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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

For the fiscal year ended December 31, 2004

Commission File Number: 1-6926

C. R. BARD, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (908) 277-8000

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

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  ¨    No  x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No  ¨

The aggregate market value of the voting stock held by nonaffiliates of the registrant was approximately $5,932,539,142 based on the closing price of stock traded on the New York Stock Exchange on June 30, 2004. As of January 24, 2005, there were 104,732,651 shares of Common Stock, $.25 par value per share, outstanding.

The company’s definitive Proxy Statement in connection with its 2005 annual meeting of shareholders is incorporated by reference with respect to certain information contained therein in Part III of this Form 10-K.

C. R. BARD, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I

Item 1. Business

General

C. R. Bard, Inc. (the “company” or “Bard”) is engaged in the design, manufacture, packaging, distribution and sale of medical, surgical, diagnostic and patient care devices. Charles Russell Bard started the company in 1907. One of its first medical products was the silk urethral catheter imported from France. In 1923, the company was incorporated as C. R. Bard, Inc. and distributed an assortment of urology and surgical products. Bard became a publicly traded company in 1963 and five years later was traded on the New York Stock Exchange. The company sells a broad range of products worldwide to hospitals, individual health care professionals, extended care facilities and alternate site facilities. In general, the company’s products are intended to be used once and then discarded or implanted either permanently or temporarily. Market leadership is one of Bard’s key strategic objectives, and the company holds strong market share positions in vascular, urology, oncology and surgical specialty products.

Bard has a history of acquiring small research or early-stage companies as well as larger, established companies with market leadership positions. In addition to acquiring companies, Bard has also expanded its business in the medical field by acquiring product lines, entering into licensing agreements and joint ventures and making equity investments in companies with emerging technologies. As a matter of policy, Bard is focused only on companies or products in the health care market. Over its 97-year history, some of the company’s significant and/or recent acquisitions have included:

The company spent approximately $104.4 million in 2004, $115.0 million in 2003 and $13.4 million in 2002 for the acquisition of businesses, patents, trademarks, purchase rights and other related items to augment its existing product lines. The company has also sold, liquidated or divested product lines over the years, including its cardiology businesses in 1998 and 1999 and certain assets of its Endoscopic Technologies Division in 2004.

Available Information

The company files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and other information with the Securities and Exchange Commission (the “SEC”). The public can obtain copies of these materials by visiting the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549, by calling the SEC at 1-800-SEC-0330 or by accessing the SEC’s website at www.sec.gov. In addition, as soon as reasonably practicable after such materials are filed with or

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furnished to the SEC, the company makes copies available to the public free of charge on or through its website at www.crbard.com.

The company has adopted, and has posted on its website at www.crbard.com, a Code of Ethics for Senior Financial Officers that applies to the company’s chief executive officer, chief financial officer and controller. The company intends to disclose any amendments to, or waivers from, the Code of Ethics on the website set forth above. In addition, the company’s audit committee charter, compensation committee charter, governance committee charter, corporate governance guidelines and business ethics policy are also posted on the company’s website at www.crbard.com. A copy of any of these documents is available, free of charge, upon written request sent to C. R. Bard, Inc., 730 Central Avenue, Murray Hill, New Jersey 07974, Attention: Secretary. Shareholders may communicate directly with the Board of Directors, the nonmanagement members of the Board of Directors or the Audit Committee. The process for doing so is described on the company’s website at www.crbard.com.

Product Group Information

The company reports its sales around the concept of disease state management in four major product group categories: vascular, urology, oncology and surgical specialties. The company also has a product group of other products. The following table sets forth for the three years ended December 31, 2004, 2003 and 2002 the approximate percentage contribution by category to Bard’s consolidated net sales on a worldwide basis.

Vascular Products

Bard develops, manufactures and markets a wide range of products for the peripheral vascular market. Bard’s line of minimally invasive vascular products includes percutaneous transluminal angioplasty (“PTA”) catheters, guidewires, introducers and accessories, peripheral stents, vena cava filters and biopsy devices; electrophysiology products, including electrophysiology laboratory systems and diagnostic, therapeutic and temporary pacing electrode catheters; and fabrics, meshes and implantable vascular grafts. Bard has combined the technologies of its self-expanding nitinol stents with its teflon vascular grafts in its Fluency^® stent graft. Other stent graft products are in development to capitalize on the company’s strong technology position in this market. Other significant vascular products include Bard’s Recovery^® vena cava filter, which can be removed percutaneously after the threat of blood clots traveling to the lungs has passed. The combination of a low-profile catheter and high pressure balloon have made Bard’s Conquest^™ PTA catheter a popular choice of clinicians for the treatment of arterial venous access stenosis. Bard’s new Vacora^™ device combines the benefits of a vacuum-assisted biopsy sample with a portable, self-contained unit for the breast biopsy market.

Urology Products

The Foley catheter, which Bard introduced in 1934, remains one of the most important products in the urology field. Foley catheters continue to be marketed in individual sterile packages and in sterile procedural kits and trays, a concept pioneered by Bard. The company is the market leader in Foley catheters, currently Bard’s largest selling urology product. This includes the infection control Foley catheter (“Bardex^® I.C.” Foley catheter), which has been proven to substantially reduce the rate of urinary tract infections. Other urology

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products include surgical sling and injectable tissue bulking products used to treat stress urinary incontinence (“SUI”); natural and synthetic materials for the treatment of pelvic floor or vaginal prolapse; brachytherapy services, devices and radioactive seeds used to treat prostate cancer; urine monitoring and collection systems; ureteral stents; and specialty devices for ureteroscopic procedures and stone removal. In 2003, Bard acquired the assets of Source Tech Medical, LLC and certain assets of Prostate Services of America, Inc. and Imagyn Medical Technologies, Inc. The company acquired these brachytherapy distributors and manufacturer to expand and strengthen its brachytherapy franchise. In January 2005, the company acquired a new injectable tissue bulking product for the treatment of SUI from Genyx Medical, Inc., which the company anticipates launching in mid 2005 under the trade name Tegress^™. This will strengthen the company’s offering of less invasive incontinence treatments.

Oncology Products

Bard’s oncology products cover a wide range of devices used in the treatment and management of various cancers and other diseases and disorders. These include specialty access catheters, ports and enteral feeding devices. The company’s specialty access products, used primarily for chemotherapy, serve a well-established market in which Bard holds a major market share position. The features and benefits of the company’s broad line of peripherally inserted central catheters (“PICCs”) have allowed Bard to capitalize on the fastest growing segment of the specialty access market. The company’s new PowerPICC^™ can also be used to inject contrast media at high flow rates. This new device eliminates the need to place an additional catheter in the significant number of PICC recipients that also require CT (contract enhanced computed tomography) scans. Kidney dialysis catheters share similar technology and call points with access products. Bard’s HemoSplit^® long-term dialysis catheter delivers superior flow performance with its proprietary split tip design. On September 30, 2004, the company sold certain assets of its Endoscopic Technologies Division to ConMed Corporation (“ConMed”). Net sales of the disposed and other endoscopic devices are reported in Oncology Products.

Surgical Specialties

Bard’s surgical specialty products include meshes for hernia and other soft tissue repairs, irrigation devices for orthopaedic, laparoscopic and gynecological procedures and products for topical hemostasis. The innovation of Bard’s PerFix^® plug and Kugel^® patch has significantly improved the way groin hernias are repaired and reduced procedure times from hours to minutes. Hernia operations using these types of products can be done in an outpatient setting in approximately 20 minutes. The patient generally can return to normal activity after minimal recovery time. To expand its hernia repair franchise and to leverage the strength of its groin hernia repair technology, the company has developed products specifically for the repair of ventral or abdominal hernias. Products like the Composix^® Kugel^® and Ventralex^® hernia patches have made Bard the leader in this large and fast growing segment of the hernia repair market. To further expand its markets around the hernia repair call point, in June 2004, the company acquired the Salute^® Fixation system and related technology from Onux, Inc. The device is used to attach mesh to host tissue for laparoscopic hernia repair procedures.

International

Bard markets its products through 23 subsidiaries and a joint venture in over 90 countries outside the United States. The products sold in the company’s international markets include many of the products described above under Product Group Information. However, the principal markets, products and methods of distribution in the company’s international businesses vary with market size and stage of development. The company’s principal international markets are in Europe and Japan. The company believes that its geographically-based sales organization gives the company greater flexibility in international markets. Approximately 66% of international sales are of products manufactured by Bard in the United States, Puerto Rico or Mexico. For financial reporting purposes, revenues and long-lived assets in significant geographic areas are presented in Note 12 Segment Information of the notes to consolidated financial statements.

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Bard’s foreign operations are subject to certain financial and other risks, and international operations in general present complex tax and money management issues requiring sophisticated analysis to meet the company’s financial objectives. Relationships with customers and effective terms of sale frequently vary by country. Trade receivable balances outside the United States generally are outstanding for longer periods than in the United States. Inventory management is an important business concern due to the potential for rapidly changing business conditions and currency exposure. Currency exchange rate fluctuations can affect income and cash flows of international operations. The company attempts to hedge some of these currency exposures to reduce the effects of foreign exchange fluctuations on the business. See “Quantitative and Qualitative Disclosure About Market Risk” and Note 6 Derivative Instruments of the notes to consolidated financial statements.

Competition

The company competes in the therapeutic and diagnostic medical markets around the world. These global markets are characterized by rapid change resulting from technological advances and scientific discoveries. The company’s market position depends more broadly on its reliable product quality, dependable service and ability to develop products to meet market needs than on patent protection. However, many of its products are patented or are the subject of patent applications. The company faces a mix of competitors ranging from large manufacturers with multiple business lines to smaller manufacturers that offer a limited selection of products. In addition, the United States Food and Drug Administration (“FDA”) has recently increased its oversight of companies involved with the reprocessing of single-use medical devices and has provided improved guidance to reprocessors, thereby facilitating the reprocessing business. This may result in increased competition and price erosion. See “Regulation.”

In keeping with the increased emphasis on cost-effectiveness in health care delivery, the trend among hospitals and other customers of medical device manufacturers is to consolidate purchases to enhance purchasing power. The medical device industry has also experienced some consolidation, partly in order to offer a broader range of products to large purchasers. As a result, sale transactions are more complex and tend to involve more long-term contracts than in the past. This enhanced purchasing power has placed pressure on product pricing. The company believes it is well positioned to respond to changes resulting from this trend toward cost containment.

Marketing

The company’s products are distributed domestically directly to hospitals and other health care institutions as well as through numerous hospital/surgical supply and other medical specialty distributors with whom the company has distributor agreements. In international markets, products are distributed either directly or through distributors with the practice varying by country. Full-time representatives of the company in domestic and international markets carry on sales promotion. Sales to distributors, which supply the company’s products to many end users, accounted for approximately 34%, 35% and 38% of the company’s net sales in 2004, 2003 and 2002, respectively, and the five largest distributors combined accounted for approximately 69%, 71% and 70% of such sales for the corresponding years. The company is not dependent on any single customer, and no single customer accounted for more than 10% of the company’s consolidated net sales in 2004, 2003 or 2002.

In order to service its customers, optimize logistics, lower facilities costs and reduce finished goods inventory levels, the company is transitioning to one consolidated distribution facility in the United States and operates one consolidated distribution facility in Europe. Orders are normally shipped within a matter of days after receipt. Backlog is not considered significant for the company.

Most of the products sold by the company, whether manufactured by the company or by others, are sold under the BARD^® trade name or trademark or other trademarks owned by the company. Products manufactured for the company by outside suppliers are produced according to the company’s specifications.

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Regulation

The development, manufacture, sale and distribution of the company’s products are subject to comprehensive government regulation both within and outside the United States. Government regulation, including detailed inspection of and controls over, research and laboratory procedures, clinical investigations, manufacturing, marketing, sampling, distribution, record keeping and storage and disposal practices, substantially increases the time, difficulty and costs incurred in obtaining and maintaining the approval to market newly developed and existing products. Government regulatory actions can result in the seizure or recall of products, suspension or revocation of the authority necessary for their production and sale and other civil or criminal sanctions.

In the early 1990s, the review time by the FDA to clear medical devices for commercial release lengthened and the number of clearances of 510(k) submissions and approval of pre-market applications decreased. In response to public and congressional concern, the FDA Modernization Act of 1997 (“FDAMA”) was adopted with the intent of bringing better definition to the review process.

In October 2002, the Medical Device User Fees Modernization Act (“MDUFMA”) was enacted in response to the FDA’s request for additional funds to be allocated for staffing needs so that statutory deadlines for review times could be met. Through MDUFMA, those funds will be generated through the application of user fees for device submissions. The continuation of the user fee process by the FDA is tied to submission review time performance goals. As a result of MDUFMA, the company is obligated to pay user fees at the time of product approval submissions. The cost of those fees is not expected to be material to the company’s results of operations.

While FDA review times have improved since passage of the FDAMA and there is anticipation that MDUFMA performance goals will be met, there can be no assurance that the FDA review process will not involve delays or that clearances will be granted on a timely basis.

Through MDUFMA, the FDA increased its oversight of businesses involved with the reprocessing of single use medical devices (“SUDs”). The regulation was amended to require reprocessing labeling, clarify submission pathways and define the requirements for validation of cleaning, sterilizing and functional performance of reprocessed SUDs. The improved guidance to reprocessors facilitates the reprocessing business and may result in increased competition and price erosion.

Medical device laws are also in effect in many of the countries in which the company does business outside the United States. These range from comprehensive device approval requirements for some or all of the company’s medical device products to requests for product data or certifications. Inspection of and controls over manufacturing as well as monitoring of device-related adverse events are also components of most of these regulatory systems. The number and scope of these requirements are increasing.

Health Care Cost Containment and Third-Party Reimbursement

Reimbursement remains an important strategic consideration in the development, marketing and introduction of medical devices and procedures. Difficulty in obtaining coverage, coding and payment can be a significant barrier to the commercial success of a new product or procedure. The consequences can include slow adoption in the marketplace and inadequate payment levels that can linger for months or even years.

Because few patients pay directly for their health care, third-party payers play a significant role in influencing whether a new medical technology will be successful. Manufacturers such as Bard rely on insurance reimbursement to create favorable markets for their products, while providers depend on this reimbursement to incorporate new products into their medical practices. As the largest single insurer in the United States, Medicare has a profound influence on the health care market. The Center for Medicare and Medicaid Services (“CMS”)

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formulates national and local coverage policy and sets payment rates for facilities and physician providers. Additionally, most private payers will follow the lead of CMS when developing their policies and payment rates. Technology assessment organizations, including the one run by Blue Cross Blue Shield Association, are consulted by public and private payers to evaluate the relative merits of new technologies and their impact on net health outcomes in an effort to get as much value for the health care dollar as possible.

The processes necessary for a medical device manufacturer to obtain appropriate levels of reimbursement are complex. Reimbursement criteria are often broadly defined and can vary from payer to payer. Payment systems are moving away from the charge-based systems to prospective bundled payment systems where medical devices are reimbursed as part of a procedure or episode of care. Diagnosis Related Groups (“DRGs”) and Ambulatory Payment Classifications (“APCs”) are examples of these prospective payment systems used to reimburse health care providers upon whom medical device manufacturers depend for payment. Under those systems, an aggregate prospective reimbursement amount is set for each DRG or APC, which covers a bundled group of services and products provided to a patient whose care or condition comes within a particular DRG or APC. Creating a new procedure code, often a requirement for new products to be properly reimbursed, can be a lengthy and uncertain twelve- to eighteen-month process. Further, where devices are within established DRG or APC coverage, there may nevertheless be issues of sufficiency of reimbursement.

Initiatives to limit the growth of health care costs, including price regulation, are also underway in several other countries in which the company does business. Implementation of health care reforms now under consideration in Japan, Germany, France and other countries may limit the price or reimbursement level of the company’s products. The ability of customers to obtain appropriate reimbursement for their products and services from government and third-party payers is critical to the success of medical device companies around the world. Several foreign governments have attempted to dramatically reshape reimbursement policies affecting medical devices. Further restrictions on reimbursement of the company’s customers likely will have an impact on the products purchased by customers and the prices they are willing to pay.

Raw Materials

The company uses a wide variety of readily available plastics, textiles, alloys and latex materials for conversion into its devices. These materials are primarily purchased from external suppliers. Certain of the raw materials are available only from single-source suppliers. Materials are purchased from selected suppliers for reasons of quality assurance, sole-source availability, cost effectiveness or constraints resulting from regulatory requirements. Bard works closely with its suppliers to assure continuity of supply while maintaining high quality and reliability. Generally, either party upon short notice can terminate the agreements the company has with certain suppliers. The establishment of additional or replacement suppliers for certain materials cannot always be accomplished quickly due to the FDA approval system, the complex nature of manufacturing processes employed by many suppliers or proprietary manufacturing techniques. In addition, in an effort to reduce potential product liability exposure, certain suppliers have terminated or may terminate sales of certain materials to companies that manufacture implantable medical devices. The company’s inability to replace a supplier, or a delay in doing so, could result in the company being unable to manufacture and sell certain of its products, including certain of the company’s higher margin products.

Environment

The company is subject to various environmental laws and regulations both within and outside the United States. The operations of the company, like those of other medical device companies, involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. While the company continues to make capital and operational expenditures relating to compliance with existing environmental laws and regulations, management believes that such compliance will not have a material impact on the company’s financial position, results of operations or liquidity. See “Legal Proceedings.”

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Employees

The company has approximately 8,600 employees.

Seasonality

The company’s business is not affected to any material extent by seasonal factors.

Research and Development

The company is engaged in both internal and external research and development in an effort to introduce new products, to enhance the effectiveness, ease of use, safety and reliability of its existing products and to expand the applications for which the uses of its products are appropriate. The company is dedicated to developing novel technologies that will furnish health care providers with a more complete line of products to treat medical conditions through less invasive procedures and in a cost-effective manner. The company’s research and development expenditures were approximately $111.6 million in 2004, $87.4 million in 2003 and $61.7 million in 2002. The company continually evaluates developing technologies in areas where it may have technological or marketing expertise for possible investment or acquisition. See the information above under “General” for a discussion of the company’s acquisition strategy.

Intellectual Property

Patents and other proprietary rights are important to Bard’s business. The company also relies upon trade secrets, manufacturing know-how, continuing technological innovations and licensing opportunities to maintain and improve its competitive position. The company reviews third-party proprietary rights, including patents and patent applications, as available, in an effort to develop an effective intellectual property strategy, avoid infringement of third-party proprietary rights, identify licensing opportunities and monitor the intellectual property claims of others.

The company owns numerous patents and has numerous patent applications pending in the United States and in certain foreign countries that relate to aspects of the technology used in many of the company’s products. The company’s policy is to file patent applications in the United States and foreign countries where rights are available and where the company believes it is commercially advantageous to do so. However, the standards for international protection of intellectual property vary widely. The company cannot assure that pending patent applications will result in issued patents, that patents issued to or licensed by the company will not be challenged or circumvented by competitors or that its patents will not be found to be invalid. The company does not consider its business to be materially dependent upon any individual patent.

The company operates in an industry susceptible to significant intellectual property legal claims. At any given time, the company generally is involved as both a plaintiff and defendant in a number of intellectual property actions, including patent infringement actions. Patent litigation can result in significant royalty or other payments or result in injunctions that can prevent the manufacture or sale of products. See “Legal Proceedings.”

Item 2. Properties

The executive offices of the company are located in Murray Hill, New Jersey, in a facility that the company owns. Domestic manufacturing and development units are located in Arizona, California, Georgia, Illinois, Kansas, Massachusetts, Montana, New Jersey, New York, Pennsylvania, Puerto Rico, Rhode Island, South Carolina and Utah. Sales offices are in many of these locations as well as others. Outside the United States, the company has plants or offices in Austria, Australia, Belgium, Canada, China, Denmark, Finland, France, Germany, Greece, India, Italy, Korea, Malaysia, Mexico, the Netherlands, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, Taiwan and the United Kingdom.

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The company owns approximately 2.0 million square feet of space in 18 locations and leases approximately 0.9 million square feet of space in 46 locations. All these facilities are well maintained and suitable for the operations conducted in them.

Item 3. Legal Proceedings

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 both a plaintiff and defendant in a number of patent infringement actions. If infringement of a third party’s patent 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 sell 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 noncash charge, which could be significant in amount.

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, 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 outcomes of the proceedings and claims described above will likely be disposed of over an extended period of time. However, while it is not feasible to predict the outcome of many 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 consolidated financial position or liquidity, but one or more of the proceedings could be material to the consolidated results of operations for a future period.

On March 16, 2004, Rochester Medical Corporation, Inc. filed a complaint against the company, another manufacturer and two group purchasing organizations under the caption Rochester Medical Corporation, Inc. v. C. R. Bard, Inc., et al. (Civil Action No. 304 CV 060, United States District Court, Eastern District of Texas). The plaintiff alleges that the company and the other defendants conspired to exclude it from the market and to maintain the company’s market share by engaging in a variety of conduct in violation of state and federal antitrust laws. The plaintiff also has asserted claims for business disparagement, common law conspiracy and tortious interference with business relationships. The plaintiff seeks injunctive relief and money damages in an unspecified amount. The company intends to defend this matter vigorously. Because the litigation is in a preliminary stage, the company cannot 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 impact on the company’s results of operations in a future period or on the company’s financial condition.

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Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Executive Officers of the Registrant

Set forth below is the name, age, position, five-year business history and other information with respect to each executive officer of the company as of February 21, 2005. No family relationships exist among the officers of the company. The Board of Directors elects all officers of the company annually.

Timothy M. Ring joined Bard in 1992 as Vice President, Human Resources after 10 years with Abbott Laboratories, Inc. In 1993, Mr. Ring was promoted to Group Vice President, International Operations. Mr. Ring was promoted to Group President in 1997 with oversight for Bard’s Corporate Healthcare Services, Peripheral Vascular, Access Systems and Electrophysiology Divisions as well as Bard’s businesses in Europe, the Middle East and Africa. Mr. Ring was elected Chairman and Chief Executive Officer in 2003. Mr. Ring was elected to the Board of Directors in 2003.

John H. Weiland joined Bard in 1996 from Dentsply International as Group Vice President. He was promoted to Group President in 1997 with oversight for Bard’s Davol, Urological, Medical and Endoscopic Technologies Divisions as well as responsibility for all of Bard’s businesses in Japan, Latin and Central America, Canada and Asia Pacific. Mr. Weiland previously served as President and Chief Executive Officer of Pharmacia Diagnostics, Inc. and was with American Hospital Supply and Baxter Healthcare. He served one year as a White House Fellow in the role of Special Assistant in the Office of Management and Budget. Mr. Weiland was elected President and Chief Operating Officer in 2003.

Todd C. Schermerhorn joined Bard in 1985 as a cost analyst and has held various financial positions including Controller of the Vascular Systems Division and Vice President and Controller of the USCI Division. In 1996, Mr. Schermerhorn was promoted to Vice President and Group Controller for Bard’s Global Cardiology Unit. He was promoted to Vice President and Treasurer in 1998. Mr. Schermerhorn was elected to the position of Senior Vice President and Chief Financial Officer in 2003.

Brian P. Kelly joined Bard in 1983 as a territory sales manager for the Davol Division. He has held a succession of management positions including Vice President of Sales for Bard Access Systems and in 1997 President of the Davol Division. Mr. Kelly was promoted to Group Vice President in 2003 with responsibility for Bard’s Davol, Endoscopic Technologies and Electrophysiology Divisions.

Amy S. Paul joined Bard in 1982 as a Senior Product Manager in the Davol Division. After a variety of promotions within the marketing organization at both the Davol and Cardiopulmonary Divisions, Ms. Paul was promoted in 1990 to Vice President/Business Manager for Bard Ventures—GYN followed by her promotion to

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Vice President and General Manager and then President of Bard Endoscopic Technologies Division. In 1997, Ms. Paul was promoted to President of Bard Access Systems Division and most recently was appointed to her current position of Group Vice President International in 2003. Prior to joining the company, she was with Kendall (Tyco) and GTE Sylvania.

Christopher D. Ganser joined Bard in 1989 as the Quality Control Manager for the Moncks Corner, South Carolina Latex Operation. In 1991, he was promoted to Manager of Quality Control Operations for the Bard Urological Division (“BUD”). In 1994, after serving as the Director of Quality Assurance for BUD, Mr. Ganser was promoted to Corporate Vice President, Quality Assurance. He held that position until July 2003 when he was promoted to his current position of Vice President, Regulatory Sciences.

James L. Natale joined Bard in 1994 as President, Bard Corporate Marketing and Services after 16 years with Johnson & Johnson. In 1996, Mr. Natale was promoted to Corporate Vice President and elected a Corporate Officer. In 2003, Mr. Natale was promoted to his current position of Senior Vice President and President, Corporate Healthcare Services.

Judith A. Reinsdorf joined Bard in 2004 as Vice President, General Counsel and Secretary. Prior to joining Bard, she was Vice President and Secretary of Tyco International Ltd. since 2003. Before joining Tyco, Ms. Reinsdorf was the Vice President and Associate General Counsel of Pharmacia Corporation from 2000 until it was acquired by Pfizer Inc. in 2003. From 1995 to 2000, Ms. Reinsdorf held the position of Assistant General Counsel and then Chief Legal Counsel, Corporate at Monsanto Company.

Charles P. Grom joined Bard in 1977 as Corporate Accounting Manager and was promoted to Corporate Cost and Budget Manager in 1980. Mr. Grom served as Vice President and Division Controller for various Bard divisions between 1981 and 1988 when he was promoted to Assistant Corporate Controller. He was elected Corporate Controller in 1994 and to his present position in 1995.

Bronwen K. Kelly joined Bard in 2002 in her current role. Prior to joining Bard, she was with American Home Products as Vice President, Human Resources for the Global Agricultural Products Group. Previously, Ms. Kelly held positions with American Cyanamid Company, including Director, Human Resources for the Cyanimid International, Agricultural Products Division and Director, Human Resources for Shulton USA.

Robert L. Mellen joined Bard in 1993 as Director of Marketing, Bard Gynecology. Mr. Mellen was promoted to Vice President, Marketing for Bard Access Systems in 1994, Vice President and General Manager for Bard Radiology in 1997 and President, Bard Peripheral Vascular Technologies in 2000. He was appointed to his present position in 2002. Prior to joining the company, he was with BOC Health Care.

Scott T. Lowry joined Bard in 1992 and has held a number of positions within the treasury organization. Mr. Lowry was promoted to Assistant Treasurer in 2000 and to his present position in 2003. Previously, Mr. Lowry worked in the treasury functions at AT&T Corp. and Burson-Marsteller.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Stock Split - On April 21, 2004, the company announced that its Board of Directors approved a 2-for-1 stock split, which was effected in the form of a 100 percent stock dividend. The dividend was distributed on May 28, 2004 to shareholders of record as of May 17, 2004. The dividends paid per share, presented below, have been restated to reflect the stock split.

Market and Market Prices of Common Stock

The company’s common stock is traded on the New York Stock Exchange under the symbol: BCR. The following table illustrates the high and low sale prices as traded on the New York Stock Exchange for each quarter during the last two years.

Dividends

The company paid cash dividends of approximately $49.2 million, or $0.47 per share, in 2004 and $46.8 million, or $0.45 per share, in 2003. The following table illustrates the dividends paid per share in each of the indicated quarters.

The first quarter 2005 dividend of $0.12 per share was paid on February 4, 2005 to shareholders of record on January 24, 2005.

Issuer Repurchases of Equity Securities

On December 12, 2002, the company announced that the Board of Directors had authorized the repurchase from time to time of 5.0 million shares of the common stock of the company.

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Item 6. Selected Financial Data - For the Years Ended December 31,

(dollars and shares in thousands except per share amounts)

Set forth below is selected financial data as of the end of and for each of the five years in the five-year period ended December 31, 2004. All the data in “Common Stock Data,” below, has been restated to reflect the company’s 2-for-1 stock split which became effective on May 28, 2004.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Executive Overview

The company is engaged in the design, manufacture, packaging, distribution and sale of medical, surgical, diagnostic and patient care devices. The company markets its products to hospitals, individual health care professionals, extended care health facilities and alternative 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 discarded or implanted either temporarily or permanently.

The company reports its results of operations around the concept of disease state management in four major product group categories: vascular, urology, oncology and surgical specialties. The company also has a product group of other products. The company strives to have a leadership position in all of its markets. Approximately 79% of the company’s ongoing net sales in 2004 were derived from products in which the company has a number one or number two market leadership position. See the “Net Sales” discussion below for an explanation of ongoing net sales.

The company’s key growth initiatives include additional focus on research and development, the expansion of its sales organization, business development activities and improved manufacturing efficiencies. The company’s margins and net income are driven by the company’s ability to generate sales of its products and improve operating efficiency. The company’s ability to improve sales over time depends in part upon its success in developing and marketing new products. In this regard, the company has strategically increased funding of research and development activities, with a focus on products and markets that are growing faster than 8%. In 2004, the company spent approximately $111.6 million on research and development, an increase of approximately 27.7% from research and development spending of approximately $87.4 million in 2003. The company expects research and development spending to increase in 2005 as compared to 2004. In light of the complexity of the process of developing and bringing new products to market, the company expects a lag of as much as several years before the results of increased research and development spending are reflected in increased net sales. In addition, there can be no assurance that research and development activities will successfully generate new products or that new products will be successful.

In 2003, as part of its effort to generate increased sales, the company increased its U.S. sales force by approximately 50 sales representatives. In the third quarter of 2004, the company began a further sales force expansion to increase its U.S. sales force by approximately 60 sales representatives and to increase its international sales force, primarily in Europe, by approximately 40 sales representatives. The company believes that its sales force expansions enhance geographic coverage, increase focus on high-growth businesses, facilitate new product introductions and aid in the identification of new product opportunities at the call-point level.

The company also plans to generate increased sales through selective acquisitions of businesses, products and technologies. In general, the company focuses on small- to medium-size acquisitions of products and technologies that complement the company’s existing product portfolio. In addition, the company may from time to time selectively consider acquisitions of larger, established companies under appropriate circumstances. From time to time, the company may divest lines of business in which the company is not able to reasonably attain or maintain a leadership position or for other strategic reasons. For a discussion of acquisitions and dispositions which the company completed during 2004 and 2003, see the information in Note 2 Acquisitions and Divestitures in the notes to consolidated financial statements included in this report.

The company has a comprehensive program aimed at improving manufacturing efficiencies. This program has built on the company’s past restructuring activities and has resulted in sustained improvement of both margins and cash flow. Gross margins as a percentage of net sales improved by 260 basis points in 2004 as compared to 2003. The improved cash flow associated with these activities provides additional funding for the company’s research and development activities and other growth initiatives discussed above.

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The company has taken advantage of strong cash flow over the past several years to strengthen its balance sheet, reducing total debt to total capitalization from approximately 17% at the end of 2001 to 10% at the end of 2004. Working capital increased from approximately $391 million to approximately $664 million over the same period. The company’s strong financial position further enables the company to pursue the growth initiatives discussed above.

Results of Operations

Net Sales

The company’s revenues are generated from sales of the company’s products, net of discounts, returns, rebates and other allowances. Bard reported 2004 consolidated net sales of $1,656.1 million, an increase of 16% on a reported basis over 2003 consolidated net sales of $1,433.1 million. Bard’s 2003 consolidated net sales increased 13% on a reported basis over consolidated net sales of $1,273.8 million in 2002.

The geographic breakdown of net sales by the location of the third-party customer for each of the last three years is presented below:

The growth in consolidated net sales in 2004 was offset by a decrease of 0.4% as a result of price reductions compared to the prior year. The growth in consolidated net sales in 2003 included a decrease of 0.1% as a result of price reductions compared to the prior year. Consolidated net sales were also affected by the impact of exchange rate fluctuations. Exchange rate fluctuations had the effect of increasing 2004 consolidated net sales by 2.6% as compared to the prior year. Exchange rate fluctuations had the effect of increasing 2003 consolidated net sales by 3.3% as compared to the prior year. The primary exchange rate movement that impacts net sales is the movement of the Euro compared to the United States 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 2004 United States net sales of $1,156.2 million increased 13% over 2003 United States net sales of $1,020.4 million. Bard’s 2004 international net sales of $499.9 million increased 21% on a reported basis (12% on a constant currency basis) over 2003 international net sales of $412.7 million. Bard’s 2003 United States net sales of $1,020.4 million increased 10% over 2002 United States net sales of $928.7 million. Bard’s 2003 international net sales of $412.7 million increased 20% on a reported basis (8% on a constant currency basis) over 2002 international net sales of $345.1 million. See “Commitments and Contingencies—Management’s Use of Non-GAAP Measures” below.

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Presented below is a discussion of consolidated net sales by disease state for the years ended December 31, 2004, 2003 and 2002. Net sales excluding sales of the divested Endoscopic Technologies products (which were previously reported as part of the oncology group) are referred to below as “ongoing net sales.” Ongoing net sales is a non-GAAP measure and not a replacement for GAAP results. See “Commitments and Contingencies—Management’s Use of Non-GAAP Measures” below.

Product Group Summary of Net Sales

Vascular Products - Bard markets a wide range of products for the peripheral vascular market, including endovascular products, electrophysiology products and graft products. Consolidated net sales in 2004 of vascular products increased 28% on a reported basis (23% on a constant currency basis) compared to the prior year. United States net sales in 2004 of vascular products grew 31% compared to the prior year. International net sales in 2004 increased 25% on a reported basis (15% on a constant currency basis) compared to the prior year. The vascular group is the company’s most global business, with international net sales comprising 47% of consolidated net sales of vascular products in 2004.

Endovascular products comprised 56% of 2004 consolidated net sales of vascular products. Consolidated net sales in 2004 of endovascular products increased 47% on a reported basis (40% on a constant currency basis) compared to the prior year. Due to the continued strong performance of the Conquest^™ PTA balloon catheter, the company saw strong performance in 2004 from percutaneous transluminal angioplasty (“PTA”) catheter products, the net sales of which grew 55% on a reported basis (50% on a constant currency basis) compared to the prior year. The company’s self-expanding stent line had notable performance in 2004, with net sales growing 56% on a reported basis (48% on a constant currency basis) compared to the prior year with a strong contribution from the ePTFE encapsulated Fluency^® stent graft. Net sales of the vena cava filter category grew 88% on a reported basis (87% on a constant currency basis) in 2004 as compared to the prior year, driven by sales of the Recovery^® vena cava filter. The Vacora^™ vacuum-assisted biopsy device continued to gain momentum in 2004, fueling growth in the biopsy category. The company is driving growth through the combination of Vacora’s unique features and benefits, the company’s leadership presence in the core needle market and the increased call-point focus of the company’s biopsy business unit.

Endovascular products comprised 49% of 2003 consolidated net sales of vascular products. Consolidated net sales in 2003 of endovascular products increased 32% on a reported basis (23% on a constant currency basis) compared to the prior year. Products such as the company’s Conquest^™ PTA balloon catheter, Fluency^® stent graft, Luminexx^® stent, and Recovery^® vena cava filter contributed to the growth in this category. The company saw strong performance in 2003 from PTA catheter products, the net sales of which grew over 63% on a reported basis (54% on a constant currency basis) compared to the prior year. The company’s self-expanding stent line grew 36% in 2003 on a reported basis (26% on a constant currency basis) compared to the prior year. The Recovery^® vena cava filter was approved for use as a removable device starting in mid 2003, giving clinicians greater flexibility in the use of these filters.

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Consolidated net sales in 2004 of electrophysiology products increased 8% on a reported basis (3% on a constant currency basis) compared to the prior year. Consolidated net sales in 2003 of electrophysiology products increased 9% on a reported basis (1% on a constant currency basis) compared to the prior year.

Consolidated net sales in 2004 of graft products increased 12% on a reported basis (8% on a constant currency basis) compared to the prior year. United States net sales in 2004 of graft products grew 8% compared to the prior year.

Consolidated net sales in 2003 of graft products increased 7% on a reported basis (1% on a constant currency basis) compared to the prior year. United States net sales in 2003 of graft products grew 7% compared to the prior year.

Urology Products - Bard markets a wide range of products for the urology market, including basic drainage products, incontinence products and urological specialty products. Consolidated net sales in 2004 of urology products were $493.1 million, an increase of 9% on a reported basis (7% on a constant currency basis) compared to the prior year. United States net sales of urology products represented 72% of consolidated net sales of urology products in 2004 and grew 7% compared to the prior year. International net sales in 2004 of urology products increased 16% on a reported basis (8% on a constant currency basis) compared to the prior year. Consolidated net sales in 2003 of urology products were $451.5 million, an increase of 8% on a reported basis (5% on a constant currency basis) compared to the prior year. United States net sales of urology products represented 74% of consolidated net sales of urology products in 2003 and grew 5% compared to the prior year. International net sales in 2003 of urology products increased 16% on a reported basis (7% on a constant currency basis) compared to the prior year.

Basic drainage products continue to provide a solid foundation for the company’s urology business. Consolidated net sales in 2004 of basic drainage products increased 9% on a reported basis (7% on a constant currency basis) compared to the prior year. Consolidated net sales in 2004 of infection control products grew 17% on a reported and on a constant currency basis compared to the prior year. This growth demonstrates the company’s ability to increase market share with the Bardex^® I.C. Foley catheter’s proven record for reducing urinary tract infections. Consolidated net sales in 2003 of basic drainage products increased 7% on a reported basis (5% on a constant currency basis) compared to the prior year. Consolidated net sales in 2003 of infection control products grew 13% on a reported and on a constant currency basis compared to the prior year.

Consolidated net sales in 2004 of urological specialties, which includes brachytherapy products and services, grew 6% on a reported basis (5% on a constant currency basis) compared to the prior year. Consolidated net sales in 2004 of brachytherapy products grew 3% on a reported and on a constant currency basis compared to the prior year. Brachytherapy is a form of prostate cancer treatment in which small radioactive seeds are implanted into the prostate gland to deliver low amounts of radiation over a period of time. The company believes its growth in brachytherapy product sales is favorable to the overall growth in the brachytherapy market. In 2003, the company acquired certain assets of several small brachytherapy distributors and a seed manufacturer. See Note 2 Acquisitions and Divestitures in the notes to consolidated financial statements for further discussion. Consolidated net sales in 2003 of urological specialties grew 8% on a reported basis (5% on a constant currency basis) compared to the prior year. Consolidated net sales in 2003 of brachytherapy products grew 11% on a reported basis (10% on a constant currency basis) compared to the prior year.

Consolidated net sales in 2004 of continence products comprised 14% of consolidated net sales of urology products. Consolidated net sales in 2004 of incontinence products increased 17% on a reported basis (13% on a constant currency basis) compared to the prior year. The company’s surgical incontinence product line continues to provide the momentum in the continence category, with net sales growing 44% on a reported basis (41% on a constant currency basis) compared to the prior year. The company’s Pelvilace^™ Transvaginal Tape sling and Pelvisoft^® biomesh product for pelvic floor repair were strong contributors. The company’s growth in the female incontinence and vaginal prolapse markets has been offset in part by continued weakness in the Contigen^®

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collagen implant product line. The anticipated introduction of the new Tegress^™ product in 2005, as a result of the company’s acquisition of certain assets of Genyx Medical, Inc. in January 2005, will allow the company to offer an additional tissue bulking treatment alternative and further strengthen Bard’s broad offering of both surgical and less invasive incontinence solutions. See Note 2 Acquisitions and Divestitures in the notes to consolidated financial statements. Consolidated net sales in 2003 of continence products increased 8% on a reported basis (5% on a constant currency basis) compared to the prior year.

Oncology Products - The company’s oncology products include specialty access products used primarily for chemotherapy. On September 30, 2004, the company sold certain assets of its Endoscopic Technologies Division to ConMed. Net sales of the disposed and other endoscopic devices are reported in Oncology Products. The company uses “ongoing net sales” to refer to net sales excluding the net sales of the products that were sold to ConMed. Consolidated ongoing net sales in 2004 of oncology products grew 21% on a reported basis (19% on a constant currency basis) compared to the prior year. United States ongoing net sales in 2004 of oncology products grew 22% compared to the prior year. International ongoing net sales in 2004 of oncology products grew 20% on a reported basis (12% on a constant currency basis) compared to the prior year. Consolidated ongoing net sales in 2003 of oncology products grew 19% on a reported basis (16% on a constant currency basis) compared to the prior year. United States ongoing net sales in 2003 of oncology products grew 16% compared to the prior year. International ongoing net sales in 2003 of oncology products grew 27% on a reported basis (14% on a constant currency basis) compared to the prior year.

Consolidated net sales of specialty access products of $304.9 million comprised 78% of the oncology product group in 2004 and increased 23% on a reported basis (21% on a constant currency basis) compared to the prior year. In 2004, PICCs continue to be the fastest growing products in the specialty access category, with net sales growing 34% on a reported basis (33% on a constant currency basis) compared to the prior year. PICCs are catheters that are placed into a large vein in the arm, allowing clinicians to access a patient’s central venous system for administration of chemotherapeutic agents, antibiotics, intravenous fluids and blood sampling. Contributing to the strong performance in the PICC category in 2004 was the first quarter introduction of the new PowerPICC^™ which allows for the injection of contrast media for CT (contrast enhanced computed tomography) scans, eliminating the need to place an additional catheter. The company continues to see the PICC market expand as these products are being used more frequently in place of intravenous catheters. Consolidated net sales in 2004 of dialysis catheters grew 32% on a reported basis (31% on a constant currency basis) compared to the prior year. Consolidated net sales of specialty access products of $247.5 million comprised 74% of the oncology product group in 2003 and increased 20% on a reported basis (17% on a constant currency basis) compared to the prior year. In 2003, PICCs were the fastest growing products in the specialty access category, growing 34% on a reported basis (33% on a constant currency basis) compared to the prior year. In 2003, the company introduced its new Hemosplit^® dialysis access catheter with its proprietary split tip design. This catheter entered the market in mid-year and was met with strong demand. Consolidated net sales in 2003 of dialysis catheters grew 32% on a reported basis (30% on a constant currency basis) compared to the prior year.

The enteral feeding devices and other products that remain in the ongoing oncology category following the sale of certain endoscopic products to ConMed totaled $37.9 million and $35.2 million and grew 8% and 11% for the years ended 2004 and 2003, respectively, in each case compared to the prior year.

Surgical Specialty Products - Consolidated net sales in 2004 of surgical specialty products increased 15% on a reported basis (14% on a constant currency basis) compared to the prior year. United States net sales in 2004 of surgical specialty products increased 12% compared to the prior year. International net sales in 2004 of surgical specialty products increased 26% on a reported basis (18% on a constant currency basis) compared to the prior year. Consolidated net sales in 2003 of surgical specialty products increased 19% on a reported basis (17% on a constant currency basis) compared to the prior year. United States net sales in 2003 of surgical specialty products increased 16% compared to the prior year. International net sales in 2003 of surgical specialty products increased 32% on a reported basis (20% on a constant currency basis) compared to the prior year.

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The company’s hernia repair product offerings comprised 71% of 2004 consolidated net sales of surgical specialty products. The company’s ventral hernia repair franchise, led by the Ventralex^™ and Composix^® Kugel^® products, was the primary contributor to this category’s growth. Consolidated net sales in 2004 of hernia products grew 18% on a reported basis (16% on a constant currency basis) compared to the prior year. Sales of groin hernia repair products, including the company’s proprietary Perfix^® Plug and Kugel^® patch, continue to grow faster than the market. Also contributing to the growth in the surgical specialties category was the company’s acquisition of the new Salute^® fixation system from Onux Medical, Inc. in mid 2004. The Salute^® device is used to attach hernia repair products to host tissue in laproscopic procedures. Consolidated net sales in 2003 of hernia products grew 30% on a reported basis (27% on a constant currency basis) compared to the prior year. In 2003, the company’s hernia product offerings comprised 70% of consolidated net sales of surgical specialty products.

Other Products - The other product group includes irrigation, wound drainage and certain other equipment manufacturers’ products. Consolidated net sales in 2004 of other products were $67.8 million, an increase of 3% on a reported basis (2% on a constant currency basis) compared to the prior year. Consolidated net sales in 2003 of other products were $65.7 million, approximately flat on a reported basis (-1% on a constant currency basis) compared to the prior year.

Costs and Expenses

The company’s costs and expenses consist of costs of goods sold, marketing, selling and administrative expense, research and development expense, interest expense and other (income) expense, net. Costs of goods sold consist principally of the manufacturing and distribution costs of the company’s products. Marketing, selling and administrative expense consists principally of the costs associated with the company’s sales and administrative organizations. Research and development expense consists principally of expenses incurred with respect to internal research and development activities, milestone payments for third-party research and development activities and acquired in-process research and development costs (“IPR&D”) arising from the company’s business development activities. Interest expense consists of interest charges on indebtedness. Other (income) expense, net consists principally of interest income, foreign exchange gains and losses and other items, some of which may impact the comparability of the company’s results of operations between periods.

The following is a summary of major costs and expenses as a percentage of net sales for the years shown:

Cost of goods sold - The company’s cost of goods sold as a percentage of net sales for the year ended December 31, 2004 was 39.9%, a reduction of 260 basis points from the cost of goods sold as a percentage of net sales for the year ended December 31, 2003 of 42.5%. As in the prior year, the primary reason for this lower cost of goods sold was manufacturing efficiencies driven by higher production volumes and continuous manufacturing cost improvement projects. The company’s cost of goods sold as a percentage of net sales for the year ended December 31, 2003 was 42.5%, a reduction of 320 basis points from cost of goods sold as a percentage of net sales for the year ended December 31, 2002 of 45.7%.

Marketing, selling and administrative - The company’s marketing, selling and administrative costs as a percentage of net sales for the year ended December 31, 2004 was 31.5%, an increase of 20 basis points from the marketing, selling and administrative costs for the year ended December 31, 2003 of 31.3%. The primary factors in the increased percentage were higher payments under sales compensation plans, the incremental effect of the

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company’s sales expansion program and increased spending related to the company’s compliance with the internal control requirements of the Sarbanes-Oxley Act of 2002.

The company’s marketing, selling and administrative costs as a percentage of net sales for the year ended December 31, 2003 was 31.3%, an increase of 170 basis points from the marketing, selling and administrative costs for the year ended December 31, 2002 of 29.6%. Executive severance negatively impacted the change in marketing, selling and administrative costs as a percentage of net sales by 40 basis points, ongoing consulting studies related to sales coverage and deployment negatively impacted the change in marketing, selling and administrative costs as a percentage of net sales by 40 basis points and legal expenses related to intellectual property and other commercial matters negatively impacted the change in marketing, selling and administrative costs as a percentage of net sales by 80 basis points.

Research and development expense - Research and development expenses are comprised of expenses related to internal research and development activities, milestone payments for third-party research and development activities and acquired IPR&D costs arising from the company’s business development activities. The components of internal research and development expense include: salary and benefits, allocated overhead and occupancy costs, clinical trial and related clinical manufacturing costs, contract services and milestone payments for third-party research and development. All research and development costs are expensed as incurred. The following table presents the breakdown of the company’s research and development expense:

Research and development expenditures in 2004 of $111.6 million represented a 27.7% increase over the prior year’s expenditures of $87.4 million. The company has strategically increased funding of research and development activities, with a focus on products and markets that are growing faster than 8%. The company has entered into one product development arrangement resulting in a variable interest entity for which Bard is the primary beneficiary. This arrangement requires consolidation under the provisions of revised Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”) of the Financial Accounting Standards Board (“FASB”). For the full year ended December 31, 2004, the company recorded approximately $1.5 million in research and development expense and a corresponding credit in other (income) expense, net for the noncontrolling interest related to this arrangement. For the full year ended December 31, 2004, the company recorded IPR&D expense of $6.7 million related to the acquisition of the assets of Onux, Inc. and the stock of Bridger Biomed, Inc. See Note 2 Acquisitions and Divestitures in the notes to consolidated financial statements.

Research and development expenditures of $87.4 million for the year ended December 31, 2003 represented a 41.7% increase over the prior year’s expenditures of $61.7 million. Included in 2003 internally managed research and development was a $3.0 million payment to Genyx Medical, Inc. related to the development of a second generation urethral bulking agent for stress incontinence. In addition, 2003 internally managed research and development included a $3.0 million payment associated with the company’s PTA catheter development project. The PTA catheter development project relates to the development of several high-pressure PTA balloon catheters. For the full year ended December 31, 2003, the company recorded IPR&D expense of $1.0 million related to the acquisition of the assets of Source Tech Medical, LLC. See Note 2 Acquisitions and Divestitures in the notes to consolidated financial statements.

Interest expense - Interest expense in 2004 was $12.7 million as compared with 2003 interest expense of $12.5 million and 2002 interest expense of $12.6 million.

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Other (income) expense, net - The table below presents the components of other (income) expense, net for each of the three years ended December 31.

Gain on Endoscopic Technologies asset divestiture - Consistent with the company’s stated intention to divest from time to time lines of business in which the company is not able to reasonably attain or maintain a leadership position, the company sold certain assets of its Endoscopic Technologies Division to ConMed for $81.3 million on September 30, 2004 including a post-closing adjustment. The products associated with this sale are used primarily by gastroenterologists for endoscopic procedures. Significant assets of the Endoscopic Technologies Division were retained by the company. Net sales associated with the divested assets were $46 million for the nine-month period ended September 30, 2004 and approximately $54 million in 2003. The company did not separately track the pretax profitability of the disposed assets due to the company’s shared corporate infrastructure and the integration of the disposed assets with assets remaining with the company.

A summary of the book value of the disposed assets is as follows:

As a result of the sale, the company recorded a pretax gain of $45.5 million in other (income) expense, net ($31.1 million after-tax) in 2004.

Legal settlements, net - In the first quarter of 2004, the company settled certain commercial litigation related to the company’s brachytherapy business and reversed $16.0 million ($9.8 million after-tax) of a $58.0 million pretax charge recorded in the fourth quarter of 2003 related to this litigation. In addition, during the first quarter of 2004, the company recorded a $3.9 million pretax charge for an unrelated legal settlement ($2.3 million after-tax). In the second quarter of 2004, the company settled an intellectual property dispute related to certain of the company’s laparoscopic irrigators and recorded a pretax charge of $10.5 million ($6.3 million after-tax).

In the fourth quarter of 2003, the company recorded a pretax charge of $58.0 million ($35.5 million after-tax) for certain commercial litigation related to the company’s brachytherapy business. In addition, during the fourth quarter of 2003, the company reached a settlement on an intellectual property matter and recorded a pretax gain of $3.5 million ($2.1 million after-tax).

In 2002, the company recorded a $5.0 million pretax gain ($3.0 million after tax) for the reversal of a legal accrual which had been established in 1998 in connection with a legal proceeding involving three former Bard employees. The matter was finally concluded by court order in the first quarter of 2002, and, accordingly, the accrual was reversed in that period.

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Investment gain - On April 23, 2004, Zimmer Holdings, Inc. announced that it had completed its acquisition of privately-held Implex Corp. (“Implex”) for $98.6 million in cash. Bard held Implex shares at a zero basis and accordingly recorded a $6.2 million pretax gain ($3.7 million after-tax) arising from the company’s cash proceeds associated with this transaction during the second quarter of 2004 . Pursuant to the Implex acquisition agreement, the company may also receive periodic contingent milestone payments based upon performance. In January of 2005, Bard received $3.2 million related to an Implex milestone payment which will be recognized in the first quarter of 2005.

Asset impairments - The majority of the $6.1 million fourth quarter 2003 charge for asset impairments ($3.6 million after tax) related to the company’s pain management pump program. This program was administered internally with regard to marketing and sales and by a third-party partner for manufacture and future product development. For 2003, the company recorded $0.1 million in net sales related to pain management pump products. During the fourth quarter of 2003, the company reassessed the pain management pump program and determined that the program was not meeting the company’s strategic objectives. Based upon this reassessment, the company informed its partner of the company’s termination of the development arrangement. The asset impairment charge related primarily to the write-off of intangible and tangible assets associated with the pain management pump program. In addition to the pain management pump program impairment described above, the company recorded during the fourth quarter of 2003 an additional impairment charge for the assets of a minor product offering. This impairment was triggered by the rapidly declining sales and associated cash flows of this product.

Divisional and manufacturing restructuring - During the first and third quarters of 2002, based upon reviews of administrative, divisional and manufacturing operations, the company’s management, with board approval, committed to certain initiatives to eliminate excess capacity, reduce redundant positions and improve product profitability. These initiatives included the exit from two manufacturing facilities in the United States, one manufacturing facility in Europe and two administrative offices in the United States by the end of 2003. A total of 617 manufacturing, manufacturing support and administrative positions were eliminated at these five locations and elsewhere. The manufacturing initiatives resulted in the consolidation of manufacturing operations into existing facilities in Mexico, Malaysia and the United States.

The company accounted for these initiatives in accordance with Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” In total, the company recorded pretax charges of $33.7 million ($20.7 million after tax) in other (income) expense, net during 2002 ($9.1 million in the first quarter of 2002 and $24.6 million in the third quarter of 2002).

The table below summarizes the 2002 restructuring charges and associated accruals for the three years ended December 31, 2004.

The 2002 termination benefit charge of $19.8 million consisted of severance payments and benefit continuation payments for 617 positions. Lump-sum payments were made throughout 2003. The company recorded a charge of $8.1 million for the impairment of property, plant and equipment. This charge was

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determined based on the impaired assets’ net book value compared to their estimated fair market value, including estimated proceeds from disposal. The company recorded a charge of $2.3 million for the estimated present value of future non-cancelable lease payments. This charge was estimated based upon the contractual terms of the agreements. The company believes that due to current market conditions sublease revenues are unlikely. The company will attempt to sell the closed facilities and either redeploy or dispose of the associated assets. The company recorded a charge of $3.5 million for idle facility costs for committed operating expenses which were incurred after the closed facilities ceased production but prior to disposition. Through December 31, 2004, the company has eliminated 610 positions and closed all five facilities.

The 2003 accrual reduction of $4.2 million was offset by incremental expense related to the shortfall in the estimated proceeds for the closed manufacturing facilities of approximately $1.7 million. The net adjustment to 2002 divisional and manufacturing restructuring was a $2.5 million pretax gain ($1.6 million after-tax) recorded in other (income) expense, net. In 2004, the company recorded a pretax gain of $2.7 million ($2.6 million after-tax) related to the disposal of a manufacturing facility closed as a result of a prior-year restructuring program.

The pretax operating savings resulting from the company’s restructuring activities are integral to the company’s overall program of continuous manufacturing improvement. Savings are primarily realized through reduced salary expense and greater productivity. In 2002, the company achieved incremental pretax operating savings of approximately $6.9 million from restructuring activities and the company’s ongoing program of manufacturing improvement (approximately $3.7 million in cost of goods sold and approximately $3.2 million in selling, general and administrative expense). These 2002 savings were offset by approximately $1.0 million of pretax transition costs. In 2003, the company achieved overall incremental pretax operating savings of approximately $36.0 million from restructuring activities and the company’s ongoing program of manufacturing improvement (approximately $33.2 million in cost of goods sold and approximately $2.8 million in selling, general and administrative expense). These 2003 savings were offset by approximately $5.2 million of pretax transition costs. Incremental improvements in the company’s operating cash flow have approximated the improvement in the company’s pretax operating savings. With the exception of some ongoing termination benefit payments, the company considers all activities related to this restructuring plan closed.

Merger termination costs - On May 29, 2001, Bard entered into an agreement that provided for the merger of Bard with a subsidiary of Tyco International Ltd. (“Tyco Merger Agreement”). On February 6, 2002, Bard and Tyco agreed to terminate this agreement. Each company agreed to bear its own costs and expenses. Neither company paid a break-up fee. In the first quarter of 2002, the company recorded a pretax charge of $6.2 million ($4.0 million after tax) associated with the termination of the Tyco Merger Agreement. In the fourth quarter of 2003, the company reversed the remaining accruals for termination costs and recorded a pretax gain of $0.4 million ($0.2 million after-tax).

Noncontrolling interest - The company has entered into one product development arrangement with Genyx Medical, Inc. resulting in a variable interest entity for which Bard is the primary beneficiary. This arrangement requires consolidation under the provisions of FIN 46. For the full year ended December 31, 2004, the company recorded approximately $1.5 million in research and development expense and a corresponding credit in other (income) expense, net for noncontrolling interest related to this arrangement.

Taxes - The following is a reconciliation between the effective tax rates and the statutory rates:

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The variability in the company’s effective tax rate between 2004 and 2003 is primarily attributable to the impact of certain commercial litigation related to the company’s brachytherapy business. See Note 11 Other (Income) Expense, Net in the notes to consolidated financial statements.

The company operates in multiple taxing jurisdictions, both within the United States and outside the United States. The company faces audits from these various tax authorities regarding the amount of taxes due. Such audits can involve complex issues and may require an extended period of time to resolve. The company’s U.S. federal tax filings have been examined by the Internal Revenue Service (“IRS”) for calendar years ending prior to 1996. All differences arising from those audits have been resolved and settled. The company is currently under examination by the IRS for the 1996 through 1999 calendar years. The company’s U.K. affiliates’ tax filings have been examined by Inland Revenue in the United Kingdom for tax years ending prior to 1999. All differences arising from these audits have been resolved and settled. The company’s U.K. affiliates’ tax filings are currently under examination by Inland Revenue in the United Kingdom for the 1999 through 2002 tax years.

Net Income and Earnings Per Share

Bard reported 2004 consolidated net income of $302.8 million, an increase of 80% over 2003 consolidated net income of $168.5 million. Bard reported 2004 diluted earnings per share of $2.82, an increase of 76% over 2003 diluted earnings per share of $1.60.

Bard reported 2003 consolidated net income of $168.5 million, an increase of 9% over 2002 consolidated net income of $155.0 million. Bard reported 2003 diluted earnings per share of $1.60, an increase of 9% over 2002 diluted earnings per share of $1.47.

As described above under other (income) expense, net, certain events in 2004, 2003 and 2002 impact the comparability of the company’s results of operations between periods.

Stock Split

Stock Split - On April 21, 2004, the company announced that its Board of Directors approved a 2-for-1 stock split, which was effected in the form of a 100 percent stock dividend. The dividend was distributed on May 28, 2004 to shareholders of record as of May 17, 2004. All earnings per share amounts and dividend per share amounts within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” have been restated to reflect the stock split.

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, investments in businesses and technologies, cash dividends and common stock repurchases. Cash provided from operations continues to be the company’s primary source of funds. Should it be necessary, the company believes it could borrow adequate funds at competitive terms. The table below summarizes liquidity measures for Bard for the years ended December 31, 2004, 2003 and 2002.

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Short-term investments that have original maturities of ninety days or less are considered cash equivalents. Working capital is defined as current assets less current liabilities. Current ratio is defined as the ratio of current assets to current liabilities. Net cash position is defined as cash, cash equivalents and short-term investments less total debt. Substantially all of the company’s cash equivalents and short-term investments are held by wholly or majority-owned foreign subsidiaries and are invested in highly rated, liquid investments including time deposits and money funds. Should it be necessary, these investments could be repatriated back to the United States resulting in additional United States income taxes. In October 2004, the American Jobs Creation Act (“AJCA”) was signed into law. The AJCA creates a temporary incentive for the company to repatriate accumulated foreign earnings in the form of an elective 85% dividends received deduction for certain dividends from controlled foreign corporations. The company may elect to apply this provision in 2005. The company has begun evaluating the effects of the repatriation provision and expects to complete this evaluation within a reasonable period of time. Based on the company’s analysis to date, the range of possible amounts being considered for repatriation is between zero and $750 million. The related potential range of income tax is between zero and $55 million. Notwithstanding the potential impact of AJCA, the company believes that its domestic cash needs can be satisfied with domestic operating cash flows and additional borrowings if required.

The following table provides cash flow data for the years ended December 31, 2004, 2003 and 2002.

Operating activities - During 2004, the company generated $277.2 million cash flow from operations, $13.6 million more than the cash flow from operations reported in 2003. During 2003, the company generated $263.6 million cash flow from operations, $2.0 million more than the cash flow from operations reported in 2002. In 2004, net income of $302.8 million increased $134.3 million over net income reported in 2003. In 2003, net income of $168.5 million increased $13.5 million over net income reported in 2002. Adjustments to reconcile net income to net cash provided by operating activities were $(25.6) million, $95.1 million and $106.6 million for the years ended December 31, 2004, 2003 and 2002, respectively. Depreciation expense was approximately $32.7 million in 2004, $29.9 million in 2003 and $27.7 million in 2002. Amortization expense was approximately $22.0 million in 2004, $14.8 million in 2003 and $14.6 million in 2002.

Investing activities - During 2004, the company used $86.9 million in cash for investing activities, $98.7 million less than investing activities reported in 2003. During 2003, the company used $185.6 million in cash for investing activities, $131.2 million more than investing activities reported in 2002. Consistent with the company’s stated intention to divest, from time to time, lines of business in which the company is not able to reasonably attain or maintain a leadership position, the company sold certain assets of its Endoscopic Technologies Division to ConMed for $81.3 million on September 30, 2004 including a purchase price adjustment. Capital expenditures amounted to $74.0 million, $72.1 million and $41.0 million for the years ended December 31, 2004, 2003 and 2002, respectively. Capital expenditures in 2004 and 2003 are higher than 2002 capital expenditures due to the ongoing implementation of the company’s enterprise-wide software platform, the construction of a consolidated domestic distribution center and expansions at several manufacturing facilities. The company expects capital expenditures to be approximately $100 million in 2005 as additional investments will be made in information technology systems and manufacturing facilities. The company spent approximately $104.4 million in 2004, $115.0 million in 2003 and $13.4 million in 2002 for the acquisition of businesses, patents, trademarks, purchase rights and other related items to augment its existing product lines. These cash expenditures were financed primarily with cash from operations and short-term borrowings.

Financing activities - During 2004, the company used $88.1 million in cash for financing activities, $33.0 million more than financing activities reported in 2003. During 2003, the company used $55.1 million in

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cash for financing activities, $48.6 million less than financing activities reported in 2002. Cash flow related to financing activities included changes in borrowings, equity proceeds related to option exercises, repurchases of company common stock and dividend payments. Total debt was $151.5 million, $168.1 million and $153.1 million at December 31, 2004, 2003 and 2002, respectively. The increase in total debt in 2003 was primarily the result of purchases of businesses and technologies and increased capital spending and was financed with commercial paper. Total debt to total capitalization was 10.0%, 13.8% and 14.8% at December 31, 2004, 2003 and 2002, respectively. On December 11, 2002, the company’s Board of Directors approved the repurchase of 5,000,000 shares of the company’s common stock. In 2004, the company spent approximately $85.9 million to purchase 1,275,000 shares. In 2003, the company spent approximately $59.4 million to purchase 886,700 shares. In 2002, the company spent approximately $71.7 million to purchase 1,340,900 shares. At December 31, 2004, a total of 3,350,800 shares remain under the company’s share repurchase authorization. The company paid cash dividends of $0.47 per share in 2004, $0.45 per share in 2003 and $0.43 per share in 2002. The 2004 payment marked the 33^rd consecutive year in which Bard has increased its annual dividend payout to shareholders.

The company maintains a commercial paper program and a committed credit facility that supports the company’s commercial paper program. The committed facility may also be used for general corporate purposes. The committed credit facility in the amount of $400.0 million matures in May of 2009. A pricing grid based on the company’s long-term credit ratings determines interest rates and facility fees for the facility. The facility does not require compensating balances. There were no commercial paper borrowings at December 31, 2004. The maximum amount of commercial paper outstanding during 2004 was approximately $88.0 million with an average outstanding balance of $34.0 million and an effective interest rate of 1.39%. At December 31, 2003 commercial paper borrowings totaled $15.7 million. There were no commercial paper borrowings at December 31, 2002. Certain of the company’s debt agreements contain customary representations, warranties and default provisions as well as restrictions that, among other things, require the maintenance of a minimum ratio of operating cash flow to interest expense and limit the amount of debt that the company may have outstanding. As of December 31, 2004, the company was in compliance with all such covenants.

The company has $150.0 million of unsecured notes outstanding at December 31, 2004. The notes mature in 2026 and pay a semi-annual coupon of 6.70%. The coupon interest closely approximates the effective annual cost of the notes. The 6.70% notes due 2026 may be redeemed at the option of the note holder on December 1, 2006, at a redemption price equal to the principal amount. Assuming these notes are held to maturity, the market value of the notes approximates $168.1 million at December 31, 2004.

At December 31, 2004, the company’s long-term debt was rated “BBB+” by Standard and Poor’s and “Baa2” by Moody’s and the company’s commercial paper ratings were “A-2” by Standard and Poor’s and “P-2” by Moody’s. This overall financial strength gives Bard sufficient financing flexibility.

Commitments and Contingencies

Presented below is a summary of contractual obligations and other commercial commitments.

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Forward currency agreements - The company periodically enters into forward contracts and purchases options to reduce its exposure to fluctuations in currency values. See Note 6 Derivative Instruments in the notes to consolidated financial statements. The table above includes forward currency agreements, which obligate the company for the forward purchase of currencies in which the company has known or anticipated sales or payments. Because these forward currency agreements were entered into as hedges, these obligations will be funded by the underlying hedged item.

Total debt - Total debt was $151.5 million at December 31, 2004, down $16.6 million from December 31, 2003. Total debt was $168.1 million at December 31, 2003, up $15.0 million from December 31, 2002. Total debt to total capitalization was 10.0% at December 31, 2004. Total debt to total capitalization was 13.8% at December 31, 2003.

Operating lease obligations - The company is committed under noncancelable operating leases involving certain facilities and equipment.

Acquisition and investment milestones - The company enters into various acquisition and investment arrangements, including research and development arrangements, product and intellectual property acquisitions and business combinations. In connection with some of these activities, the company agrees to make payments to third parties when milestones are achieved, such as the achievement of research and development targets, receipt of regulatory approvals or achievement of performance or operational targets. Such payments, when made, are allocated to specific intangible asset categories, assigned to excess of cost over net assets acquired or charged to research and development, depending on the nature of the arrangement. The most significant of these arrangements are described below and assume all milestones will be achieved and payments made.