<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 March 31, 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
----------------------------------------------------
(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 April 30, 1995
--------------------- ----------------------------------------
Common stock, par value $1.00 67,006,042
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
---------------------
Condensed Consolidated Balance Sheets at March 31, 1995 and September
30, 1994
Condensed Consolidated Statements of Income for the three and six month
periods ended March 31, 1995 and 1994
Condensed Consolidated Statements of Cash Flows for the six months
ended March 31, 1995 and 1994
Notes to Condensed Consolidated Financial Statements
-2-
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
<TABLE>
<CAPTION>
March 31, September 30,
Assets 1995 1994
- ------ ---------- ----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $ 47,555 $ 94,913
Short-term investments 93,514 83,854
Trade receivables, net 552,150 589,918
Inventories (Note 2):
Materials 87,181 85,303
Work in process 71,155 69,696
Finished products 265,341 265,002
---------- ----------
423,677 420,001
Prepaid expenses, deferred taxes and other 140,125 137,865
---------- ----------
Total Current Assets 1,257,021 1,326,551
Investments in Marketable Securities 71,525 71,527
Property, plant and equipment 2,507,012 2,479,936
Less allowances for depreciation and amortization 1,162,735 1,103,587
---------- ----------
1,344,277 1,376,349
Intangibles, Net
Patents and other 95,446 103,882
Goodwill 113,402 113,843
Other 169,006 167,381
---------- ----------
Total Assets $3,050,677 $3,159,533
========== ==========
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-term debt $ 232,747 $ 173,228
Payables and accrued expenses 462,433 505,093
---------- ----------
Total Current Liabilities 695,180 678,321
Long-Term Debt 628,828 669,157
Long-Term Employee Benefit Obligations 301,003 297,644
Deferred Income Taxes and Other 36,715 32,717
Commitments and Contingencies 0 0
Shareholders' Equity:
Preferred stock 55,520 56,331
Common stock 85,349 85,349
Capital in excess of par value 114,255 111,600
Cumulative currency translation adjustments 2,421 8,573
Retained earnings 1,821,792 1,752,360
Unearned ESOP compensation (40,683) (41,096)
Shares in treasury - at cost (649,703) (491,423)
---------- ----------
Total Shareholders' Equity 1,388,951 1,481,694
---------- ----------
Total Liabilities and Shareholders' Equity $3,050,677 $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 Six Months Ended
March 31, March 31,
------------------------ ------------------------------
1995 1994 1995 1994
---------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
REVENUES $ 692,839 $ 634,814 $ 1,286,315 $ 1,188,894
Cost of products sold 370,237 343,082 697,302 655,964
Selling and administrative 180,898 162,617 352,504 319,993
Research and development 35,504 35,684 70,727 70,487
---------- ---------- ------------ -------------
TOTAL OPERATING COSTS AND EXPENSES 586,639 541,383 1,120,533 1,046,444
---------- ---------- ------------ -------------
OPERATING INCOME 106,200 93,431 165,782 142,450
Interest expense, net (11,571) (13,655) (22,125) (24,498)
Other expense,net (2,404) (4,653) (3,786) (9,019)
---------- ---------- ------------ --------------
INCOME BEFORE INCOME TAXES 92,225 75,123 139,871 108,933
Income tax provision 27,296 18,030 41,398 26,144
---------- ---------- ------------ -------------
NET INCOME $ 64,929 $ 57,093 $ 98,473 $ 82,789
========== ========== ============ =============
EARNINGS PER SHARE $ .92 .76 $ 1.38 $ 1.09
=========== =========== ============= =============
DIVIDENDS PER SHARE $ .205 $ .185 $ .41 $ .37
=========== =========== ============= =============
Average common and common
equivalent shares outstanding 69,243 73,540 69,797 74,148
=========== =========== ============= =============
</TABLE>
See notes to condensed consolidated financial statements
-4-
<PAGE>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
---------------------------
1995 1994
---------- ----------
<S> <C> <C>
Operating Activities:
Net income $ 98,473 $ 82,789
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 101,856 99,756
Change in working capital (27,829) 230
Other, net 8,133 13,378
---------- ---------
Net cash provided by operating activities 180,633 196,153
---------- ---------
Investing Activities:
Capital expenditures (50,103) (57,016)
Payment received on note receivable 23,836 0
Change in investments, net (9,675) 7,840
Other, net (12,483) (19,886)
---------- ----------
Net cash used for investing activities (48,425) (69,062)
---------- ----------
Financing Activities:
Change in short-term debt (80,316) (9,013)
Proceeds of long-term debt 107,976 27,750
Payments of long-term debt (19,033) (16,106)
Issuance of common stock 8,879 5,754
Repurchase of common stock (165,315) (114,387)
Dividends paid (29,512) (28,696)
---------- ----------
Net cash used for financing activities (177,321) (134,698)
---------- ----------
Effect of exchange rate changes on cash
and equivalents (2,245) (511)
---------- ----------
Net decrease in cash and equivalents (47,358) (8,118)
Opening Cash and Equivalents 94,913 39,126
---------- ----------
Closing Cash and Equivalents $ 47,555 $ 31,008
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
-5-
<PAGE>
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 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.
-6-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
-------------------------------------------
Results of Operations
- ---------------------
Second Quarter 1995 vs. Second Quarter 1994
- -------------------------------------------
Second quarter reported revenues of $693 million exceeded the prior year's
revenues by 9%. Revenues would have increased 6% after excluding the estimated
$22 million favorable effect of foreign currency translation. Orders for the
Company's core products continue to be strong in both segments reflecting
continued increases in demand for safety products. Medical Supplies and Devices
segment revenues of $385 million increased 10%, or 6% after excluding the
estimated $11 million favorable impact from foreign currency translation.
Strong growth was achieved in the hypodermic business as a result of continued
conversion to safety products and in the diabetes care business reflecting
primarily the benefits from trends toward more frequent injections. Diagnostic
Systems segment revenues of $308 million increased 9%, or 5% after excluding the
estimated $11 million favorable impact from foreign currency translation.
Worldwide sales in the segment's core businesses remained satisfactory with
sales of blood collection products showing strong growth as a result of
continued increases in demand for safety products.
Domestic Medical segment revenues increased 6%. International Medical segment
revenues increased 13%, or 6% after excluding the estimated favorable impact
from foreign currency translation, reflecting good growth in most geographic
regions, especially Asia-Pacific, Europe and Brazil.
Domestic Diagnostic segment revenues increased 5% and International Diagnostic
segment revenues increased 14%, or 5% after excluding the estimated favorable
impact from foreign currency translation. Good growth was achieved in most
geographic regions with strong growth in Asia-Pacific, Europe and Brazil.
The gross profit margin of 46.6% was six-tenths of a percentage point higher
than last year's second quarter rate of 46.0%. The improvement reflects
productivity improvements and favorable product mix trends as well as favorable
foreign currency translation. Selling and administrative expense of $181
million was 26.1% of revenues which was slightly higher than last year's second
quarter ratio of 25.6%. The benefits from continued spending controls over
operating expenses were offset by a write-off of leasehold improvements in Japan
associated with a decision made in the second quarter to relocate the Tokyo
staff to a more earthquake-proof building and by unfavorable foreign currency
translation. Investment of $36 million in research and development was 5.1% of
revenues as compared with last year's second quarter rate of 5.6%. This slight
decrease from last year's second 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 reduced spending for lower potential projects.
Operating income of $106 million increased 14% from last year's second quarter
amount of $93 million. The improvement of the operating margin from 14.7% in
the second quarter last year to 15.3% in the current quarter was the result of
the positive impact of the improved gross profit margin and overall spending
controls.
-7-
<PAGE>
Net interest expense of $12 million was $2 million lower than last year's second
quarter amount, due to higher interest income as well as lower hedging costs in
Brazil partially offset by higher domestic interest expense associated with the
current quarter debt issuance. Other expense, net was $2 million favorable
compared with last year's second quarter amount of $5 million due to favorable
foreign exchange and a gain on the disposition of an equity investment in the
current quarter. The second quarter income tax rate of 29.6%, compared with
last year's second quarter rate of 24.0%, resulted primarily from the reduction
in certain tax benefits associated with operations in Puerto Rico.
Net income was $65 million compared with $57 million last year, an increase of
14%. Earnings per share of $.92 increased 21% over last year's $.76, or 13%
after excluding the estimated $.06 favorable impact of foreign currency
translation compared with the prior year.
Six Months 1995 vs. Six Months 1994
- -----------------------------------
Reported revenues of $1.286 billion exceeded the prior year level of $1.189
billion by 8%, or 5% after excluding the estimated favorable impact of foreign
currency translation. Medical Supplies and Devices segment revenues increased
9% to $705 million. Diagnostic Systems segment revenues were $581 million, an
increase of 7%. Geographically, domestic revenues increased 4% to $689 million
and international revenues of $598 million increased 14%, or 6% after excluding
the estimated favorable impact of foreign currency translation.
The gross profit margin of 45.8% was one percentage point higher than last
year's rate of 44.8%. Selling and administrative expense was 27.4% of revenues,
higher than last year's rate of 26.9%. Investment of $71 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 5.5%, slightly lower
than last year's rate of 5.9%. The reasons for these changes are consistent
with those previously discussed in the Second Quarter Results of Operations.
Operating income of $166 million increased $23 million over last year. As a
percent of revenues, operating income was 12.9% compared with last year's 12.0%,
resulting from improved gross profit margins and spending controls.
Other expense, net was $5 million favorable compared with last year. The change
is principally due to favorable foreign exchange and a gain on the sale of an
equity investment.
The income tax rate of 29.6%, compared with last year's rate of 24.0%,
represents the reduction of certain tax benefits associated with operations in
Puerto Rico.
Net income was $98 million, compared with $83 million last year, an increase of
19%. Earnings per share of $1.38 increased 27% over last year's $1.09, or 18%
after excluding the estimated $.09 favorable impact of foreign currency
translation compared with the prior year.
-8-
<PAGE>
Financial Condition
- -------------------
During the first six months of 1995, cash provided by operations was $181
million, compared with $196 million during the first six months of last year.
Total debt increased $19 million during the first six months of 1995. In
January 1995, the Company issued $100 million of 8.70% Debentures (see Note 3 to
Condensed Consolidated Financial Statements), the proceeds of which were used to
repay a portion of the Company's outstanding commercial paper, which had been
classified as long-term debt. 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 38.0%, lower than 38.8% a year
ago.
Capital expenditures for the six months were $50 million compared with $57
million during the first six months of last year. For the full year, capital
expenditures are expected to be approximately the same as 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 six months of 1995, the Company repurchased 3.4 million shares
of its common stock at an average cost per share of approximately $48.03,
representing a total expenditure of $165 million. At March 31, 1995,
authorization from the Board of Directors remained outstanding to acquire an
additional 6.4 million shares.
The Company has operations in Mexico representing approximately $100 million of
the Company's $2.6 billion annual revenues. The impact on the Company's
operations from the recent devaluation of the Mexican peso was an estimated
reduction in total revenues for the second quarter of less than 1%. The
estimated impact on earnings per share for the second quarter was not
significant. The Company expects the unfavorable impact on the total year
earnings per share from lower revenues and income from its Mexico operations and
losses on the balance sheet exposure in Mexico to be approximately $.05.
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.
-9-
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
a) The Annual Meeting of Shareholders of the Company was held on February
14, 1995.
c) (i) A management proposal for the election of six directors for the
terms indicated below was voted upon as follows:
Nominee Term Votes For Votes Withheld
------- ------ --------- --------------
Henry P. Becton, Jr. 3 Years 61,497,403 344,929
Clateo Castellini 2 Years 61,432,895 409,437
Gerald M. Edelman 3 Years 60,470,709 1,371,623
Edmund B. Fitzgerald 3 Years 61,481,590 360,742
John W. Galiardo 2 Years 61,438,230 404,102
Richard W. Hanselman 3 Years 61,468,338 373,994
(ii) A management proposal to ratify the selection of Ernst & Young LLP
as independent auditors for fiscal year 1995 was voted upon.
61,602,812 shares were voted for the proposal, 123,169 shares were
voted against and 116,351 shares abstained.
(iii) A management proposal to approve the 1995 Stock Option Plan
including making available 6,000,000 shares of the Company's common
stock for the granting of options, was voted upon. 42,882,189 shares
were voted for the proposal, 14,876,113 shares were voted against
and 291,908 shares abstained.
(iv) A shareholder proposal to recommend that the Company disclose
information concerning senior executives with the corporation who
have previously served in a governmental capacity was voted upon.
1,882,412 shares were voted for the proposal, 54,913,569 shares were
voted against and 1,250,729 shares abstained.
(v) A shareholder proposal to recommend the annual election of directors
was voted upon. 27,589,815 shares were voted for the proposal,
29,630,890 shares were voted against and 829,505 shares abstained.
(vi) A shareholder proposal to recommend the disclosure of a
comprehensive report on the Company's Mexican operations was voted
upon. 3,837,988 shares were voted for the proposal, 48,402,444
shares were voted against and 5,808,178 shares abstained.
-10-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits
11 - Computation of Earnings Per Share.
27 - Financial Data Schedule.
b) Reports on Form 8-K
The following reports on Form 8-K were filed by the registrant with
the Securities and Exchange Commission:
(i) Form 8-K dated January 12, 1995 reported Item 7 in connection
with the registrant's anticipated offering of up to $100
million principal amount of debentures pursuant to a
Prospectus Supplement dated January 10, 1995 under the
registrant's Registration Statement on Form S-3 (Registration
No. 33-47957). The registrant filed the following exhibits on
Form 8-K:
4(c) - Form of Second Supplemental Indenture, dated as of
January 10, 1995, between the Registrant and
Chemical Bank (as successor by merger to
Manufacturers Hanover Trust Company), as Trustee.
12 - Calculation of Ratio of Earnings to Fixed Charges.
(ii) Form 8-K dated January 20, 1995 reported Item 7 in connection
with the registrant's sale of $100 million principal amount of
debentures pursuant to a Prospectus Supplement dated January
10, 1995 under the registrant's Registration Statement on Form
S-3 (Registration No. 33-47957). The registrant filed the
following exhibits on Form 8-K:
1 - Underwriting Agreement and related Pricing Agreement,
each dated January 10, 1995, between the Registrant
and Goldman Sachs & Co. and CS First Boston
Corporation.
4(c) - Second Supplemental Indenture, dated as of January
10, 1995, between the Registrant and Chemical Bank
(as successor by merger to Manufacturers Hanover
Trust Company), as Trustee.
4(d) - Copy of definitive 8.70% Debenture Due January 15,
2025.
-11-
<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 May 11, 1995
--------------------------
/s/ Edward J. Ludwig
------------------------------------------
Edward J. Ludwig
Vice President - Finance and Controller
(Principal Financial and Accounting Officer)
-12-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Method of
Number Description Filing
- --------- ----------------------- -----------
11 Computation of Earnings Filed with
Per Share this report
27 Financial Data Schedule Filed with
this report
-13-
<PAGE>
Exhibit 11
BECTON, DICKINSON AND COMPANY
COMPUTATION OF EARNINGS PER SHARE
(All amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
-------------------------
PRIMARY EARNINGS PER SHARE 1995 1994
- -------------------------- ----------- -----------
<S> <C> <C>
Net income $ 98,473 $ 82,789
Less preferred stock dividends (1,812) (1,877)
-------- --------
Net income applicable to common stock $ 96,661 $ 80,912
======== ========
Shares:
Average shares outstanding 67,938 73,165
Add dilutive stock equivalents from stock plans 1,859 983
-------- --------
Weighted average number of common and common
equivalent shares outstanding during the year 69,797 74,148
======== ========
Earnings per share $ 1.38 $ 1.09
======== ========
FULLY DILUTED EARNINGS PER SHARE
- --------------------------------
Net income applicable to common stock $ 96,661 $ 80,912
Add preferred stock dividends
using the "if converted" method 1,812 1,877
Less additional ESOP contribution, using
the "if converted" method (716) (767)
-------- --------
Net income for fully diluted earnings per
share $ 97,757 $ 82,022
======== ========
Shares:
Average shares outstanding 67,938 73,165
Add:
Dilutive stock equivalents from stock plans 2,169 1,032
Shares issuable upon conversion
of preferred stock 1,506 1,557
-------- --------
Weighted average number of common shares used
in calculating fully diluted earnings per
share 71,613 75,754
======== ========
Fully diluted earnings per share $ 1.37 $ 1.08
======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the
Company's Condensed Consolidated Financial Statements for the six months
ended March 31, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 47,555
<SECURITIES> 93,514
<RECEIVABLES> 552,150
<ALLOWANCES> 0 <F1>
<INVENTORY> 423,677
<CURRENT-ASSETS> 1,257,021
<PP&E> 2,507,012
<DEPRECIATION> 1,162,735
<TOTAL-ASSETS> 3,050,677
<CURRENT-LIABILITIES> 695,180
<BONDS> 628,828
<COMMON> 85,349
0
55,520
<OTHER-SE> 1,248,082
<TOTAL-LIABILITY-AND-EQUITY> 3,050,677
<SALES> 1,286,315
<TOTAL-REVENUES> 1,286,315
<CGS> 697,302
<TOTAL-COSTS> 697,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0 <F1>
<INTEREST-EXPENSE> 31,636
<INCOME-PRETAX> 139,871
<INCOME-TAX> 41,398
<INCOME-CONTINUING> 98,473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98,473
<EPS-PRIMARY> 1.38
<EPS-DILUTED> 1.37
<FN>
<F1> These items are consolidated only at year-end.
</FN>
</TABLE>
