SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001

Commission File Number 1-6926

C. R. BARD, INC.

(Exact name of registrant as specified in its charter)

730 Central Avenue, Murray Hill, New Jersey 07974

(Address of principal executive offices)

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 X No

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 amendments to this Form 10-K. [ X ]

The aggregate market value of the voting stock held by nonaffiliates of the registrant was approximately $2,900,000,000 based on the closing price of stock traded on the New York Stock Exchange on February 28, 2002. As of February 28, 2002, there were 52,522,953 shares of Common Stock, $.25 par value per share, outstanding.

The company's definitive Proxy Statement dated March 15, 2002 has been incorporated by reference with respect to certain information contained therein in Part III of this Form 10-K.

The exhibit index is located in Part IV, Item 14, Page IV-2.

C. R. Bard, Inc. (the "company" or "Bard") was started by Charles Russell Bard 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 urological and surgical products. Bard became a publicly traded company in 1963 and five years later was traded on the New York Stock Exchange.

In 1966, Bard acquired the United States Catheter & Instrument Co., a supplier of urological and cardiovascular specialty products. In 1980, Bard acquired its major production source for the Foley catheter, Davol Inc. Numerous other acquisitions were made over the last thirty-five years broadening Bard's product lines. Today, Bard is a leading multinational developer, manufacturer and marketer of health care products. During 2001 and 2000, the company spent approximately $27.0 million and $46.8 million, respectively, for the acquisition of several companies to augment existing product lines. The impact on the company's results of operations was not significant. During 2001 and 2000, the company spent approximately $27.0 million and 46.8 $million, respectively, for the acquisition of several companies to augment existing product lines. The impact on the company's results of operations was not significant.

2001 net sales of $1.181 billion increased 8% from 2000. Net income for 2001 totaled $143.2 million compared with $106.9 million in 2000. Basic and diluted earnings per share were $2.80 and $2.75, respectively, in 2001. Basic and diluted earnings per share were $2.11 and $2.09, respectively, in 2000.

Acquisition of C.R. Bard by Tyco International - On May 29, 2001, Bard entered into an agreement that provided for the merger of Bard with a subsidiary of Tyco International Ltd. ("Tyco"). On February 6, 2002, Bard and Tyco agreed to terminate the merger agreement. Each party agreed to bear its own costs and expenses. Neither company will pay a break-up fee. Bard anticipates a first quarter 2002 one-time charge associated with the termination of the Tyco merger of approximately $10.0,000,000 million on a pre-tax basis.

Cardiology Dispositions - In 1998, the company announced a series of strategic dispositions of its cardiology businesses. The first in this series was the company's 1998 sale of its cardiac cath lab business. This sale resulted in a 1998 pretax gain of $329.2 million ($3.03 per share after tax). Following the sale of the cardiac cath lab business, the company completed in 1999 the sale of its cardiopulmonary business. This disposition resulted in a 1999 pretax gain of $9.2 million ($0.12 per share after tax). In the first quarter of 2000, the company settled all remaining open issues related to the 1998 dispositions of its cardiology businesses and recorded a gain of $15.4 million ($0.19 per share after tax).

 Item 1. Business (continued)

Endologix - In 1999, the company entered into an exclusive agreement with Endologix, Inc., a California-based company that had developed an endoluminal graft (ELG) used for the minimally invasive treatment of abdominal aortic aneurysms. The agreement, as amended, included an exclusive and irrevocable option to acquire before the end of the year 2000 all of the remaining capital stock of Endologix, Inc. not already owned by Bard for approximately $42 million. On December 14, 2000 the company announced that it would not exercise its option to acquire the remaining stock of Endologix, Inc. The company recorded a pretax charge of $40.3 million ($0.53 per share after tax) for the write-off of the Endologix option and related assets and liabilities.

Bard is engaged in the design, manufacture, packaging, distribution and sale of medical, surgical, diagnostic and patient care devices. Hospitals, physicians and nursing homes purchase approximately 90% of the company's products, most of which are used once and discarded. The company reports its sales around the concept of disease state management. Three of Bard's four major product group categories are: vascular diagnosis and intervention, urological diagnosis and intervention, and oncological diagnosis and intervention. In addition the company maintains and grows its fourth major product group, surgical specialties, and also has a product group of other products. The divested products category contains divested and discontinued product lines.

The following table sets forth for the last three years ended December 31, 2001, the approximate percent contribution by product line to Bard's consolidated net sales on a worldwide basis.

General - Historically, Bard has been known for its products in the urological field, where its Foley catheter is the leading device for bladder drainage. Bard's largest product group is the urological diagnosis and intervention category, contributing approximately 33% of consolidated net sales in 2001. Bard continually expands its research toward the improvement of existing products and the development of new ones. It has pioneered the development of disposable medical products for standardized procedures.

Vascular Diagnosis and Intervention - Bard's line of vascular diagnosis and intervention products includes peripheral angioplasty stents, catheters, guidewires, introducers and accessories, vena cava filters and biopsy devices; electrophysiology products including cardiac mapping and electrophysiology laboratory systems, and diagnostic and temporary pacing electrode catheters; fabrics and meshes and implantable blood vessel replacements.

Urological Diagnosis and Intervention - Bard offers a complete line of urological diagnosis and intervention products including Foley catheters, procedure kits and trays and related urine monitoring and collection systems; ureteral stents; and specialty devices for incontinence, endoscopic procedures and stone removal.

Oncological Diagnosis and Intervention - Bard's line of oncological diagnosis and intervention products includes specialty access catheters and ports and gastroenterological products.

Surgical Specialties - Bard's surgical specialties products include meshes for hernia repair , irrigation devices for orthopaedic and laparoscopic procedures, laparoscopic accessories and topical hemostasis.

International - Bard markets vascular, urological, oncological and surgical specialties products throughout the world. Principal markets are Japan, Canada, the United Kingdom and continental Europe. Approximately 27% of the sales outside the United States are of products manufactured by Bard in its facilities in Australia, Canada, France, Germany, Malaysia and the United Kingdom. The balance of the sales is from products manufactured in the continental United States, Puerto Rico or Mexico for export. Bard's foreign operations are subject to the usual risks of doing business abroad, including restrictions on currency transfer, exchange fluctuations and possible adverse government regulations. See Note 10 in the Notes to Consolidated Financial Statements for additional information.

Competition - The company knows of no published statistics permitting a general industry classification that would be meaningful as applied to the company's variety of products. However, products sold by the company are in substantial competition with those of many other firms, including a number of larger well-established companies. The company depends more on its consistently reliable product quality, dependable service and its ability to develop products to meet market needs than on patent protection, although many of its products are patented or are the subject of patent applications.

Marketing - The company's products are distributed domestically directly to hospitals and other 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 37% of the company's net sales in 2001, and the five largest distributors combined accounted for approximately 68% of such sales.

In order to service its customers, both within and outside the U.S., the company maintains inventories at distribution facilities in most of its principal marketing areas. Orders are normally shipped within a matter of days after receipt, except for items temporarily out of stock, and backlog is normally not significant for the company.

Most of the products sold by the company, whether manufactured by it 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.

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, 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 1990's, the review time by the United States Food and Drug Administration ("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 was adopted with the intent of bringing better definition to the review process. While FDA review times have improved since passage of the 1997 Act, there can be no assurance that the FD A review process will not involve delays or that clearances will be granted on a timely basis.

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.

Government and private sector initiatives to limit the growth of health care costs, including price regulation and competitive pricing, are continuing in many countries where the company does business, including the United States. These changes are causing the marketplace to put increased emphasis on the delivery of more cost-effective medical therapies. Although the company believes it is well positioned to respond to changes resulting from this worldwide trend toward cost containment, the uncertainty as to the outcome of any proposed legislation or changes in the marketplace precludes the company from predicting the impact these changes may have on future operating results.

In keeping with the increased emphasis on cost-effectiveness in health care delivery, the current trend among hospitals and other customers of medical device manufacturers is to consolidate into larger purchasing groups 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, transactions with customers are more significant, more complex and tend to involve more long-term contracts than in the past. This enhanced purchasing power may also increase the pressure on product pricing, although management is unable to estimate the potential impact at this time.

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. Either party upon short notice can terminate agreements 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 the 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 are planning to terminate sales of certain materials to companies that manufacture implantable medical devices. The Biomaterials Access Assurance Act was adopted in 1998 to help ensure availability of raw materials to the manufacturers of medical devices. Management cannot estimate the impact of this law on supplier arrangements at this time. 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.

Employees - The company employs approximately 7,700 persons.

Seasonality - The company's business is not affected to any material extent by seasonal factors.

Research and Development - The company's research and development expenditures amounted to approximately $53,400,000 in 2001, $53,200,000 in 2000 and $53,800,000 in 1999.

Intellectual Property - The company owns patents on certain of its products and obtains licenses from others as it deems necessary to its business. The company's policy is to obtain patents on its products whenever practical. Technological advancement characteristically has been rapid in the medical device industry and the company does not consider its business to be materially dependent upon any individual patent.

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

The company owns approximately 1,900,000 square feet of space in 18 locations and leases approximately 1,000,000 square feet of space in 47 locations. All these facilities are well maintained and suitable for the operations conducted in them.

During 1992, the United States Environmental Protection Agency (the "EPA") notified the company that it had been identified as a Potentially Responsible Party ("PRP") in connection with an ongoing investigation of the Solvents Recovery Service of New England site in Southington, Connecticut. Although the full extent of liability in this case is unknown, the company has been identified with less than one-half percent of the total gallonage of waste materials. Beginning in 1995, the company, together with several hundred other parties, entered into two consent orders to perform a remedial investigation and feasibility study and two removal actions with respect to groundwater contamination. The company may become liable for a portion of the costs of future soil remediation. In May 2000, the EPA notified the company that it is a PRP with respect to a satellite site, the Angellio Superfund Site, also in Southington, Connecticut, to which hazardous waste had allegedly been transhipped from the Solvents Reco very Service of New England site. The final resolution of these matters is not expected to have a material adverse impact on the company.

During 1993, the United States Environmental Protection Agency (the "EPA") notified the company's Urological division that it might be a Potentially Responsible Party ("PRP") relative to cleanup of the Frontier Chemical site in Niagara Falls, New York. In September 1993, the company entered into a consent order concerning the first phase of the cleanup, which was a drum removal action. The company's liability for the first phase was $119,000.

A second phase of remedial action involves removal of waste in several large tanks. The company's liability for this phase was assessed at less than $15,000. The third phase of remedial action involves soil and groundwater contamination. The company's responsibility, if any, for cleanup of this phase is unknown at this time, but the final resolution of this matter is not expected to have a material financial impact on the company. During 1992, the EP A notified the company that it had been identified as a PRP in connection with an ongoing investigation of the Solvents Recovery Service of New England site in Southington, Connecticut. Although the full extent of liability in this case is unknown, the company has been identified with less than one-half percent of the total gallonage of waste materials. Beginning in 1995, the company, together with several hundred other parties, entered into two consent orders to perform the remedial investigation and feasibility study and two removal actions with respect to groundwater contamination. In or about May 2000, the EP A notified the company that it is a PRP with respect to a satellite site, the Angellio Superfund Site, also in Southington, Connecticut, to which hazardous waste had allegedly been transhipped from the Solvents Recovery Service of New England site. The final resolution of these matters is not expected to have a material adverse financial impact on the company.

Davol Inc., a Bard subsidiary , washas been identified in 1998 as a PRP by the Massachusetts Department of Environmental Protection for two new Superfund sites in Dartmouth and Freetown, Massachusetts. The allegations stem from transhipments of waste from the ReSolve hazardous waste reprocessing facility in Dartmouth, Massachusetts to each of the sites associated with the H&M Drum Company. At this time, Davol Inc. and the other former ReSolve waste generators have agreed to contribute $2,000 towards a fund to finance a site investigation. The final resolution of this matter is not expected to have a material adverse financial impact on the company.

On June 7, 2000, the Casmalia Resources Site Steering Committee ("Casmalia Committee") notified the company that in the Committee's view, the company is a PRP in connection with the remediation of the Casmalia Disposal Site located in Santa Barbara County, California. The Casmalia Committee identified itself as a group of 54 PRPs that in 1997 entered into a consent decree with the EPA regarding remediation of the site. The Casmalia Committee's stated estimate of the costs of total site remediation was $271,900,000. The EP A has not given any notice to the company with regard to this site. The final resolution of this matter is not expected to have a material financial impact on the company.

In December of 2001, Bard received a letter from the Georgia Department of Natural Resources alleging that Bard was one of approximately 2,000 PRPs that sent waste to a site in Atlanta, Georgia. The Georgia Department of Natural Resources alleged that it had incurred approximately $790,000 in completing a surface cleanup at the site. The Georgia Department of Natural Resources has requested all of the PRPs to finance an investigation of subsurface conditions at the site. Bard is unable to predict whether it will incur any further associated costs or liabilities, but the final resolution of this matter is not expected to have a material adverse impact on the company.

The company is subject to various legal proceedings and claims including claims of alleged personal injuries as a result of exposure to natural rubber latex gloves distributed by the company and other product liability matters; intellectual property matters and disputes on agreements which arise in the ordinary course of business. The company believes that these legal matters will likely be disposed of over an extended period of time and should not have a material adverse impact on the company's consolidated financial position or results of operations.

Not applicable.

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 March 1, 2002. No family relationships exist among the officers of the company.

The Board of Directors elects all officers of the company annually.

William H. Longfield joined Bard in 1989 as Executive Vice President and Chief Operating Officer. Prior to joining the company, he was President and Chief Executive Officer of Cambridge Group, Inc. Previously, Mr. Longfield was Executive Vice President - Operations of Lifemark, Inc. and prior thereto, he was employed by American Hospital Supply Corporation where he held a number of positions including President of the Convertors Division. Mr. Longfield was elected Bard's President and Chief Operating Officer in 1991 and delegated the duties and responsibilities of Chairman and Chief Executive Officer in 1993. He was elected President and Chief Executive Officer in 1994 and elected to his present position in 1995. Mr. Longfield was elected to the Board of Directors in 1990.

Guy J. Jordan joined Bard in 1986 as Director of Research and Development for USCI. He was promoted to Vice President for specialty access products in 1990 for Davol. In 1991, Mr. Jordan was promoted to Vice President and General Manager of Bard Access Systems and became President of the division in 1993. He was elected to Group Vice President in October 1996 and to his present position in April 1997. Prior to joining Bard, Mr. Jordan was with the American Cyanamid Corporation.

Timothy M. Ring joined Bard in 1992 as Vice President - Human Resources. Prior to joining the company, he was with Abbott Laboratories, Inc. for ten years, most recently with their Hospital Products Division as Director of Personnel. Mr. Ring was elected to Group Vice President in 1993 and to his present position in 1997.

Executive Officers of the Registrant (continued)

John H. Weiland joined Bard in 1996 as Group Vice President. Prior to joining the company, he was Senior Vice President at Dentsply International. Mr. Weiland previously served as President and Chief Executive Officer of Pharmacia Diagnostics, Inc. and was with American Hospital Supply and Baxter Healthcare. Mr. Weiland served one year as a White House Fellow in the role of Special Assistant in the Office of Management and Budget. He was elected to his present position in 1997.

Charles P. Slacik joined Bard in 1999 as Senior Vice President and Chief Financial Officer. Prior to joining the company, he was with American Home Products Corporation since 1982 in various financial and operating positions. Mr. Slacik's most recent position at American Home Products was as Chief Operating Officer for Solgar Vitamin and Herb Company. In addition, he served as Senior Vice President of Finance for American Home Products' Whitehall-Robins Healthcare Division and Sherwood-Davis & Geck Corp.; Corporate Controller for American Home Products and Executive Vice President of Whitehall-Robins Healthcare Division.

Susan Alpert, Ph.D., M.D. joined Bard in 2000 in her current position. Prior to joining the company, she was with the Food and Drug Administration in the Center for Devices and Radiological Health as Director of the Office of Device Evaluation from 1993-1999 and most recently in the Center for Food Safety and Applied Nutrition as the Director of Food Safety.

Nadia J. Bernstein joined Bard in 1999 as Vice President, General Counsel and Secretary . Prior to joining Bard, she was Senior Vice President, General Counsel and Assistant Secretary of Montefiore Medical Center in New York City since 1987. Before Montefiore, Ms. Bernstein was a partner in the law firm of Rosenman & Colin where she served as a member of the litigation department and later their corporate department.

E. Robert Ernest joined Bard in 1977 as Director of Market Research and Business Development. Prior to joining Bard, he was with Abbott Laboratories for ten years. Mr. Ernest was promoted to Vice President-Business Development in 1979 and named to his present position in 1994.

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 Division Controller for various Bard divisions between 1981 and 1988 when he was promoted to Assistant Corporate Controller. He was elected Controller in 1994 and to his present position in 1995.

Todd C. Schermerhorn joined Bard in 1985 as cost analyst and has held various financial positions including Controller of the Vascular Systems Division and Vice President and Controller of the USCI1 Division. In 1996, Mr. Schermerhorn was promoted to Vice President and Group Controller for Bard's Global Cardiology Unit. He was promoted to his present position in 1998.

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 sales prices as traded on the New York Stock Exchange for each quarter during the last two years.

In December 2001, the first quarter 2002 dividend of $.21 per share was declared., indicating an annual rate of $.84 per share. The first quarter dividend was paid on February 1, 2002 to shareholders of record on January 21, 2002. The company anticipates a 2002 annual dividend of $.86 per share. 

Bard reported 2001 net sales of $1,181.3 million, up 8% over 2000 net sales of $1,098.8 million. Holding currency rates constant, Bard would have recorded a 9% increase in total net sales over the prior-year period. The company demonstrated growth in each of its four product groups: vascular, urology, oncology and surgery. Bard reported net income of $143.2 million or $2.75 of diluted earnings per share in 2001 compared with net income of $106.9 million or $2.09 of diluted earnings per share in 2000. 2000's earnings included one-time items. Without these one-time items, diluted earnings per share were $2.45 in 2000. Net of one-time items, Bard's margin of net income to net sales improved to 12.1% in 2001 from 11.4% in 2000.

Net sales for 2001 totaled $1,181.3 million, which represented an 8% increase over the prior year net sales of $1,098.8 million. Price reductions and the impact of a stronger dollar had the effect of reducing 2001 net sales by 0.5% and 1.1%, respectively. Excluding negative currency effects, total net sales would have increased 9% in 2001 and 8% in 2000. Due to these negative currency effects, certain comparisons between 2001 and 2000, where indicated, are made holding currency rates constant.

Sales of vascular products increased 4% in 2001 to $250.9 million. On a constant currency basis, these sales increased 6% over the prior year. The electrophysiology franchise continued to show good worldwide growth.

Urology product group sales increased 8% in 2001 to $390.1 million and increased 9% on a constant currency basis over the prior year. Both the infection control Foley catheter and brachytheraphy products demonstrated solid sales growth.

Sales of oncology products increased 9% in 2001 to $274.6 million. The company's EndoCinch^TM endoscopic suturing system, which isa device used to treat gastroesophageal reflux disease (GERD), and bronchoscopy products continue to grow. Gastroenterological products showed particularly strong growth internationally. 

Sales of surgery products grew 12% in 2001 to $205.2 million, led by the mesh product lines, used primarily in hernia repair. On a constant currency basis, these sales increased 13% over the prior year.

Other product sales of $60.5 million in 2001 remained comparable to prior year's net sales on a constant currency basis. This product group includes irrigation, wound drainage and certain OEM products.

Net sales by product group for the last three years (in thousands) are:

Sales in the U.S. rose 9% to $862.5 million and represented 73% of total net sales. Surgery products provided the best growth domestically. Sales outside the U.S. increased 3% to $318.8 million and represented 27% of net sales. Oncology products demonstrated the best growth internationally. For the year, excluding negative currency effects, net sales outside the U.S. would have increased 7%.

Bard markets its products through direct selling organizations and selected distributors throughout the world. The geographic breakdown, in percent, of net sales for each of the last three years is presented below:

Cost of goods sold as a percent of net sales increased to 46.6% in 2001 from 45.4% in 2000. Product mix and the impact of currency contributed to this increase.

As a percent of sales, marketing, selling and administrative expense was 30.8%, compared with the prior-year figure of 321.09%. Research and development expense of $53.4 million in 2001 remained flat with the prior year and was complemented by $44.7 million of spending for acquired technologies. Interest expense was $14.2 million in 2001 compared to $19.3 million in 2000, reflecting lower interest rate and debt levels.

Please refer to Note 9, Other (Income) Expense, Net, of the Notes to Consolidated Financial Statements for a summary of items in this category for the last three years. In 2000, the company announced that it would not exercise its option to acquire the remaining capital stock of Endologix, Inc., a California-based company that had developed an endoluminal graft (ELG) used for the minimally invasive treatment of abdominal aortic aneurysms. As a result, other (income) expense, net included a pretax charge of $40.3 million ($0.53 per share after tax) for the write-off of the Endologix option and related assets and liabilities.

The company recorded one-time gains in 2000, 1999 and 1998 related to the series of dispositions of its cardiology product lines. In the first quarter of 2000, the company settled all remaining open issues related to these dispositions and recorded a gain of $15.4 million ($0.19 per share after tax). Please refer to Note 2, Acquisitions and Dispositions, of the Notes to Consolidated Financial Statements for additional disclosure.

The effective tax rate was 30.1% in 2001 and 30.6% in 2000.

In 2001, Bard reported net income of $143.2 million or diluted earnings per share of $2.75. The results for 2001 did not include any one-time items.

In 2000, Bard reported net income of $106.9 million or diluted earnings per share of $2.09. Foreign exchange and the company's dialysis catheter recall negatively impacted 2000 results by approximately $0.11 and $0.09 per share, respectively. The company recorded several one-time items during 2000. Excluding the after-tax charge relating to the company's decision not to exercise the Endologix option ($0.53 per share after tax), and the net after-tax gain associated with other one-time items, primarily asset dispositions and legal settlements ($0.17 per share after tax), diluted earnings per share was $2.45.

In January 2001, Bard announced a major initiative designed to provide operating savings to fund incremental investment in research and development. This project was temporarily halted while the company pursued its merger with Tyco. The company has recently begun to reassess the various components of this project. It is likely that the company will resume certain aspects of this initiative during 2002. Please refer to the company's statement on forward-looking information on page II-11.

Net sales for 2000 totaled $1,098.8 million, which represented a 6% increase over the prior year net sales of ongoing products of $1,036.5 million. Price reductions and the impact of a stronger dollar had the effect of reducing 2000 reported net sales by 1.3% and 2.3%, respectively.

Sales of vascular products rose 7% in 2000. The peripheral technology and electrophysiology franchises continued to show strong worldwide growth. Urology product sales grew 2% in 2000. Both the infection control Foley catheter and brachytheraphy products demonstrated solid sales growth. Sales of oncology products increased 6% in 2000. Both the EndoCinch endoscopic suturing system and bronchoscopy products were introduced in 2000. Specialty access devices also showed good growth. Sales of surgery products grew 11% in 2000, propelled by high worldwide growth of mesh products, used primarily for hernia repair.

Net sales in the U.S. of ongoing products rose 8% in 2000 to $788.3 million as compared to 1999. Surgery products provided the best growth domestically. Net sales of ongoing products outside the U.S. increased 2% to $310.5 million with oncology products demonstrating the best growth internationally. Cost of goods sold as a percent of net sales increased to 45.4% in 2000 from 44.6% in 1999. Pricing pressures, the impact of currency, product recalls and lower margin OEM business all contributed to this increase.

Marketing, selling and administrative expense in 2000 was 32%, essentially flat as compared with the prior-year figure of 31.9% in 1999. Research and development expense remained consistent with the prior year at $53.2 million and was complemented by $68.6 million of spending for acquired technologies. Interest expense was $19.3 million in 2000, also consistent with the prior year.

Please refer to Note 9, Other (Income) Expense, Net, of the Notes to Consolidated Financial Statements for a summary of items in this category for the last three years. In 2000, the company announced that it would not exercise its option to acquire the remaining capital stock of Endologix, Inc., a California-based company that had developed an endoluminal graft (ELG) used for the minimally invasive treatment of abdominal aortic aneurysms. As a result, the company recorded a pretax charge of $40.3 million ($0.53 per share after tax) for the write-off of the Endologix option and related assets and liabilities. Other (income) expense, net, in 1999 included a pretax charge of $8.4 million for the write-down of impaired assets. The company recorded one-time gains in 2000, 1999 and 1998 related to the series of dispositions of its cardiology product lines. In the first quarter of 2000, the company settled all remaining open issues related to these dispositions and recorded a gain of $15.4 million ($0.19 per sha re after tax). Please refer to Note 2, Acquisitions and Dispositions, of the Notes to Consolidated Financial Statements for additional disclosure.

The effective tax rate was 30.6% in 2000 and 31.9% in 1999.

In 2000, Bard reported net income of $106.9 million or diluted earnings per share of $2.09. Foreign exchange and the company's dialysis catheter recall negatively impacted 2000 results by approximately $0.11 and $0.09 per share, respectively. The company recorded several one-time items during 2000. Excluding the after-tax charge relating to the company's decision not to exercise the Endologix option ($0.53 per share after tax), and the net after-tax gain associated with other one-time items, primarily asset dispositions and legal settlements ($0.17 per share after tax), diluted earnings per share was $2.45.

In 1999, Bard reported net income of $118.1 million or diluted earnings per share of $2.28. Excluding the impact of the after-tax gain on the sale of the cardiopulmonary business of $0.12 per share and the after-tax loss associated with the fourth quarter write-down of impaired assets of $0.11 per share, diluted earnings per share was $2.27.

Bard's financial condition remains strong. Total debt was $157.2 million at December 31, 2001, down from $205.1 million at December 31, 2000. This decrease was the result of improved operating cash flow. Total debt to total capitalization was 16.6% at December 31, 2001, compared to 25.0% at December 31, 2000. In addition, Bard increased its cash and marketable securities position to $271 million at December 31, 2001 from $119.7 million at December 31, 2000. , while net debt, or debt less cash and short-term investments, to total capitalization was 13.4% at December 31, 2001, compared to 12.2% at December 31, 2000. Shareholders' investment was impacted in 2001 by the repurchase of $17.5 million of common stock.

Cash provided from operations continued to be the company's primary source of funds to finance operating needs, capital expenditures and dividend payments. The company believes it could borrow adequate funds at competitive terms and rates, should it be necessary. This overall financial strength gives Bard sufficient financing flexibility.

Total cash outlays made for the purchase of businesses, patents, trademarks, purchase rights, and other related items were approximately $45 million in 2001, $69 million in 2000 and $48 million in 1999. The majority of these investments were for intangible assets, reflecting the premium over book value for these purchases. These cash outlays were financed with cash from operations and additional debt.

Periodically, the company purchases its common stock in the open market to provide shares for issuance under various employee stock plans. In connection with the announced sale of the cardiology businesses, the Board of Directors in July of 1998 authorized the purchase from time to time of up to 10 million shares of common stock. Total shares purchased were 401,500 in 2001, 420,300 in 2000, and 1,629,600 in 1999. 1,853,400 shares remain under the 10 million share purchase authorization.

The company periodically enters into foreign exchange contracts and options to reduce its exposure to fluctuations in currency values. These contracts, which have not been significant, have been exclusively for the forward purchase of, and options in, currencies in which the company has known or anticipated sales or payments. Monetary assets of the company held in foreign currencies have relatively short maturities and are denominated in currencies that have not experienced wide, short-term fluctuations in their equivalent U.S. dollar values.

On January 1, 1999, the eleven original member countries of the European Union began the transition to a common currency, the Euro. These participating countries expect the Euro transition to be completed by July 2002. The company has addressed potential Euro-related issues including pricing/marketing strategy, conversion of computer systems, existing contracts and currency risk in the participating countries. At the present time, management does not believe the Euro conversion has had or will have a material impact on the company's business.

The consolidated financial statements include certain amounts that are based on management's best estimates and judgments. Estimates are used in determining such items as provisions for rebates, returns and allowances, depreciable/amortizable lives, pension assumptions, inventory realization and amounts recorded for contingencies, environmental liabilities and other reserves. Because of the uncertainty inherent in such estimates, actual results may differ from these estimates. The company is not aware of reasonably likely events or circumstances that would result in different amounts being recorded that would have a material impact on results of operations or financial condition.

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of C. R. Bard, Inc. (a New Jersey corporation) and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders' investment and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of C. R. Bard, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States.

ARTHUR ANDERSEN LLP

Roseland, New Jersey

January 29, 2002

The accompanying notes to consolidated financial statements are an integral part of these statements.

The accompanying notes to consolidated financial statements are an integral part of these statements.