<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, 1995
------------------------------------------
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
-----------
Becton, Dickinson and Company
- --------------------------------------------------------------------------------
(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
--------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(201) 847-6800
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(Registrant's telephone number, including area code)
N/A
--------------------------------------------------------
(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, 1995
--------------------- --------------------------------------
Common stock, par value $1.00 65,941,076
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
---------------------
Condensed Consolidated Balance Sheets at June 30, 1995 and September
30, 1994
Condensed Consolidated Statements of Income for the three and nine
month periods ended June 30, 1995 and 1994
Condensed Consolidated Statements of Cash Flows for the nine months
ended June 30, 1995 and 1994
Notes to Condensed Consolidated Financial Statements
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<PAGE>
ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
<TABLE>
<CAPTION>
June 30, September 30,
Assets 1995 1994
- ------ ------------ -------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $ 120,689 $ 94,913
Short-term investments 23,431 83,854
Trade receivables, net 544,575 589,918
Inventories (Note 2):
Materials 89,145 85,303
Work in process 73,254 69,696
Finished products 256,919 265,002
------------ -------------
419,318 420,001
Prepaid expenses, deferred taxes and other 211,311 137,865
------------ -------------
Total Current Assets 1,319,324 1,326,551
Investments in Marketable Securities 71,525 71,527
Property, plant and equipment 2,421,458 2,479,936
Less allowances for depreciation and amortization 1,132,506 1,103,587
------------ -------------
1,288,952 1,376,349
Intangibles, Net
Patents and other 86,470 103,882
Goodwill 109,760 113,843
Other 172,567 167,381
------------ -------------
Total Assets $ 3,048,598 $ 3,159,533
============ =============
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-term debt $ 233,734 $ 173,228
Payables and accrued expenses 486,507 505,093
------------ -------------
Total Current Liabilities 720,241 678,321
Long-Term Debt 565,345 669,157
Long-Term Employee Benefit Obligations 301,410 297,644
Deferred Income Taxes and Other 46,342 32,717
Commitments and Contingencies - -
Shareholders' Equity:
Preferred stock 55,122 56,331
Common stock 85,349 85,349
Capital in excess of par value 116,277 111,600
Cumulative currency translation adjustments 20,451 8,573
Retained earnings 1,874,108 1,752,360
Unearned ESOP compensation (40,477) (41,096)
Shares in treasury - at cost (695,570) (491,423)
------------ -------------
Total Shareholders' Equity 1,415,260 1,481,694
------------ -------------
Total Liabilities and Shareholders' Equity $ 3,048,598 $ 3,159,533
============ =============
</TABLE>
See notes to condensed consolidated financial statements
-3-
<PAGE>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Thousands of Dollars, Except Per Share Data
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
------------------ ----------------------
1995 1994 1995 1994
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES $704,096 $652,988 $1,990,411 $1,841,882
Cost of products sold 378,419 357,857 1,075,721 1,013,821
Selling and administrative 180,191 165,478 532,695 485,471
Research and development 35,581 35,086 106,308 105,573
-------- -------- ---------- ----------
TOTAL OPERATING COSTS AND EXPENSES 594,191 558,421 1,714,724 1,604,865
-------- -------- ---------- ----------
OPERATING INCOME 109,905 94,567 275,687 237,017
Interest expense, net (10,878) (13,264) (33,003) (37,762)
Other expense, net (9,560) (2,419) (13,346) (11,438)
-------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 89,467 78,884 229,338 187,817
Income tax provision 22,817 20,810 64,215 46,954
-------- -------- ---------- ----------
NET INCOME $ 66,650 $ 58,074 $ 165,123 $ 140,863
======== ======== ========== ==========
EARNINGS PER SHARE $ .95 $ .78 $ 2.33 $ 1.87
======== ======== ========== ==========
DIVIDENDS PER SHARE $ .205 $ .185 $ $.615 $ .555
======== ======== ========== ==========
Average common and common
equivalent shares outstanding $ 69,294 $ 72,700 $ 69,603 $ 73,648
======== ======== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
---------------------------
1995 1994
------------ ----------
<S> <C> <C>
Operating Activities:
Net income $ 165,123 $ 140,863
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 154,065 148,510
Change in working capital 7,559 30,645
Other, net 12,976 15,321
------------- -----------
Net cash provided by operating activities 339,723 335,339
------------- -----------
Investing Activities:
Capital expenditures (75,220) (87,959)
Payment received on note receivable 23,836 -
Acquisition of business - (11,558)
Change in investments, net 60,458 742
Other, net (12,899) (20,529)
------------- -----------
Net cash used for investing activities (3,825) (119,304)
------------- -----------
Financing Activities:
Change in short-term debt (146,195) (50,693)
Proceeds of long-term debt 108,653 27,795
Payments of long-term debt (24,496) (16,534)
Issuance of common stock 14,666 9,287
Repurchase of common stock (215,345) (129,766)
Dividends paid (44,973) (43,877)
------------ -----------
Net cash used for financing activities (307,690) (203,788)
------------ -----------
Effect of exchange rate changes on cash and equivalents (2,432) 143
------------ -----------
Net increase in cash and equivalents 25,776 12,390
Opening Cash and Equivalents 94,913 39,126
------------ -----------
Closing Cash and Equivalents $ 120,689 $ 51,516
============ ===========
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
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 1994 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.
Note 3 - Debt Issuance
- ----------------------
In January 1995, the Company issued $100 million of 8.70% debentures with an
effective yield of 8.90% which mature on January 15, 2025. Interest on the
debentures is payable on January 15 and July 15 of each year, commencing on July
15, 1995. The debentures are redeemable in whole or in part at the option of
the Company at any time on or after January 15, 2005 at specified redemption
prices. The debentures are not entitled to any sinking fund. The Company used
the net proceeds to repay a portion of its outstanding commercial paper.
Note 4 - Sale Of Medical Gloves Business
- ----------------------------------------
In June 1995, the Company consummated the previously announced sale of its
Medical Gloves business. The pre-tax loss recognized on this sale of
approximately $6 million is included in Other Expense, Net.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
------------------------------------------------------------
Results of Operations
- ---------------------
Third Quarter 1995 vs. Third Quarter 1994
- -----------------------------------------
Third quarter reported revenues of $704 million exceeded the prior year's
revenues by 8%. Revenues would have increased 3% after excluding the estimated
$30 million favorable effect of foreign currency translation. While orders for
the Company's core products remained strong in both segments reflecting
continued increases in demand for safety products, the absence of revenues from
some divested product lines, lower revenues in non-core businesses, and the
continuing effect of devaluations in Mexico negatively affected the overall
growth rate. Medical Supplies and Devices segment revenues of $392 million
increased 7%, or 3% after excluding the estimated $15 million favorable impact
from foreign currency translation. The hypodermic business and diabetes care
business continued to benefit from ongoing conversions to safety products and
the trend toward more frequent injections, respectively. Sales of new vascular
access safety products were also strong as were sales of prefillable syringes
for pharmaceutical companies. Sales of non-core contract packaging services and
surgical products were lower than last year. Diagnostic Systems segment
revenues of $312 million increased 9%, or 3% after excluding the estimated $15
million favorable impact from foreign currency translation. Worldwide sales
growth in the segment's blood collection and flow cytometry businesses continues
to be very strong.
Domestic Medical segment revenues increased 2%. International Medical segment
revenues increased 14%, or 5% after excluding the estimated favorable impact
from foreign currency translation.
Domestic Diagnostic segment revenues increased 2% and international Diagnostic
segment revenues increased 17%, or 5% after excluding the estimated favorable
impact from foreign currency translation. The domestic growth rate was affected
by the absence of revenues in the current quarter from the radioimmunoassay
business and from a labware product line, both of which were previously
divested.
The gross profit margin of 46.3% was over a full percentage point higher than
last year's third quarter rate of 45.2%. This improvement reflects increased
productivity and a more profitable mix of products sold as well as favorable
foreign currency translation. Selling and administrative expense of $180
million was 25.6% of revenues which was slightly higher than last year's third
quarter ratio of 25.3%. Spending increased 9%, or 3% after excluding the
estimated impact of foreign currency translation. Investment of $36 million in
research and development was 5.1% of revenues as compared with last year's third
quarter rate of 5.4%. The slight decrease from last year's third quarter rate
represents the Company's continued increase in the rate of spending for high
potential projects, more than offset by the benefits derived from the reduction
in the rate of spending for lower potential projects.
Operating income of $110 million increased 16% from last year's third quarter
amount of $95 million. The improvement in the operating margin from 14.5% in
the third quarter last year to 15.6% in the current quarter reflected the
positive impact of the improved gross profit margin.
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<PAGE>
Net interest expense of $11 million was $2 million lower than last year's third
quarter amount, principally due to lower interest expense outside the United
States, partially offset by higher domestic interest expense associated with the
long-term debt issuance in the second quarter of this year. Other expense, net
was $7 million unfavorable compared with last year's third quarter amount of $2
million, primarily due to the inclusion of a $6 million loss on the disposition
of the Medical Gloves business which was consummated in the current quarter.
The third quarter income tax rate was 25.5%, compared with last year's third
quarter rate of 26.4%.
Net income was $67 million compared with $58 million last year, an increase of
15%. Earnings per share of $.95 increased 22% over last year's $.78, or
approximately 24% after excluding the estimated $.04 favorable impact of foreign
currency translation and approximately a $.06 loss on the sale of the Medical
Gloves business.
Nine Months 1995 vs. Nine Months 1994
- -------------------------------------
Reported revenues of $1.990 billion exceeded the prior year level of $1.842
billion by 8%, or 4% after excluding the estimated favorable impact of foreign
currency translation. Medical Supplies and Devices segment revenues increased
8% to $1.097 billion. Diagnostic Systems segment revenues were $893 million,
also an increase of 8%. Geographically, domestic revenues increased 3% to
$1.057 billion and international revenues of $934 million increased 14%, or 6%
after excluding the estimated favorable impact of foreign currency translation.
The gross profit margin of 46.0% was one percentage point higher than last
year's rate of 45.0%. Selling and administrative expense was 26.8% of revenues,
higher than last year's rate of 26.4%. Investment of $106 million in research
and development expense was about the same as last year's expenditures. As a
percent of revenues, research and development expense was 5.3%, slightly lower
than last year's rate of 5.7%. The reasons for these changes are consistent
with those previously discussed in the Third Quarter Results of Operations.
Operating income of $276 million increased $39 million over last year. As a
percent of revenues, operating income was 13.9% compared with last year's 12.9%,
principally resulting from improved gross profit margins.
Net interest expense of $33 million was $5 million lower than last year for
reasons consistent with those previously discussed in the Third Quarter Results
of Operations. Other expense, net was $2 million unfavorable compared with last
year largely as a result of the $6 million loss on the disposition of the
Medical Gloves business offset by gains on the sale of an equity investment and
certain divested product lines.
The income tax rate of 28.0%, compared with last year's rate of 25.0%,
represents the reduction of certain tax benefits associated with operations in
Puerto Rico.
Net income was $165 million, compared with $141 million last year, an increase
of 17%. Earnings per share of $2.33 increased 25% over last year's $1.87, or
approximately 21% after excluding the estimated $.13 favorable impact of foreign
currency translation and approximately a $.06 loss from the sale of the Medical
Gloves business.
-8-
<PAGE>
Financial Condition
- -------------------
During the first nine months of 1995, cash provided by operations was $340
million, compared with $335 million during the first nine months of last year.
Total debt decreased $43 million during the first nine months of 1995, despite
the issuance of $100 million of 8.70% Debentures in the second quarter (see Note
3 to Condensed Consolidated Financial Statements). The percentage of debt to
capitalization (wherein capitalization is defined as the sum of shareholders'
equity, net non-current deferred income tax liabilities, and debt) was 35.8%,
lower than 36.8% a year ago.
Capital expenditures for the nine months were $75 million compared with $88
million during the first nine months of last year. For the full year, capital
expenditures are expected to be slightly lower than last year's $123 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 1995, the Company repurchased 4.3 million shares
of its common stock at an average cost per share of approximately $49.94,
representing a total expenditure of $215 million.
The Company has operations in Mexico representing approximately $100 million of
the Company's approximately $2.6 billion annual revenues. The impact on the
Company's operations from the devaluation of the Mexican peso was an estimated
reduction in total revenues for the third quarter of less than 1%. The
estimated impact on earnings per share for the third quarter was not significant
and it is not currently expected that there will be any significant impact on
earnings per share for the year.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of." This Statement establishes accounting standards for
the assessment and measurement of impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable intangibles to be
disposed of. The Company is presently assessing the effect of adoption of
Statement No. 121, which is required to be adopted by the Company by the first
quarter of fiscal 1997.
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<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits
3(a) Restated Certificate of Incorporation, as amended January 22,
1990.
3(b) By-Laws, as amended May 30, 1989.
11 Computation of Earnings Per Share.
27 Financial Data Schedule.
b) Reports on Form 8-K
There were no reports on Form 8-K filed for the quarter ended June
30, 1995.
-10-
<PAGE>
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
-----------------------------
(Registrant)
Date August 11, 1995
-----------------------------
/s/ Edward J. Ludwig
-------------------------------
Edward J. Ludwig
Senior Vice President - Finance
and Chief Financial Officer
-11-
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
- ------- ----------- ----------
<S> <C> <C>
3(a) Restated Certificate of Incorporation, Incorporated by reference to
as amended January 22, 1990 Exhibit 3(a) to the
registrant's Annual Report on
Form 10-K for the fiscal year
ended September 30, 1990
3(b) By-Laws, as amended Incorporated by reference to
May 30, 1989 Exhibit 3(b) to the
registrant's Annual Report on
Form 10-K for the fiscal year
ended September 30, 1989
11 Computation of Earnings Filed with this report
Per Share
27 Financial Data Schedule Filed with this report
</TABLE>
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<PAGE>
Exhibit 11
BECTON, DICKINSON AND COMPANY
COMPUTATION OF EARNINGS PER SHARE
(All amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
-------------------------------
PRIMARY EARNINGS PER SHARE 1995 1994
- -------------------------- --------------- --------------
<S> <C> <C>
Net income $ 165,123 $ 140,863
Less preferred stock dividends (2,706) (2,795)
------------- -------------
Net income applicable to common stock $ 162,417 $ 138,068
============= =============
Shares:
Average shares outstanding 67,557 72,658
Add dilutive stock equivalents from stock plans 2,046 990
------------- -------------
Weighted average number of common and common
equivalent shares outstanding during the year 69,603 73,648
============= =============
Earnings per share $ 2.33 $ 1.87
============= =============
FULLY DILUTED EARNINGS PER SHARE
- --------------------------------
Net income applicable to common stock $ 162,417 $ 138,068
Add preferred stock dividends
using the "if converted" method 2,706 2,795
Less additional ESOP contribution, using
the "if converted" method (1,068) (1,159)
------------- -------------
Net income for fully diluted earnings per share $ 164,055 $ 139,704
============= =============
Shares:
Average shares outstanding 67,557 72,658
Add:
Dilutive stock equivalents from stock plans 2,484 1,369
Shares issuable upon conversion
of preferred stock 1,495 1,538
------------- -------------
Weighted average number of common shares used
in calculating fully diluted earnings per share 71,536 75,565
============= =============
Fully diluted earnings per share $ 2.29 $ 1.85
============= =============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED
JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 120,689
<SECURITIES> 23,431
<RECEIVABLES> 544,575
<ALLOWANCES> 0<F1>
<INVENTORY> 419,318
<CURRENT-ASSETS> 1,319,324
<PP&E> 2,421,458
<DEPRECIATION> 1,132,506
<TOTAL-ASSETS> 3,048,598
<CURRENT-LIABILITIES> 720,241
<BONDS> 565,345
<COMMON> 85,349
0
55,122
<OTHER-SE> 1,274,789
<TOTAL-LIABILITY-AND-EQUITY> 3,048,598
<SALES> 1,990,411
<TOTAL-REVENUES> 1,990,411
<CGS> 1,075,721
<TOTAL-COSTS> 1,075,721
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 46,414
<INCOME-PRETAX> 229,338
<INCOME-TAX> 64,215
<INCOME-CONTINUING> 165,123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 165,123
<EPS-PRIMARY> 2.33
<EPS-DILUTED> 2.29
<FN>
<F1>These items are consolidated only at year-end.
</FN>
</TABLE>
