growth in urology products for the quarter ended March 31, 2010 was favorably impacted by the inventory reductions made by distributors in the prior year quarter. United States net sales of urology products for the quarter ended March 31, 2010 increased 6% compared to the prior year quarter. International net sales for the quarter ended March 31, 2010 of urology products increased 10% on a reported basis (2% on a constant currency basis) compared to the prior year quarter.

Consolidated net sales for the quarter ended March 31, 2010 of basic drainage products increased 5% on a reported basis (3% on a constant currency basis) compared to the prior year quarter. Net sales growth of basic

drainage products for the quarter ended March 31, 2010 was favorably impacted by the inventory reductions made by distributors in the prior year quarter. Consolidated net sales for the quarter ended March 31, 2010 of infection control Foley catheter products decreased 1% on both a reported and constant currency basis compared to the prior year quarter.

Consolidated net sales for the quarter ended March 31, 2010 of continence products decreased 2% on a reported basis (5% on a constant currency basis) compared to the prior year quarter. Net sales of continence products for the quarter ended March 31, 2010 were impacted by a decline in sales of surgical continence products, a trend that may continue, partially offset by sales growth in fecal management products.

Consolidated net sales for the quarter ended March 31, 2010 of the StatLock^® catheter stabilization product line increased 33% on a reported basis (31% on a constant currency basis) compared to the prior year quarter. Net sales growth of StatLock^® devices for the quarter ended March 31, 2010 was favorably impacted by inventory reductions made by distributors in the prior year quarter.

Consolidated net sales for the quarter ended March 31, 2010 of urological specialty products increased 6% on a reported basis (2% on a constant currency basis) compared to the same period in the prior year. Net sales growth of urological specialty products for the quarter ended March 31, 2010 was favorably impacted by the inventory reductions made by distributors in the prior year quarter. A decline in net sales of brachytherapy products impacted sales of urological specialty products for the quarter ended March 31, 2010. The company believes that the brachytherapy market has been losing procedural share to alternative therapies, a trend that may continue.

Oncology Products - Bard’s oncology business includes specialty vascular access products and enteral feeding devices. Specialty vascular access products include peripherally inserted central catheters (“PICCs”), used for intermediate to long-term central venous access, specialty access ports and accessories (“Ports”), used most frequently for chemotherapy, dialysis access catheters and vascular access ultrasound devices, which help facilitate the placement of PICCs.

The increase in consolidated net sales for the quarter ended March 31, 2010 of oncology products compared to the prior year quarter was due primarily to growth in sales of PICCs and Ports. United States net sales increased 6% compared to the prior year quarter. International net sales increased 14% on a reported basis (3% on a constant currency basis) compared to the prior year quarter.

Consolidated net sales for the quarter ended March 31, 2010 of PICCs increased 12% on a reported basis (10% on a constant currency basis) compared to the prior year quarter. Consolidated net sales for the quarter ended March 31, 2010 of Ports increased 5% on a reported basis (4% on a constant currency basis) compared to the prior year quarter. Consolidated net sales for the quarter ended March 31, 2010 of dialysis access catheters increased 18% on a reported basis (13% on a constant currency basis) compared to the prior year quarter. Consolidated net sales for the quarter ended March 31, 2010 of vascular access ultrasound devices increased 14% on a reported basis (12% on a constant currency basis) compared to the prior year quarter.

Surgical Specialty Products - Surgical specialty products include soft tissue repair, performance irrigation and hemostasis product lines. The increase in consolidated net sales for the quarter ended March 31, 2010 of surgical specialty products compared to the prior year quarter was due primarily to growth in the soft tissue repair product line. United States net sales of surgical specialty products for the quarter ended March 31, 2010 increased 18% compared to the prior year quarter. International net sales for the quarter ended March 31, 2010 of surgical specialty products increased 9% on a reported basis (flat on a constant currency basis) compared to the prior year quarter.

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 for the quarter ended March 31, 2010 of soft tissue repair products increased 25% on a reported basis (22% on a constant currency

basis) compared to the prior year quarter. Net sales in this category were impacted by growth in sales of both biologic soft tissue repair and hernia fixation products due to the introduction of products and the expansion of product lines in these categories.

Beginning in December 2005 the company initiated, and later expanded, a voluntary product recall of certain of its Bard^® Composix^® Kugel^® Mesh products intended for ventral hernia repair. In connection with the recall, the FDA conducted several inspections of the company’s Davol, Inc. subsidiary and issued several Form-483 notices and a Warning Letter, each citing observations generally relating to non-conformances in Davol’s quality systems. The company responded to the Form-483 notices and the Warning Letter and, in each case, completed corrective actions to address the observations. In January 2010, the FDA notified the company that the observations relating to its Davol facility contained in the Form-483 notices and the Warning Letter had been satisfactorily resolved and closed out.

In connection with several inspections conducted by the FDA of the company’s manufacturing facility located in Humacao, Puerto Rico, the FDA issued a Form-483 notice in February 2008 and a Warning Letter in July 2008, each citing observations generally relating to non-conformances in the facility’s quality systems. The company responded to the Form-483 notice and the Warning Letter and, in each case, completed corrective actions to address the observations. In April 2010, the FDA notified the company that the observations relating to the Humacao, Puerto Rico facility contained in the Form-483 notice and the Warning Letter had been satisfactorily resolved and closed out. The facility manufactures products for many of the company’s divisions and subsidiaries, including soft tissue repair products for the company’s Davol subsidiary.

Other Products - The other product group includes irrigation, wound drainage and certain original equipment manufacturers’ products. Consolidated net sales of other products for the quarter ended March 31, 2010 decreased 1% on a reported basis (2% on a constant currency basis) compared to the prior year quarter.

Costs and Expenses

The following is a summary of costs and expenses as a percentage of net sales for the quarters ended March 31:



	2010^(A)		2009

Cost of goods sold	38.8	%	37.6	%
Marketing, selling and administrative expense	27.6	%	27.5	%
Research and development expense	6.2	%	6.1	%
Interest expense	0.4	%	0.5	%
Other (income) expense, net	—	%	1.6	%

Total costs and expenses	73.1	%	73.3	%

(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 company’s products. The category also includes royalties, amortization of intangible assets and the impact of hedging activities. Cost of goods sold as a percentage of net sales for the quarter ended March 31, 2010 increased 120 basis points compared to the prior year quarter. This increase was attributed primarily to lower production volumes. Also, contributing to this increase was the impact of approximately 30 basis points of incremental amortization of intangible assets acquired in the last twelve months.

Marketing, selling and administrative expense - Marketing, selling and administrative expense consists principally of the costs associated with the company’s sales and administrative organizations. These costs as a percentage of net sales for the quarter ended March 31, 2010 were 27.6% compared to 27.5% for the prior year quarter.

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 purchased R&D costs arising from the company’s business development activities. Purchased R&D payments may impact the comparability of the company’s results of operations between periods. There was no purchased R&D recorded for the current or prior year quarter. Research and development expense for the quarter ended March 31, 2010 was $40.6 million, an increase of approximately 12% compared to the prior year quarter.

Interest expense - Interest expense was $2.9 million and $3.0 million for the quarters ended March 31, 2010 and 2009, respectively.

Other (income) expense, net - The components of other (income) expense, net, for the quarters ended March 31, 2010 and 2009, respectively, are:


	2010			2009
(dollars in millions)
Interest income	$	(0.7	)	$	(1.4	)
Foreign exchange losses		0.4			0.7
Restructuring		—			9.8
Other, net		0.2			0.2

Total other (income) expense, net	$	(0.1	)	$	9.3

Interest income - For the quarter ended March 31, 2010, interest income was $0.7 million, compared to $1.4 million for the prior year quarter. The decrease in 2010 was primarily due to lower global interest rates.

Restructuring - See Note 3 to the notes to condensed consolidated financial statements.

Income tax provision

The company’s effective tax rate for the quarter ended March 31, 2010 was approximately 31% compared to approximately 29% for the prior year quarter.

Net Income Attributable to Common Shareholders and Earnings Per Share Available to Common Shareholders

The company reported net income attributable to common shareholders and diluted earnings per share available to common shareholders for the quarter ended March 31, 2010 of $120.9 million and $1.24, respectively. The current year period reflects acquisition related items, consisting primarily of legal costs, of $1.5 million, or $0.02 per diluted share. The company reported net income attributable to common shareholders and diluted earnings per share available to common shareholders for the prior year quarter of $112.5 million and $1.10, respectively. Net income attributable to common shareholders for the prior year period reflects an after tax restructuring charge of $6.5 million, or $0.07 per diluted share.

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 balances and cash provided from operations continue to be the company’s primary source of funds. The company believes that it could borrow adequate funds at competitive terms should it be necessary. The company believes that its overall financial strength gives it sufficient financial flexibility. The table below summarizes certain liquidity measures for Bard as of March 31:


	2010		2009
(dollars in millions)
Working capital	$	1,261.4	$	1,173.2

Current ratio		5.77/1		5.75/1

For the three months ended March 31, 2010 and 2009, net cash provided by operating activities was $181.4 and $170.9 million, respectively. The increase reflects improvements in working capital.

For the three months ended March 31, 2010, the company used $23.1 million in cash for investing activities, compared to the $40.3 million used in the prior year period. The prior year period included contingent milestone payments of $27.0 million associated with the acquisition of assets of the LifeStent^® family of stents from Edwards Lifesciences. The purchase of short-term investments was $13.4 million for the three month period ended March 31, 2010. Capital expenditures were approximately $9.2 million and $11.1 million for the three month periods ended March 31, 2010 and 2009, respectively.

For the three months ended March 31, 2010, the company used $103.6 million in cash for financing activities, compared to the $49.0 million used in the prior year period. Total debt was $149.8 million at both March 31, 2010 and December 31, 2009. Total debt to total capitalization was 6.3% and 6.4% at March 31, 2010 and December 31, 2009, respectively. The company spent approximately $97.9 million to repurchase 1,200,000 shares of common stock in the three months ended March 31, 2010 compared with approximately $36.4 million to repurchase 425,000 shares of common stock in the prior year period. The company paid cash dividends of $0.17 per share and $0.16 per share for the three month periods ended March 31, 2010 and 2009, respectively.

The company maintains a committed syndicated bank credit facility with a $400 million five-year credit agreement that expires in June 2012. The credit facility supports the company’s commercial paper program and can be used for general corporate purposes. The facility includes pricing based on the company’s long-term credit rating and includes a financial covenant that limits the amount of total debt to total capitalization. There were no outstanding borrowings or commercial paper borrowings at March 31, 2010 and December 31, 2009.

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, 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.

Management’s Use of Non-GAAP Measures

Net sales “on a constant currency basis” is a non-GAAP financial 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 company’s investors. Constant currency growth rates are calculated by translating the prior year’s local currency sales by the current period’s exchange rate. Constant currency growth rates are not indicative of changes in corresponding cash flows. The limitation of non-GAAP measures is that they do not reflect results on a standardized reporting basis. Non-GAAP financial measures are intended to supplement the applicable GAAP disclosures and should not be viewed as a replacement of GAAP results.

Critical Accounting Policies

The preparation of financial statements requires the company’s 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 management’s 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 Management’s Discussion and Analysis of Financial Condition and Results of Operations section in C. R. Bard, Inc.’s 2009 Annual Report on Form 10-K. There have been no significant changes to the company’s critical accounting policies since December 31, 2009.

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 company’s 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 company’s business involves the design, development, manufacture, packaging, distribution and sale of life-enhancing medical devices. These devices are often utilized 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 regulatory enforcement actions relating to one or more of the company’s 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 C. R. Bard, Inc.’s 2009 Annual Report on Form 10-K and Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.

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, but the most significant factors, in addition to those addressed above, that could adversely affect our business or cause the actual results to differ materially from those expressed or implied include, but are 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 process 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 with 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 maintain or increase research and development expenditures;

•

the uncertainty of whether increased research and development expenditures and sales force expansion will result in increased sales;

•

the ability to maintain our effective tax rate 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 company’s 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 company facility, which could render the company unable to manufacture one or more products (as the company may utilize only one manufacturing facility for certain of its major 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; and

•

the ability to recover for claims made to our insurance companies.

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 company’s 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 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;

•

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 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 relating to the company’s 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 company’s 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 company’s products and/or price increases from the company’s 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 company’s 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 company’s 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;

•

the impact of more vigorous compliance and enforcement activities affecting the healthcare industry in general or the company in particular;

•

changes in the tax or 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 intellectual property rights;

•

product liability claims, including lawsuits seeking class action status or seeking to establish multi-district litigation proceedings, including with respect to our Composix^® Kugel^® and certain other hernia repair implant products;

•

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 company’s 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.

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 Item 7A in C. R. Bard, Inc.’s 2009 Annual Report on Form 10-K. There have been no material changes in information reported since the year ended December 31, 2009.

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 company’s reports under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the company’s 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.

The company’s management, with the participation of the company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the company’s disclosure controls and procedures as of March 31, 2010. Based upon that evaluation, the company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2010, the design and operation of the company’s 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.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, the company is subject to various legal proceedings and claims, including, for example, product liability matters, environmental matters, employment disputes, 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. If a third party’s 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 were to be determined to be invalid or unenforceable, the company might be required to reduce the value of the patent on the company’s balance sheet and to record a corresponding charge, which could be significant in amount. The company believes that any of these proceedings and claims could have a material adverse effect on its business, results of operations, financial condition and/or liquidity.

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 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 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 any 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 company’s 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. 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 company’s 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 company’s business and/or results of operations.

On June 22, 2007, the Judicial Panel on Multidistrict Litigation transferred Composix^® Kugel^® lawsuits pending in federal courts nationwide into one Multidistrict Litigation (“MDL”) for coordinated pre-trial proceedings in the United States District Court for the District of Rhode Island. The MDL court subsequently determined to include other hernia repair products in the MDL proceeding. Approximately 1,475 of the state lawsuits, involving individual claims by a substantially equivalent number of plaintiffs, are pending in the Superior Court of the State of Rhode Island, with the remainder in various other jurisdictions. The company completed its first MDL trial in April 2010 which resulted in a judgment that the company was not liable for plaintiff’s damages. The plaintiff has the right to appeal this judgment. The company expects additional trials of a limited number of the Hernia Product Claims to take place during the remainder of 2010.

On February 21, 2007, Southeast Missouri Hospital (“Southeast”) filed a putative class action complaint on behalf of itself and all others similarly situated against the company and another manufacturer, Tyco International, Inc. (“Tyco”) which was subsequently dismissed from the action. The complaint was later amended to add St. Francis Medical Center (“St. Francis”) as an additional named plaintiff. The action was re-named as St. Francis Medical Center, et al. v. C. R. Bard, Inc., et al. (Civil Action No. 1:07-cv-00031, United States District Court, Eastern District of Missouri, Southeastern District) when the court denied Southeast’s motion to serve as a class representative and dismissed Southeast from the lawsuit. In September 2008, the court granted St. Francis’s motion for class certification and determined the measurement period for any potential damages. St. Francis alleges that the company conspired to exclude competitors from the urological catheter market and that the company sought to maintain market share by engaging in conduct in violation of state and federal antitrust laws. St. Francis seeks injunctive relief and has presented an expert report that calculates damages of up to approximately $320 million, a figure that the company believes is unsupported by the facts. The company’s expert report establishes that, even assuming a determination adverse to the company, the plaintiffs suffered no damages. In September 2009, the District Court granted Bard’s summary judgment motion and dismissed with prejudice all counts in this action. St. Francis has appealed the court’s decision to the Eighth Circuit Court of Appeals. The company intends to defend this matter vigorously. If, however, St. Francis is ultimately successful, any damages awarded under the federal antitrust laws will be subject to statutory trebling and St. Francis’s attorneys would be entitled to an award of reasonable fees and costs. At this time, it is not possible to assess the likelihood of an adverse outcome or determine an estimate, or a range of estimates, of potential damages. The company cannot give any assurances that this matter will not have a material adverse effect on the company’s business, results of operations, financial condition and/or liquidity.

that the patent is unenforceable due to inequitable conduct. On March 31, 2009, the U. S. District Court doubled the jury award to approximately $371 million for damages through June 2007. The Court is still assessing damages for Gore’s infringing sales from July 2007 to the present date and is also expected to set a royalty rate for future infringing sales. The Court also awarded Bard attorneys’ fees of $19 million and prejudgment interest of approximately $20 million. In addition, the Court denied Gore’s remaining motions, including its motions for a new trial and to set aside the jury’s verdict. After a final judgment is entered, Gore may appeal this matter to the Court of Appeals for the Federal Circuit. Because the company considers this matter a gain contingency, no amounts have been recorded as of March 31, 2010.

Item 1A. Risk Factors

Other than the risk factor set forth below, there have been no material changes from the risk factors disclosed in Part I, Item 1A in C. R. Bard, Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

The adoption of healthcare reform in the United States may adversely affect our business, results of operations and/or financial condition.

In March 2010, significant reforms to the healthcare system were adopted as law in the United States. The law includes provisions that, among other things, reduce and/or limit Medicare reimbursement, require all individuals to have health insurance (with limited exceptions) and impose new and/or increased taxes. Specifically, the law requires the medical device industry to subsidize healthcare reform in the form of a 2.3% excise tax on U.S. sales of most medical devices beginning in 2013. While we are still evaluating the impact of this tax on our overall business, in 2009 this would have equated to an excise tax of approximately $40 million. Various healthcare reform proposals have also emerged at the state level. The new law and these proposals could reduce medical procedure volumes and impact the demand for our products or the prices at which the company sells its products. In addition, the excise tax will increase our cost of doing business. The impact of this law and these proposals could have a material adverse effect on our business, results of operations and/or financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds


	Issuer Purchases of Equity Securities
Period	Total Number of Shares Purchased⁽¹⁾⁽²⁾	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⁾
January 1 - January 31, 2010	302,867	$	78.83	300,000	$	283,109,636
February 1 - February 28, 2010	950,632		82.33	900,000		208,941,802
March 1 - March 31, 2010	34,499		83.92	—		208,941,802

Total	1,287,998	$	81.55	1,200,000	$	208,941,802

(1)

The company repurchased 87,998 shares during the three month period ended March 31, 2010 that were not part of the publicly announced share repurchase authorization. These shares were purchased from employees to satisfy tax withholding requirements on the vesting of restricted shares from equity-based awards.

(2)	On April 15, 2009, the Board of Directors approved the repurchase of up to $500 million of common stock of the company.

Item 4. Removed and Reserved

Item 5. Other Information

The company’s policy governing transactions in its securities by the company’s 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 company’s executive officers have established trading plans relating to the company’s 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.

Item 6. Exhibits

(a)	Exhibit 12.1 – Computation of Ratio of Earnings to Fixed Charges

(b)	Exhibit 31.1 – Rule 13a-14(a) / 15d-14(a) Certification of Chief Executive Officer

(c)	Exhibit 31.2 – Rule 13a-14(a) / 15d-14(a) Certification of Chief Financial Officer

(d)	Exhibit 32.1 – Section 1350 Certification of Chief Executive Officer

(e)	Exhibit 32.2 – Section 1350 Certification of Chief Financial Officer

(f)	101.INS XBRL Instance Document

(g)	101.SCH XBRL Taxonomy Extension Schema Document

(h)	101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

(i)	101.DEF XBRL Taxonomy Extension Definition Linkbase Document

(j)	101.LAB XBRL Taxonomy Extension Label Linkbase Document

(k)	101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

SIGNATURES

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: April 26, 2010

				/s/ TODD C. SCHERMERHORN
				Todd C. Schermerhorn Senior Vice President and Chief Financial Officer


				/s/ FRANK LUPISELLA JR.
				Frank Lupisella Jr. Vice President and Controller

INDEX TO EXHIBITS


Number
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
32.2		Section 1350 Certification of Chief Financial Officer
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

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