Fair Value of Financial Instruments

Cash equivalents, short-term investments and short-term debt are carried at cost, which approximates fair value. Other investments are classified as available-for-sale securities. Fair values were estimated based on market prices, where available, or dealer quotes. The fair value of certain long-term debt is based on redemption value.

The estimated fair values of the Company’s financial instruments at September 30, 1999 and 1998 were as follows:

(A) Included in Other non-current assets.
(B) Included in Prepaid expenses, deferred taxes and other.
(C) Included in Accrued expenses.

Off-Balance Sheet Risk

The Company has certain receivables, payables and short-term borrowings denominated in currencies other than the functional currency of the Company and its subsidiaries. During the year, the Company hedged substantially all of these exposures by entering into forward exchange contracts and currency options. The Company’s foreign currency risk exposure is primarily in Western Europe, Asia Pacific, Japan, Brazil and Mexico.

At September 30, the stated or notional amounts of the Company’s outstanding forward exchange contracts and currency options, classified as held for purposes other than trading, were as follows:

At September 30, 1999, $346,762 of the forward exchange contracts mature within 90 days and $50,219 at various other dates in fiscal 2000. The currency options at September 30, 1999 expire within 30 days.

The Company’s foreign exchange hedging activities do not generally create exchange rate risk since gains and losses on these contracts generally offset losses and gains on the related non-functional currency denominated receivables, payables and short-term borrowings.

The Company enters into interest rate swap and interest rate cap agreements, classified as held for purposes other than trading, in order to reduce the impact of fluctuating interest rates on its short-term third-party and intercompany debt and investments outside the United States. At September 30, 1998, the Company had foreign interest rate swap agreements with maturities at various dates through 1999. Under these agreements, the Company agreed with other parties to pay or receive fixed rate payments, generally on an annual basis, in exchange for paying or receiving variable rate payments, generally on a quarterly basis, calculated on an agreed-upon notional amount. The notional amounts of the Company’s outstanding interest rate swap agreements were $12,000 at September 30, 1998. The Company had no interest rate swap agreements outstanding at September 30, 1999.

In June 1998, the FASB issued SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” This Statement requires that all derivatives be recorded in the balance sheet as either an asset or liability measured at fair value and that changes in fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The Company is in the process of evaluating this Statement and has not yet determined the future impact on its consolidated financial statements. The Company is required to adopt the provisions of this Statement no later than the beginning of its fiscal year 2001.

Concentration Of Credit Risk

Substantially all of the Company’s trade receivables are due from public and private entities involved in health care. Due to the large size and diversity of the Company’s customer base, concentrations of credit risk with respect to trade receivables are limited. The Company does not normally require collateral. The Company is exposed to credit loss in the event of nonperformance by financial institutions with which it conducts business. The Company minimizes exposure to such risk, however, by dealing only with major international banks and financial institutions.