<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 December 31, 1994
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-4802
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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
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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 January 31, 1995
--------------------- -----------------------------------------
Common stock, par value $1.00 67,182,892
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
---------------------
Condensed Consolidated Balance Sheets at December 31, 1994 and September
30, 1994
Condensed Consolidated Statements of Income for the three months ended
December 31, 1994 and 1993
Condensed Consolidated Statements of Cash Flows for the three months ended
December 31, 1994 and 1993
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>
December 31, September 30,
Assets 1994 1994
- ------ ------------ ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $ 119,037 $ 94,913
Short-term investments 62,802 83,854
Trade receivables, net 491,127 589,918
Inventories (Note 2):
Materials 83,916 85,303
Work in process 66,732 69,696
Finished products 271,708 265,002
---------- ----------
422,356 420,001
Prepaid expenses, deferred taxes and other 140,203 137,865
---------- ----------
Total Current Assets 1,235,525 1,326,551
Investments in Marketable Securities 71,527 71,527
Property, plant and equipment 2,456,438 2,479,936
Less allowances for depreciation and amortization 1,115,623 1,103,587
---------- ----------
1,340,815 1,376,349
Intangibles, Net
Patents and other 100,227 103,882
Goodwill 111,423 113,843
Other 164,366 167,381
---------- ----------
Total Assets $3,023,883 $3,159,533
========== ==========
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-term debt $ 218,663 $ 173,228
Payables and accrued expenses 464,045 505,093
---------- ----------
Total Current Liabilities 682,708 678,321
Long-Term Debt 685,531 669,157
Long-Term Employee Benefit Obligations 300,207 297,644
Deferred Income Taxes and Other 33,824 32,717
Commitments and Contingencies -- --
Shareholders' Equity:
Preferred stock 55,945 56,331
Common stock 85,349 85,349
Capital in excess of par value 112,505 111,600
Cumulative currency translation adjustments (23,056) 8,573
Retained earnings 1,771,226 1,752,360
Unearned ESOP compensation (40,890) (41,096)
Shares in treasury - at cost (639,466) (491,423)
---------- ----------
Total Shareholders' Equity 1,321,613 1,481,694
---------- ----------
Total Liabilities and Shareholders' Equity $3,023,883 $3,159,533
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
<TABLE>
<CAPTION>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Thousands of Dollars, Except Per Share Data
(Unaudited)
Three Months Ended
December 31,
------------------
1994 1993
-------- --------
<S> <C> <C>
REVENUES $593,476 $554,080
Cost of products sold 327,065 312,882
Selling and administrative 171,606 157,376
Research and development 35,223 34,803
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TOTAL OPERATING COSTS AND EXPENSES 533,894 505,061
-------- --------
OPERATING INCOME 59,582 49,019
Interest expense, net (10,554) (10,843)
Other expense, net (1,382) (4,366)
-------- --------
INCOME BEFORE INCOME TAXES 47,646 33,810
Income tax provision 14,102 8,114
-------- --------
NET INCOME $ 33,544 $ 25,696
======== ========
EARNINGS PER SHARE $ .46 $ .33
======== ========
DIVIDENDS PER SHARE $ .205 $ .185
======== ========
Average common and common
equivalent shares outstanding 70,411 74,805
======== ========
</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>
Three Months Ended
December 31,
----------------------
1994 1993
--------- --------
<S> <C> <C>
Operating Activities:
Net income $ 33,544 $ 25,696
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 50,270 49,725
Change in working capital 20,470 29,882
Other, net 1,231 9,258
--------- --------
Net cash provided by operating activities 105,515 114,561
--------- --------
Investing Activities:
Capital expenditures (22,938) (29,606)
Change in investments, net 21,174 (28,310)
Other, net 4,926 (11,875)
--------- --------
Net cash provided by (used for) investing activities 3,162 (69,791)
--------- --------
Financing Activities:
Change in short-term debt 66,199 (16,041)
Proceeds of long-term debt -- 22,917
Payments of long-term debt (1,626) (1,952)
Issuance of common stock 2,623 1,920
Repurchase of common stock (150,147) (61,566)
Dividends paid (915) (949)
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Net cash used for financing activities (83,866) (55,671)
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Effect of exchange rate changes on cash and equivalents (687) (558)
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Net increase (decrease) in cash and equivalents 24,124 (11,459)
Opening Cash and Equivalents 94,913 39,126
--------- --------
Closing Cash and Equivalents $ 119,037 $ 27,667
========= ========
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 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 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 - Subsequent Event
- -------------------------
In January 1995, the Company issued $100,000 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.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
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Results of Operations
- ---------------------
First quarter reported revenues of $593 million exceeded the prior year's
revenues by 7%. The favorable effect of a weaker dollar versus the prior year
added an estimated $18 million to revenues, or 3 percentage points. Medical
Supplies and Devices segment revenues of $320 million increased 8%, or 5% after
excluding the estimated $9 million favorable impact from foreign currency
translation. Sales of the Company's drug delivery products, particularly safety
products, and diabetes care products continued to be strong worldwide.
Diagnostic Systems segment revenues of $274 million increased 6%, which included
an estimated $9 million or 3 percentage point 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
reflecting continued increases in demand for safety products.
Domestic Medical segment revenues were slightly above last year with good growth
in core businesses and lower growth, principally due to timing, in some of the
segment's non-core medical device businesses. International Medical segment
revenues increased 17%, or 10% after excluding the estimated favorable impact of
foreign currency translation, reflecting good growth in most geographic regions.
Domestic Diagnostic segment revenues increased 2% and International Diagnostic
segment revenues increased 12%, or 4% after excluding the estimated favorable
impact from foreign currency translation. Although the rate of growth of
traditional microbiology products was slower than historical levels as a result
of some adjustments being made in microbiology test protocols due to cost
containment initiatives in the United States and Europe, good growth was
achieved in most geographic regions in the segment's core businesses.
The gross profit margin of 44.9% was 1.4 percentage points higher than last
year's first quarter rate of 43.5%. This improvement is primarily the result of
a more profitable mix of products sold and productivity improvements. Selling
and administrative expense of $172 million was 28.9% of revenues and increased
9%, or 5% excluding the estimated unfavorable impact of foreign currency
translation. Investment of $35 million in research and development increased
slightly over last year's first quarter expenditures.
Operating income of $60 million increased 22% from last year's first quarter
amount of $49 million, primarily reflecting the improved gross profit margin and
productivity improvements. No significant adjustments have been made in this
quarter with regard to estimates used to record the special charges established
in the fourth quarter of fiscal 1994. These special charges were primarily
associated with decisions made to exit specific product lines and refocus
certain businesses.
Net interest expense of $11 million was the same as last year. Other expense,
net was $1 million which was $3 million favorable to last year, principally due
to lower charges related to foreign exchange. The first quarter income tax rate
was 29.6%, compared with last year's first quarter rate of 24.0%. This increase
is the result of increased U.S. taxes on earnings from operations in Puerto Rico
and shifts in income between tax jurisdictions compared to the prior year.
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<PAGE>
Net income was $34 million compared with $26 million last year, an increase of
31%. This increase reflects strong growth in operating income and an overall
reduction of Other expense, net which was partially offset by an increase in the
tax rate.
Earnings per share of $.46 increased 39% over last year's $.33, or 30% after
excluding the estimated $.03 favorable impact of foreign currency translation
compared with the prior year. The Company's continuation of the share
repurchase program contributed to this favorable earnings per share growth
trend.
Financial Condition
- -------------------
During the first quarter of 1995, cash provided by operations was $106 million,
compared with $115 million during the first quarter of last year. Debt
increased $62 million during the first quarter of 1995 primarily due to
increased short-term borrowings. 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 40.4%, higher than 38.7%
a year ago principally due to the impact of share repurchases in the first
quarter of 1995.
Capital expenditures for the quarter were $23 million compared with $30 million
during the first quarter of last year. For the full year, capital expenditures
are expected to be approximately the same as last year's $123 million.
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 (see Note 3 to
Condensed Consolidated Financial Statements). 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 quarter of 1995, the Company repurchased 3.2 million shares of
its common stock at an average cost of $47.63. At December 31, 1994,
authorization from the Board of Directors remained outstanding to acquire an
additional 6.7 million shares.
At its November 1994 meeting, the Board of Directors increased the Company's
quarterly dividend from $.185 to $.205 per common share.
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 not significant
to the first quarters' results. 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.
-8-
<PAGE>
PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits
10 - 1995 Stock Option Plan.
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
December 31, 1994.
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<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 February 13, 1995
------------------------
/s/ Edward J. Ludwig
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Edward J. Ludwig
Vice President - Finance and
Controller (Principal Financial
and Accounting Officer)
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<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
- ------- ----------- ---------
<S> <C> <C>
10 1995 Stock Option Plan Incorporated by reference
to Exhibit A to the
registrant's Proxy Statement
dated December 29, 1994
11 Computation of Earnings Filed with
Per Share this report
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>
Three Months Ended
December 31,
------------------
PRIMARY EARNINGS PER SHARE 1994 1993
-------------------------- -------- --------
<S> <C> <C>
Net Income $33,544 $25,696
Less preferred stock dividends (909) (939)
------- -------
Net income applicable to common stock $32,635 $24,757
======= =======
Shares:
Average shares outstanding 68,689 73,888
Add dilutive stock equivalents from stock plans 1,722 917
------- -------
Weighted average number of common and common
equivalent shares outstanding during the year 70,411 74,805
======= =======
Earnings per share $.46 $.33
======= =======
</TABLE>
FULLY DILUTED EARNINGS PER SHARE
--------------------------------
<TABLE>
<S> <C> <C>
Net income applicable to common stock $32,635 $24,757
Add preferred stock dividends
using the "if converted" method 909 939
Less additional ESOP contribution, using
the "if converted" method (359) (390)
------- -------
Net income for fully diluted earnings per share $33,185 $25,306
======= =======
Shares:
Average shares outstanding 68,689 73,888
Add:
Dilutive stock equivalents from stock plans 1,763 917
Shares issuable upon conversion
of preferred stock 1,517 1,568
------- -------
Weighted average number of common shares used
in calculating fully diluted earnings per share 71,969 76,373
======= =======
Fully diluted earnings per share $.46 $.33
======= =======
</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 three months ended December
31, 1994, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 119,037
<SECURITIES> 62,802
<RECEIVABLES> 491,127
<ALLOWANCES> 0<F1>
<INVENTORY> 422,356
<CURRENT-ASSETS> 1,235,525
<PP&E> 2,456,438
<DEPRECIATION> 1,115,623
<TOTAL-ASSETS> 3,023,883
<CURRENT-LIABILITIES> 682,708
<BONDS> 685,531
<COMMON> 85,349
0
55,945
<OTHER-SE> 1,180,319
<TOTAL-LIABILITY-AND-EQUITY> 3,023,883
<SALES> 593,476
<TOTAL-REVENUES> 593,476
<CGS> 327,065
<TOTAL-COSTS> 327,065
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 15,049
<INCOME-PRETAX> 47,646
<INCOME-TAX> 14,102
<INCOME-CONTINUING> 33,544
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,544
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.46
<FN>
<F1> These items are consolidated only at year-end.
</FN>
</TABLE>
