v2.4.0.6
Financial Instruments
 12 Months Ended
Dec. 31, 2011
Financial Instruments [Abstract]  
Financial Instruments [Text Block]

Note 6: Financial Instruments

 

Financial instruments that potentially subject us to credit risk consist principally of trade receivables and interest-bearing investments. Wholesale distributors of life-sciences products account for a substantial portion of trade receivables; collateral is generally not required. The risk associated with this concentration is mitigated by our ongoing credit-review procedures and insurance. Major financial institutions represent the largest component of our investments in corporate debt securities. In accordance with documented corporate policies, we limit the amount of credit exposure to any one financial institution or corporate issuer. We are exposed to credit-related losses in the event of nonperformance by counterparties to risk-management instruments but do not expect any counterparties to fail to meet their obligations given their high credit ratings.

 

At December 31, 2011, we had outstanding foreign currency forward commitments to purchase 494.3 million British pounds and sell 583.4 million euro, and commitments to purchase 1.61 billion euro and sell 2.11 billion U.S. dollars, which will all settle within 30 days.

 

At December 31, 2011, approximately 90 percent of our total debt is at a fixed rate. We have converted approximately 70 percent of our fixed-rate debt to floating rates through the use of interest rate swaps.
 

The Effect of Risk Management Instruments on the Statement of Operations

 
The following effects of risk-management instruments were recognized in other—net, expense:
 

 

2011

2010

2009

Fair value hedges

 

 

 

  Effect from hedged fixed-rate debt

$259.6

$149.6

$(369.5)

  Effect from interest rate contracts

(259.6)

(149.6)

369.5

 

 

 

 

Cash flow hedges

 

 

 

  Effective portion of losses on interest rate contracts

    reclassified from accumulated other comprehensive loss

 

9.0

 

9.0

 

10.2

 

 

 

 

Net losses on foreign currency exchange contracts not designated as
    hedging instruments

 

97.4

 

12.0

 

82.6

 

 

The effective portion of net gains (losses) on equity contracts in designated cash flow hedging relationships recorded in other comprehensive income (loss) was $35.6 million, $(35.6) million, and $0.0 million for the years ended December 31, 2011, 2010, and 2009, respectively. The effective portion of net gains on interest rate contracts in designated cash flow hedging relationships recorded in other comprehensive income (loss) was $0.0 million, $0.0 million, and $38.0 million for the years ended December 31, 2011, 2010, and 2009 respectively.

 

We expect to reclassify $9.0 million of pretax net losses on cash flow hedges of the variability in expected future interest payments on floating rate debt from accumulated other comprehensive loss to earnings during the next 12 months.

 

 

During the years ended December 31, 2011, 2010, and 2009, net losses related to ineffectiveness, as well as net losses related to the portion of our risk-management hedging instruments, fair value hedges, and cash flow hedges that were excluded from the assessment of effectiveness, were not material.

 

Fair Value of Financial Instruments

 

The following tables summarize certain fair value information at December 31 for assets and liabilities measured at fair value on a recurring basis, as well as the carrying amount and amortized cost of certain other investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

Description

 

Carrying
Amount

 

 

Amortized
Cost

 

 

Quoted
Prices in

Active
Markets
for

Identical
Assets

(Level 1)

 

 

Significant

Other

Observable Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

 

Fair

Value

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

   $

5,922.5

 

 

$

5,922.5

 

 

$

5,264.6

 

 

$

657.9

 

 

$

 

 

 

$

5,922.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agencies

 

   $

362.3

 

 

$

362.3

 

 

$

362.3

 

 

$

 

 

 

$

 

 

 

$

362.3

 

Corporate debt securities

 

 

600.7

 

 

 

601.1

 

 

 

 

 

 

 

600.7

 

 

 

 

 

 

 

600.7

 

Other securities

 

 

11.6

 

 

 

11.6

 

 

 

 

 

 

 

11.6

 

 

 

 

 

 

 

11.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

   $

974.6

 

 

$

975.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agencies

 

   $

908.8

 

 

$

901.3

 

 

$

908.8

 

 

$

 

 

 

$

 

 

 

$

908.8

 

Corporate debt securities

 

 

2,081.3

 

 

 

2,093.3

 

 

 

 

 

 

 

2,081.3

 

 

 

 

 

 

 

2,081.3

 

Mortgage-backed

 

 

443.8

 

 

 

479.1

 

 

 

 

 

 

 

443.8

 

 

 

 

 

 

 

443.8

 

Asset-backed

 

 

245.0

 

 

 

253.2

 

 

 

 

 

 

 

245.0

 

 

 

 

 

 

 

245.0

 

Other securities

 

 

10.0

 

 

 

11.9

 

 

 

 

 

 

 

8.7

 

 

 

1.3

 

 

 

10.0

 

Marketable equity

 

 

180.8

 

 

 

107.5

 

 

 

180.8

 

 

 

 

 

 

 

 

 

 

 

180.8

 

Equity method and other investments (1)

 

 

160.1

 

 

 

160.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

   $

4,029.8

 

 

$

4,006.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

   $

5,993.2

 

 

$

5,993.2

 

 

$

2,138.6

 

 

$

3,854.6

 

 

$

 

 

 

$

5,993.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

   $

540.8

 

 

$

540.8

 

 

$

 

 

 

$

540.8

 

 

$

 

 

 

$

540.8

 

U.S. government and agencies

 

 

128.9

 

 

 

128.9

 

 

 

128.9

 

 

 

 

 

 

 

 

 

 

 

128.9

 

Corporate debt securities

 

 

63.4

 

 

 

63.9

 

 

 

 

 

 

 

63.4

 

 

 

 

 

 

 

63.4

 

Other securities

 

 

0.7

 

 

 

0.7

 

 

 

 

 

 

 

0.7

 

 

 

 

 

 

 

0.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments

 

   $

733.8

 

 

$

734.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncurrent investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government and agencies

 

   $

359.2

 

 

$

361.8

 

 

$

359.2

 

 

$

 

 

 

$

 

 

 

$

359.2

 

Corporate debt securities

 

 

367.9

 

 

 

368.9

 

 

 

 

 

 

 

367.9

 

 

 

 

 

 

 

367.9

 

Mortgage-backed

 

 

315.5

 

 

 

350.7

 

 

 

 

 

 

 

315.5

 

 

 

 

 

 

 

315.5

 

Asset-backed

 

 

132.4

 

 

 

140.8

 

 

 

 

 

 

 

132.4

 

 

 

 

 

 

 

132.4

 

Other securities

 

 

6.4

 

 

 

8.3

 

 

 

 

 

 

 

3.3

 

 

 

3.1

 

 

 

6.4

 

Marketable equity

 

 

433.7

 

 

 

182.6

 

 

 

433.7

 

 

 

 

 

 

 

 

 

 

 

433.7

 

Equity method and other investments (1)

 

 

164.4

 

 

 

164.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments

 

   $

1,779.5

 

 

$

1,577.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)
   - Fair value not applicable
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

Description

 

Carrying
Amount

 

 

Quoted
Prices in

Active
    Markets    
for

Identical
Assets

(Level 1)

 

 

Significant
Other

Observable Inputs

(Level 2)

 

 

Significant

    Unobservable    

Inputs

(Level 3)

 

 

Fair

Value

 

 

 

 

 

Long-term debt, including current portion

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2011

 

$

(6,981.5)

 

 

$

 

 

 

$

(7,451.5)

 

 

$

 

 

 

$

(7,451.5)

 

December 31, 2010

 

 

(6,788.7)

 

 

 

 

 

 

 

(7,030.0)

 

 

 

 

 

 

 

(7,030.0)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

 

Description

 

Carrying
Amount

 

 

Quoted
Prices in

Active
    Markets    
for

Identical
Assets

(Level 1)

 

 

Significant
Other

Observable Inputs

(Level 2)

 

 

Significant

    Unobservable    

Inputs

(Level 3)

 

 

Fair

Value

 

 

 

 

 

December 31, 2011

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-management instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts
designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other receivables

 

$

6.1

 

 

$

 

 

 

$

6.1

 

 

$

 

 

 

$

6.1

 

Sundry

 

 

531.7

 

 

 

 

 

 

 

531.7

 

 

 

 

 

 

 

531.7

 

Foreign exchange contracts
not designated as hedging
instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other receivables

 

 

16.2

 

 

 

 

 

 

 

16.2

 

 

 

 

 

 

 

16.2

 

Other current liabilities

 

 

(25.9)

 

 

 

 

 

 

 

(25.9)

 

 

 

 

 

 

 

(25.9)

 

                             

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-management instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate contracts designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sundry

 

$

278.3

 

 

$

 

 

 

$

278.3

 

 

$

 

 

 

$

278.3

 

Foreign exchange contracts
not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other receivables

 

 

13.7

 

 

 

 

 

 

 

13.7

 

 

 

 

 

 

 

13.7

 

Other current liabilities

 

 

(31.6)

 

 

 

 

 

 

 

(31.6)

 

 

 

 

 

 

 

(31.6)

 

Equity contracts designed as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other current liabilities

 

 

(35.6)

 

 

 

 

 

 

 

(35.6)

 

 

 

 

 

 

 

(35.6)

 

 

The fair value of the contingent consideration liability related to the Avid and Alnara acquisitions (Note 3), a Level 3 measurement in the fair value hierarchy, was $121.6 million and $163.5 million as of December 31, 2011 and 2010, respectively.

 

We determine fair values based on a market approach using quoted market values, significant other observable inputs for identical or comparable assets or liabilities, or discounted cash flow analyses. The fair value of equity method investments and other investments is not readily available.

 

Approximately $4.03 billion of our investments in debt securities, measured at fair value, will mature within five years.

 

A summary of the fair value of available-for-sale securities in an unrealized gain or loss position and the amount of unrealized gains and losses (pretax) in accumulated other comprehensive loss follows:

 

 

 

 

 

 

 

 

 

 

 

2011    

 

 

2010    

 

 

 

 

 

 

 

 

 

 

Unrealized gross gains

 

 

$ 103.0

 

 

 

$  262.6

 

Unrealized gross losses

 

 

     80.0

 

 

 

     61.1

 

Fair value of securities in an unrealized gain position

 

 

2,498.9

 

 

 

1,031.8

 

Fair value of securities in an unrealized loss position

 

 

2,164.4

 

 

 

   758.1

 

 

Other-than-temporary impairment losses on fixed income securities of $26.8 million, $12.0 million, and $22.4 million were recognized in the statement of operations for the years ended December 31, 2011, 2010, and 2009, respectively. These losses primarily relate to credit losses on other securities for the year ended December 31, 2011 and on certain mortgage-backed securities for the years ended December 31, 2010 and 2009. The amount of credit losses represents the difference between the present value of cash flows expected to be collected on these securities and the amortized cost. Factors considered in assessing the credit loss were the position in the capital structure, vintage and amount of collateral, delinquency rates, current credit support, and geographic concentration.

 

The securities in an unrealized loss position include fixed-rate debt securities of varying maturities. The value of fixed income securities is sensitive to changes in the yield curve and other market conditions. Approximately 90 percent of the securities in a loss position are investment-grade debt securities. At this time, there is no indication of default on interest or principal payments for debt securities other than those for which an other-than-temporary impairment charge has been recorded. We do not intend to sell and it is not more likely than not we will be required to sell the securities in a loss position before the market values recover or the underlying cash flows have been received, and we have concluded that no additional other-than-temporary loss is required to be charged to earnings as of December 31, 2011.

The net adjustment to unrealized gains and losses (net of tax) on available-for-sale securities decreased other comprehensive income (loss) by $114.1 million for the year ended December 31, 2011 and increased other comprehensive income (loss) by $53.5 million and $186.6 million for the years ended December 31, 2010 and 2009, respectively.  Activity related to our available-for-sale investment portfolio was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    2011    

 

 

    2010    

 

 

    2009    

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sales

 

$

2,268.3

 

 

$

760.3

 

 

$

1,227.4

 

 

 

 

 

Realized gross gains on sales

 

 

  140.0

 

 

 

110.7

 

 

 

    68.9

 

 

 

 

 

Realized gross losses on sales

 

 

     9.9

 

 

 

   4.8

 

 

 

      6.8