Thousands of dollars, except per-share amounts and numbers of shares

The Company uses foreign exchange forward contracts and currency options to reduce the effect of fluctuating foreign exchange rates on certain foreign currency denominated receivables and payables, third party product sales, and investments in foreign subsidiaries. Gains and losses on the derivatives are intended to offset gains and losses on the hedged transaction. The Company’s foreign currency risk exposure is primarily in Western Europe, Asia Pacific, Japan, and Latin America.

     The Company hedges substantially all of its transactional foreign exchange exposures, primarily intercompany payables and receivables, through the use of forward contracts and currency options with maturities of less than 12 months. Gains or losses on these contracts are largely offset by gains and losses on the underlying hedged items. These foreign exchange contracts do not qualify for hedge accounting under SFAS No. 133.

     In addition, the Company enters into option and forward contracts to hedge certain forecasted sales that are denominated in foreign currencies. These contracts are designated as cash flow hedges, as defined by SFAS No. 133, and are effective as hedges of these revenues. These contracts are intended to reduce the risk that the Company’s cash flows from certain third party transactions will be adversely affected by changes in foreign currency exchange rates. Changes in the effective portion of the fair value of these contracts are included in other comprehensive income until the hedged sales transactions are recognized in earnings. Once the hedged transaction occurs, the gain or loss on the contract is recognized from accumulated other comprehensive income to revenues. The Company recorded hedge net losses of $9,110 and $1,732 to revenues in fiscal 2004 and 2003, respectively.

     Fiscal 2004, 2003 and 2002 revenues are net of hedging costs of $15,124, $9,876 and $10,612, respectively, related to the purchased option contracts. The Company records in Other expense, net, the net premium on the forward contracts, which is excluded from the assessment of hedge effectiveness. This net premium was $618, $993 and $2,209 in fiscal 2004, 2003 and 2002, respectively. All outstanding contracts that were designated as cash flow hedges as of September 30, 2004 will mature by September 30, 2005. As of September 30, 2004, Other Comprehensive Income included an unrealized loss of $5,106, net of tax relating to foreign exchange derivatives that have been designated as cash flow hedges.

     The Company enters into forward exchange contracts to hedge its net investments in certain foreign subsidiaries. These forward contracts are designated and effective as net investment hedges, as defined by SFAS No. 133. The Company recorded losses of $3,690 and $15,304 in fiscal 2004 and 2003, respectively, to foreign currency translation adjustments in other comprehensive income for the change in the fair value of the contracts.

Interest Rate Derivatives

The Company’s policy is to manage interest cost using a mix of fixed and floating debt. The Company has entered into interest rate swaps in which it agrees to exchange, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated as either fair value or cash flow hedges, as defined by SFAS No. 133. For fair value hedges, changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt due to changes in market interest rates. For cash flow hedges, changes in the fair value of the interest rate swaps are offset by changes in other comprehensive income. There was no ineffective portion to the hedges recognized in earnings during the period.

     In addition, during 2003, the Company entered into forward rate agreements in order to reduce its exposure to changing interest rates during the period leading up to the issuance of long term debt. These transactions were designated as “highly effective” cash flow hedges, as defined by SFAS No. 133. Upon issuance of the long term debt, a realized loss was recorded in other comprehensive income, which will be reclassified into Interest expense, net over the life of the hedged debt issues. The amount of the loss to be reclassified into earnings within the next 12 months is $62.

     For the year ended September 30, 2004, other comprehensive income included an unrealized loss of $7,247, net of tax, relating to interest rate derivatives that have been designated as cash flow hedges.

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. Available-for-sale securities are carried at fair value, with unrecognized gains and losses reported in other comprehensive income, net of taxes. Losses on available-for-sale securities are recognized when a loss is determined to be other than temporary or when realized. In accordance with the provisions of SFAS No. 133, forward exchange contracts and currency options are recorded at fair value. 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, 2004 and 2003 were as follows:

	2004						2003
	Carrying			Fair			Carrying			Fair
	Value			Value			Value			Value
Assets:    Other investments       (non-current)(A)	$	9,706		$	26,661		$	5,706		$	22,194
Currency options(B)		8,618			8,618			9,394			9,394
Forward exchange contracts(B)		5,805			5,805			—			—
Interest rate swaps(B)		30,142			30,142			36,881			36,881
Liabilities:    Forward exchange contracts(C)		—			—			22,474			22,474
Long-term debt		1,171,506			1,228,259			1,184,031			1,252,785
Interest rate swaps(C)		10,912			10,912			2,569			2,569

Concentration of Credit Risk

Substantially all of the Company’s trade receivables are due from public and private entities involved in the healthcare industry. 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. However, this loss is limited to the amounts, if any, by which the obligations of the counterparty to the finan-cial instrument contract exceed the obligations of the Company. The Company also minimizes exposure to credit risk by dealing with a diversified group of major financial institutions.