<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
-------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________to__________________
Commission file number 1-4802
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Becton, Dickinson and Company
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(Exact name of registrant as specified in its charter)
New Jersey 22-0760120
- - ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Becton Drive Franklin Lakes, New Jersey 07417-1880
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(Address of principal executive offices)
(Zip Code)
(201) 847-6800
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class of Common Stock Shares Outstanding as of July 31, 1994
--------------------- --------------------------------------
Common stock, par value $1.00 70,970,796
Page 1 of 12 Pages (Exhibit Index is on Page 11)
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PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
---------------------
Condensed Consolidated Balance Sheets at June 30, 1994 and September
30, 1993
Condensed Consolidated Statements of Operations for the three and nine
month periods ended June 30, 1994 and 1993
Condensed Consolidated Statements of Cash Flows for the nine months
ended June 30, 1994 and 1993
Notes to Condensed Consolidated Financial Statements
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ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
<TABLE>
<CAPTION>
June 30, September 30,
Assets 1994 1993
- - ------ ------------- -------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $ 51,516 $ 39,126
Short-term investments 60,077 25,753
Trade receivables, net 525,855 557,803
Inventories (Note 2):
Materials 87,936 89,549
Work in process 72,681 67,257
Finished products 286,523 289,071
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447,140 445,877
Prepaid expenses, deferred taxes and other 80,196 82,183
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Total Current Assets 1,164,784 1,150,742
Investments in marketable securities 89,221 123,605
Property, plant and equipment 2,460,452 2,363,856
Less allowances for depreciation and amortization 1,075,534 960,786
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1,384,918 1,403,070
Intangibles, net
Patents and other 104,060 110,820
Goodwill 115,027 105,272
Other 201,039 194,056
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Total Assets $ 3,059,049 $ 3,087,565
============ ============
Liabilities and Shareholders' Equity
- - ------------------------------------
Current Liabilities:
Short-term debt $ 149,688 $ 206,763
Payables and other liabilities 414,158 429,299
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Total Current Liabilities 563,846 636,062
Long-term debt 706,577 680,581
Long-term employee benefit obligations 300,128 294,054
Deferred income taxes and other 28,306 19,915
Shareholders' Equity:
Preferred stock 56,712 58,108
Common stock 85,349 85,349
Capital in excess of par value 106,432 104,954
Cumulative currency translation adjustments 3,539 (22,048)
Retained earnings 1,679,880 1,581,196
Unearned ESOP compensation (44,406) (45,249)
Shares in treasury - at cost (427,314) (305,357)
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Total Shareholders' Equity 1,460,192 1,456,953
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Total Liabilities and Shareholders' Equity $ 3,059,049 $ 3,087,565
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</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Thousands of Dollars, Except Per Share Data
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------- ----------------------
1994 1993* 1994 1993*
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $ 652,988 $ 625,356 $1,841,882 $1,798,352
Cost of products sold 357,857 345,818 1,013,821 1,005,175
Selling and administrative 165,478 166,321 485,471 488,116
Research and development 35,086 35,156 105,573 101,928
--------- --------- ---------- ----------
TOTAL OPERATING COSTS AND EXPENSES 558,421 547,295 1,604,865 1,595,219
--------- --------- ---------- ----------
OPERATING INCOME 94,567 78,061 237,017 203,133
Interest expense, net (13,264) (14,864) (37,762) (41,826)
Other (expense) income, net (2,419) 7,205 (11,438) 8,768
--------- --------- ---------- ----------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES 78,884 70,402 187,817 170,075
Income tax provision 20,810 13,342 46,954 33,675
--------- --------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 58,074 57,060 140,863 136,400
Cumulative effect of accounting changes,
net of taxes - - - (141,057)
--------- --------- ---------- ----------
NET INCOME (LOSS) $ 58,074 $ 57,060 $ 140,863 $ (4,657)
========= ========= ========== ==========
EARNINGS (LOSS) PER SHARE
- - -------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES $ .78 $ .72 $ 1.87 $ 1.73
Cumulative effect of accounting changes,
net of taxes - - - (1.83)
--------- --------- ---------- ----------
NET INCOME (LOSS) $ .78 $ .72 $ 1.87 $ (.10)
========= ========= ========== ==========
DIVIDENDS PER SHARE $ .185 $ .165 $ .555 $ .495
========= ========= ========== ==========
Average common and common
equivalent shares outstanding 72,700 76,770 73,648 77,228
========= ========= ========== ==========
</TABLE>
* Restated to reflect adoption of SFAS Nos. 106, 109, and 112 in the fourth
quarter of fiscal 1993 retroactive to October 1, 1992.
See notes to condensed consolidated financial statements
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BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
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1994 1993*
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<S> <C> <C>
Operating Activities:
Net income (loss) $ 140,863 $ (4,657)
Adjustments to net income (loss) to derive net cash
provided by operating activities:
Depreciation and amortization 148,510 140,450
Cumulative effect of accounting changes, net of taxes - 141,057
Change in working capital 30,645 (32,637)
Other, net 15,321 (2,764)
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Net cash provided by operating activities 335,339 241,449
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Investing Activities:
Capital expenditures (87,959) (129,213)
Acquisition of business (11,558) 0
Sale of equity investment 0 59,470
Change in investments, net 742 (15,825)
Other, net (20,529) (28,778)
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Net cash used for investing activities (119,304) (114,346)
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Financing Activities:
Change in short-term debt (50,693) (113,728)
Proceeds of long-term debt 27,795 42,044
Payments of long-term debt (16,534) (1,559)
Issuance of common stock 9,287 12,252
Repurchase of common stock (129,766) (33,827)
Dividends paid (43,877) (41,460)
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Net cash used for financing activities (203,788) (136,278)
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Effect of exchange rate changes on cash and equivalents 143 (3,235)
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Net increase (decrease) in cash and equivalents 12,390 (12,410)
Opening Cash and Equivalents 39,126 56,631
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Closing Cash and Equivalents $ 51,516 $ 44,221
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</TABLE>
* Restated to reflect the adoption of SFAS Nos. 106, 109 and 112 in the fourth
quarter of fiscal 1993 retroactive to October 1, 1992.
See notes to condensed consolidated financial statements
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BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994
Note 1 - Basis of Presentation
- - ------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion of
the management of the Company, include all adjustments, which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However,
the financial statements do not include all information and footnotes required
for a presentation in accordance with generally accepted accounting principles.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included or
incorporated by reference in the Company's 1993 Annual Report on Form 10-K. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year.
Note 2 - Inventory Valuation
- - ----------------------------
An actual valuation of inventory under the LIFO method can be made only at the
end of each fiscal year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management's estimates of
expected year-end inventory levels and costs.
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ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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Results of Operations
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Third Quarter 1994 vs. Third Quarter 1993
- - -----------------------------------------
Third quarter revenues of $653 million exceeded the prior year's revenues of
$625 million by 4%. Revenues would have increased 6% after excluding the
estimated $8 million adverse impact of foreign currency translation. Orders for
high volume Medical and Diagnostic products in the Company's core businesses in
the United States and International markets continued to result in good growth
rates, confirming that there does not seem to be an adverse effect from the
uncertainty about health care reform. The growth in core businesses continued
to be driven by product offerings which provide greater value and safety for our
customers. Medical Supplies and Devices segment revenues of $366 million and
Diagnostic Systems segment revenues of $287 million each increased 4%, but would
have increased 6% and 5%, respectively, after excluding the estimated adverse
impact of foreign currency translation.
Domestic Medical segment revenues increased 6%. International Medical segment
revenues increased 3%, but would have increased 6% after excluding the estimated
$5 million adverse impact of foreign currency translation. These growth rates
continued to reflect strong sales of safety products and of diabetic and
prefillable syringes.
Domestic Diagnostic segment revenues increased 6%. International Diagnostic
segment revenues increased 3%, or 5% after excluding the estimated adverse
impact of foreign currency translation. Revenue growth was adversely affected
by the continuing economic weakness in European countries, especially Italy and
Spain, and a general tightening of research funding in the U.S. market. Good
growth rates were experienced in Latin America and Asia Pacific.
The gross profit margin of 45.2% improved from last year's third quarter rate of
44.7%. Productivity improvements and the mix of products sold were the
principal reasons for the improvement. Selling and administrative expense was
25.3% of revenues, more than a full percentage point better than last year's
third quarter ratio of 26.6%, reflecting tight spending controls and cost
reduction programs. Expense of $165 million was slightly less than last year's
third quarter expense. Investment of $35 million in research and development
was the same as last year's third quarter expenditure. As a percent of
revenues, research and development expense was 5.4%, slightly lower than last
year's third quarter rate of 5.6%.
Operating income of $95 million increased 21% from last year's third quarter
amount of $78 million despite the adverse effect of a stronger dollar and the
effect of a retirement enhancement program charge of $4.5 million in the third
quarter which was recorded primarily in cost of products sold and selling and
administrative expense. Operating margin improved from 12.5% in the third
quarter last year to 14.5% in the current quarter.
Net interest expense of $13 million was approximately $2 million less than last
year's third quarter, principally due to lower interest rates.
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Other (expense) income, net was $10 million unfavorable compared with last
year's third quarter. The change is principally due to the absence of dividend
income and a capital gain of almost $7 million recorded in last year's third
quarter in connection with the Company's disposition of its shares of stock in
The Perkin-Elmer Corporation. In addition, higher charges related to foreign
exchange in the current quarter resulted in an unfavorable comparison of $2
million.
The income tax rate of 26.4%, compared with last year's third quarter rate of
19.0%, resulted from the change in projected mix of income from the various tax
rate jurisdictions in which the Company operates.
Earnings per share were $.78, an increase of 8% over last year's $.72 which
included a gain of $.07 related to the Perkin-Elmer transaction. Foreign
currency translation decreased earnings per share by an estimated $.02.
Nine Months 1994 vs. Nine Months 1993
- - -------------------------------------
Reported revenues of $1.842 billion exceeded the prior year level of $1.798
billion by 2%. Revenues would have increased 5% without the estimated adverse
impact of foreign currency translation. Medical Supplies and Devices segment
revenues increased 3% to $1.014 billion. Diagnostic Systems segment revenues
were $828 million, an increase of 2%. Geographically, domestic revenues
increased 3% to $1.025 billion and international revenues increased 1% to $816
million, but would have increased 6% after excluding the estimated adverse
impact of foreign currency translation.
The gross profit margin of 45.0% improved from 44.1% in 1993. Selling and
administrative expense was 26.4% of revenues, lower than last year's rate of
27.1%, reflecting effective spending controls and cost reduction programs.
Investment of $106 million in research and development expense increased 4% over
last year's expenditures. As a percent of revenues, research and development
expense was 5.7%, the same as last year's rate.
Operating income of $237 million increased $34 million over last year. As a
percent of revenues, operating income was 12.9% compared with last year's 11.3%,
resulting from productivity improvements in both manufacturing and operating
expenses.
Other (expense) income, net was $20 million unfavorable compared with last year.
The change is principally due to the absence of an $11 million capital gain
recorded last year in connection with the Perkin-Elmer transaction, as well as
the Company's share of earnings of Applied Biosystems, Inc. prior to its merger
with The Perkin-Elmer Corporation, in the amount of $1 million, and other
miscellaneous income.
The income tax rate of 25.0%, compared with last year's rate of 19.8%, resulted
from the change in projected mix of income from the various tax rate
jurisdictions in which the Company operates.
Income before the cumulative effect of accounting changes was $141 million
compared with $136 million last year, an increase of 3%. Net income was $141
million, compared with a net loss of $5 million last year which included an
after-tax charge of $141 million, or $1.83 per share, representing the
cumulative effect of accounting changes adopted in 1993.
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<PAGE>
Earnings per share were $1.87, an increase of 8% over last year's $1.73 before
the cumulative effect of accounting changes. The prior year's amount included a
gain of $.11 related to the Perkin-Elmer transaction. Foreign currency
translation decreased earnings per share by an estimated $.09.
Financial Condition
- - -------------------
During the first nine months of 1994, cash provided by operations was $335
million, compared with $241 million during the first nine months of last year.
Debt decreased $31 million during the first nine months of 1994. The percentage
of debt to capitalization (defined as the sum of shareholders' equity, net non-
current deferred income tax liabilities, and debt) was 36.8%, lower than 37.6% a
year ago. Last year's ratio has been restated to reflect the cumulative effect
of accounting changes adopted in fiscal 1993 retroactive to October 1, 1992.
Capital expenditures for the nine months were $88 million compared with $129
million during the first nine months of last year. For the full year, capital
expenditures are expected to be less than $140 million.
Because of its strong credit ratings, the Company believes it has the capacity
to arrange significant additional borrowings should the need arise.
During the first nine months of 1994, the Company repurchased 3.5 million shares
of its common stock at an average cost of approximately $37.00 per share. At
June 30, 1994, authorization from the Board of Directors remained outstanding to
acquire an additional 1.7 million shares.
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<PAGE>
PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits
11 - Computation of Earnings Per Share.
b) Reports on Form 8-K
A report on Form 8-K dated June 13, 1994 was filed by the Company
with the Securities and Exchange Commission on June 13, 1994. The
Form 8-K stated that the Company had named Clateo Castellini Chairman
of the Board of Directors, President and Chief Executive Officer,
succeeding Raymond V. Gilmartin, who resigned to accept a similar
position with Merck & Company, Inc. The Form 8-K also stated that
John W. Galiardo had been named to the new position of Vice Chairman
of the Board of Directors.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Becton, Dickinson and Company
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(Registrant)
Date August 11, 1994
----------------------
/s/ Robert A. Reynolds
--------------------------------------
Robert A. Reynolds
Vice President - Finance and Controller
(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
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<TABLE>
<CAPTION>
Exhibit Method of Sequential
Number Description Filing Page Number
- - --------- ----------------------- ----------- -----------
<S> <C> <C> <C>
11 Computation of Earnings Filed with 12
Per Share this report
</TABLE>
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<PAGE>
BECTON, DICKINSON AND COMPANY Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(All amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
--------------------------
PRIMARY EARNINGS PER SHARE 1994 1993 *
-------------------------- ----------- -----------
<S> <C> <C>
Net Income:
Income before cumulative effect
of accounting changes $ 140,863 $ 136,400
Less preferred stock dividends (2,795) (2,856)
----------- -----------
Income before cumulative effect of
accounting changes applicable to common stock 138,068 133,544
Cumulative effect of accounting changes, net of taxes - (141,057)
----------- -----------
Net income(loss) applicable to common stock $ 138,068 $ (7,513)
=========== ===========
Shares:
Average shares outstanding 72,658 76,053
Add dilutive stock equivalents from stock plans 990 1,175
----------- -----------
Weighted average number of common and common
equivalent shares outstanding during the year 73,648 77,228
=========== ===========
Earnings per share:
Income before cumulative effect
of accounting changes $ 1.87 $ 1.73
Cumulative effect of accounting changes, net of taxes - (1.83)
----------- -----------
Net income(loss) $ 1.87 $ (.10)
=========== ===========
FULLY DILUTED EARNINGS PER SHARE**
----------------------------------
Net Income:
Income before cumulative effect of accounting
changes applicable to common stock $ 138,068 $ 133,544
Add preferred stock dividends
using the "if converted" method 2,795 2,856
Less additional ESOP contribution,using
the "if converted" method (1,159) (1,241)
----------- -----------
Income before cumulative effect of accounting
changes for fully diluted earnings per share $ 139,704 $ 135,159
Cumulative effect of accounting changes, net of taxes - (141,057)
----------- -----------
Net income(loss) for fully diluted earnings per share $ 139,704 $ (5,898)
=========== ===========
Shares:
Average shares outstanding 72,658 76,053
Add:
Dilutive stock equivalents from stock plans 1,369 1,374
Shares issuable upon conversion
of preferred stock 1,538 1,582
----------- -----------
Weighted average number of common shares used
in calculating fully diluted earnings per share 75,565 79,009
=========== ===========
Fully diluted earnings per share:
Income before
cumulative effect of accounting changes $ 1.85 $ 1.71
Cumulative effect of accounting changes, net of taxes - (1.78)
----------- -----------
Net income(loss) $ 1.85 $ (.07)
=========== ===========
</TABLE>
* Restated to reflect adoption of SFAS Nos. 106, 109 and 112 in the fourth
quarter of fiscal 1993 retroactive to October 1, 1992.
** Excluding the assumed conversion of preferred shares in 1993 would yield the
following results:
Income before cumulative effect of accounting changes: $1.73;
Cumulative effect of accounting changes, net of taxes: ($1.83); and Net
loss: ($.10).
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