Notes to Consolidated Financial Statements

Foreign Exchange Derivatives
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 in Europe, Asia Pacific, Canada, 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 loss to revenues. The Company recorded hedge net losses, exclusive of hedging costs, of $1,876, $9,110 and $1,732 to revenues in fiscal 2005, 2004 and 2003, respectively. Fiscal 2005, 2004 and 2003 revenues are net of hedging costs of $17,286, $15,124 and $9,876, respectively, related to the purchased option contracts. The Company records in Other expense, net, the premium or cost of the forward contracts, which is excluded from the assessment of hedge effectiveness. The net cost was $236 in fiscal 2005 and the net premium was $618 and $993 in fiscal 2004 and 2003, respectively. All outstanding contracts that were designated as cash flow hedges as of September 30, 2005 will mature by September 30, 2006. At September 30, 2005 and 2004, Accumulated other comprehensive loss included an unrealized gain of $872 and an unrealized loss of $5,106, respectively, 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 $2,390, $3,690 and $15,304 in fiscal 2005, 2004 and 2003, respectively, to foreign currency translation adjustments in other Accumulated comprehensive loss 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 rate 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 amounts recorded in other comprehensive (loss) income. There was no ineffective portion to the hedges recognized in earnings during the period. If interest rate derivatives designated as cash flow hedges mature or are terminated, then the balance in other comprehensive (loss) income attributable to those derivatives is reclassified into earnings over the remaining life of the hedged debt. The amount that will be reclassified and recorded in Interest expense, net within the next 12 months is $1,753.

     At September 30, 2005 and 2004, Accumulated other comprehensive loss included an unrealized loss of $13,360 and $7,247, respectively, 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. Equity investments, where a readily determinable market value exists, 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 were as follows:

	2005						2004
	Carrying Value			Fair Value			Carrying Value			Fair Value
Assets:    Currency options(A)	$	16,172		$	16,172		$	8,618		$	8,618
Forward exchange contracts(A)		—			—			5,805			5,805
Interest rate swaps(A)		10,154			10,154			30,142			30,142
Equity investments(B)		24,918			24,918			26,661			26,661
Liabilities:    Forward exchange contracts(C)		5,558			5,558			—			—
Interest rate swaps(C)		63			63			10,912			10,912
Long-term debt		1,060,833			1,113,311			1,171,506			1,228,259

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. Short-term investments consist primarily of liquid investments with high quality financial institutions. The Company is exposed to credit loss in the event of nonperfor-mance 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 financial instrument contract exceed the obligations of the Company. The Company also minimizes exposure to credit risk by dealing with a diversi-fied group of major financial institutions.