<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, 1997
------------------------------------
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, 1997
--------------------- ---------------------------------------
Common stock, par value $1.00 122,081,475
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
---------------------
Condensed Consolidated Balance Sheets at March 31, 1997 and September 30,
1996
Condensed Consolidated Statements of Income for the three and six months
ended March 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows for the six months ended
March 31, 1997 and 1996
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 1997 1996
- ------ ------------- -------------
<S> <C> <C>
(Unaudited)
Current Assets:
Cash and equivalents $ 151,283 $ 135,151
Short-term investments 17,549 29,949
Trade receivables, net 533,096 580,313
Inventories (Note 2):
Materials 87,696 91,154
Work in process 65,863 66,005
Finished products 249,194 245,323
------------- -------------
402,753 402,482
Prepaid expenses, deferred taxes and other 130,346 128,946
------------- -------------
Total Current Assets 1,235,027 1,276,841
Investments in Marketable Securities 23,800 23,800
Property, plant and equipment 2,465,744 2,462,235
Less allowances for depreciation and amortization 1,256,502 1,218,087
------------- -------------
1,209,242 1,244,148
Intangibles, Net
Patents and other 80,936 81,992
Goodwill 83,123 93,873
Other 161,106 169,098
------------- -------------
Total Assets $ 2,793,234 $ 2,889,752
============= =============
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-term debt $ 201,644 $ 227,424
Payables and accrued expenses 456,714 538,698
------------- -------------
Total Current Liabilities 658,358 766,122
Long-Term Debt 466,378 468,223
Long-Term Employee Benefit Obligations 308,291 295,122
Deferred Income Taxes and Other 42,412 35,102
Commitments and Contingencies --- ---
Shareholders' Equity:
Preferred stock 51,955 52,927
Common stock 168,121 170,484
Capital in excess of par value 73,315 58,378
Cumulative currency translation adjustments (48,459) (14,959)
Retained earnings 2,163,935 2,160,279
Unearned ESOP compensation (32,733) (32,787)
Shares in treasury - at cost (1,058,339) (1,069,139)
------------- -------------
Total Shareholders' Equity 1,317,795 1,325,183
------------- -------------
Total Liabilities and Shareholders' Equity $ 2,793,234 $ 2,889,752
============= =============
</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,
---------------------------------- ----------------------------------------
1997 1996 1997 1996
---------------- --------------- ------------------- ------------------
<S> <C> <C> <C> <C>
REVENUES $699,207 $705,725 $1,355,006 $1,345,660
Cost of products sold 352,674 368,709 695,806 717,455
Selling and administrative 185,454 185,901 371,984 367,810
Research and development 39,411 38,323 79,067 75,657
---------------- --------------- ------------------- ------------------
TOTAL OPERATING COSTS AND EXPENSES 577,539 592,933 1,146,857 1,160,922
---------------- --------------- ------------------- ------------------
OPERATING INCOME 121,668 112,792 208,149 184,738
Interest expense, net (8,563) (9,698) (18,010) (18,985)
Other income (expense), net 3,333 781 8,141 (42)
---------------- --------------- ------------------- ------------------
INCOME BEFORE INCOME TAXES 116,438 103,875 198,280 165,711
Income tax provision 33,767 29,085 57,501 46,399
---------------- --------------- ------------------- ------------------
NET INCOME $ 82,671 $ 74,790 $140,779 $119,312
================ =============== =================== ==================
EARNINGS PER SHARE $ .63 $ .55 $ 1.07 $ .87
================ =============== =================== ==================
DIVIDENDS PER SHARE $ .13 $ .115 $ .26 $ .23
================ =============== =================== ==================
Average common and common
equivalent shares outstanding 129,938 134,646 129,390 134,534
================ =============== =================== ==================
</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,
--------------------------------
1997 1996
---------------------------------
Operating Activities:
<S> <C> <C>
Net income $ 140,779 $ 119,312
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 101,060 101,811
Change in working capital (46,095) (55,483)
Other, net 13,568 13,580
---------- ----------
Net cash provided by operating activities 209,312 179,220
---------- ----------
Investing Activities:
Capital expenditures (62,627) (61,530)
Acquisitions of businesses - (10,418)
Proceeds from divestitures of businesses 20,860 29,667
Change in investments, net 21,112 1,490
Other, net (19,315) 2,233
---------- ----------
Net cash used for investing activities (39,970) (38,558)
---------- ----------
Financing Activities:
Change in short-term debt (20,744) (7,043)
Proceeds of long-term debt 97,838 -
Payments of long-term debt (102,079) (2,056)
Issuance of common stock 19,810 18,964
Repurchase of common stock (107,875) (159,952)
Dividends paid (33,894) (31,200)
---------- ----------
Net cash used for financing activities (146,944) (181,287)
---------- ----------
Effect of exchange rate changes on cash and
equivalents (6,266) (1,237)
---------- ----------
Net increase (decrease) in cash and
equivalents 16,132 (41,862)
Opening Cash and Equivalents 135,151 198,506
---------- ----------
Closing Cash and Equivalents $ 151,283 $ 156,644
========== ==========
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
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 1996 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.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------
Results of Operations
- ---------------------
Second Quarter 1997 vs. Second Quarter 1996
- -------------------------------------------
Second quarter reported revenues of $699 million were slightly below last year's
reported revenues of $706 million. Reported revenues for the quarter were
unfavorably impacted by the effect of a stronger dollar versus the prior year,
which reduced revenues by an estimated $20 million, and the absence of
approximately $16 million of revenues included in the prior year second quarter
associated with divested businesses, all of which related to the Medical
Supplies and Devices segment. Adjusting for the effects of these items,
revenues would have increased approximately 4%.
Medical Supplies and Devices segment revenues of $376 million were slightly
below last year's revenues of $379 million. Adjusting for the absence of sales
related to divested businesses and the estimated unfavorable effect of foreign
currency translation, Medical Supplies and Devices segment revenues would have
increased approximately 5%. Diagnostic Systems segment revenues were $323
million compared with last year's revenues of $326 million and would have
increased 3% after adjusting for the estimated unfavorable impact of foreign
currency translation.
Domestic Medical segment revenues of $194 million were about the same as last
year. Adjusting for the unfavorable impact from the absence of sales of
divested businesses, Domestic Medical segment revenues increased approximately
4%. International Medical segment revenues of $182 million decreased 2%, but
would have increased 7% after adjusting for both the estimated unfavorable
impact of foreign currency translation and the absence of sales of divested
businesses. Good growth rates were experienced worldwide by both the injection
systems and infusion therapy businesses.
Domestic Diagnostic segment revenues of $167 million decreased 1%. Diagnostic
segment revenue growth continues to be unfavorably impacted by U.S. cost
containment initiatives in the infectious disease diagnostics business.
International Diagnostic segment revenues of $156 million were about the same as
last year but would have increased approximately 7% after excluding the
estimated unfavorable effect of foreign currency translation. Good growth rates
were achieved in the sample collection and flow cytometry businesses.
The gross profit margin of 49.6% improved almost two percentage points over last
year's second quarter rate of 47.8%. The improvement reflects a more profitable
mix of products sold as well as continuing productivity improvements. Selling
and administrative expense of $185 million was 26.5% of revenues which was
slightly higher than last year's second quarter ratio of 26.3%. Investment of
$39 million in research and development increased 3% over last year's second
7
<PAGE>
quarter expenditures, reflecting the continued investment in strategic areas of
the Company's businesses.
Operating income of $122 million increased 8% from last year's second quarter
amount of $113 million. The improvement in the operating margin from 16.0% to
17.4% primarily reflects the improved gross profit margin.
Net interest expense of $9 million was $1 million lower than last year's second
quarter amount due to a reduction in overall debt levels resulting from strong
cash flows. Other income (expense), net was $3 million favorable to last year's
second quarter amount primarily due to a $6 million gain on the sale of an
equity investment in the current quarter. The second quarter income tax rate
was 29.0%, compared with last year's second quarter rate of 28.0%, reflecting a
less favorable forecasted mix in income among tax jurisdictions.
Net income was $83 million compared with $75 million last year, an increase of
11%. Earnings per share of $.63 increased 15% over last year's $.55. Strong
growth in operating income as well as a continuation of the Company's share
repurchase program contributed to this favorable earnings per share growth.
Six Months 1997 vs. Six Months 1996
- -----------------------------------
Reported revenues of $1.355 billion were 1% higher than last year's reported
revenues of $1.346 billion. After adjusting for the estimated unfavorable effect
of foreign currency translation and the absence of sales associated with
divested businesses, revenues would have increased approximately 6%. Medical
Supplies and Devices segment revenues were $724 million compared with last
year's reported revenues of $726 million. After adjusting for the absence of
sales associated with divested businesses and the unfavorable effect of foreign
currency translation, Medical Supplies and Devices segment revenues would have
grown 8%. Diagnostic Systems segment revenues of $631 million increased 2%, or
5% after adjusting for the estimated unfavorable impact of foreign currency
translation. Domestic revenues increased $2 million despite the effect of the
divestitures mentioned above. International revenues of $663 million increased
1%, or 6% after excluding the estimated impact of foreign currency translation.
The gross profit margin of 48.6% was almost two percentage points higher than
last year's rate of 46.7%, reflecting a more profitable mix of products sold and
productivity improvements. Selling and administrative expense was 27.5% of
revenues, slightly higher than last year's rate of 27.3%. Investment of $79
million in research and development expense was 5% higher than last year's
investment. As a percent of revenues, research and development expense was
5.8%, higher than last year's rate of 5.6%. The reasons for these changes are
consistent with those previously discussed in the Second Quarter Results of
Operations.
8
<PAGE>
Operating income of $208 million increased $23 million over last year. As a
percent of revenues, operating income was 15.4% compared with last year's rate
of 13.7% resulting primarily from the improved gross profit margin.
Other income (expense), net was $8 million favorable compared with last year,
principally due to a $4 million gain on the sale of the infusion pump business
in the first quarter of 1997, in addition to the reasons discussed in the Second
Quarter Results of Operations.
The income tax rate of 29.0%, compared with last year's rate of 28.0% reflects
a less favorable forecasted mix in income among tax jurisdictions.
Financial Condition
- -------------------
During the first six months of 1997, cash provided by operations was $209
million, compared with $179 million during the first six months of last year
principally due to improvement in net income and lower working capital
requirements. Capital expenditures for the first six months of 1997 were $63
million which was about the same as last year. For the full year, capital
expenditures are expected to be slightly higher than last year's full year
amount of $146 million. The Company also received $21 million in proceeds from
the sale of the infusion pump business and $9 million in proceeds from the sale
of an equity investment.
During the first six months of 1997, total debt declined $28 million. 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 33.4%, compared with 36.0% a year ago. 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 1997, the Company repurchased 2.4 million shares
of its common stock for a total expenditure of $108 million. At March 31, 1997,
authorization from the Board of Directors remained outstanding to acquire an
additional 12.4 million shares.
In March 1997, the Company signed a definitive agreement to purchase Difco
Laboratories Incorporated, a Michigan-based manufacturer of microbiology media
and supplies with estimated annual revenues of $82 million. The Company has
received government approval for the transaction, which is expected to be
completed during the third quarter of fiscal 1997. In April 1997, the Company
also signed a definitive agreement to acquire PharMingen, a California-based
manufacturer of products for biomedical research with estimated annual revenues
of $30 million. Upon receipt of government approval, the Company expects to
complete the transaction later in fiscal 1997.
9
<PAGE>
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings per Share." This
Statement specifies the computation, presentation and disclosure requirements
for earnings per share for entities with publicly held common stock or potential
common stock. The Company is required to adopt the provisions of SFAS No. 128
for the quarter ended December 31, 1997. The principal difference between the
provisions of SFAS No. 128 and previous authoritative pronouncements is related
to the exclusion of common stock equivalents in the determination of Basic
Earnings Per Share and the market price at which common stock equivalents are
calculated in the determination of Diluted Earnings Per Share. In accordance
with the provisions of SFAS No. 128, earnings per share for the three and six
months ended March 31, 1997 and 1996 are presented in the table below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
Earnings Per Share 1997 1996 1997 1996
- -------------------- -------- -------- -------- ------
<S> <C> <C> <C> <C>
Basic $ .67 $ .58 $1.13 $ .92
Diluted $ .62 $ .54 $1.06 $ .86
</TABLE>
10
<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 11, 1997.
c.) i.) A management proposal for the election of five
directors for the terms indicated below was voted upon as
follows:
Nominee Term Votes For Votes Withheld
------------- ------- ----------- --------------
Albert J. Costello 2 Years 106,417,953 984,174
Harry N. Beaty 3 Years 106,429,543 972,584
Clateo Castellini 3 Years 106,390,246 1,011,881
John W. Galiardo 3 Years 106,402,871 999,256
Frank A. Olson 3 Years 106,407,889 994,228
ii.) A management proposal to approve the selection of Ernst &
Young, LLP as independent auditors for the fiscal year 1997 was
voted upon. 106,995,031 shares were voted for the proposal,
183,861 shares were voted against and 223,235 shares abstained.
iii.) A shareholder proposal requesting the Board of Directors
to take the necessary steps to provide for cumulative voting in
the election of directors was voted upon. 27,088,965 shares
were voted for the proposal, 61,477,389 shares were voted
against and 8,623,737 shares abstained.
iv.) A shareholder proposal requesting the Board of Directors
to provide a report on the Company's Mexican operations was
voted upon. 7,424,674 shares were voted for the proposal,
80,974,700 shares were voted against and 8,786,916 shares
abstained.
11
<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
There were no reports on Form 8-K filed for the quarter ended March
31, 1997.
12
<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 15, 1997
---------------
/s/ Edward J. Ludwig
----------------------------------
Edward J. Ludwig
Senior Vice President - Finance and Chief
Financial Officer (Principal Financial and
Accounting Officer)
13
<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
<PAGE>
BECTON, DICKINSON AND COMPANY Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
(All amounts in thousands, except per share data)
Six Months Ended
March 31,
-----------------------
1997 1996
------------------------
PRIMARY EARNINGS PER SHARE
--------------------------
Net Income $140,779 $119,312
Less preferred stock dividends (1,699) (1,759)
-------- --------
Net income applicable to common stock $139,080 $117,553
======== ========
Shares:
Average shares outstanding 122,921 128,388
Add dilutive stock equivalents from stock
plans 6,469 6,146
-------- --------
Weighted average number of common and
common equivalent shares outstanding
during the year 129,390 134,534
-------- --------
Earnings per share $1.07 $0.87
======== ========
FULLY DILUTED EARNINGS PER SHARE
--------------------------------
Net income applicable to common stock $139,080 $117,553
Add preferred stock dividends
using the "if converted" method 1,699 1,759
Less additional ESOP contribution, using
the "if converted" method (786) (651)
-------- --------
Net income for fully diluted earnings per
share $139,993 $118,661
======== ========
Shares:
Average shares outstanding 122,921 128,388
Add:
Dilutive stock equivalents from stock
plans 6,469 6,592
Shares issuable upon conversion
of preferred stock 2,818 2,922
-------- --------
Weighted average number of common shares
used in calculating fully diluted
earnings per share 132,208 137,902
======== ========
Fully diluted earnings per share $1.06 $0.86
======== ========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Company's Consolidated Financial Statements for the six months ended March 31,
1997, 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-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 151,283
<SECURITIES> 17,549
<RECEIVABLES> 533,096
<ALLOWANCES> 0 <F1>
<INVENTORY> 402,753
<CURRENT-ASSETS> 1,235,027
<PP&E> 2,465,744
<DEPRECIATION> 1,256,502
<TOTAL-ASSETS> 2,793,234
<CURRENT-LIABILITIES> 658,358
<BONDS> 466,378
<COMMON> 168,121
0
51,955
<OTHER-SE> 1,097,719
<TOTAL-LIABILITY-AND-EQUITY> 2,793,234
<SALES> 1,355,006
<TOTAL-REVENUES> 1,355,006
<CGS> 695,806
<TOTAL-COSTS> 695,806
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0 <F1>
<INTEREST-EXPENSE> 24,246
<INCOME-PRETAX> 198,280
<INCOME-TAX> 57,501
<INCOME-CONTINUING> 140,779
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 140,779
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.06
<FN>
<F1> These items are consolidated only at year-end.
</FN>
</TABLE>
