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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997 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 (Zip Code)
offices)
(201) 847-6800
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock, Par Value $1.00 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of November 30, 1997, 121,188,014 shares of the registrant's common stock
were outstanding and the aggregate market value of such common stock held by
nonaffiliates of the registrant was approximately $6,248,454,002.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's Annual Report to Shareholders for the fiscal
year ended September 30, 1997 are incorporated by reference into Parts I and II
hereof.
(2) Portions of the registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held February 10, 1998 are incorporated by reference into
Part III hereof.
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K, including information incorporated herein
by reference, contains certain forward looking statements (as defined under
federal securities laws) regarding future revenues, products and income which
are based upon current expectations of the Company and involve a number of
business risks and uncertainties. Actual results could vary materially from
anticipated results described in any forward looking statement. Factors that
could cause actual results to vary materially include, but are not limited to,
competitive factors, changes in regional, national or foreign economic
conditions, changes in interest or foreign currency exchange rates, delays in
product introductions, and changes in health care or other governmental
regulation, as well as other factors discussed herein and in the Company's
filings with the Securities and Exchange Commission.
PART I
ITEM 1. BUSINESS.
GENERAL
Becton, Dickinson and Company was incorporated under the laws of the State
of New Jersey in November 1906, as successor to a New York business started in
1897. Its executive offices are located at 1 Becton Drive, Franklin Lakes, New
Jersey 07417-1880 and its telephone number is (201) 847-6800. All references
herein to "the Company" refer to Becton, Dickinson and Company and its
domestic and foreign subsidiaries unless otherwise indicated by the context.
The Company is engaged principally in the manufacture and sale of a broad
line of medical supplies and devices and diagnostic systems used by health
care professionals, medical research institutions and the general public.
BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
The Company's operations consist of two worldwide business segments: Medical
Supplies and Devices, and Diagnostic Systems. The countries in which the
Company has local revenue-generating operations have been combined into the
following geographic areas: United States (including Puerto Rico); Europe; and
Other (which is comprised of Canada, Latin America, Japan and Asia-Pacific).
Information with respect to revenues, operating income and identifiable
assets attributable to each of the Company's business segments and geographic
areas of operation, as well as capital expenditures and depreciation and
amortization attributable to each of the Company's business segments, appears
on pages 30-31 of the Company's Annual Report to Shareholders for the fiscal
year ended September 30, 1997 (the "1997 Annual Report"), and is incorporated
herein by reference.
MEDICAL SUPPLIES AND DEVICES SEGMENT
The major products in this segment are hypodermic products, specially
designed devices for diabetes care, prefillable drug delivery systems,
infusion therapy products and elastic support products and thermometers. This
segment also includes disposable scrubs, specialty needles and specialty and
surgical blades.
DIAGNOSTIC SYSTEMS SEGMENT
The major products in this segment are clinical and industrial microbiology
products, sample collection products, flow cytometry systems for cellular
analysis, tissue culture labware, hematology instruments and other diagnostic
systems including immunodiagnostic test kits.
DISPOSITIONS OF BUSINESS
The Company's syringe pump business was sold in October 1996. The operating
results of this business until its date of sale are reflected in the
Consolidated Financial Statements incorporated herein by reference as part of
Exhibit 13.
ACQUISITION OF BUSINESSES
In May 1997, the Company acquired PharMingen, a manufacturer of products for
biomedical research. Also, in May 1997, the Company acquired Difco
Laboratories Incorporated, a manufacturer of microbiology media and supplies.
The operating results of these businesses from their respective
1
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dates of acquisition are reflected in the Consolidated Financial Statements
incorporated herein by reference as part of Exhibit 13.
FOREIGN OPERATIONS
The Company's products are manufactured and sold worldwide. The principal
markets for the Company's products outside the United States are Europe, Japan,
Mexico, Asia-Pacific, Canada and Brazil. The principal products sold by the
Company outside of the United States are hypodermic needles and syringes,
diagnostic systems, VACUTAINER (R) brand blood collection products, HYPAK (R)
brand prefillable syringe systems, and infusion therapy products. The Company
has manufacturing operations in Australia, Brazil, China, France, Germany,
Ireland, Japan, Mexico, Singapore, Spain and the United Kingdom and in 1996
commenced construction of a hypodermic syringe manufacturing facility in India.
Foreign economic conditions and exchange rate fluctuations have caused the
profitability from foreign revenues to fluctuate more than profitability from
domestic revenues. The Company believes its activities in some countries
outside of the United States involve greater risk than its domestic business
due to the foregoing factors as well as local commercial and economic policies
and political uncertainties.
REVENUES AND DISTRIBUTION
The Company's products and services are marketed in the United States both
through independent distribution channels and directly to end-users. The
Company's products are marketed outside the United States through independent
distributors and sales representatives, and, in some markets, directly to end-
users. Sales to a distributor, which supplies the Company's products to many
end-users, accounted for approximately 10% of total Company revenues in fiscal
1997, and were from both business segments. Order backlog is not material to
the Company's business inasmuch as orders for the Company's products are
generally received and filled on a current basis, except for items temporarily
out of stock. Substantially all revenue is recognized when products are shipped
to customers.
RESEARCH AND DEVELOPMENT
The Company conducts its research and development activities at its operating
units, its Research Center in Research Triangle Park, North Carolina and in
collaboration with selected universities, medical centers and other entities.
The Company also retains individual consultants to support its efforts in
specialized fields. The Company spent $180,626,000 on research and development
during the fiscal year ended September 30, 1997 and $154,220,000 and
$144,201,000, respectively, during the two immediately preceding fiscal years.
Included in fiscal year 1997 is an aggregate $14,750,000 related to in-process
research and development acquired in connection with the Difco and PharMingen
acquisitions, that was expensed at the date of acquisition.
COMPETITION
A number of companies, some of which are more specialized than the Company,
compete in the medical technology field. In each such case, competition
involves only a part of the Company's product lines. Competition in the
Company's markets is based on a combination of factors including price,
quality, service, reputation, distribution and promotion. Ongoing investments
in research, quality management, quality and product improvement and
productivity improvement are required to maintain an advantage in the
competitive environments in which the Company operates.
New companies have entered the medical technology field and established
companies have diversified their business activities into this area. Other
firms engaged in the distribution of medical technology products have become
manufacturers as well. Some of the Company's competitors have greater financial
resources than the Company. The Company is also faced with competition from
products manufactured outside the United States.
INTELLECTUAL PROPERTY AND LICENSES
The Company owns significant intellectual property, including patents, patent
applications, trade secrets, know-how and trademarks in the United States and
other countries. The Company is also
2
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licensed under domestic and foreign patents, patent applications, trade
secrets, know-how and trademarks owned by others. In the aggregate, these
intellectual property assets and licenses are of material importance to the
Company's business. The Company does not believe, however, that any single
patent, trademark or intellectual property asset or single license is material
in relation to the Company's business as a whole.
RAW MATERIALS
The Company purchases many different types of raw materials including
plastics, glass, metals, yarn and yarn goods, paper products, agricultural
products, electronic and mechanical sub-assemblies and various biological,
chemical and petrochemical products. All but a few of the Company's principal
raw materials are available from multiple sources.
REGULATION
The Company's medical technology products and operations are subject to
regulation by the federal Food and Drug Administration and various other
federal and state agencies, as well as by a number of foreign governmental
agencies. The Company believes it is in compliance in all material respects
with the regulations promulgated by such agencies, and that such compliance has
not had, and is not expected to have, a material adverse effect on its
business.
The Company also believes that its operations comply in all material respects
with applicable environmental laws and regulations. Such compliance has not
had, and is not expected to have, a material adverse effect on the Company's
capital expenditures, earnings or competitive position.
EMPLOYEES
As of September 30, 1997, the Company had approximately 18,900 employees, of
whom approximately 9,600 were employed in the United States. The Company
believes that its employee relations are satisfactory.
ITEM 2. PROPERTIES.
The executive offices of the Company are located in Franklin Lakes, New
Jersey. The Company owns and leases approximately 10,992,350 square feet of
manufacturing, warehousing, administrative and research facilities throughout
the world. The domestic facilities, including Puerto Rico, comprise
approximately 5,454,830 square feet of owned and 1,602,370 square feet of
leased space. The foreign facilities comprise approximately 2,703,230 square
feet of owned and 1,231,930 square feet of leased space. Sales offices and
distribution centers included in the total square footage are also located
throughout the world.
Operations in both of the Company's business segments are carried on at both
domestic and foreign locations. Primarily at foreign locations, facilities
often serve both business segments and are used for multiple purposes, such as
administrative/sales, manufacturing and/or warehousing/distribution. The
Company generally seeks to own its manufacturing facilities, although some are
leased. Most of the Company's administrative, sales and
warehousing/distribution facilities are leased.
The Company believes that its facilities are of good construction and in good
physical condition, are suitable and adequate for the operations conducted at
those facilities, and are, with minor exceptions, fully utilized and operating
at normal capacity.
The domestic facilities include facilities in Arizona, California, Colorado,
Connecticut, Georgia, Indiana, Maryland, Massachusetts, Michigan, Missouri,
Nebraska, New Jersey, New York, North Carolina, South Carolina, Texas, Utah,
Wisconsin and Puerto Rico.
The foreign facilities are grouped as follows:
--Canada includes approximately 68,930 square feet of leased space.
--Europe includes facilities in Austria, Belgium, Czech Republic, Denmark,
Dubai, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Kenya,
the Netherlands, Poland, South Africa, Spain, Sweden, Switzerland,
Turkey, the United Arab Emirates, and the United Kingdom and is comprised
of approximately 1,067,110 square feet of owned and 692,870 square feet
of leased space.
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--Latin America includes facilities in Brazil, Colombia, Mexico, Panama
and Venezuela and is comprised of approximately 1,136,030 square feet of
owned and 266,700 square feet of leased space.
--Asia-Pacific includes facilities in Australia, China, Hong Kong, India,
Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan,
Thailand and Vietnam and is comprised of approximately 500,090 square
feet of owned and 203,430 square feet of leased space.
The table below summarizes property information by business segment:
<TABLE>
<CAPTION>
BUSINESS SEGMENT
------------------------------------------------------------------
MEDICAL
SUPPLIES AND DIAGNOSTIC
CATEGORY DEVICES SYSTEMS MIXED(A) CORPORATE TOTAL
-------- ------------ ---------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
Owned
Facilities............. 11 28 10 6 55
Square feet............ 2,080,862 3,221,567 2,384,365 471,260 8,158,054
Manufacturing (B)...... 1,195,138(11) 1,450,880(21) 1,074,560(6) 0(0) 3,720,578(38)
Leased
Facilities............. 21 17 77 3 118
Square feet............ 629,431 326,810 1,806,272 71,780 2,834,293
Manufacturing (B)...... 295,316(7) 61,802(4) 10,650(1) 22,300(2) 390,068(14)
Total
Facilities............. 32 45 87 9 173
Square feet............ 2,710,293 3,548,377 4,190,637 543,040 10,992,347
Manufacturing (B)...... 1,490,454(18) 1,512,682(25) 1,085,210(7) 22,300(2) 4,110,646(52)
</TABLE>
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(A)Facilities used by both business segments.
(B) Aggregate square footage and number of facilities (noted in parentheses) by
category used for manufacturing purposes.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to a number of federal proceedings in the United
States brought under the Comprehensive Environmental Response, Compensation and
Liability Act, also known as Superfund, and similar state laws. The Company is
also involved in other legal proceedings and claims which arise in the ordinary
course of business, both as a plaintiff and a defendant. The results of these
matters, individually and in the aggregate, are not expected to have a material
effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF DECEMBER 1, 1997)
The following is a list of the executive officers of the Company, their ages
and all positions and offices held by each of them during the past five years.
There is no family relationship between any of the named persons.
<TABLE>
<CAPTION>
AGE POSITION
NAME --- --------
<S> <C> <C>
Clateo Castellini........ 62 Director, Chairman of the Board, President and
Chief Executive Officer since June 1994 and prior
thereto Sector President -- Medical.
John W. Galiardo......... 63 Director, Vice Chairman of the Board and General
Counsel since June 1994 and prior thereto Vice
President and General Counsel.
</TABLE>
4
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<TABLE>
<CAPTION>
AGE POSITION
NAME --- --------
<S> <C> <C>
Robert F. Adrion........ 56 President--Worldwide Infusion Therapy since October
1995; President--Worldwide Becton Dickinson
Vascular Access from July 1994 to September 1995;
and prior thereto, Vice President--Research and
Development, Becton Dickinson Vascular Access.
Gary M. Cohen........... 38 President--Becton Dickinson Europe and Worldwide
Sample Collection since October 1997; President--
Worldwide Sample Collection from October 1996 to
September 1997; President--Becton Dickinson
Division/Worldwide Hypodermic from August 1994 to
September 1996; Vice President, Marketing and
Development from July 1993 to July 1994; and prior
thereto, Director of Marketing.
Vincent L. De Caprio.... 47 Senior Vice President and Chief Technology Officer
since October 1996; Senior Vice President--
Planning and Technology from July 1995 to
September 1996; Sector President--Technique
Products from October 1994 to June 1995; and prior
thereto, President--Becton Dickinson Vascular
Access.
Vincent A. Forlenza..... 44 President--Worldwide Microbiology Systems since
October 1996; President--Diagnostic Instrument
Systems from October 1995 to September 1996; and
prior thereto, Division President--Becton
Dickinson Advanced Diagnostics.
Andrew J. Kaslow........ 47 Vice President--Human Resources since April 1996;
Vice President--Human Resources, Pepsico Inc. from
August 1994 to March 1996; and prior thereto, Vice
President--Human Resources, KFC International,
Inc.
William A. Kozy......... 45 President--Worldwide Injection Systems since
October 1996; President--Worldwide Blood
Collection from July 1995 to September 1996; and
prior thereto, Division President--Vacutainer
Systems.
Edward J. Ludwig........ 46 Senior Vice President--Finance and Chief Financial
Officer since July 1995; Vice President--Finance
from May 1995 to June 1995; Vice President--
Finance and Controller from January 1995 to May
1995; and prior thereto, President--Becton
Dickinson Diagnostic Instrument Systems.
Walter M. Miller........ 54 Senior Vice President--Strategy and Development
since October 1996; Senior Vice President from
July 1995 to September 1996; Sector President--
Infectious Disease Diagnostics from October 1994
to June 1995; and prior thereto, Sector
President--Diagnostic.
Deborah J. Neff......... 44 President--Worldwide Immunocytometry Systems since
October 1996; President--Becton Dickinson
Immunocytometry Systems from January 1995 to
September 1996; Vice President--General Manager
from October 1992 to December 1994; and prior
thereto, Vice President--Operations.
</TABLE>
5
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<TABLE>
<CAPTION>
AGE POSITION
NAME --- --------
<S> <C> <C>
Mark C. Throdahl........ 46 Senior Vice President since July 1995; Sector
President--Drug Delivery from October 1994 to June
1995; President -- Nippon Becton Dickinson
Company, Ltd. from May 1991 to September 1994; and
prior thereto Director -- Corporate Planning.
Kenneth R. Weisshaar.... 47 President--Worldwide Consumer Health Care since
October 1997; Senior Vice President from July 1995
to September 1997; Sector President--Cellular
Analysis Diagnostics from October 1994 to June
1995; President -- Becton Dickinson Division from
March 1992 to September 1994; and prior thereto
Vice President -- Planning, Performance and
Development.
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is listed on the New York Stock Exchange. As of
November 30, 1997, there were approximately 8,993 shareholders of record. The
balance of the information required by this item appears under the caption
"Common Stock Prices and Dividends" on the inside back cover of the Company's
1997 Annual Report and is incorporated herein by reference as part of Exhibit
13.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this item is included under the caption "Six-Year
Summary of Selected Financial Data" on page 29 of the Company's 1997 Annual
Report and is incorporated herein by reference as part of Exhibit 13.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this item is included in the text contained under
the caption "Financial Review" on pages 21-28 of the Company's 1997 Annual
Report and is incorporated herein by reference as part of Exhibit 13.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The information required by this item is included in the text contained on
pages 24 through and including the second paragraph on page 25 of the Company's
1997 Annual Report, and in Notes 1 and 9 to the consolidated financial
statements contained in the Company's 1997 Annual Report, and each is
incorporated herein by reference as part of Exhibit 13.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item appears on pages 30-31 and pages 34-50
of the Company's 1997 Annual Report and is incorporated herein by reference as
part of Exhibit 13.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information relating to directors required by this item will be contained
under the captions "Board of Directors", "Election of Directors" and
"Continuing Directors" in a definitive Proxy Statement involving the election
of directors which the registrant will file with the Securities
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and Exchange Commission not later than 120 days after September 30, 1997 (the
"Proxy Statement"), and such information is incorporated herein by reference.
The information relating to executive officers required by this item is
included herein in Part I under the caption "Executive Officers of the
Registrant".
The information required pursuant to Item 405 of Regulation S-K will be
contained under the caption "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Company's Proxy Statement, and such information is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this item will be contained under the captions
"Board of Directors" and "Executive Compensation" in the Company's Proxy
Statement, and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this item will be contained under the caption
"Share Ownership of Management and Certain Beneficial Owners" in the Company's
Proxy Statement, and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) FINANCIAL STATEMENTS
The following consolidated financial statements of the Company included in
the Company's 1997 Annual Report at the pages indicated in parentheses, are
incorporated by reference in Item 8 hereof:
Consolidated Statements of Income--Years ended September 30, 1997, 1996
and 1995 (page 34)
Consolidated Balance Sheets--September 30, 1997 and 1996 (page 35)
Consolidated Statements of Cash Flows--Years ended September 30, 1997,
1996 and 1995 (page 36)
Notes to Consolidated Financial Statements (pages 37-50)
(a)(2) FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statement schedule of the Company is
included herein at the page indicated in parentheses:
Schedule II--Valuation and Qualifying Accounts (page 11)
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All other schedules for which provision is made in the applicable accounting
regulations of the Securities Exchange Act of 1934 are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(a)(3) EXHIBITS
See Exhibit Index on pages 12, 13 and 14 hereof for a list of all management
contracts, compensatory plans and arrangements required by this item (Exhibit
Nos. 10(a)(i) through 10(k)(ii)), and all other Exhibits filed or incorporated
by reference as a part of this report.
(b) REPORTS ON FORM 8-K
On July 31, 1997, the registrant filed a report on Form 8-K for purposes of
filing certain agreements and instruments executed in connection with the
public offering by the registrant of its 7% Debentures due August 1, 2027. No
other reports on Form 8-K were filed by the registrant during the three-month
period ended September 30, 1997.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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
/s/ John W. Galiardo
By__________________________________
JOHN W. GALIARDO VICE CHAIRMAN OF
THE BOARD AND GENERAL COUNSEL
Dated: December 16, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW ON THE 16TH DAY OF DECEMBER, 1997 BY THE FOLLOWING
PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.
NAME CAPACITY
/s/ Clateo Castellini Chairman of the Board, President,
- ------------------------------------- Chief Executive Officer and Director
CLATEO CASTELLINI (Principal Executive Officer)
/s/ Edward J. Ludwig Senior Vice President-Finance and
- ------------------------------------- Chief Financial Officer(Principal
EDWARD J. LUDWIG Financial and Accounting Officer)
/s/ Harry N. Beaty, M.D. Director
- -------------------------------------
HARRY N. BEATY, M.D.
/s/ Henry P. Becton, Jr. Director
- -------------------------------------
HENRY P. BECTON, JR.
/s/ Albert J. Costello Director
- -------------------------------------
ALBERT J. COSTELLO
/s/ Gerald M. Edelman, M.D. Director
- -------------------------------------
GERALD M. EDELMAN, M.D.
/s/ John W. Galiardo Director
- -------------------------------------
JOHN W. GALIARDO
/s/ Richard W. Hanselman Director
- -------------------------------------
RICHARD W. HANSELMAN
/s/ Frank A. Olson Director
- -------------------------------------
FRANK A. OLSON
/s/ James E. Perrella Director
- -------------------------------------
JAMES E. PERRELLA
/s/ Gloria M. Shatto Director
- -------------------------------------
GLORIA M. SHATTO
/s/ Raymond S. Troubh Director
- -------------------------------------
RAYMOND S. TROUBH
/s/ Margaretha AF Ugglas Director
- -------------------------------------
MARGARETHA AF UGGLAS
9
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REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors
Becton, Dickinson and Company
We have audited the consolidated financial statements and related schedule of
Becton, Dickinson and Company listed in the accompanying index to financial
statements (Item 14(a)). These financial statements and related schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and related schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and related
schedule are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and related schedule. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements listed in the accompanying index to
financial statements (Item 14(a)) present fairly, in all material respects, the
consolidated financial position of Becton, Dickinson and Company at September
30, 1997 and 1996, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended September 30, 1997 in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
-----------------------
Ernst & Young LLP
Hackensack, New Jersey
November 6, 1997
10
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BECTON, DICKINSON AND COMPANY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1997, 1996, AND 1995
(THOUSANDS OF DOLLARS)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- --------------------------------------------------------------------------------
ADDITIONS
BALANCE CHARGED
AT TO COSTS BALANCE AT
BEGINNING AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997
Against trade receivables:
For doubtful accounts............ $19,608 $ 3,289 $ 2,663(A) $20,234
For cash discounts............... 8,448 30,532 30,481 8,499
------- ------- ------- -------
Total........................ $28,056 $33,821 $33,144 $28,733
======= ======= ======= =======
1996
Against trade receivables:
For doubtful accounts............ $16,924 $ 6,209 $ 3,525(A) $19,608
For cash discounts............... 8,122 28,713 28,387 8,448
------- ------- ------- -------
Total........................ $25,046 $34,922 $31,912 $28,056
======= ======= ======= =======
1995
Against trade receivables:
For doubtful accounts............ $13,937 $ 4,943 $ 1,956(A) $16,924
For cash discounts............... 8,221 27,295 27,394 8,122
------- ------- ------- -------
Total........................ $22,158 $32,238 $29,350 $25,046
======= ======= ======= =======
</TABLE>
- --------
(A) Accounts written off.
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
<S> <C> <C>
3(a)(i) Restated Certificate of Incorporation, Incorporated by reference to Exhibit
as amended January 22, 1990 3(a) to the registrant's Annual Re-
port on Form 10-K for the fiscal year
ended September 30, 1990
3(a)(ii) Amendment to the Restated Certificate Incorporated by reference to Exhibit
of Incorporation, as of August 5, 3(a) to the registrant's Quarterly
1996 Report on Form 10-Q for the period
ended June 30, 1996
3(b) By-Laws, as amended September 23, 1997 Filed with this report
4(a) Indenture, dated as of December 1, Incorporated by reference to Exhibit 4
1982, between the registrant and Man- to Registration Statement No. 2-80707
ufacturers Hanover Trust Company on Form S-3 filed by the registrant
4(b) First Supplemental Indenture, dated as Incorporated by reference to Exhibit
of May 15, 1986, between the regis- 4(b) to Registration Statement No.
trant and Manufacturers Hanover Trust 33-5663 on Form S-3 filed by the reg-
Company istrant
4(c) Second Supplemental Indenture, dated Incorporated by reference to Exhibit
as of January 10, 1995, between the 4(c) to Form 8-K filed by the regis-
registrant and The Chase Manhattan trant on January 12, 1995
Bank (formerly known as Chemical
Bank, the successor by merger to Man-
ufacturers Hanover Trust Company)
4(d) Indenture, dated as of March 1, 1997, Incorporated by reference to Exhibit
between the registrant and The Chase 4(a) to Form 8-K filed by the regis-
Manhattan Bank trant on July 31, 1997 (the regis-
trant hereby agrees to furnish to the
Commission upon request a copy of any
other instruments which define the
rights of holders of long-term debt
of the registrant)
4(e) Rights Agreement, dated as of November Incorporated by reference to Exhibit 1
28, 1995, between the registrant and to Form 8-K filed by the registrant
First Chicago Trust Company of New on December 14, 1995
York, which includes as Exhibit A
thereto, the Form of Right Certifi-
cate
10(a)(i) Employment Agreement, dated June 18, Incorporated by reference to Exhibit
1986, between the registrant and 10(b)(i) to the registrant's Annual
Clateo Castellini Report on Form 10-K for the fiscal
year ended September 30, 1986
10(a)(ii) Employment Agreement, dated June 18, Incorporated by reference to Exhibit
1986, between the registrant and John 10(b)(ii) to the registrant's Annual
W. Galiardo Report on Form 10-K for the fiscal
year ended September 30, 1986
10(a)(iii) Employment Agreement, dated June 9, Incorporated by reference to Exhibit
1987, between the registrant and 10(b)(v) to the registrant's Annual
Walter M. Miller Report on Form 10-K for the fiscal
year ended September 30, 1989
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
<S> <C> <C>
10(b) Certified Resolution authorizing cer- Incorporated by reference to Exhibit
tain payments to certain corporate 10(k) to the registrant's Annual Re-
officers in the event of a discharge, port on Form 10-K for the fiscal year
resignation due to removal from posi- ended September 30, 1986
tion or a significant change in such
officers' respective duties within
two years after a change in control
of the registrant
10(c) Form of Split Dollar Agreement and re- Incorporated by reference to Exhibit
lated Collateral Assignment covering 10(e) to the registrant's Annual Re-
the providing to corporate officers port on Form 10-K for the fiscal year
of a life insurance policy in an ended September 30, 1987
amount equal to two times base salary
in lieu of full participation in the
registrant's group life insurance
program
10(d) Stock Award Plan, as amended and re- Incorporated by reference to Exhibit
stated effective February 11, 1992 10(d) to the registrant's Annual Re-
port on Form 10-K for the fiscal year
ended September 30, 1992
10(e) 1997 Management Incentive Plan Filed with this report
10(f)(i) 1982 Unqualified Stock Option Plan, as Incorporated by reference to Exhibit
amended and restated February 8, 1994 10(g) to the registrant's Annual Re-
port on Form 10-K for the fiscal year
ended September 30, 1994
10(f)(ii) Addendum to 1982 Unqualified Stock Op- Filed with this report
tion Plan
10(g)(i) Salary and Bonus Deferral Plan, as Incorporated by reference to Exhibit 4
amended and restated as of August 15, to Registration Statement No. 333-
1996 11885 on Form S-8 filed by the regis-
trant
10(g)(ii) 1996 Directors' Deferral Plan Incorporated by reference to Exhibit 4
to Registration Statement No. 333-
16091 on Form S-8 filed by the regis-
trant
10(h)(i) 1990 Stock Option Plan, as amended and Incorporated by reference to Exhibit
restated February 8, 1994 10(i) to the registrant's Annual Re-
port on Form 10-K for the fiscal year
ended September 30, 1994
10(h)(ii) Addendum to 1990 Stock Option Plan Filed with this report
10(i) Retirement Benefit Restoration Plan Incorporated by reference to Exhibit
and related Benefit Restoration Plan 10(j) to the registrant's Annual Re-
Trust port on Form 10-K for the fiscal year
ended September 30, 1992
10(j)(i) 1994 Restricted Stock Plan for Non- Incorporated by reference to Exhibit A
Employee Directors to the registrant's Proxy Statement
dated January 5, 1994
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
------- ----------- ----------------
<S> <C> <C>
10(j)(ii) Amendment to the 1994 Restricted Stock Incorporated by reference to Exhibit
Plan for Non-Employee Directors as of 10(j)(ii) to the registrant's Annual
November 26, 1996 Report on Form 10-K for the fiscal
year ended September 30, 1996
10(k)(i) 1995 Stock Option Plan, as amended and Filed with this report
restated January 27, 1997
10(k)(ii) Addendum to 1995 Stock Option Plan Filed with this report
11 Computation of Earnings Per Share Filed with this report
13 Portions of the registrant's Annual Filed with this report
Report to Shareholders for fiscal
year 1997
21 Subsidiaries of the registrant Filed with this report
23 Consent of independent auditors Filed with this report
27 Financial Data Schedule Filed with this report
</TABLE>
Copies of any Exhibits not accompanying this Form 10-K are available at a
charge of 25 cents per page by contacting: Investor Relations, Becton,
Dickinson and Company, 1 Becton Drive, Franklin Lakes, New Jersey 07417-
1880, Phone: 1-800-284-6845.
14
<PAGE>
Exhibit 3(b)
------------
BY-LAWS
of
BECTON, DICKINSON AND COMPANY
A New Jersey Corporation
as Amended September 23, 1997
ARTICLE I
Offices
-------
The registered office of Becton, Dickinson and Company ("Company") shall be
in the Borough of Paramus, County of Bergen, State of New Jersey or such other
place within or without the State of New Jersey as the Board of Directors may
designate. The Company may also establish and have such other offices within or
without the State of New Jersey, as the Board of Directors may designate or its
business may require.
ARTICLE II
Meetings of Shareholders
------------------------
SECTION 1. PLACE OF MEETINGS. Meetings of the shareholders shall be held
at the registered office of the Company in New Jersey, or at such other place,
within or without the State of New Jersey, as may be designated by the Board of
Directors and stated in the notice of the meeting.
SECTION 2.A. ANNUAL MEETINGS. The annual meeting of shareholders for the
election of directors and the transaction of such other business as may be
related to the purposes set forth in the notice of the meeting shall be held at
such time as may be fixed by the Board of Directors.
B. SPECIAL MEETING FOR ELECTION OF DIRECTORS. If the annual meeting of
shareholders is not held on the date designated, the Board of Directors may call
a special meeting of the shareholders for the election of directors and the
transaction of other business.
C. SPECIAL MEETINGS. Special meetings of the shareholders may be called by
the Board of Directors or by the Chairman of the Board or by the President, and
shall be called by the Chairman of the Board or by the President upon written
request of a majority of the Directors then in office, which request shall state
the time, place and purpose of the meeting.
SECTION 3. QUORUM. The presence, in person or by proxy, of the holders of
shares representing a majority of the votes entitled to be cast at a meeting
shall constitute a quorum. The shareholders present in person or by proxy at a
duly organized meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. If a quorum not be present or represented at any meeting,
the
<PAGE>
shareholders present in person, or by proxy, shall have power to adjourn the
meeting without notice until the required voting shares shall be represented. At
such adjourned meeting with the requisite amount of voting shares represented,
any business may be transacted which might have been transacted at the meeting
as originally notified.
SECTION 4. NOTICE OF MEETINGS. A written notice of each annual or special
meeting of the shareholders of the Company, signed by the Chairman of the Board
or the President or the Secretary, which shall state the time, place and purpose
of such meeting, shall be delivered personally or mailed, not less than 10 days
nor more than 60 days before the date of any such meeting, to each shareholder
of record entitled to vote at such meeting. If mailed, the notice shall be
directed to the shareholder at his address as it appears on the records of the
stock transfer agent. Any shareholder, in person or by proxy, may at any time
by a duly signed statement in writing to that effect, waive any statutory or
other notice of any meeting, whether such statement be signed before or after
such meeting.
SECTION 5. VOTING. At all meetings of the shareholders, each holder of
common stock having the right to vote, and present at the meeting in person or
by proxy, shall be entitled to one vote for each full share of common stock of
the Company entitled to vote and registered in his name. Each holder of
preferred stock of any series shall have such voting powers, if any, as the
Board of Directors shall have fixed by resolution prior to the issuance of any
shares of such series. Whenever any action is to be taken by vote of the
shareholders, it shall be authorized by a majority of the votes cast at a
meeting of the shareholders by the holders of shares entitled to vote,
unless a greater plurality is required by law or the Certificate of
Incorporation.
SECTION 6. PROXIES. Any shareholder of record entitled to vote may be
represented at any annual or special meeting of the shareholders by a duly
appointed proxy. All proxies shall be written and properly signed, but shall
require no other attestation, and shall be filed with the Secretary of the
meeting before being voted.
SECTION 7. ORGANIZATION. The Chairman of the Board, or in the absence of
the Chairman of the Board, the Vice Chairman or the President, shall act as
chairman of the meeting at all meetings of the shareholders. The Secretary, or
in his absence one of the Assistant Secretaries, shall act as secretary of the
meeting. In case none of the officers above designated to act as Chairman or
Secretary of the meeting shall be present, a chairman or a secretary of the
meeting, as the case may be, shall be chosen by a vote of the shareholders.
SECTION 8. ORDER OF BUSINESS. The order of business at all meetings of the
shareholders shall be as determined by the Chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a vote of the shareholders.
ARTICLE III
Directors
---------
SECTION 1. QUALIFICATIONS. Each Director shall be at least 21 years of age,
a
<PAGE>
shareholder of record of the Company, and shall be elected in the manner
provided by these By-Laws.
SECTION 2. DUTIES AND POWERS. The Board of Directors shall control and
manage the business and affairs of the Company, and shall exercise all powers of
the Company and perform all acts which are not required to be exercised or
performed by the shareholders. The Directors may adopt such rules and
regulations for the conduct of their meetings and the management of the Company
as they may deem proper.
SECTION 3. PLACE OF MEETINGS. Meetings of the Board of Directors shall be
held at the principal office of the Company or at such other place within or
without the State of New Jersey, as the Chairman of the Board or the Board may
designate.
SECTION 4. TELEPHONE MEETINGS. Any or all Directors may participate in a
meeting of the Board or a committee of the Board by means of conference
telephone or any means of communication by which all persons participating in
the meeting are able to hear each other.
SECTION 5. NOTICE OF MEETINGS There shall be an annual meeting of the
Board of Directors held without notice immediately following the annual meeting
of shareholders, or as soon thereafter as convenient, at the same place as the
annual meeting of shareholders unless some other location is designated by the
Chairman of the Board or by the President. Regular meetings, without notice,
may be held at such time and place as the Board of Directors may designate The
Chairman of the Board or the President may call any special meeting of the Board
of Directors, and shall do so whenever requested in writing by at least one-
third of the Directors. Notice of each special meeting shall be mailed to
each director at least four days before the date on which the meeting is to be
held, or be telephoned or sent to each Director by telegraph, telex, TWX,
cable, wireless or similar means of communication, or be delivered in person,
not later than the day before the date on which such meeting is to be held. The
Board of Directors may meet to transact business at any time and place without
notice, provided that each director shall be present, or that any Director or
Directors not present shall waive notice in writing, either before or after such
meeting. The attendance of any Director at a meeting without protesting prior to
the conclusion of the meeting the lack of notice of such meeting shall
constitute a waiver of notice by him. Neither the business to be transacted
at, nor the purpose of, any meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting. Notice of an adjourned
meeting need not be given if the time and place are fixed at the meeting
adjourning and if the period of adjournment does not exceed 10 days in any one
adjournment.
SECTION 6. QUORUM. A majority of the Directors then in office shall
constitute a quorum for the transaction of business, but the Director or
Directors present, if less than a quorum, may adjourn any meeting from time to
time until such quorum shall be present. All questions coming before the Board
of Directors shall be determined and decided by a majority vote of the Directors
present, unless the vote of a greater number is required by statute, the
Certificate of Incorporation or these By-Laws.
<PAGE>
SECTION 7. ACTION WITHOUT A MEETING. The Board of Directors may act without
a meeting if, prior or subsequent to such action, each Director shall consent in
writing to such action. Such written consent or consents shall be filed with
the minutes of the proceedings of the Board of Directors.
SECTION 8. COMPENSATION OF DIRECTORS. The Board may, by the affirmative
vote of a majority of the Directors then in office, fix reasonable fees or
compensation of the Directors for services to the Company, including attendance
at meetings of the Board of Directors or Committees of the Board. Nothing
herein contained shall be construed to preclude any Director from serving the
Company in any other capacity and receiving compensation therefor. Each
Director shall be entitled to receive reimbursement for reasonable
expenses incurred in the performance of his duties.
ARTICLE IV
Committees
----------
SECTION 1. HOW CONSTITUTED AND POWERS. The Board of Directors, by
resolution of a majority of the Directors then in office, shall appoint from
among its members the committees enumerated in the By-laws and may appoint one
or more other committees. The Board shall designate one member of each
committee its chairman. To the extent provided in the By-law or any resolution
conferring or limiting its powers each committee shall have and may
exercise all the authority of the Board, except that no committee shall:
(a) make, alter, or repeal any By-law of the Company;
(b) elect, appoint or remove any Director, or elect, appoint or remove any
corporate officer;
(c) submit to shareholders any action that requires approval of
shareholders;
(d) amend or repeal any resolution adopted by the terms is amendable or
repealable only by the Board of Directors which by its Board;
(e) act on matters assigned to other committees appointed by the Board of
Directors;
(f) declare or pay any dividends or issue any additional shares of
authorized and unissued capital stock; or
(g) create, dissolve or fill any vacancy on any committee appointed by the
Board of Directors.
The Board, by resolution of a majority of the Directors then in office may fill
any vacancy in any committee; appoint one or more alternate members of any
committee to act in the absence or disability of members of such committees with
all the powers of such absent or disabled members; or remove any director from
membership on any committee
<PAGE>
SECTION 2. EXECUTIVE COMMITTEE. The Executive Committee shall consist of
not less than 3 members. During the intervals between meetings of the Board of
Directors and subject to Section 1 of this Article, the Executive Committee
shall possess and may exercise all the powers and authority of the Board of
Directors in the control and management of the business and affairs of the
Company.
SECTION 3. FINANCE COMMITTEE. The Finance Committee shall consist of
not less than five members. The Finance Committee shall regularly review the
financial and accounting affairs of the Company and shall:
(i) monitor the Company's financial structure and recommend to the Board
appropriate debt or equity financing to meet the Company's long-term
objectives;
(ii) review and approve the Company's dividend policy and recommend to the
Board appropriate dividend action;
(iii) review and approve financial plans, capital expenditure budgets and
capital expenditures (including leases) that on an individual basis
exceed $5 million and that are not included in the capital expenditure
budget;
(iv) review and approve purchases and dispositions of real property;
provided, that notwithstanding the foregoing or anything contained in
--------
clause (iii) above to the contrary, any two executive officers of the
Company acting together shall have the power, without the need for any
approval of the Finance Committee or the Board, to approve, execute and
effect from time to time (A) acquisitions of real property that on an
individual basis have purchase prices of up to and including $25
million, and (B) dispositions of real property that on an individual
basis have sale prices of up to and including $25 million and do not
result in a pre-tax loss of $5 million or more on the consolidated
books of the Company;
(v) review and recommend appropriate Board action with respect to
acquisitions and divestitures of assets (including, without limitation,
stock and other equity interests in corporations, partnerships or other
entities, but excluding individual purchases and dispositions of real
property and acquisitions of assets approved pursuant to clause (iii)
above) that, individually or in the aggregate, in one or more of a
series of related transactions, have a purchase or sale price, as
applicable, equal to or greater than $10 million; and
(vi) review and approve (A) the establishment of a subsidiary in a country
in which the Company has no other subsidiary if the operation of such
subsidiary would involve an investment of more than $2.5 million, (B)
the dissolution of a subsidiary that would result in a pre-tax loss of
$5 million or more on the consolidated books of the Company, (C) the
establishment of a subsidiary in a country in which the Company has an
existing subsidiary if the operation of such new subsidiary would
involve an
<PAGE>
investment of more than $25 million, and (D) any change in capital of a
subsidiary that exceeds $25 million or that would result in a pre-tax
charge of $5 million or more on the consolidated books of the Company.
The Finance Committee also shall be a fiduciary of the Company's employee
benefit plans in the United States and Puerto Rico which require funding, and be
responsible for the selection of fund managers, the establishment and
implementation of funding and investment policies and guidelines, and for the
fiscal management and control of all such plans of the Company and its
subsidiaries in the United States and Puerto Rico.
SECTION 4. AUDIT COMMITTEE. The Audit Committee shall consist of not less
than 3 members, none of whom are officers or employees of the Company or any
subsidiary, and a majority of whom are not former officers of the Company or any
subsidiary.
The Audit Committee shall (i) recommend to the Board of Directors each year a
firm of independent accountants to be the auditors of the Company for the
ensuing fiscal year; (ii) review and discuss with the auditors and report to the
Board of Directors thereon, prior to the annual meeting of shareholders, the
plan and results of the annual audit of the Company; (iii) review and discuss
with the auditors their independence, fees, functions and responsibilities, the
internal auditing, control, and accounting systems of the Company and
other related matters as the Committee from time to time deems necessary or
desirable; and (iv) direct and supervise investigations into matters within the
scope of its duties.
SECTION 5. COMPENSATION AND BENEFITS COMMITTEE. The Compensation and
Benefits Committee (the "Committee") shall consist of not less than three
members, all of whom are to be "nonemployee directors" within the meaning of
Rule 16b-3(b)(3) under the Securities Exchange Act of 1934.
The Committee and Benefits Committee shall: (i) review annually the overall
compensation program for the Company's corporate officers, including the
executive officers; (ii) approve the compensation of the executive officers,
including, but not limited to, regular or periodic compensation and additional
or year-end compensation; (iii) review and approve all consulting or employment
contracts of the Company or of any subsidiary with any corporate officer,
including any executive officer, or with any Director, provided, that any such
contract with any Director must also be approved by the Board of Directors; (iv)
serve as the granting and administrative committee for the Company's stock
option and stock award plans; and (v) perform such other duties as may from time
to time be assigned by the Board of Directors with respect to executive
compensation.
In addition, the Committee shall: (i) oversee the administration of
employee benefits and benefit plans for the Company and its subsidiaries; (ii)
review and approve, or recommend to the Board, new benefits or changes in
existing benefits; and (iii) appoint from among the management of the Company
committees to administer such employee benefits and benefit plans.
SECTION 6. CORPORATE RESPONSIBILITY COMMITTEE. The Corporate
Responsibility Committee shall review the Company's policies and procedures
affecting its role as a
<PAGE>
responsible corporate citizen, including, but not limited to, those relating to
issues such as equal employment opportunity and community relations, to health,
safety and environmental matters, and to proper business practices.
SECTION 7. COMMITTEE ON DIRECTORS. The Committee on Directors shall consist
of not less than 3 members, a majority of whom are neither officers of nor
otherwise employed or retained by the Company or any subsidiary.
The Committee on Directors shall: (i) recommend to the Board candidates for
election as Directors at the annual meeting of shareholders or to fill vacancies
on the Board; and (ii) make recommendations concerning the composition,
organization and functions of the Board and the performance, qualifications,
conduct, including memberships on other boards, and compensation of Directors.
SECTION 8. MEETINGS AND PROCEDURES. Each committee may make its own rules
of procedure and shall meet as provided by such rules or by resolution of the
Board of Directors, and shall also meet at the call of the chairman of the
committee, the Chairman of the Board, the President, or a majority of the
members of the committee.
A majority of the members of a committee shall constitute a quorum. The
affirmative vote of a majority of all of the members shall be necessary for the
adoption of a resolution or to approve any matter within the scope of the
authority of a committee. Minutes of the proceedings of a committee shall be
recorded in a book provided for that purpose and filed with the Secretary of the
Company. A committee may act without a meeting if, prior or subsequent to such
action, each member shall consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
committee.
Action taken by a committee, with or without a meeting, shall be reported to
the Board of Directors at its next regular meeting following such committee
action; except that, when the meeting of the Board is held within 2 days after
the committee action, such report, if not made at the first meeting, shall be
made to the Board at its second meeting following such action.
ARTICLE V
Officers
--------
SECTION 1. ENUMERATION, APPOINTMENT AND REMOVAL. The corporate officers of
the Company shall be a Chairman of the Board, a Vice Chairman of the Board, a
President, one or more Executive Vice Presidents, one or more Senior Vice
Presidents, one or more Sector Presidents, one or more Group Presidents, one or
more Vice Presidents, a Controller, a Treasurer, a Secretary and such other
corporate officers (including assistant corporate officers) as the Board
of Directors may deem necessary or desirable for the transaction of the business
of the Company. In its discretion, the Board of Directors may leave unfilled
any office except those of the President, Treasurer, and Secretary, and should
any vacancy occur among said officers by death, resignation or otherwise, the
same shall be filled at the next regular meeting of the Board of Directors or at
a special meeting. Any two or more
<PAGE>
offices may be held by the same person. The Board of Directors, by resolution
adopted by a majority of the Directors, then in office, shall designate the
Chairman of the Board or the President to serve as the Chief Executive Officer
of the Company.
The corporate officers shall be elected at the first meeting of the Board of
Directors after the annual election of Directors, and shall hold office until
the next succeeding annual meeting of the Board of Directors, subject to the
power of the Board of Directors to remove any corporate officer at pleasure
by an affirmative vote of the majority of the Directors then in office.
Every corporate officer shall have such authority and perform such duties in
the management of the Company as may be provided in these By-laws, or such
duties consistent with these By-laws as may be assigned by the Board of
Directors or the Chief Executive Officer.
SECTION 2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
elected from among the members of the Board of Directors and shall have general
charge and supervision over and responsibility for the business and affairs of
the Company. He shall keep the Board of Directors fully informed concerning
those areas in his charge, and shall perform such other duties as may be
assigned to him by the Board of Directors. In the absence or disability of the
Chairman of the Board and of the Vice Chairman of the Board, the Chief Executive
Officer shall have all the powers and perform all the duties of the Chairman of
the Board.
SECTION 3. CHAIRMAN OF THE BOARD The Chairman of the Board shall preside
at all meetings of the Board of Directors and of the shareholders and shall
perform such other duties as these By-laws or the Board of Directors
may prescribe.
SECTION 4. VICE CHAIRMAN OF THE BOARD. In the absence or disability of the
Chairman of the Board, the Vice Chairman of the Board shall have all the powers
and perform all the duties of the Chairman of the Board. He shall perform such
other duties as may be assigned to him by the Board of Directors or Chairman of
the Board
SECTION 5. PRESIDENT. The President shall have such powers and perform such
duties as may be provided by statute, these By-laws, and as may be assigned by
the Board of Directors or the Chief Executive Officer.
SECTION 6. TREASURER. The Treasurer shall have the care and custody of the
Company funds and securities, maintain banking relationships and execute credit
and collection policies. He shall perform such other duties and possess such
other powers as are incident to his office.
SECTION 7. SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and of the shareholders, and shall record all proceedings of such
meetings in books to be kept for that purpose. The Secretary shall give, or
cause to be given, notice of all meetings of the shareholders and the Board of
Directors. He shall have the custody of the seal of the Company and shall affix
the same to all instruments requiring it, and attest the same. He shall perform
such other duties and possess such other powers as are incident to his office.
<PAGE>
ARTICLE VI
Certificate of Capital Stock
----------------------------
SECTION 1. FORM AND TRANSFERS. The interest of each shareholder of the
Company shall be evidenced by certificates for shares of capital
stock, certifying the number of shares represented thereby and in such form as
the Board of Directors may from time to time prescribe.
Transfers of shares of the capital stock of the Company shall be made only on
the books of the Company, which shall include the books of the stock transfer
agent, by the registered holder thereof, or by his attorney authorized by power
of attorney duly executed and filed with the Secretary of the Company, or a
transfer agent appointed as provided in Section 4 of this Article, and on
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. The person in whose name shares of
capital stock stand on the books of the Company shall be deemed the owner
thereof for all purposes. The Board may, from time to time, make such
additional rules and regulations as it may deem expedient concerning the
issue, transfer, and registration of certificates for shares of the capital
stock of the Company.
Certificates shall be signed by, or in the name of the corporation by, the
chairman or vice-chairman of the board, or the president or a vice-president,
and may be countersigned by the treasurer or an assistant treasurer, or the
secretary or an assistant secretary of the corporation and may be sealed with
the seal of the corporation or a facsimile thereof. Any or all signatures upon
a certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon such
certificate, shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of its issue.
SECTION 2. FIXING RECORD DATE. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
an adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining the shareholders entitled
to receive payment of any dividend or allotment of any right, or for the purpose
of any other action, the Board of Directors shall fix a date not more than 60
days nor less than 10 days before the date of any such meeting, nor more than 60
days prior to any other action, as the record date for any such determination
of shareholders.
SECTION 3. LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES. No
certificate for shares of capital stock in the Company shall be issued in place
of any certificate alleged to have been lost, destroyed or stolen, except on
production of evidence of such loss, destruction or theft and on delivery to the
Company, if the Board of Directors shall so require, of a bond of indemnity upon
such terms and secured by such surety as the Board of Directors may in its
discretion require. A new certificate may be issued without requiring any bond
when, in the judgment of the Board of Directors, it is proper to do so.
<PAGE>
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint
one or more transfer agents and one or more registrars, and may require all
certificates of capital stock to bear the signature or signatures of any of
them. One corporation may serve as both transfer agent and registrar.
SECTION 5. EXAMINATION OF BOOKS BY SHAREHOLDERS. So far as it is not
inconsistent with the law of New Jersey, the Board of Directors shall have power
to determine, from time to time, whether and to what extent and at what times
and places and under what conditions and regulations the books and records
of account, minutes of the proceedings of the shareholders, Board of Directors
and any committee of the Company, and other documents of the Company, or any of
them, shall be open to inspection of the shareholders.
SECTION 6. VOTING SHARES OF OTHER CORPORATIONS. Unless otherwise ordered by
the Board of Directors, the Chairman of the Board and the President, or either
of them, shall have full power and authority on behalf of the Company to attend
and to act and to vote at any meeting of Shareholders of any corporation in
which this Company may hold stock, and at any such meeting shall possess and may
exercise any and all rights and powers incident to the ownership of such stock,
and which, as the owner thereof, this Company might have possessed and exercised
if present. The Board of Directors, by resolution, from time to time, may
confer like powers upon any other person or persons.
ARTICLE VII
Dividends
---------
Dividends shall be declared and paid at such times and in such amounts as the
Board of Directors may in its absolute discretion determine and designate,
subject to the restrictions and limitations imposed by law.
ARTICLE VIII
Signatures
----------
Unless otherwise required by law, by the Certificate of Incorporation, by
these By-laws, or by resolution of the Board of Directors, the Chief Executive
Officer, the President or any Executive Vice President, Senior Vice President,
Sector President, Group President, or Vice President, or the Controller or the
Treasurer of the Company may enter into and execute in the name of the Company,
contracts or other instruments in the regular course of business, or contracts
or other instruments not in the regular course of business which are authorized
either generally or specifically by the Board of Directors, and the Secretary or
an Assistant Secretary shall affix the Company seal thereto and attest the same,
if required.
<PAGE>
ARTICLE IX
Fiscal Year
-----------
The fiscal year of the Company shall begin on the 1st day of October in each
year and end on the September 30th next succeeding.
ARTICLE X
Directors May Contract With Company
-----------------------------------
Any Director or corporate officer may be a party to or may be interested in
any agreement or transaction of this Company by which he may personally benefit,
with the same force and effect as if he were either an entire stranger to the
Company or to the Board of Directors, provided the fact that he is so interested
or may personally benefit shall be disclosed or shall have been known to the
majority of the Board of Directors; and further provided that such agreement or
transaction shall be approved or ratified by the affirmative vote of a majority
of the Directors not so interested or benefited.
ARTICLE XI
Indemnification
---------------
The Company shall indemnify to the full extent authorized or permitted by the
New Jersey Business Corporation Act, any corporate agent (as defined in said
Act), or his legal representative, made, or threatened to be made, a party to
any action, suit or proceeding (whether civil, criminal, administrative
or investigative) by reason of the fact that he is or was a corporate agent of
this Company.
ARTICLE XII
Amendments
----------
These By-laws may be altered, amended or repealed by the shareholders or by a
majority vote of the Directors then in office. Any By-law adopted, amended or
repealed by the shareholders may be amended or repealed by a majority vote of
the Directors then in office unless the resolution of the shareholders adopting
such By-law expressly reserves the right to amend or repeal it to the
shareholders.
ARTICLE XIII
Force and Effect of By-Laws
---------------------------
These By-laws are subject to the provisions of the New Jersey Business
Corporation Act and the Company's Certificate of Incorporation, as it may be
amended from time to time. If any provision in these By-laws is inconsistent
with a provision in that Act or the Certificate of Incorporation, the provision
of that Act or the Certificate of Incorporation shall govern to the extent of
such inconsistency
<PAGE>
chairman of the committee, the Chairman of the Board, the President or a
majority of the members of the committee.
A majority of the members of a committee shall constitute a quorum.
The affirmative vote of a majority of all of the members shall be necessary for
the adoption of a resolution or to approve any matter within the scope of the
authority of a committee. Minutes of the proceedings of a committee shall be
recorded in a book provided for that purpose and filed with the Secretary of the
Company. A committee may act without a meeting if, prior or subsequent to such
action, each member shall consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
committee.
Action taken by a committee, with or without a meeting, shall be reported to
the Board of Directors at its next regular meeting following such committee
action; except that, when the meeting of the Board is held within 2 days after
the committee action, such report, if not made at the first meeting, shall be
made to the Board at its second meeting following such action.
ARTICLE V
Officers
--------
SECTION 1. ENUMERATION, APPOINTMENT AND REMOVAL. The corporate officers
of the Company may include a Chairman of the Board, a Vice Chairman of the
Board, a President, one or more Executive Vice Presidents, one or more Senior
Vice Presidents, one or more Sector Presidents, one or more Group Presidents,
one or more Vice Presidents, a Controller, a Treasurer, a Secretary and such
other corporate officers (including assistant corporate officers) as the
12
<PAGE>
Board of Directors may deem necessary or desirable for the transaction of the
business of the Company. In its discretion, the Board of Directors may leave
unfilled any office except those of the President, Treasurer and Secretary, and
should any vacancy occur among said officers by death, resignation or otherwise,
the same shall be filled at the next regular meeting of the Board of Directors
or at a special meeting. Any two or more offices may be held by the same
person. The Board of Directors, by resolution adopted by a majority of the
Directors, then in office, shall designate the Chairman of the Board or the
President to serve as the Chief Executive Officer of the Company.
The corporate officers shall be elected at the first meeting of the Board of
Directors after the annual election of Directors, and shall hold office until
the next succeeding annual meeting of the Board of Directors, subject to the
power of the Board of Directors to at any time appoint additional corporate
officers or remove any corporate officer at pleasure by an affirmative vote of
the majority of the Directors.
The corporate officers shall have such authority and perform such duties in
the management of the Company as are incident to their respective offices and as
may be provided in these By-laws, as well as such other duties consistent with
these By-laws as may be assigned by the Board of Directors or the Chief
Executive Officer.
SECTION 2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall
be elected from among the members of the Board of Directors and shall have
general charge and supervision over and responsibility for the business and
affairs of the Company. He shall keep the Board of Directors fully informed
concerning those areas in his charge, and shall perform such other duties as may
13
<PAGE>
be assigned to him by the Board of Directors. In the absence or disability of
the Chairman of the Board and of the Vice Chairman of the Board, the Chief
Executive Officer shall have all the powers and perform all the duties of the
Chairman of the Board.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the Board of Directors and of the shareholders and
shall perform such other duties as these By-laws or the Board of Directors may
prescribe.
SECTION 4. VICE CHAIRMAN OF THE BOARD. In the absence or disability of
the Chairman of the Board, the Vice Chairman of the Board shall have all the
powers and perform all the duties of the Chairman of the Board. He shall
perform such other duties as may be assigned to him by the Board of Directors or
Chairman of the Board.
SECTION 5. PRESIDENT. The President shall have such powers and perform
such duties as may be provided by statute, these By-laws, and as may be assigned
by the Board of Directors or the Chief Executive Officer.
SECTION 6. TREASURER. The Treasurer shall have the care and custody of
the Company funds and securities, maintain banking relationships and execute
credit and collection policies. He shall perform such other duties and possess
such other powers as are incident to his office.
SECTION 7. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and of the shareholders, and shall record all proceedings of
such meetings in books to be kept for that purpose. The Secretary shall give,
or
14
<PAGE>
cause to be given, notice of all meetings of the shareholders and the Board of
Directors. He shall have the custody of the seal of the Company and shall affix
the same to all instruments requiring it, and attest the same. He shall perform
such other duties and possess such other powers as are incident to his office.
ARTICLE VI
Certificate of Capital Stock
----------------------------
SECTION 1. FORM AND TRANSFERS. The interest of each shareholder of the
Company shall be evidenced by certificates for shares of capital stock,
certifying the number of shares represented thereby and in such form as the
Board of Directors may from time to time prescribe.
Transfers of shares of the capital stock of the Company shall be made only
on the books of the Company, which shall include the books of the stock transfer
agent, by the registered holder thereof, or by his attorney authorized by power
of attorney duly executed and filed with the Secretary of the Company, or a
transfer agent appointed as provided in Section 4 of this Article, and on
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. The person in whose name shares of
capital stock stand on the books of the Company shall be deemed the owner
thereof for all purposes. The Board may, from time to time, make such
additional rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates for shares of the capital stock of the
Company.
Certificates shall be signed by, or in the name of the Company by, the
Chairman or Vice Chairman of the Board, or the President or a Vice-President,
15
<PAGE>
and may be countersigned by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the Company, and may be sealed with the
seal of the Company or a facsimile thereof. Any or all signatures upon a
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Company with the same
effect as if he were such officer, transfer agent or registrar at the date of
its issue.
SECTION 2. FIXING RECORD DATE. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
an adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining the shareholders entitled
to receive payment of any dividend or allotment of any right, or for the purpose
of any other action, the Board of Directors shall fix a date not more than 60
days nor less than 10 days before the date of any such meeting, nor more than 60
days prior to any other action, as the record date for any such determination of
shareholders.
SECTION 3. LOST, STOLEN, DESTROYED OR MUTILATED CERTIFICATES. No
certificate for shares of capital stock in the Company shall be issued in place
of any certificate alleged to have been lost, destroyed or stolen, except on
production of evidence of such loss, destruction or theft and on delivery to the
Company, if the Board of Directors shall so require, of a bond of indemnity upon
such terms and secured by such surety as the Board of Directors may in its
discretion require. A new certificate may be issued without requiring any bond
when, in the judgment of the Board of Directors, it is proper to do so.
16
<PAGE>
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint one or more transfer agents and one or more registrars, and may require
all certificates of capital stock to bear the signature or signatures of any of
them. One company may serve as both transfer agent and registrar.
SECTION 5. EXAMINATION OF BOOKS BY SHAREHOLDERS. So far as it is not
inconsistent with the law of New Jersey, the Board of Directors shall have power
to determine, from time to time, whether and to what extent and at what times
and places and under what conditions and regulations the books and records of
account, minutes of the proceedings of the shareholders, Board of Directors and
any committee of the Company, and other documents of the Company, or any of
them, shall be open to inspection of the shareholders.
SECTION 6. VOTING SHARES OF OTHER CORPORATIONS. Unless otherwise
ordered by the Board of Directors, the Chairman of the Board, or another officer
thereunto duly authorized by the Chairman of the Board, shall have full power
and authority on behalf of the Company to attend and to act and to vote at any
meeting of shareholders of any corporation in which this Company may hold stock,
and at any such meeting shall possess and may exercise any and all rights and
powers incident to the ownership of such stock, and which, as the owner thereof,
this Company might have possessed and exercised if present. The Board of
Directors, by resolution, from time to time, may confer like powers upon any
other person or persons.
17
<PAGE>
ARTICLE VII
Dividends
---------
Dividends shall be declared and paid at such times and in such amounts as
the Board of Directors may in its absolute discretion determine and designate,
subject to the restrictions and limitations imposed by law.
ARTICLE VIII
Signatures
----------
Unless otherwise required by law, by the Certificate of Incorporation, by
these By-laws, or by resolution of the Board of Directors, the Chief Executive
Officer, the President or any Executive Vice President, Senior Vice President,
Sector President, Group President, or Vice President, or the Controller or the
Treasurer of the Company may enter into and execute in the name of the Company,
contracts or other instruments in the regular course of business, or contracts
or other instruments not in the regular course of business which are authorized,
either generally or specifically by the Board of Directors, and the Secretary or
an Assistant Secretary shall affix the Company seal thereto and attest the same,
if required.
ARTICLE IX
Fiscal Year
-----------
The fiscal year of the Company shall begin on the 1st day of October in each
year and end on the September 30th next succeeding.
18
<PAGE>
ARTICLE X
Directors May Contract With Company
-----------------------------------
Any Director may be a party to or may be interested in any agreement or
transaction of this Company by which such Director may personally benefit, with
the same force and effect as if such Director were either an entire stranger to
the Company or to the Board of Directors, provided the fact that such Director
is so interested or may personally benefit shall be disclosed or shall have been
known to the majority of the Board of Directors; and further provided that such
agreement or transaction shall be approved or ratified by the affirmative vote
of a majority of the Directors not so interested or benefited.
ARTICLE XI
Indemnification
---------------
The Company shall indemnify to the full extent authorized or permitted by
the New Jersey Business Corporation Act, any corporate agent (as defined in said
Act), or such agent's legal representative, made, or threatened to be made, a
party to any action, suit or proceeding (whether civil, criminal, administrative
or investigative) by reason of the fact that such agent is or was a corporate
agent of this Company.
ARTICLE XII
Amendments
----------
These By-laws may be altered, amended or repealed by the shareholders or by
a majority vote of the Directors. Any By-law adopted, amended or repealed by
the shareholders may be amended or repealed by a majority vote of the Directors,
19
<PAGE>
unless the resolution of the shareholders adopting such By-law expressly
reserves the right to amend or repeal it to the shareholders.
ARTICLE XIII
Force and Effect of By-laws
---------------------------
These By-laws are subject to the provisions of the New Jersey Business
Corporation Act and the Company's Certificate of Incorporation, as it may be
amended from time to time. If any provision in these By-laws is inconsistent
with a provision in that Act or the Certificate of Incorporation, the provision
of that Act or the Certificate of Incorporation shall govern to the extent of
such inconsistency.
20
<PAGE>
EXHIBIT 10(E)
BECTON, DICKINSON AND COMPANY
1997 MANAGEMENT INCENTIVE PLAN
PURPOSE
The purpose of the 1997 Management Incentive Plan (the "Plan") is to provide
annual incentive payments to management for their contribution to the Company's
successful financial performance and the accomplishment of strategic
objectives.
THE PAYMENT OF ANNUAL INCENTIVES IS SOLELY WITHIN THE DISCRETION OF THE
MANAGEMENT INCENTIVE COMMITTEE, SUBJECT TO THESE GUIDELINES. NO EMPLOYEE HAS
ANY VESTED RIGHT TO ANY SUCH PAYMENT.
MANAGEMENT INCENTIVE COMMITTEE
The Management Incentive Committee will be responsible for administering this
Plan. The committee will consist of the Chairman, President and Chief Executive
Officer and other senior executives as designated from time to time by the
Chairman, President and Chief Executive Officer.
ELIGIBILITY
Participation in any particular fiscal year is restricted to employees of the
Company and its worldwide subsidiaries in exempt (or management) Band E (or
Grade 9) and above positions (other than those covered under Sales Incentive
Plans). Current employees promoted to, and persons newly hired to, Band E (or
Grade 9) and above positions during a particular fiscal year are considered for
a pro-rata bonus. Persons employed by companies acquired by the Company which
have pre-existing executive incentive, profit sharing or similar programs will
not participate in this Plan until and unless those plans are superseded by
this Plan.
PARTICIPATION LEVELS
Plan targets for eligible employees are determined based upon base salary or
title and reporting relationships of the participant. Targets range from 10% to
80% of base salary.
INCENTIVE CALCULATION
Incentive payments shall be made under the Plan based upon total company,
business unit and individual performance, as measured against certain financial
and strategic criteria and targets established from time to time by the
Compensation and Benefits Committee of the Board of Directors.
<PAGE>
FACTOR SCALES AND MULTIPLIERS
Financial and strategic performance measures be subject to a multiplier
determined on an annual basis by the Management Incentive Committee, both
upwards (for performance above target, up to a maximum score of 200% of target)
and downwards (for performance below target).
DETERMINATION OF DIVISION AND CORPORATE INCENTIVE POOLS
(a) Unit Theoretical Incentive
On or about October 15th following the close of each fiscal year, Business
Unit Heads and Corporate Officers will be provided with a list of approved
participants for their unit for whom that unit has, during the course of the
prior fiscal year, accrued a hypothetical incentive pool at 100% of target.
(b) Unit Performance Ratings
On or about October 15th following the close of each fiscal year, the
Management Incentive Committee will determine the final unit and company
performance ratings used to determine incentive factors for the fiscal year.
The incentive pool is determined by applying the incentive factors determined
by the Compensation and Benefits Committee to the hypothetical accrued
incentive pool.
INCENTIVE PAYMENT FACTORS
Incentive payment factors will be established as a composite of total company
and business unit performance ratings.
(a) Minimum Earnings Requirement
If the financial performance of a unit is below the minimum threshold
established by the Compensation and Benefits Committee, the incentive payout
will be limited pursuant to guidelines recommended by management for approval
by the Compensation and Benefits Committee.
(b) Communication
The operating unit and Corporate ratings will be communicated to Business
Unit Heads and Corporate Staff by the Chairman, President and Chief Executive
Officer.
(c) Incentive Payment Recommendations
The Business Unit Heads and Corporate Officers will apply the final unit
factors to the individual incentive targets to develop the recommended
incentive amounts. They will have discretion to recommend incentives that
differ from the formula; provided that no individual may receive an incentive
payment in excess of 200% of target.
2
<PAGE>
FINAL REVIEW AND APPROVAL
The recommendations for all incentive payments will be reviewed and approved
by the Business Unit Heads and Corporate Executive Officers, and Chief
Executive Officer for their respective areas of responsibility. In the case of
Executive Officers, recommendations will be subject to final review and
approval by the Compensation and Benefits Committee of the Board of Directors.
(a) Adjustments
If the overall performance of the Company will not support the total
incentive produced by the plan formula, or if such incentive is subject to
government regulation or other external or internal limitations, any required
adjustment will be determined by the Management Incentive Committee and applied
pro rata to all units as a final step in the incentive calculation.
(b) Maximum Payout Guideline
Total incentive payments under the Plan may not, barring special
circumstances, exceed 6% of the Company's income before income taxes, as
reported, for the fiscal year. Total incentive payments to Senior Managers (as
defined by the Compensation and Benefits Committee) may not, barring special
circumstances, exceed 3% of the Company's after-tax net income, as reported,
for the fiscal year.
(c) Payment
Incentives will normally be paid in January of the calendar year following
the year in which they are awarded. An employee may elect, in writing prior to
September 30th, to accelerate any incentive payable under this Plan to
December. Except in cases of death, disability or retirement, no incentive
payments will be made to individuals who are not active employees on the final
day of the fiscal year. Employees who are terminated for cause prior to the
distribution date will forfeit their incentives.
Incentives awarded to any employee who dies prior to the distribution date
may be made, at the discretion of management, to the survivors of the employee.
(d) Deferral Options
Certain participants are eligible to defer receipt of their incentive
payments in accordance with the Company's Salary and Bonus Deferral Plan.
Eligibility to defer, and terms and conditions of deferral, are governed by
that plan.
(e) Exceptions
Any recommendations for exceptions to the provisions of the Plan must be
submitted to the Management Incentive Committee for review and are subject to
final approval by the Chief Executive Officer. Any exceptions applicable to
Executive Officers are further subject to approval by the Compensation and
Benefits Committee of the Board of Directors.
3
<PAGE>
EXHIBIT 10(f)(ii)
BECTON, DICKINSON AND COMPANY
1982 UNQUALIFIED STOCK OPTION PLAN
FRENCH ADDENDUM
This Addendum to the Becton, Dickinson and Company 1982 Unqualified Stock
Option Plan (the "Plan") modifies and supplements the terms and conditions of
the Plan with respect to the Unqualified Stock Options granted to, and the
related shares of Stock acquired upon exercise of an Unqualified Stock Option
("Option Shares") by, any Grantee subject to taxation by the Republic of France
with respect to such Stock Options or Option Shares (a "French Optionholder").
Capitalized terms used and not otherwise defined herein shall have the same
meanings as set forth in the Plan.
1. Notwithstanding anything contained in the Plan to the contrary, in no event
shall an Unqualified Stock Option granted to a French Optionholder be amended,
directly or indirectly, after the Granting Date of the Unqualified Stock Option
to change the purchase price of a share of Stock subject to the Unqualified
Stock Option, except as contemplated in Section 9 (Adjustments) of the Plan.
2. A French Optionholder shall hold all Option Shares acquired and not sold
either (i) in registered form, as the shareholder of record, on the books and
records of the Company's transfer agent, or (ii) in a named account, as the
beneficial owner of such shares, at the Broker designated from time to time by
the Company as the permitted nominal record holder of such shares (any Options
Shares not being held by a French Optionholder in accordance with either clause
(i) or (ii) above being referred to herein as "Improperly Held Shares"). For
purposes of the tax laws of France, the Company shall have the right to deem any
Option Shares not being held either of record or beneficially by the French
Optionholder in accordance with clause (i) or (ii) above to have been sold by
the French Optionholder as of the date they became Improperly Held Shares, and
the Company shall be entitled to (y) report such Improperly Held Shares as so
sold on any reports, returns or statements required to be filed by the Company
with the appropriate tax authorities of France, and (z) collect or withhold from
the French Optionholder all amounts required, if any, under applicable French
law as though such Option Shares had been sold.
<PAGE>
EXHIBIT 10(h)(ii)
BECTON, DICKINSON AND COMPANY
1990 STOCK OPTION PLAN
FRENCH ADDENDUM
This Addendum to the Becton, Dickinson and Company 1990 Stock Option Plan
(the "Plan") modifies and supplements the terms and conditions of the Plan
with respect to the Stock Options granted to, and the related shares of Stock
acquired upon exercise of a Stock Option ("Option Shares") by, any Grantee
subject to taxation by the Republic of France with respect to such Stock Options
or Option Shares (a "French Optionholder"). Capitalized terms used and not
otherwise defined herein shall have the same meanings as set forth in the Plan.
1. Notwithstanding anything contained in the Plan to the contrary, in no event
shall a Stock Option granted to a French Optionholder be amended, directly or
indirectly, after the Granting Date of the Stock Option to change the purchase
price of a share of Stock subject to the Stock Option, except as contemplated in
Section 9 (Adjustments) of the Plan.
2. A French Optionholder shall hold all Option Shares acquired and not sold
either (i) in registered form, as the shareholder of record, on the books and
records of the Company's transfer agent, or (ii) in a named account, as the
beneficial owner of such shares, at the Broker designated from time to time by
the Company as the permitted nominal record holder of such shares (any Options
Shares not being held by a French Optionholder in accordance with either clause
(i) or (ii) above being referred to herein as "Improperly Held Shares"). For
purposes of the tax laws of France, the Company shall have the right to deem any
Option Shares not being held either of record or beneficially by the French
Optionholder in accordance with clause (i) or (ii) above to have been sold by
the French Optionholder as of the date they became Improperly Held Shares, and
the Company shall be entitled to (y) report such Improperly Held Shares as so
sold on any reports, returns or statements required to be filed by the Company
with the appropriate tax authorities of France, and (z) collect or withhold from
the French Optionholder all amounts required, if any, under applicable French
law as though such Option Shares had been sold.
<PAGE>
EXHIBIT 10(k)(i)
BECTON, DICKINSON AND COMPANY
1995 STOCK OPTION PLAN, AS AMENDED
AND RESTATED EFFECTIVE JANUARY 27, 1997
SECTION 1. PURPOSE
- -------------------
The purpose of this Stock Option Plan is to provide an additional incentive
to key employees of Becton, Dickinson and Company and its subsidiaries, to aid
in attracting and retaining employees of outstanding ability, and to closely
align their interests with those of shareholders.
SECTION 2. DEFINITIONS
- -----------------------
Unless the context clearly indicates otherwise, the following terms, when
used in this Stock Option Plan, shall have the meanings set forth in this
Section 2.
(a) "Board" shall mean the Board of Directors of Becton, Dickinson and
Company.
(b) "Broker" shall mean a registered broker-dealer designated by the
Company.
(c) "Cashless Exercise" shall mean a method of exercising a Nonqualified
Stock Option under which a Grantee, in lieu of payment of the option price
in cash, by check or by delivery of shares of Stock, delivers to the Broker
irrevocable instructions to sell the shares of Stock acquired upon such
exercise and, immediately upon receipt of the proceeds from this sale, to
deliver to the Company the option price and any withholding taxes.
(d) "Change in Control." A change in control of the Company shall be
deemed to have occurred if, over the initial opposition of the then-
incumbent Board (whether or not such Board ultimately acquiesces therein),
(i) any person or group of persons shall acquire, directly or indirectly,
stock of the Company having at least 25% of the combined voting power of
the Company's then-outstanding securities, or (ii) any shareholder or group
of shareholders shall elect a majority of the members of the Board.
(e) "Code" shall mean the Internal Revenue Code of 1986 as it may be
amended from time to time.
<PAGE>
(f) "Committee" shall mean the Compensation and Benefits Committee of
the Board or such other committee as may be designated by the Board,
subject to any requirements of Section 16 of the Securities Exchange Act of
1934 and the rules promulgated thereunder, as the same now exist or may
hereafter be amended.
(g) "Company" shall mean Becton, Dickinson and Company.
(h) "Date of Exercise" shall mean the earlier of the date on which
written notice of exercise, together with payment in full, if applicable,
is received at the office of the Secretary of the Company or the date on
which such notice and payment are mailed to the Secretary of the Company at
its principal office by certified or registered mail, or, in the case of
the Cashless Exercise of a Nonqualified Stock Option, the Date of Exercise
shall mean the date the Broker executes the Grantee's sell order with
respect to the underlying shares of Stock.
(i) "Employee" shall mean any employee, including any officer, of the
Company or any of its Subsidiaries.
(j) "Fair Market Value" shall mean for any day the mean of the highest
and lowest selling prices of the Stock as reported on the Composite Tape
for securities traded on the New York Stock Exchange.
(k) "Grantee" shall mean an Employee granted a Stock Option and shall
also mean, to the extent contemplated and permitted by the Plan, executors,
administrators, successors and transferees of the Grantee.
(l) "Granting Date" shall mean the date on which the Committee
authorizes the issuance of a Stock Option for a specified number of shares
of Stock to a specified Employee.
(m) "Plan" shall mean the Becton, Dickinson and Company 1995 Stock
Option Plan as set forth herein and amended from time to time.
(n) "Stock" shall mean the Common Stock, par value $1.00 per share, of
the Company.
(o) "Stock Appreciation Right" shall mean a right granted pursuant to
the Plan to receive Stock, cash, or a combination thereof, upon the
surrender of the right to purchase all or part of the shares of Stock
covered by a Stock Option.
(p) "Stock Option" shall mean an Incentive or Nonqualified Stock Option
granted pursuant to the Plan to purchase shares of Stock.
<PAGE>
(q) "Subsidiary" shall mean any subsidiary corporation as defined in
Section 424 of the Code.
SECTION 3. SHARES OF STOCK SUBJECT TO THE PLAN
- -----------------------------------------------
Subject to adjustment pursuant to Section 9, 6,000,000 shares of Stock
(prior to giving effect to the two-for-one split of the Stock in August 1996)
shall be reserved for issuance upon the exercise of Stock Options granted
pursuant to this Plan. Shares delivered under the Plan may be authorized and
unissued shares or issued shares held by the Company in its treasury. If any
Stock Options expire or terminate without having been exercised, the shares of
Stock covered by such Stock Options shall become available again for the grant
of Stock Options hereunder. Similarly, if any Stock Options are surrendered for
cash pursuant to the provisions of Section 7, the shares of Stock covered by
such Stock Options shall also become available again for the grant of Stock
Options hereunder. Shares of Stock covered by Stock Options surrendered for
Stock pursuant to Section 7, however, shall not become available again for the
grant of Stock Options hereunder.
SECTION 4. ADMINISTRATION OF THE PLAN
- --------------------------------------
(a) The Plan shall be administered by the Committee. Subject to the
express provisions of the Plan, the Committee shall have authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of Stock Option
grants, and to make all other determinations necessary or advisable for the
administration of the Plan.
(b) It is intended that the Plan and any transaction hereunder meet all
of the requirements of Rule 16b-3 promulgated by the Securities and
Exchange Commission, as such rule is currently in effect or as hereafter
modified or amended, and all other applicable laws. If any provision of
the Plan or any transaction would disqualify the Plan or such transaction
under, or would not comply with, Rule 16b-3 or other applicable laws, such
provision or transaction shall be construed or deemed amended to conform to
Rule 16b-3 or such other applicable laws or otherwise shall be deemed to be
null and void, in each case to the extent permitted by law and deemed
advisable by the Committee.
(c) Any controversy or claim arising out of or related to this Plan shall
be determined unilaterally by and at the sole discretion of the Committee.
<PAGE>
SECTION 5. GRANTING OF STOCK OPTIONS
- -------------------------------------
(a) Only key Employees shall be eligible to receive Stock Options under
the Plan. Directors of the Company who are not also Employees shall not be
eligible for Stock Options.
(b) The purchase price of each share of Stock subject to an Incentive
Stock Option shall be at least 100% of the Fair Market Value of a share of
the Stock on the Granting Date.
(c) The purchase price of each share of Stock subject to a Nonqualified
Stock Option shall be 100% of the Fair Market Value of a share of the Stock
on the Granting Date, or such other price either greater than or less than
the Fair Market Value (but in no event less than the par value of the
Stock) as the Committee shall determine appropriate to the purposes of the
Plan and to the Company's total compensation program.
(d) The Committee shall determine and designate from time to time those
key Employees who are to be granted Stock Options and whether the
particular Stock Options are to be Incentive Stock Options or Nonqualified
Stock Options, and shall also specify the number of shares covered by and
the exercise price per share of each Stock Option.
(e) The aggregate fair market value (determined at the time the option is
granted) of the Stock with respect to which Incentive Stock Options are
exercisable for the first time by any individual during any calendar year
(under all such plans of the individual's employer corporation and its
parent and subsidiary corporations) shall not exceed $100,000.
(f) A Stock Option shall be exercisable during such period or periods
and in such installments as shall be fixed by the Committee at the time the
option is granted or in any amendment thereto; but each Stock Option shall
expire not later than ten years from the Granting Date.
(g) The Committee shall have the authority to grant both transferable
Stock Options and nontransferable Stock Options, and to amend outstanding
nontransferable Stock Options to provide for transferability. Each
nontransferable Stock Option shall provide by its terms that it is not
transferable otherwise than by will or the laws of descent and distribution
and is exercisable, during the Grantee's lifetime, only by the Grantee.
Each transferable Stock Option may provide for such limitations on
transferability and exercisability as the Committee may designate at the
time a Stock Option is granted or is otherwise amended to provide for
transferability. Subject to the foregoing, a permitted transferee shall be
entitled to exercise a Stock Option at such times and to the extent that
the Stock Option would otherwise be exercisable by the
<PAGE>
Grantee, or by the Grantee's executors, administrators and successors
pursuant to Section 8.
(h) Stock Options may be granted to an Employee who has previously
received Stock Options or other options whether such prior Stock Options or
other options are still outstanding, have previously been exercised or
surrendered in whole or in part, or are canceled in connection with the
grant of new Stock Options.
(i) Subject to adjustment pursuant to Section 9, the aggregate number of
shares of Stock subject to Stock Options granted to an Employee under the
Plan during any calendar year shall not exceed 300,000 shares (prior to
giving effect to the two-for-one split of the Stock in August 1996).
SECTION 6. EXERCISE OF STOCK OPTIONS
- -------------------------------------
Except as otherwise provided with respect to the Cashless Exercise of a
Nonqualified Stock Option, the Grantee shall pay the option price in full on the
Date of Exercise of a Stock Option in cash, by check, or by delivery of full
shares of Stock of the Company, duly endorsed for transfer to the Company with
signature guaranteed, or by any combination thereof. Stock will be accepted at
its Fair Market Value on the Date of Exercise.
SECTION 7. STOCK APPRECIATION RIGHTS
- -------------------------------------
(a) The Committee may grant Stock Appreciation Rights in connection with
any Stock Option.
(b) Stock Appreciation Rights shall be exercisable at such times and to
the extent that the related Stock Option shall be exercisable, unless the
Committee specifies a more restrictive period.
(c) Upon the exercise of a Stock Appreciation Right, the Grantee shall
surrender the related Stock Option or a portion thereof and shall be
entitled to receive payment of an amount determined by multiplying the
number of shares as to which option rights are surrendered by the
difference obtained by subtracting the exercise price per share of the
related Stock Option from the Fair Market Value of a share of Stock on the
Date of Exercise of the Stock Appreciation Right.
(d) Payment of the amount determined under Section 7(c) shall be made in
Stock, in cash, or partly in cash and partly in Stock as the Committee
shall determine in its sole discretion.
<PAGE>
SECTION 8. TERMINATION OF EMPLOYMENT
- -------------------------------------
Except as otherwise provided by the Committee at the time the option is
granted or in any amendment thereto, if a Grantee ceases to be an Employee,
then:
(a) if termination is for cause, all Stock Options held by the Grantee
shall be canceled as of the date of termination;
(b) if termination of employment is voluntary or involuntary without
cause, the Grantee may exercise each Stock Option held by him within three
months after such termination (but not after the expiration date of the
option) to the extent of the number of shares subject to the Stock Option
which were purchasable pursuant to its terms at the date of termination;
provided, however, if the Grantee should die within three months after such
termination, each Stock Option held by the Grantee may be exercised by the
Grantee's estate, or by any person who acquires the right to exercise by
reason of the Grantee's death, at any time within a period of one year
after death (but not after the expiration date of the option) to the extent
of the number of shares subject to the Stock Option which were purchasable
pursuant to its terms at the date of termination;
(c) subject to the provisions of Section 8(d), if termination is by
reason of retirement at a time when the Grantee is entitled to the current
receipt of benefits under any retirement plan maintained by the Company or
any Subsidiary or by reason of disability, each Stock Option held by the
Grantee shall, at the date of retirement or disability, become exercisable
to the extent of the total number of shares subject to the Stock Option,
irrespective of the number of shares which would otherwise have been
purchasable pursuant to the terms of the Stock Option at the date of
retirement or disability, and shall otherwise remain in full force and
effect in accordance with its terms; provided, however, that in the case of
termination by reason of disability, each Stock Option shall only be
exercisable within a period of three years after the date of disability
(but not after the expiration date of the option);
(d) if termination is by reason of the death of the Grantee, or if the
Grantee dies after retirement or disability as referred to in Section 8(c),
each Stock Option held by the Grantee may be exercised by the Grantee's
estate, or by any person who acquires the right to exercise the option by
reason of the Grantee's death, at any time within a period of three years
after death (but not after the expiration date of the option) to the extent
of the total number of shares subject to the Stock Option, irrespective of
the number of shares which would have otherwise been purchasable pursuant
to the terms of the Stock Option at the date of death.
<PAGE>
SECTION 9. ADJUSTMENTS
- -----------------------
In the event of any merger, consolidation, reorganization,
recapitalization, stock dividend, stock split or other change in the corporate
structure or capitalization affecting the Stock, there shall be an appropriate
adjustment made by the Board in the number and kind of shares that may be
granted in the aggregate and to individual Employees under the Plan, the number
and kind of shares subject to each outstanding Stock Option and Stock
Appreciation Right, and the option prices.
No exercise of conversion rights with respect to the shares of the
Company's Series B ESOP Convertible Preferred Stock shall call for any
adjustment under this Section 9.
SECTION 10. TENDER OFFER; CHANGE IN CONTROL
- --------------------------------------------
(a) A Stock Option shall become immediately exercisable to the extent of
the total number of shares subject to the option in the event of (i) a
tender offer by a person or persons other than the Company for all or any
part of the outstanding Stock if, upon consummation of the purchases
contemplated, the offeror or offerors would own, beneficially or of record,
an aggregate of more than 25% of the outstanding Stock, or (ii) a Change in
Control of the Company.
(b) The Committee may authorize the payment of cash upon the exercise of
a Stock Appreciation Right during a period (i) beginning on the date on
which a tender offer as described in (a), above, is first published or sent
or given to holders of Stock and ending on the date which is seven days
after its termination or expiration, or (ii) beginning on the date on which
a Change in Control of the Company occurs and ending on the twelfth
business day following such date.
SECTION 11. GENERAL PROVISIONS
- ------------------------------
(a) Each Stock Option shall be evidenced by a written instrument
containing such terms and conditions, not inconsistent with this Plan, as
the Committee shall approve.
(b) The granting of a Stock Option in any year shall not give the Grantee
any right to similar grants in future years or any right to be retained in
the employ of the Company or any Subsidiary or interfere in any way with
the right of the Company or such Subsidiary to terminate an Employee's
employment at any time.
<PAGE>
(c) Notwithstanding any other provision of the Plan, the Company shall
not be required to issue or deliver any certificate or certificates for
shares of Stock under the Plan prior to fulfillment of all of the following
conditions:
(i) The listing, or approval for listing upon notice of issuance, of
such shares on the New York Stock Exchange;
(ii) Any registration or other qualification of such shares under
any state or federal law or regulation, or the maintaining in effect of
any such registration or other qualification which the Committee may, in
its discretion upon the advice of counsel, deem necessary or advisable;
and
(iii) The obtaining of any other consent, approval or permit from
any state or federal governmental agency which the Committee may, in its
discretion upon the advice of counsel, determine to be necessary or
advisable.
(d) The Company shall have the right to deduct from any payment or
distribution under the Plan any federal, state or local taxes of any kind
required by law to be withheld with respect to such payments or to take
such other action as may be necessary to satisfy all obligations for the
payment of such taxes. In case distributions are made in shares of Stock,
the Company shall have the right to retain the value of sufficient shares
to equal the amount of tax to be withheld for such distributions or require
a recipient to pay the Company for any such taxes required to be withheld
on such terms and conditions prescribed by the Committee.
SECTION 12. AMENDMENT AND TERMINATION
- --------------------------------------
(a) The Plan shall terminate on December 14, 2004 and no Stock Option
shall be granted hereunder after that date, provided that the Board may
terminate the Plan at any time prior thereto.
(b) The Board may amend the Plan at any time without notice, provided
however, that the Board may not, without prior approval by the
shareholders, increase the maximum number of shares for which options may
be granted (except as contemplated by the provisions of Section 9).
(c) No termination or amendment of the Plan may, without the consent of a
Grantee to whom a Stock Option shall theretofore have been granted,
adversely affect the rights of such Grantee under such Stock Option.
<PAGE>
EXHIBIT 10(k)(ii)
BECTON, DICKINSON AND COMPANY
1995 STOCK OPTION PLAN
FRENCH ADDENDUM
This Addendum to the Becton, Dickinson and Company 1995 Stock Option Plan
(the "Plan") modifies and supplements the terms and conditions of the Plan with
respect to the Stock Options granted to, and the related shares of Stock
acquired upon exercise of a Stock Option ("Option Shares") by, any Grantee
subject to taxation by the Republic of France with respect to such Stock Options
or Option Shares (a "French Optionholder"). Capitalized terms used and not
otherwise defined herein shall have the same meanings as set forth in the Plan.
1. Notwithstanding anything contained in the Plan to the contrary, in no event
shall a Stock Option granted to a French Optionholder be amended, directly or
indirectly, after the Granting Date of the Stock Option to change the purchase
price of a share of Stock subject to the Stock Option, except as contemplated in
Section 9 (Adjustments) of the Plan.
2. A French Optionholder shall hold all Option Shares acquired and not sold
either (i) in registered form, as the shareholder of record, on the books and
records of the Company's transfer agent, or (ii) in a named account, as the
beneficial owner of such shares, at the Broker designated from time to time by
the Company as the permitted nominal record holder of such shares (any Options
Shares not being held by a French Optionholder in accordance with either clause
(i) or (ii) above being referred to herein as "Improperly Held Shares"). For
purposes of the tax laws of France, the Company shall have the right to deem any
Option Shares not being held either of record or beneficially by the French
Optionholder in accordance with clause (i) or (ii) above to have been sold by
the French Optionholder as of the date they became Improperly Held Shares, and
the Company shall be entitled to (y) report such Improperly Held Shares as so
sold on any reports, returns or statements required to be filed by the Company
with the appropriate tax authorities of France, and (z) collect or withhold from
the French Optionholder all amounts required, if any, under applicable French
law as though such Option Shares had been sold.
<PAGE>
EXHIBIT 11
BECTON, DICKINSON AND COMPANY
COMPUTATION OF EARNINGS PER SHARE
YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
- ---------------------------------------------------------------------------------
PRIMARY EARNINGS PER SHARE
--------------------------
<S> <C> <C> <C>
Net income......................................... $300,074 $283,447 $251,696
Less preferred stock dividends..................... (3,365) (3,484) (3,596)
-------- -------- --------
Net income applicable to common stock.............. $296,709 $279,963 $248,100
======== ======== ========
Shares:
Average shares outstanding...................... 122,543 126,709 134,144
Add dilutive stock equivalents from stock plans. 6,429 6,086 4,258
-------- -------- --------
Weighted average number of common and common
equivalent shares outstanding during the year.. 128,972 132,795 138,402
======== ======== ========
Earnings per share................................. $ 2.30 $ 2.11 $ 1.79
======== ======== ========
<CAPTION>
FULLY DILUTED EARNINGS PER SHARE
--------------------------------
<S> <C> <C> <C>
Net income applicable to common stock.............. $296,709 $279,963 $248,100
Add preferred stock dividends using the "if
converted" method................................. 3,365 3,484 3,596
Less additional ESOP contribution, using the "if
converted" method................................. (1,124) (1,288) (1,420)
-------- -------- --------
Net income for fully diluted earnings per share.... $298,950 $282,159 $250,276
======== ======== ========
Shares:
Average shares outstanding...................... 122,543 126,709 134,144
Add:
Dilutive stock equivalents from stock plans... 6,488 6,667 5,450
Shares issuable upon conversion of preferred
stock........................................ 2,772 2,871 2,968
-------- -------- --------
Weighted average number of common shares used in
calculating fully diluted earnings per share... 131,803 136,247 142,562
======== ======== ========
Fully diluted earnings per share................... $ 2.27 $ 2.07 $ 1.76
======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 13
FINANCIAL TABLE OF CONTENTS
21 Financial Review
29 Six-Year Summary of Selected Financial Data
30 Summary by Business Segment
31 Summary by Geographic Area
32 Report of Management
33 Report of Ernst & Young LLP, Independent Auditors
34 Consolidated Statements of Income
35 Consolidated Balance Sheets
36 Consolidated Statements of Cash Flows
37 Notes to Consolidated Financial Statements
FINANCIAL REVIEW
Becton Dickinson is a medical technology company that manufactures and sells a
broad range of medical supplies and devices and diagnostic systems for use by
health care professionals, medical research institutions and the general public.
The Company focuses strategically on achieving growth in two worldwide business
segments -- the Medical Supplies and Devices Segment ("Medical") and the
Diagnostic Systems Segment ("Diagnostic"). The Company's financial results and
the operating performance of the segments are discussed below.
Acquisitions
In the third quarter of 1997, the Company completed acquisitions of
PharMingen, a manufacturer of reagents for biomedical research, and Difco
Laboratories Incorporated ("Difco"), a manufacturer of microbiology media and
supplies, for an aggregate amount of $187 million, net of cash acquired. The
Company recorded a $15 million charge for purchased in-process research and
development in connection with these acquisitions. The aggregate net revenues of
these companies for fiscal years 1997 and 1996 were approximately $117 million
and $103 million, respectively. Included in the Company's 1997 worldwide
revenues was $43 million related to these companies. The Company continues to
seek new strategic alliances and acquisitions that complement its existing
businesses and geographic presence, as well as contribute to the acceleration of
revenue growth.
Revenues and Earnings
Worldwide revenues rose 1.5% to $2.8 billion. Excluding the estimated
unfavorable impact of foreign currency translation of 3%, and the net impact of
acquisitions and divestitures, the resulting underlying growth rate was 5%. This
growth rate resulted primarily from volume increases and an improved product mix
in both segments. Price increases have been limited as a result of health care
cost containment pressures in the United States and abroad, as well as increased
competition in certain product lines.
21
<PAGE>
Health care cost containment remains an important factor in many of the
markets served by the Company. By improving manufacturing productivity and
leveraging the Company's worldwide presence and capabilities, the Company's cost
to serve its customers has continued to decline. Health care providers have
increasingly demonstrated their preference to enter into comprehensive
arrangements with the Company to take full advantage of technology and marketing
incentives. Although such arrangements typically result in short-term pricing
pressures, they can also result in longer-term increases in volume, as well as
standardized buying practices that can contribute to manufacturing and
administrative efficiencies. On balance, these arrangements should benefit the
Company.
Medical revenues of $1.5 billion were about the same as last year.
Excluding the estimated impact of unfavorable foreign currency translation of 3%
and the decrease in revenues related to divested non-core product lines, Medical
revenues increased 7%. Revenue growth was led by market share gains for infusion
therapy products and increased sales of prefillable syringes to pharmaceutical
companies.
Medical operating income of $350 million increased 2% over 1996. Excluding
the estimated unfavorable effects of business divestitures and foreign currency
translation, Medical operating income increased 9%. This performance was
primarily due to revenue growth, improved sales mix and manufacturing
productivity.
Diagnostic revenues of $1.3 billion increased 3%. The incremental revenues
related to acquisitions were offset by the estimated impact of unfavorable
foreign currency translation of 4%. Growth in sample collection revenues was
strong, reflecting continued conversion of markets outside the United States to
safer and more convenient products and techniques. FACS brand flow cytometry
systems also continued to exhibit strong sales growth. The addition of
PharMingen to its flow cytometry business provided the Company with a broader
array of higher growth cell analysis products. These products are used by
researchers and clinicians working with immunological diseases and cancer.
Although revenues of infectious disease products increased as a result of the
Difco acquisition, revenue growth of these products continues to be affected by
cost containment in infectious disease testing. The acquisition of Difco
provides a platform for further expansion into the higher growth industrial
segment of the market for dehydrated culture media and prepared plated media.
Diagnostic operating income of $195 million increased 11% over 1996.
Excluding the impact of acquisitions, including related charges of $15 million
for purchased in-process research and development, and the estimated impact of
unfavorable foreign currency translation, Diagnostic operating income increased
29%. This strong performance reflects an improved sales mix and operating
expense productivity programs in the United States and Europe.
On a geographical basis, revenues outside the United States of $1.3 billion
declined 2%. Excluding the estimated impact of unfavorable foreign currency
translation of 6% and the net impact of divestitures and acquisitions, the
resulting underlying growth rate was 7%. Double-digit increases were achieved in
sales of prefillable syringes to pharmaceutical companies, sample collection
devices and diabetes health care products. The Asia-Pacific region, including
China and India where the Company recently completed manufacturing facilities,
continued to be the Company's area of fastest revenue growth.
Revenues in the United States were $1.5 billion, an increase of 4%. The
incremental revenues related to acquisitions were offset by the impact of
divestitures. Sales of infusion therapy products were particularly strong,
reflecting market share gains and sales of new products. As mentioned earlier,
sales of infectious disease products continued to be negatively affected by the
effects of cost containment on such testing.
Gross profit margin rose sharply to 49.7%, compared with 48.4% last year,
reflecting the Company's continued success in improving manufacturing efficiency
as well as a more profitable mix of products sold.
22
<PAGE>
Selling and administrative expense of $766 million was 27.3% of revenues,
the same percentage as in 1996. Aggregate expenses were slightly higher,
reflecting increased investment in new international markets and new strategic
initiatives, partially offset by savings achieved through the Company's
productivity improvements.
Investment in research and development increased to $181 million, or 6.4%
of revenues. Excluding the $15 million of charges for purchased in-process
research and development referred to above, research and development was 5.9% of
revenues, as compared with 5.6% in 1996. This spending included additional
funding for new blood collection and infusion therapy safety products, and
emerging new platforms, such as next generation products for blood glucose
monitoring, to support the Company's efforts to accelerate its rate of sales
growth. Excluding acquisitions, sales of new products introduced in the last
five years represented 12% and 17% of revenues in 1997 and 1996, respectively.
Operating income in 1997 was $451 million, an increase of 4.5%. Excluding
the estimated impact of unfavorable foreign currency translation and the net
impact of divestitures and acquisitions, including related charges of $15
million for purchased in-process research and development, operating income
increased 17%, primarily from improved gross profit margin. The Company's
operating margin improved to 16.0% of revenues compared with 15.6% in 1996.
Net interest expense of $39 million in 1997 was $2 million higher than in
1996, primarily due to the financing of operations in Mexico and Brazil, which
was partially offset by an increase in capitalized interest.
"Other income (expense), net" in 1997, included $8 million of gains from
the disposition of non-core business lines and a gain of $6 million on the sale
of an investment. Also included were foreign exchange losses of $5 million,
including hedging costs.
The effective tax rate in 1997 was 29% as compared with 28% in 1996,
principally due to the lack of a tax benefit associated with the $15 million of
purchased in-process research and development charges recorded in 1997, as
discussed earlier, which was partially offset by a slight improvement in the mix
in income among tax jurisdictions.
Net income was $300 million, an increase of 6% over $283 million in 1996.
Earnings per share were $2.30, an increase of 9% over $2.11 in 1996. The
purchased in-process research and development charges recorded in 1997 decreased
earnings per share by $.11, and the estimated impact of unfavorable foreign
currency translation was $.17 per share. Adjusting for these two items, earnings
per share grew 22% over last year.
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
52 "Foreign Currency Translation," the net monetary assets ($16 million and $9
million at September 30, 1997 and 1996, respectively) of the Company's Brazilian
subsidiary, whose functional currency is the U.S. dollar, were translated at
current exchange rates, with the related translation gains and losses included
in net earnings. During the year, the Brazilian three-year cumulative inflation
rate fell below 100%. The Company is currently assessing the appropriateness of
continuing to consider its Brazilian business to be operating in a highly
inflationary economy. Effective January 1, 1997, the Company also considered its
Mexican business to be operating in a highly inflationary economy. The net
monetary assets of the Company's Mexican subsidiary at January 1, 1997 and
September 30, 1997, were $30 million and $45 million, respectively.
The net assets of foreign operations, whose functional currencies are the
local currencies, are translated at current exchange rates. The Company
generally does not hedge these translation exposures since such amounts are
recorded as cumulative currency translation adjustments, a separate component of
shareholders' equity, and do not affect reported earnings or current cash flow.
The net assets of these foreign operations were $849 million and $907 million at
September 30, 1997 and 1996, respectively. This decline is attributable
primarily to the exclusion of Mexico at September 30, 1997, as a result of the
change in functional currency, as discussed earlier.
23
<PAGE>
The Company has certain receivables, payables and short-term borrowings,
denominated in currencies other than the functional currencies of the Company
and its subsidiaries, which create foreign exchange risk. The Company utilizes
simple derivative instruments to manage its foreign exchange and interest rate
risks. These instruments are selectively employed solely to hedge exposures in
those instances in which their use reduces the volatility of the impact of
foreign exchange or interest rate movements. At September 30, 1997, the Company
had the following significant foreign exchange instruments:
<TABLE>
<CAPTION>
(Dollar Amounts in Thousands)
U.S.$ Forward
Local Amount Contract Fair Maturity
Forward Contracts Currency Buy (Sell) Rate Per U.S.$ Value Date
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Non-U.S. Dollar
Functional
Currency: Japanese Yen $ 39,383 JPY 113.92 $ 2,234 10/24/97
Japanese Yen 19,422 JPY 118.58 189 12/22/97
Italian Lira 28,385 ITL 1779.12 (842) 10/24/97
French Franc 25,974 FRF 6.13 (921) 10/24/97
French Franc 15,063 FRF 5.91 39 10/24/97
Spanish Peseta 15,476 ESP 150.41 (129) 10/24/97
Spanish Peseta 10,608 ESP 135.05 988 01/28/98
Irish Pound (43,660) IEP 0.67 (918) 10/24/97
Irish Pound (74,170) IEP 0.68 (1,231) 11/25/97
Irish Pound (19,150) IEP 0.68 (285) 12/22/97
Irish Pound (38,201) IEP 0.66 (1,719) 01/23/98
Irish Pound (29,699) IEP 0.67 (729) 09/18/98
Singapore Dollar (53,646) SGD 1.47 (2,008) 10/24/97
Australian Dollar 6,560 AUD 1.39 (64) 12/19/97
Swiss Franc (6,829) CHF 1.45 40 12/22/97
U.S. Dollar
Functional
Currency: British Pound $ 19,000 GBP 0.62 $ (45) 10/30/97
Italian Lira 17,600 ITL 1724.40 (22) 10/30/97
Japanese Yen 10,000 JPY 120.00 (3) 10/30/97
German Mark 9,000 DEM 1.76 (6) 10/30/97
Australian Dollar 5,800 AUD 1.38 (5) 10/30/97
Canadian Dollar 5,000 CAD 1.38 (3) 10/30/97
Irish Pound (18,600) IEP 0.69 8 10/30/97
French Franc (6,300) FRF 5.91 7 10/30/97
</TABLE>
<TABLE>
<CAPTION>
U.S.$ Forward
Forward Cross Local Contract Contract Fair Maturity
Rate Contracts Currency Amount Cross Rate Value Date
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Buy Irish Pound/ $ 11,462 IEP 8.77/FRF $(185) 10/24/97
Sell French Franc
Buy Irish Pound/ 11,054 ESP 215.30/IEP 21 01/26/98
Sell Spanish Peseta
Buy Irish Pound/ 16,722 IEP 2557.25/ITL (169) 01/22/99
Sell Italian Lira
Buy Belgian Franc/ 6,817 FRF .16/BEF (3) 10/24/97
Sell French Franc
</TABLE>
<TABLE>
<CAPTION>
Purchased U.S.$ Option Strike
Currency Local Amount Price Per Fair Maturity
Options Currency Buy (Sell) U.S. $ Value Date
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Dollar
Functional
Currency: New Mexican Peso Put/ $39,000 NMP 7.88 $ 49 10/10/97
U.S.$ Call
Non-U.S. Dollar
Functional
Currency: Colombian Peso Put/ 4,000 COP 1193.16 184 10/24/97
U.S.$ Call
</TABLE>
The Company enters into interest rate swap agreements in order to reduce
the impact of fluctuating interest rates on its foreign currency short-term
floating rate third party and intercompany debt and investments outside the
United States. Under these agreements, the Company agrees with other parties to
pay or receive fixed rate payments, generally on an annual basis, in exchange
for paying or receiving variable rate payments, generally on a quarterly basis,
calculated on an agreed-upon notional amount. At September 30, 1997, the Company
had the following interest rate swap agreements:
<TABLE>
<CAPTION>
Notional Amount Variable
U.S. Dollar Fixed Rate At Fair Maturity
Interest Rate Swaps Equivalent Rate Year End Value Date
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
French Franc $16,910 4.63% 3.40% $(106) 01/17/98
Japanese Yen 7,057 2.48% 0.64% (80) 05/08/98
Japanese Yen 7,057 2.44% 0.59% (102) 05/10/98
Japanese Yen 3,321 1.87% 0.58% (36) 05/30/98
Italian Lira 11,622 8.29% 6.90% (590) 07/23/99
Irish Pound 29,130 6.64% 6.25% 642 08/23/99
Irish Pound 29,130 5.92% 6.25% 304 10/22/99
Irish Pound 29,130 6.27% 6.16% 430 12/20/99
</TABLE>
24
<PAGE>
At September 30, 1997, the Company's Brazilian subsidiary entered into an
agreement under which it will pay interest of 21.05% per annum in local currency
on the Brazilian Real equivalent of a notional amount of $21.8 million and
receive the Brazilian Real equivalent of 8.65% per annum on the notional amount,
plus an amount equal to the currency devaluation for the period. This agreement,
which matures on February 2, 1998, was entered into to protect the Company from
a devaluation of the Brazilian Real versus the U.S. dollar. The fair value of
this instrument approximated the carrying value of zero at September 30, 1997.
For further discussion of derivative instruments, see Notes 1 and 9 of the
Notes to Consolidated Financial Statements.
In February 1997, the Financial Accounting Standards Board issued 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 ending 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. For further discussion, see Note 1
of the Notes to Consolidated Financial Statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company is required to adopt the
provisions of these Statements no later than its 1999 fiscal year. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components in a primary financial statement. The Company is currently evaluating
the reporting formats recommended under this Statement. SFAS No. 131 establishes
a new method by which companies will report operating segment information. This
method is based on the manner in which management organizes the segments within
a company for making operating decisions and assessing performance. The Company
continues to evaluate the provisions of SFAS No. 131 and, upon adoption,
different operating segments may be reported by the Company.
As the end of the twentieth century approaches, many companies are faced
with adapting their existing computer systems to accommodate the year 2000. The
Company is currently evaluating alternatives for modifying or replacing existing
software to address issues presented by the year 2000 and does not expect the
incremental costs associated with these issues to have a material impact on the
Company's results of operations, financial condition or cash flows.
Financial Condition
Cash provided by operations continued to be the Company's primary source of
funds to finance operating needs and capital expenditures. In 1997, net cash
provided by operating activities was $443 million, compared with $460 million in
1996.
Capital expenditures were $170 million in 1997, compared with $146 million
in the prior year. Medical capital spending, which totaled $106 million in 1997,
included the acquisition of equipment for the ongoing expansion of the
prefillable syringe, diabetes health care and hypodermic businesses. In
addition, funds were expended to complete a new manufacturing facility in China,
which began producing hypodermic syringes, intravenous catheters and anesthesia
needles during the year. Also, work continued on a new manufacturing facility in
India, which initially will produce products for diabetes health care. Funds
also were expended to support global manufacturing productivity improvement
programs. Diagnostic capital spending, which totaled $50 million in 1997,
included the acquisition of additional equipment by the sample collection
business for the new SAFETY-LOK blood collection set. Funds also were expended
to increase the capacity of the Company's warehouse in Japan and for the
acquisition of equipment to support capacity expansion and cost reduction
programs, primarily in the sample collection, infectious disease diagnostics and
flow cytometry businesses. Funds expended outside of the above segments included
the upgrade of information technology and telecommunication systems in the
United States. The Company expects capital expenditures in 1998 to be somewhat
higher than in 1997.
25
<PAGE>
The Company expended $201 million, net of cash acquired, for business
acquisitions. Business divestitures in 1997 resulted in cash proceeds of $24
million. The divested operations included an infusion systems business and a
small product line related to the Company's microbiology business. The Company
intends to use substantial amounts of excess cash that is expected to be
generated over the next several years to pursue strategic alliances and
acquisitions.
Net cash used for financing activities was $92 million during 1997 as
compared with $412 million in 1996. This change was due primarily to
a reduction in common share repurchases, as well as net proceeds received from
newly issued debt, which were partially offset by the repayment of commercial
paper.
The Company repurchased 3.2 million of its common shares at an average cost
of $46.30 for a total expenditure of $150 million in 1997, compared with
repurchases totaling $325 million in 1996. At September 30, 1997, authorization
to repurchase up to an additional 11.6 million shares remained under a July 23,
1996 Board of Directors' resolution.
During 1997, total debt increased $102 million, primarily as a result of
increased spending on acquisitions, which was partially offset by lower spending
on common stock repurchases. Short-term debt was 17% of total debt at year end,
compared with 33% in 1996. The change in the percentage was principally
attributable to the repayment of short-term debt with the proceeds of the
Company's issuances of long-term debt. The Company's weighted average cost of
total debt at the end of 1997 was 7.6% compared with 7.7% at the end of last
year. Total debt to capitalization at year end increased to 36.3% from 34.3%
last year.
In November 1996, the Company entered into a five-year, $500 million
syndicated and committed revolving credit facility that was undrawn at September
30, 1997. The facility supports the Company's commercial paper program, under
which $79 million was outstanding at September 30, 1997, and is also available
for other general corporate purposes. In addition, the Company has unconfirmed
lines of credit outside the United States. In October 1996, the Company issued
to the public $100 million of 10-year non-redeemable notes with a coupon rate of
6.9% and an effective rate of 7.34%. In July 1997, the Company publicly issued
$200 million of 30-year non-redeemable debentures with a coupon rate of 7% and
an effective rate of 7.23%. Proceeds of both debt issues were used to repay
commercial paper. In October 1997, the Company increased its existing shelf
registration statement to issue up to $500 million of debt securities. Based on
its strong financial condition, the Company has a high degree of confidence in
its ability to refinance maturing short-term and long-term debt, as well as to
incur substantial additional debt, if required.
Return on equity increased to 22.1% in 1997 from 20.8% in 1996.
The Company manufactures various medical products in Brazil for sale in
that country and for export. In addition, the Company imports other medical and
diagnostic products from affiliates for distribution within Brazil. While the
Brazilian economy has experienced very high inflation rates and significant
devaluation of its currency in the past, more recently, inflation and the rate
of currency devaluation have declined significantly. The Company also
manufactures in Mexico and imports from affiliates various medical and
diagnostic products for sale in Mexico. Since December 1994, the Mexican economy
has experienced a period of high inflation, recession and currency instability.
More recently, Mexico's economy and currency have shown signs of stabilizing.
The Brazilian and Mexican economies have the potential for creating volatility
in the revenues and earnings of the Company's operations in these countries,
including the risk of foreign exchange losses as a result of fluctuations in
their local currencies. The Company has successfully managed these risks by
adjusting the selling prices of its products in line with inflation and by
taking steps to limit the size of its foreign exchange exposures. In the
aggregate, the Company's Brazilian and Mexican operations constituted 7% or less
of each of the Company's consolidated revenues, net income and total assets.
In the second half of 1997, the currencies of many countries in Southeast
Asia, in which the Company maintains operations, depreciated against the U.S.
dollar. The Company was able to offset the foreign exchange transaction losses
of these devaluations through the hedging of its exposures in the affected
currencies. Consequently, the impact on the Company was insignificant. The
Company's operations in Southeast Asia constituted less than 2% of each of the
Company's consolidated revenues, net income and total assets.
26
<PAGE>
The Company believes that the fundamentally noncyclical nature of its core
medical and diagnostic businesses, its international diversification, and its
ability to meet the needs of the worldwide health care industry for cost-
effective and innovative products will continue to cushion the long-term impact
on the Company of economic and political dislocations in the countries in which
it does business, including the effects of possible health care system reforms.
In 1997, inflation did not have a material impact on the Company's overall
operations.
The Company believes that its operations comply in all material respects
with applicable laws and regulations. The Company is a party to a number of
Federal proceedings in the United States brought under the Comprehensive
Environmental Response, Compensation and Liability Act, also known as
"Superfund," and similar state laws. For all sites, there are other potentially
responsible parties that may be jointly or severally liable to pay all cleanup
costs. The Company accrues costs for an estimated environmental liability based
upon its best estimate within the range of probable losses, without considering
possible third-party recoveries. The Company believes that any reasonably
possible losses in excess of accruals would be immaterial to the Company's
financial condition.
The Company, along with a number of other manufacturers, has been named as
a defendant in approximately 75 product liability lawsuits related to natural
rubber latex that have been filed in various state and Federal courts. Cases
pending in Federal Court are being coordinated under the matter In re Latex
Gloves Products Liability Litigation (MDL Docket No. 1148) in Philadelphia, and
an analogous procedure has been implemented in the California State Courts.
Generally, these actions allege that medical personnel have suffered allergic
reactions ranging from skin irritation to anaphylaxis as a result of exposure to
medical gloves containing natural rubber latex. In 1986, the Company acquired a
business which manufactured, among other things, latex surgical gloves. In 1995,
the Company divested this glove business. The Company intends to mount a
vigorous defense in these lawsuits.
The Company is also involved in other legal proceedings and claims which
arise in the ordinary course of business, both as a plaintiff and a defendant.
In the opinion of the Company, the results of the above matters,
individually and in the aggregate, are not expected to have a material effect on
its results of operations, financial condition or cash flows.
1996 Compared with 1995
Worldwide revenues for 1996 rose 2% to $2.8 billion. Excluding the
estimated impacts of unfavorable foreign currency translation of 1% and the
decrease in revenues related to divested businesses, the resulting underlying
growth rate was 6%. This growth rate resulted primarily from volume increases
and an improved product mix in both segments. Price increases averaged less than
1%. Medical revenues for 1996 of $1.5 billion increased 1% over the prior year.
Excluding the impact of divested businesses, the most significant of which was
the medical glove business sold in June 1995, Medical revenues increased 6%.
Revenue growth was led by strong sales of injection systems products due to the
continuing shift toward the use of devices with safety features and increased
use of prefillable syringes by pharmaceutical companies. Sales of infusion
therapy products also continued to grow from market share gains, geographic
expansion and introductions of new products. Diagnostic revenues for 1996 of
$1.3 billion increased 4%, or 5% excluding the estimated unfavorable impact of
foreign currency translation. Growth in sample collection was led by the
continued strong demand for safety products, the introduction of several new and
innovative products, and overall increased demand outside the United States.
FACS brand flow cytometry systems also exhibited strong sales growth. Sales of
infectious disease products were about the same as 1995, which was consistent
with the overall market trend for infectious disease testing, and reflected the
continuing worldwide focus on infectious disease cost containment by health care
providers.
The Company's gross profit margin rose to 48.4%, compared with 47.0% in
1995, reflecting a more profitable mix of products sold, continued productivity
improvements and the absence of lower margins associated with divested
businesses.
Selling and administrative expense was 27.3% of revenues, about the same as
the 1995 ratio. Higher spending relating to a refocusing of sales and marketing
resources toward critical strategic initiatives and international expansion was
largely offset by savings achieved through reorganizations in the United States
and Europe, including the consolidation of certain field
27
<PAGE>
sales organizations. Investment in research and development increased to $154
million, or 5.6% of revenues, reflecting the additional funding directed toward
safety products, as well as emerging new platforms for long-term growth, such as
DNA probe technology and next generation products for blood glucose monitoring
and sample collection.
Operating income in 1996 was $431 million, an increase of 9%. Excluding the
estimated impacts of divestitures and unfavorable foreign exchange, as well as
the write-down of assets and other provisions relating to the cellular imaging
business, operating income grew 11%, primarily from improved gross profit
margin. The Company's operating margin improved to 15.6% of revenues compared
with 14.6% in 1995.
Net interest expense of $37 million in 1996 was $5 million lower than in
1995, primarily due to higher short-term investments in Europe, lower financing
expense in Japan and higher capitalized interest primarily related to a project
in China.
"Other income (expense), net" in 1996 included income of $8 million from a
net cash settlement received in connection with one of the Company's patents and
foreign exchange losses of $8 million, including hedging costs.
The effective tax rate of 28.0% was the same as the rate in 1995.
Net income was $283 million, an increase of 13% over $252 million in 1995.
Earnings per share were $2.11, an increase of 18% over $1.79 in 1995.
Cash provided by operations continues to be the Company's primary source of
funds to finance operating needs and capital expenditures. Capital expenditures
were $146 million, compared with $124 million in 1995. Medical and Diagnostic
capital spending totaled $91 million and $50 million, respectively, in 1996.
Business divestitures in 1996 resulted in cash proceeds of $38 million. The
divested operations included a contract packaging business and certain other
non-core product lines.
Net cash used for financing activities was $412 million during 1996 as
compared with $421 million in 1995.
During 1996, total debt decreased $68 million as a result of strong cash
flow from operations and proceeds from business divestitures. Short-term debt
was 33% of total debt at year end, compared with 27% in 1995. The change in the
ratio was principally attributable to an increase in commercial paper
outstanding and the Company's early redemption on June 1, 1996 of $66.4 million
of its outstanding 9.25% Sinking Fund Debentures due June 1, 2016.
Return on equity increased to 20.8% in 1996, from 17.5% in 1995.
28
<PAGE>
SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA Becton, Dickinson and Company
Years Ended September 30
<TABLE>
<CAPTION>
Thousands of dollars,
except per share amounts 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations Revenues $2,810,523 $2,769,756 $2,712,525 $2,559,461 $2,465,405 $2,365,317
Gross Profit Margin 49.7% 48.4% 47.0% 45.3% 44.5% 45.0%
Operating Income 450,515 431,249 396,650 325,038 270,425 328,592
Interest Expense, Net 39,373 37,409 42,833 47,624 53,412 49,116
Income Before Income
Taxes and Cumulative
Effect of Accounting
Changes 422,640 393,676 349,578 296,159 222,894 269,457
Income Tax Provision 122,566 110,229 97,882 68,985 10,054 68,704
Income Before
Cumulative Effect of
Accounting Changes 300,074 283,447 251,696 227,174 212,840 200,753
Net Income 300,074 283,447 251,696 227,174 71,783/A/ 200,753
Earnings Per Share:
- Before Cumulative
Effect of Accounting
Changes 2.30 2.11 1.79 1.52 1.35 1.28
- Net Income 2.30 2.11 1.79 1.52 .44/A/ 1.28
Dividends Per Common Share .52 .46 .41 .37 .33 .30
Average Common and Common
Equivalent Shares
Outstanding 128,972 132,795 138,402 146,666 153,860 154,056
- ---------------------------------------------------------------------------------------------------------------------
Financial Current Assets $1,312,609 $1,276,841 $1,327,518 $1,326,551 $1,150,742 $1,221,209
Position Current Liabilities 678,197 766,122 720,035 678,321 636,062 713,335
Current Ratio 1.9 1.7 1.8 2.0 1.8 1.7
Property, Plant and
Equipment, Net 1,250,705 1,244,148 1,281,031 1,376,349 1,403,070 1,429,519
Total Assets 3,080,252 2,889,752 2,999,505 3,159,533 3,087,565 3,177,675
Long-Term Debt 665,449 468,223 557,594 669,157 680,581 685,081
Shareholders' Equity 1,385,433 1,325,183 1,398,385 1,481,694 1,456,953 1,594,926
Book Value Per Common
Share 11.35 10.72 10.74 10.54 9.75 10.50
- ---------------------------------------------------------------------------------------------------------------------
Financial Income Before Income
Relationships Taxes and Cumulative
Effect of Accounting
Changes as a Percent
of Revenues 15.0% 14.2% 12.9% 11.6% 9.0% 11.4%
Return on Total Assets/B/ 15.9% 15.2% 13.3% 11.5% 9.2%/C/ 11.1%
Return on Equity 22.1% 20.8% 17.5% 15.5% 13.3%/C/ 13.6%
Debt to Capitalization/D/ 36.3% 34.3% 35.2% 36.1% 37.8% 36.1%
- ---------------------------------------------------------------------------------------------------------------------
Additional Depreciation and
Data Amortization $ 209,771 $ 200,482 $ 207,756 $ 203,705 $ 189,756 $ 169,638
Capital Expenditures 170,349 145,929 123,760 123,017 184,168 185,559
Research and Development
Expense 180,526 154,220 144,201 144,227 139,141 125,207
Number of Employees 18,900 17,900 18,100 18,600 19,000 19,100
Number of Shareholders 8,944 8,027 7,712 7,489 7,463 7,086
</TABLE>
/A/ Includes after-tax charge of $141,057, or $.91 per share, for the
cumulative effect of accounting changes.
/B/ Earnings before interest expense and taxes as a percent of average total
assets.
/C/ Excludes the cumulative effect of accounting changes.
/D/ Total debt as a percent of the sum of total debt, shareholders' equity
and net non-current deferred income tax liabilities.
29
<PAGE>
SUMMARY BY BUSINESS SEGMENT Becton, Dickinson and Company
(See Note 13 to Financial Statements)
<TABLE>
<CAPTION>
Thousands of dollars 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues Medical Supplies and Devices $1,510,881 $1,509,417 $1,500,075
Diagnostic Systems 1,299,642 1,260,339 1,212,450
-------------------------------------------------------------------------
Total Segments $2,810,523 $2,769,756 $2,712,525
=========================================================================
Segment Operating Income Medical Supplies and Devices $ 349,613 $ 342,015 $ 330,368
Diagnostic Systems 194,611 174,656 157,673
-------------------------------------------------------------------------
Total Segments 544,224 516,671 488,041
Unallocated Expenses (121,584) (122,995) (138,463)
-------------------------------------------------------------------------
Income Before Income Taxes $ 422,640 $ 393,676 $ 349,578
=========================================================================
Identifiable Assets Medical Supplies and Devices $1,324,035 $1,337,355 $1,348,860
Diagnostic Systems 1,423,612 1,209,970 1,210,888
-------------------------------------------------------------------------
Total Segments 2,747,647 2,547,325 2,559,748
Corporate/A/ 332,605 342,427 439,757
------------------------------------------------------------------------
Total $3,080,252 $2,889,752 $2,999,505
=========================================================================
Capital Expenditures Medical Supplies and Devices $ 106,298 $ 90,918 $ 77,062
Diagnostic Systems 50,390 49,651 43,776
-------------------------------------------------------------------------
Total Segments 156,688 140,569 120,838
Corporate 13,661 5,360 2,922
-------------------------------------------------------------------------
Total $ 170,349 $ 145,929 $ 123,760
=========================================================================
Depreciation and Medical Supplies and Devices $ 88,603 $ 89,727 $ 96,517
Amortization Diagnostic Systems 108,971 101,618 102,540
-------------------------------------------------------------------------
Total Segments 197,574 191,345 199,057
Corporate 12,197 9,137 8,699
-------------------------------------------------------------------------
Total $ 209,771 $ 200,482 $ 207,756
=========================================================================
</TABLE>
/A/ Consists principally of cash and cash equivalents, short-term and long-term
investments in marketable securities, buildings and equipment, and
investments in non-affiliated companies.
30
<PAGE>
SUMMARY BY BUSINESS SEGMENT Becton, Dickinson and Company
(See Note 13 to Financial Statements)
<TABLE>
<CAPTION>
Thousands of dollars 1997 1996 1995
-------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues United States $1,486,701 $1,423,883 $1,438,459
Europe 787,335 835,984 792,908
Other 536,487 509,889 481,158
-------------------------------------------------------------------------
Total/A/ $2,810,523 $2,769,756 $2,712,525
=========================================================================
Area Operating Income United States $ 383,186 $ 349,560 $ 341,277
Europe 147,040 148,812 116,229
Other 13,998 18,299 30,535
-------------------------------------------------------------------------
Total 544,224 516,671 488,041
Unallocated Expenses (121,584) (122,995) (138,463)
-------------------------------------------------------------------------
Income Before Income Taxes $ 422,640 $ 393,676 $ 349,578
=========================================================================
Identifiable Assets United States $1,653,144 $1,459,260 $1,466,376
Europe 601,398 649,206 673,546
Other 493,105 438,859 419,826
-------------------------------------------------------------------------
Total 2,747,647 2,547,325 2,559,748
Corporate/B/ 332,605 342,427 439,757
-------------------------------------------------------------------------
Total $3,080,252 $2,889,752 $2,999,505
=========================================================================
</TABLE>
/A/ Interarea revenues to affiliates amounted to $406,898 in 1997, $368,834 in
1996 and $346,905 in 1995. These revenues, which are principally from the
United States, are eliminated in consolidation. Intersegment revenues are
not material.
/B/ Consists principally of cash and cash equivalents, short-term and long-term
investments in marketable securities, buildings and equipment, and
investments in non-affiliated companies.
See notes to consolidated financial statements
31
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income Becton, Dickinson and Company
Years Ended September 30
Thousands of dollars, except per share amounts 1997 1996 1995
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Operations Revenues $ 2,810,523 $ 2,769,756 $ 2,712,525
Cost of products sold 1,413,311 1,429,177 1,436,358
Selling and administrative expense 766,071 755,110 735,316
Research and development expense 180,626 154,220 144,201
---------------------------------------------------------------------------------------
Total Operating Costs and Expenses 2,360,008 2,338,507 2,315,875
---------------------------------------------------------------------------------------
Operating Income 450,515 431,249 396,650
Interest expense, net (39,373) (37,409) (42,833)
Other income (expense), net 11,498 (164) (4,239)
---------------------------------------------------------------------------------------
Income Before Income Taxes 422,640 393,676 349,578
Income tax provision 122,566 110,229 97,882
---------------------------------------------------------------------------------------
Net Income $ 300,074 $ 283,447 $ 251,696
=======================================================================================
---------------------------------------------------------------------------------------
Earnings Per Share $ 2.30 $ 2.11 $ 1.79
=======================================================================================
</TABLE>
See notes to consolidated financial statements
34
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets Becton, Dickinson and Company
September 30
Thousands of dollars, except per share amounts 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
Assets Current Assets
Cash and equivalents $ 112,639 $ 135,151
Short-term investments 28,316 29,949
Trade receivables, net 595,685 580,313
Inventories 438,337 402,482
Prepaid expenses, deferred taxes and other 137,632 128,946
--------------------------------------------------------------------------------------------------
Total Current Assets 1,312,609 1,276,841
Investments in Marketable Securities -- 23,800
Property, Plant and Equipment, Net 1,250,705 1,244,148
Goodwill, Net 164,097 93,873
Other Intangibles, Net 167,847 81,992
Other 184,994 169,098
-----------------------------------------------------------------------------------------------------
Total Assets $ 3,080,252 $ 2,889,752
=====================================================================================================
Liabilities Current Liabilities
Short-term debt $ 132,440 $ 227,424
Accounts payable 128,476 128,046
Accrued expenses 226,182 210,987
Salaries, wages and related items 145,396 137,288
Income taxes 45,703 62,377
--------------------------------------------------------------------------------------------------
Total Current Liabilities 678,197 766,122
Long-Term Debt 665,449 468,223
Long-Term Employee Benefit Obligations 306,514 295,122
Deferred Income Taxes and Other 44,659 35,102
Commitments and Contingencies -- --
Shareholders' Equity ESOP convertible preferred stock -
$1 par value: authorized - 1,016,949 shares; issued and
outstanding - 866,286 shares in 1997 and 897,046 shares in 1996 51,111 52,927
Common stock - $1 par value: authorized - 320,000,000 shares;
issued - 167,244,580 shares in 1997 and 170,484,080 shares in 1996 167,245 170,484
Capital in excess of par value 83,422 58,378
Cumulative currency translation adjustments (86,870) (14,959)
Retained earnings 2,249,463 2,160,279
Unearned ESOP compensation (28,620) (32,787)
Common shares in treasury - at cost - 45,161,091 shares in 1997
and 46,873,585 shares in 1996 (1,050,318) (1,069,139)
-----------------------------------------------------------------------------------------------------
Total Shareholders' Equity 1,385,433 1,325,183
-----------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 3,080,252 $ 2,889,752
=====================================================================================================
</TABLE>
See notes to consolidated financial statements
35
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows Becton, Dickinson and Company
Years Ended September 30
Thousands of dollars 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Operating Activities Net income $ 300,074 $ 283,447 $ 251,696
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 209,771 200,482 207,756
Deferred income taxes (29,695) (13,497) (13,540)
Purchased in-process research and development 14,750 -- --
Change in:
Trade receivables (30,014) (21,589) 21,930
Inventories (24,074) (10,141) (7,866)
Prepaid expenses, deferred taxes and other 8,301 (20,581) (6,218)
Accounts payable, income taxes and other liabilities (11,760) 28,596 (2,609)
Other, net 5,394 13,726 21,049
------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 442,747 460,443 472,198
Investing Activities Capital expenditures (170,349) (145,929) (123,760)
Proceeds from sale of equity investment -- -- 47,805
Acquisitions of businesses, net of cash acquired (200,832) (16,501) (3,839)
Proceeds from dispositions of businesses 24,343 38,027 79,479
Proceeds of short-term investments, net 2,544 5,190 69,577
Proceeds from sales of long-term investments 31,307 29,208 6,926
Purchases of long-term investment (6,000) (3,125) --
Other, net (45,079) (16,736) (20,240)
------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by investing activities (364,066) (109,866) 55,948
------------------------------------------------------------------------------------------------------------
Financing Change in short-term debt (77,687) 71,103 (12,680)
Activities Proceeds of long-term debt 292,168 -- 107,278
Payment of long-term debt (118,686) (130,597) (177,226)
Issuance of common stock 29,393 35,366 19,789
Repurchase of common stock (150,003) (325,874) (299,723)
Dividends paid (67,161) (61,660) (58,347)
------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (91,976) (411,662) (420,909)
------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and equivalents (9,217) (2,270) (3,644)
------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and equivalents (22,512) (63,355) 103,593
------------------------------------------------------------------------------------------------------------
Opening cash and equivalents 135,151 198,506 94,913
------------------------------------------------------------------------------------------------------------
Closing cash and equivalents $ 112,639 $ 135,151 $ 198,506
------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements
36
<PAGE>
Notes to Consolidated Financial Statements
Becton, Dickinson and Company
Thousands of dollars, except per share amounts
- --------------------------------------------------------------------------------
Index
Note Subject Page
1 Summary of Significant Accounting Policies 37
2 Acquisitions 38
3 Employee Stock Ownership Plan (ESOP)/Savings Plan 39
4 Benefit Plans 39
5 Other Income (Expense) Net 41
6 Income Taxes 41
7 Supplemental Balance Sheet Information 42
8 Debt 43
9 Financial Instruments 44
10 Shareholders' Equity 46
11 Commitments and Contingencies 47
12 Stock Plans 47
13 Business Segment Data 49
- --------------------------------------------------------------------------------
Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
note
1
Principles of Consolidation
The consolidated financial statements include the accounts of Becton,
Dickinson and Company and its majority owned subsidiaries after the elimination
of intercompany transactions.
Reclassifications
The Company has reclassified certain prior year information to conform with the
current year presentation.
Cash Equivalents
Cash equivalents are stated at cost plus accrued interest, which approximates
market. The Company considers all highly liquid investments with a maturity of
90 days or less when purchased to be cash equivalents.
Inventories
Inventories are stated at the lower of cost or market. The Company uses the
last-in, first-out ("LIFO") method of determining cost for substantially all
inventories in the United States. All other inventories are accounted for using
the first-in, first-out ("FIFO") method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation
and amortization. The cost of additions, improvements, and interest on
construction are capitalized, while maintenance and repairs are charged to
expense when incurred. Depreciation and amortization are provided on the
straight-line basis over estimated useful lives which range from twenty to
forty-five years for buildings, four to ten years for machinery and equipment
and three to twenty years for leasehold improvements.
Goodwill and Other Intangibles
Goodwill represents costs in excess of net assets of businesses acquired.
Goodwill and patents are being amortized over periods ranging from five to forty
years, using the straight-line method. An impairment loss is recognized in
operating results if impairment indicators are present and the undiscounted cash
flows estimated to be generated by the related assets are less than their
carrying amounts. As a result of a change in the strategic direction for the
cellular imaging business, the Company recorded a provision in the amount of
$12,275 in 1995 primarily to write off goodwill associated with that business.
Revenue Recognition
Substantially all revenue is recognized when products are shipped to customers.
Warranty
Estimated future warranty obligations related to certain products are provided
by charges to operations in the period in which the related revenue is
recognized.
Income Taxes
United States income taxes are not provided on substantially all undistributed
earnings of foreign and Puerto Rican subsidiaries since the subsidiaries
reinvest such earnings or remit them to the Company without tax consequence.
Income taxes are provided and tax credits are recognized based on tax laws in
effect at the dates of the financial statements.
Earnings Per Share
Earnings per share are computed in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 15, "Earnings per Share," using the
weighted average number of common and common equivalent shares outstanding
during the year, and related income amounts after adjustment for dividends on
preferred shares. The weighted average number of shares used in the computations
were 128,972,000 in 1997, 132,795,000 in 1996 and 138,402,000 in 1995. Common
equivalent shares relate to employee stock plans.
37
<PAGE>
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings per
Share." This Statement supercedes APB Opinion No. 15 and 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 ending
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. Earning per share, computed in
accordance with the provisions of SFAS No. 128, for the years ended September
30, 1997, 1996 and 1995 are presented in the table below:
- --------------------------------------------------------------------------------
1997 1996 1995
---------------------------------
Earnings Per Share
Basic $2.42 $2.21 $1.85
Diluted $2.30 $2.11 $1.77
================================================================================
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates or assumptions affect reported assets, liabilities, revenues and
expenses as reflected in the financial statements. Actual results could differ
from these estimates.
Derivative Financial Instruments
Derivative financial instruments are utilized by the Company in the management
of its foreign currency and interest rate exposures. The Company does not use
derivative financial instruments for trading or speculative purposes.
The Company reduces its foreign currency exposures by entering into
forward exchange contracts and purchased currency options for the future
purchase and sale of foreign currencies. The Company also occasionally enters
into interest rate swaps, interest rate caps, interest rate collars, and forward
rate agreements in order to reduce the impact of fluctuating interest rates on
its short-term floating rate third party and intercompany debt and investments.
In connection with issuances of long-term debt, the Company may also enter into
interest rate hedge agreements in order to protect itself from fluctuating
interest rates during the period in which the sale of the debt is being
arranged.
The Company accounts for its derivative financial instruments using the
deferral method of accounting, whereby gains and losses related to these hedges
are recognized in income as part of, and concurrent with, the hedged
transactions. The carrying value of derivative financial instruments is recorded
and included in the caption Prepaid expenses, deferred taxes and other, or in
Accrued expenses on the balance sheet, as appropriate.
Any deferred gains or losses associated with derivative instruments, which
on infrequent occasions may be terminated prior to maturity, are recognized in
income in the period in which the underlying hedged transaction is recognized.
In the event a designated hedged item is sold, extinguished or matures prior to
the termination of the related derivative instrument, such instrument would be
closed and the resultant gain or loss would be recognized in income.
Stock-Based Compensation
Under the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company accounts for stock-based employee compensation using the intrinsic
value method prescribed by APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over the exercise price.
- --------------------------------------------------------------------------------
Acquisitions
- --------------------------------------------------------------------------------
note
2
In May 1997, the Company acquired PharMingen, a manufacturer of reagents
for biomedical research, and Difco Laboratories Incorporated ("Difco"), a
manufacturer of microbiology media and supplies, for an aggregate amount of
$187,200, net of cash acquired.
The PharMingen and Difco acquisitions were recorded under the purchase
method of accounting, and accordingly, their results of operations for the
post-acquisition period have been included in the accompanying consolidated
financial statements. The purchase prices have been allocated to assets acquired
and liabilities assumed based on estimated fair values. In connection with these
acquisitions, certain research and development projects acquired were determined
to have not reached technological feasibility. Accordingly, a charge of $14,750
for purchased in-process research and development was included in the 1997
results of operations. The aggregate
38
<PAGE>
fair value of assets acquired and liabilities assumed, after giving effect to
the write-off of purchased in-process research and development, is summarized
below:
- --------------------------------------------------------------------------------
Working capital, net of cash acquired $ 27,545
Property, plant and equipment 20,651
Other intangibles 86,316
Goodwill 78,833
Other assets 3,210
Long-term liabilities (44,105)
- --------------------------------------------------------------------------------
Included in the assumed liabilities for these acquisitions, is $17,813
representing severance, and other exit costs in connection with the closing of
certain Difco facilities.
Goodwill related to PharMingen and Difco is being amortized on a
straight-line basis over 15 and 20 years, respectively. Unaudited pro forma
consolidated revenues, as if the acquisitions had taken place at the beginning
of fiscal 1996, would have been approximately $2,884,256 and $2,872,519 for
fiscal years 1997 and 1996, respectively. Unaudited pro forma consolidated
income and earnings per share would not have been materially different from the
reported amounts for either year. Such unaudited pro forma amounts are not
necessarily indicative of what the actual consolidated results of operations
might have been had the acquisitions been in effect at the beginning of fiscal
1996.
- --------------------------------------------------------------------------------
Employee Stock Ownership Plan (ESOP)/Savings Plan
- --------------------------------------------------------------------------------
note
3
The Company has an Employee Stock Ownership Plan ("ESOP") as part of its
voluntary defined contribution plan (savings plan) covering most domestic
employees. The ESOP is intended to satisfy all or part of the Company's
obligation to match 50% of employees' contributions, up to a maximum of 3% of
each participant's salary. To accomplish this, in 1990, the ESOP borrowed
$60,000 in a private debt offering and used the proceeds to buy the Company's
ESOP convertible preferred stock. Each share of preferred stock has a guaranteed
liquidation value of $59 per share and is convertible into 3.2 shares of the
Company's common stock. The preferred stock pays an annual dividend of $3.835
per share, a portion of which is used by the ESOP, together with the Company's
contributions, to repay the ESOP debt. Since the ESOP debt is guaranteed by the
Company, it is reflected on the consolidated balance sheet as short-term and
long-term debt with a related amount shown in the shareholders' equity section
as unearned ESOP compensation.
The amount of ESOP expense recognized is equal to the cost of the
preferred shares allocated to plan participants and the ESOP interest expense
for the year, reduced by the amount of dividends paid on the preferred stock.
Selected financial data pertaining to the ESOP/Savings Plan follow:
- --------------------------------------------------------------------------------
1997 1996 1995
--------------------------------
Total expense of the savings plan $ 4,257 $ 5,115 $ 7,659
Compensation expense
(included in total expense above) $ 2,087 $ 2,693 $ 5,080
Dividends on ESOP shares used for debt service $ 3,366 $ 3,484 $ 3,596
Number of preferred shares allocated
at September 30 357,465 325,632 288,785
================================================================================
The Company guarantees employees' contributions to the fixed income fund
of the Savings Plan. The amount guaranteed was $90,521 at September 30, 1997.
- --------------------------------------------------------------------------------
Benefit Plans
- --------------------------------------------------------------------------------
note
4
The Company and certain of its subsidiaries have defined benefit pension
plans which cover a substantial number of its employees. The largest plan,
covering most of the Company's domestic employees, is a "final average pay"
plan.
A summary of the costs of the defined benefit pension plans follows:
- --------------------------------------------------------------------------------
1997 1996 1995
--------------------------------
Service cost: benefits earned during the year $ 19,946 $ 20,217 $ 16,884
Interest cost on projected benefit obligation 31,389 29,204 27,312
Return on assets:
Actual gain (103,350) (53,055) (71,964)
Deferred portion 65,187 18,014 42,790
- --------------------------------------------------------------------------------
Expected return (38,163) (35,041) (29,174)
- --------------------------------------------------------------------------------
Net pension cost $ 13,172 $ 14,380 $ 15,022
================================================================================
39
<PAGE>
Rate assumptions used in accounting for the domestic defined benefit plans
were:
- --------------------------------------------------------------------------------
1997 1996 1995
--------------------------------
Discount rate:
End of year 7.50% 7.75% 7.50%
Beginning of year 7.75% 7.50% 8.00%
Rate of increase in compensation 5.25% 5.25% 5.25%
Expected long-term rate of return on assets 10.00% 10.00% 10.00%
================================================================================
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets at September 30, 1997 and 1996 for the Company's
domestic defined benefit pension plans:
- --------------------------------------------------------------------------------
1997 1996
------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $ 339,139 $ 294,564
================================================================================
Accumulated benefit obligation $ 354,440 $ 308,208
================================================================================
Projected benefit obligation $ 467,866 $ 413,062
Plan assets at fair value 480,435 385,468
- --------------------------------------------------------------------------------
Plan assets in excess of (less than) projected
benefit obligation 12,569 (27,594)
Unrecognized net gain (85,336) (33,579)
Unrecognized net asset at October 1, 1985,
net of amortization (1,820) (2,427)
- --------------------------------------------------------------------------------
Net pension liability recognized
in the consolidated balance sheets $ 74,587 $ 63,600
================================================================================
Plan assets are composed primarily of investments in publicly traded
securities. The Company's funding policy is to contribute amounts to the plans
sufficient to meet the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, as amended, plus such additional amounts
as the Company may determine to be appropriate from time to time.
Employees in foreign countries are covered by various postretirement
benefit arrangements, some of which are considered to be defined benefit plans
for accounting purposes. Such plans are immaterial to the Company's consolidated
financial position and results of operations.
In addition to providing pension benefits, the Company and its domestic
subsidiaries provide certain health care and life insurance benefits for retired
employees. Substantially all of the Company's domestic employees may become
eligible for these benefits upon retirement from the Company. The Company's cost
of benefits for foreign retirees is minimal as health care and life insurance
coverage is generally provided through government plans.
Postretirement benefit costs include the following components:
- --------------------------------------------------------------------------------
1997 1996 1995
---------------------------------
Service cost: benefits earned during the year $ 2,154 $ 2,251 $ 2,108
Interest cost on projected benefit obligation 11,467 10,925 10,860
Amortization of gain from plan amendments (6,364) (6,334) (6,499)
- --------------------------------------------------------------------------------
Postretirement benefit cost $ 7,257 $ 6,842 $ 6,469
================================================================================
The postretirement benefit plans other than pensions are not funded. The
present value of the Company's obligation included in the consolidated balance
sheets at September 30, 1997 and 1996 was as follows:
- --------------------------------------------------------------------------------
1997 1996
------------------------
Accumulated postretirement benefit obligation:
Retirees $ 123,044 $ 113,377
Fully eligible active participants 14,892 14,157
Other active participants 28,204 26,060
- --------------------------------------------------------------------------------
Total 166,140 153,594
Unrecognized gain from plan amendments 69,432 75,744
Unrecognized actuarial loss (21,225) (11,246)
- --------------------------------------------------------------------------------
Accrued postretirement benefit liability $ 214,347 $ 218,092
================================================================================
At September 30, 1997 and 1996, health care cost trends of 11% and 12%,
respectively, pre-age 65 and 8% and 9%, respectively, post-age 65 were assumed.
These rates were assumed to decrease gradually to an ultimate rate of 5.75%
beginning in 2003 for pre-age 65 and 2000 for post-age 65. The effect of a 1%
annual increase in these assumed cost trend rates would increase the accumulated
postretirement benefit obligation at September 30, 1997 by $4,947 and the
postretirement cost for 1997 by $371. The discount rate used to estimate the
postretirement benefit cost was 7.75% in 1997 and 7.5% in 1996. The discount
rate used to estimate the accumulated postretirement benefit obligation at
September 30, 1997 was 7.5% and 7.75% at September 30, 1996.
40
<PAGE>
The Company utilizes a service-based approach in applying the provisions
of SFAS No. 112, "Employers' Accounting For Postemployment Benefits," for most
of its postemployment benefits. Such an approach recognizes that actuarial gains
and losses may result from experience that differs from baseline assumptions. In
1997, the Company recorded a $5,963 curtailment loss for severance in connection
with productivity programs in the United States and Europe.
- --------------------------------------------------------------------------------
1997 1996 1995
---------------------------------
Postemployment benefit costs $25,500 $12,200 $10,300
================================================================================
- --------------------------------------------------------------------------------
Other Income (Expense) Net
- --------------------------------------------------------------------------------
note
5
Other income, net in 1997, included $8,191 of gains from the dispositions
of non-core business lines and a gain of $5,763 on the sale of an investment.
Also included in Other income, net were foreign exchange losses of $5,021,
including hedging costs.
Other (expense), net in 1996 includes income of $8,216 from a net cash
settlement received in connection with one of the Company's patents and foreign
exchange losses, including hedging costs, of $8,127.
Other (expense), net in 1995 includes a net cash settlement of $10,995
received in connection with a favorable arbitration ruling relating to one of
the Company's patents offset by losses of $6,301 from the sale of the medical
glove business and foreign exchange losses, including hedging costs, of $12,074.
- --------------------------------------------------------------------------------
Income Taxes
- --------------------------------------------------------------------------------
note
6
The provision for income taxes is composed of the following charges
(benefits):
- --------------------------------------------------------------------------------
1997 1996 1995
=================================
Current:
Domestic:
Federal $ 81,588 $ 70,769 $ 53,388
State and local, including Puerto Rico 34,442 33,521 28,212
Foreign 36,231 19,436 29,822
- --------------------------------------------------------------------------------
152,261 123,726 111,422
- --------------------------------------------------------------------------------
Deferred:
Domestic (15,798) (19,769) (7,070)
Foreign (13,897) 6,272 (6,470)
- --------------------------------------------------------------------------------
(29,695) (13,497) (13,540)
- --------------------------------------------------------------------------------
$ 122,566 $ 110,229 $ 97,882
================================================================================
In accordance with SFAS No. 109, "Accounting for Income Taxes," deferred
tax assets and liabilities are netted on the balance sheet by separate tax
jurisdictions. At September 30, 1997 and 1996, net current deferred tax assets
of $62,702 and $44,845, respectively, were included in Prepaid expenses,
deferred taxes and other. Net non-current deferred tax assets of $49,046 and
$43,602, respectively, were included in Other non-current assets. Net current
deferred tax liabilities of $8,313 in 1997 were included in Current Liabilities
- - Income taxes. There were no net current deferred tax liabilities in 1996. Net
non-current deferred tax liabilities of $15,389 and $8,274, respectively, were
included in Deferred income taxes and other. Deferred taxes are not provided on
substantially all undistributed earnings of foreign and Puerto Rican
subsidiaries. At September 30, 1997, the cumulative amount of such undistributed
earnings approximated $964,000 against which United States tax-free liquidation
provisions or substantial tax credits are available. Determining the tax
liability that would arise if these earnings were remitted is not practicable.
41
<PAGE>
Deferred income taxes at September 30 consisted of:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ----------------------------- -------------------------
Assets Liabilities Assets Liabilities Assets Liabilities
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Compensation and benefits $ 143,665 $ -- $ 133,061 $ -- $ 128,676 $ --
Property and equipment -- 100,169 -- 108,455 -- 117,748
Other 131,319 74,163 89,853 27,400 79,858 19,899
- -------------------------------------------------------------------------------------------------------------------
274,984 174,332 222,914 135,855 208,534 137,647
Valuation allowance (12,606) -- (6,886) -- (9,475) --
- -------------------------------------------------------------------------------------------------------------------
$ 262,378 $174,332 $ 216,028 $135,855 $ 199,059 $137,647
===================================================================================================================
</TABLE>
A reconciliation of the federal statutory tax rate to the Company's
effective tax rate follows:
- --------------------------------------------------------------------------------
1997 1996 1995
---------------------------------
Federal statutory tax rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal tax benefit 1.3 1.4 1.5
Effect of foreign and Puerto Rican income (5.3) (4.2) (6.0)
Foreign tax credits (2.3) (2.5) (1.9)
Research tax credit (.3) (.3) (.2)
Purchased in-process research and development 1.2 -- --
Other, net (.6) (1.4) (.4)
- --------------------------------------------------------------------------------
29.0% 28.0% 28.0%
================================================================================
The approximate dollar and per share amounts of tax reductions related to
tax holidays in various countries in which the Company does business were: 1997
- - $17,400 and $.13; 1996 - $17,700 and $.13; and 1995 - $18,400 and $.13. The
tax holidays expire at various dates through 2010.
The Company made income tax payments, net of refunds, of $151,050 in 1997,
$126,236 in 1996 and $132,650 in 1995.
The components of income before income taxes follow:
- --------------------------------------------------------------------------------
1997 1996 1995
------------------------------------
Domestic, including Puerto Rico $264,910 $231,021 $218,695
Foreign 157,730 162,655 130,883
- --------------------------------------------------------------------------------
$422,640 $393,676 $349,578
================================================================================
- --------------------------------------------------------------------------------
Supplemental Balance Sheet Information
- --------------------------------------------------------------------------------
note
7
Trade Receivables
Allowances for doubtful accounts and cash discounts netted against trade
receivables were $28,733 and $28,056 at September 30, 1997 and 1996,
respectively.
- --------------------------------------------------------------------------------
Inventories 1997 1996
------------------------
Materials $ 92,307 $ 91,154
Work in process 79,519 66,005
Finished products 266,511 245,323
- --------------------------------------------------------------------------------
$ 438,337 $ 402,482
================================================================================
Inventories valued under the LIFO method were $252,243 in 1997 and
$233,714 in 1996. Inventories valued under the LIFO method would have been
higher by approximately $32,200 in 1997 and $33,700 in 1996, if valued on a
current cost basis.
42
<PAGE>
- --------------------------------------------------------------------------------
Property, Plant and Equipment 1997 1996
----------------------------
Land $ 60,912 $ 52,090
Buildings 893,696 879,316
Machinery, equipment and fixtures 1,561,521 1,500,969
Leasehold improvements 33,699 29,860
- --------------------------------------------------------------------------------
2,549,828 2,462,235
Less allowances for depreciation
and amortization 1,299,123 1,218,087
- --------------------------------------------------------------------------------
$1,250,705 $1,244,148
================================================================================
- --------------------------------------------------------------------------------
Goodwill 1997 1996
----------------------------
Goodwill $ 212,870 $ 139,676
Less accumulated amortization 48,773 45,803
- --------------------------------------------------------------------------------
$ 164,097 $ 93,873
================================================================================
- --------------------------------------------------------------------------------
Other Intangibles 1997 1996
----------------------------
Patents and other $ 299,420 $ 212,928
Less accumulated amortization 131,573 130,936
- --------------------------------------------------------------------------------
$ 167,847 $ 81,992
================================================================================
- --------------------------------------------------------------------------------
Debt
- --------------------------------------------------------------------------------
note
8
The components of short-term debt follow:
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Loans payable:
Domestic $ 78,500 $ 51,700
Foreign 46,281 54,497
Current portion of long-term debt 7,659 121,227
- --------------------------------------------------------------------------------
$132,440 $227,424
================================================================================
Domestic loans payable consist of commercial paper. Foreign loans payable
consist of short-term borrowings from financial institutions. The weighted
average interest rates for loans payable were 5.5% and 4.9% at September 30,
1997 and 1996, respectively. In November 1996, the Company entered into a
$500,000 five-year syndicated and committed revolving credit facility that was
undrawn at September 30, 1997. The facility supports the Company's commercial
paper borrowing program under which $78,500 was outstanding at September 30,
1997. It can also be used for other general corporate purposes. Restrictive
covenants under this agreement include a minimum tangible net worth level. At
September 30, 1996, the Company had lines of credit to support commercial paper
borrowings consisting of $300,000 in short-term lines of credit and $70,000 in
long-term lines of credit, all of which were unused. In addition, the Company
had unused foreign lines of credit pursuant to informal arrangements of
approximately $197,000 and $200,000 at September 30, 1997 and 1996,
respectively.
The components of long-term debt follow:
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Domestic notes due through 2015
(average year-end interest rate:
5.9% - 1997; 5.4% - 1996) $ 15,614 $109,691
Foreign notes due through 2011 (average year-end
interest rate: 6.2% - 1997; 6.1% - 1996) 16,493 20,768
9.95% Notes due March 15, 1999 100,000 100,000
8.80% Notes due March 1, 2001 100,000 100,000
9.45% Guaranteed ESOP Notes due through July 1, 2004 33,342 37,764
6.90% Notes due October 1, 2006 100,000 --
8.70% Debentures due January 15, 2025 100,000 100,000
7.00% Debentures due August 1, 2027 200,000 --
- --------------------------------------------------------------------------------
$665,449 $468,223
================================================================================
In October 1996, the Company issued $100,000 of 6.9% notes due on October
1, 2006, with an effective yield including the results of an interest rate hedge
and other financing costs of 7.34%. In July 1997, the Company issued $200,000 of
7% Debentures due on August 1, 2027. Prior to the issuance, the Company entered
into an interest rate hedge agreement to protect itself from the impact of
fluctuating interest rates during the period in which the sale of the debentures
was being arranged. The effective yield of the debentures including the results
of the interest rate hedge and other financing costs was 7.23%. The cost of each
interest rate hedge agreement is being amortized over the life of the related
debt.
43
<PAGE>
In October 1997, the Company filed a shelf registration statement to
increase its capacity to issue up to $500,000 of debt securities.
The aggregate annual maturities of long-term debt during the fiscal years
ending September 30, 1999 to 2002 are as follows: 1999 - $107,130; 2000 -
$6,447; 2001 - $106,912; 2002 - $7,449.
The Company capitalizes interest costs as a component of the cost of
construction in progress. The following is a summary of interest costs:
- --------------------------------------------------------------------------------
1997 1996 1995
-------------------------------------
Charged to operations $51,134 $54,162 $60,628
Capitalized 6,469 5,368 4,064
- --------------------------------------------------------------------------------
$57,603 $59,530 $64,692
================================================================================
Interest paid, net of amounts capitalized, was $48,573 in 1997, $59,053 in
1996, and $58,726 in 1995.
- --------------------------------------------------------------------------------
Financial Instruments
- --------------------------------------------------------------------------------
note
9
Fair Value of Financial Instruments
Cash equivalents, short-term investments and short-term debt are carried
at cost which approximate fair values. Investments in marketable securities,
which are classified as held-to-maturity and other investments, which are
classified as available-for-sale securities are also carried at cost. Fair
values were estimated based on market prices, where available, or dealer quotes.
The fair value of certain long-term debt is based on redemption value.
Investments in marketable securities were primarily composed of Puerto Rico
government bonds.
The estimated fair values of the Company's financial instruments at
September 30, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
1997 1996
--------------------- ----------------------
Carrying Fair Carrying Fair
Value Value Value Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Investments in marketable securities $ -- $ -- $ 23,800 $ 23,518
Other investments (non-current)(A) 9,000 8,380 5,987 15,092
Forward exchange contracts(B) -- -- 3,417 3,069
Purchased currency options(B) 279 233 170 166
Liabilities:
Long-term debt $665,449 $ 698,852 $468,223 $493,402
Forward exchange contracts(C) 5,979 5,270 -- --
Interest rate swaps 130 (462) 135 921
Rate hedge agreement -- -- -- 807
=========================================================================================
</TABLE>
(A) Included in Other non-current assets.
(B) Included in Prepaid expenses, deferred taxes and other.
(C) Included in Accrued expenses.
Off-Balance Sheet Risk
The Company has certain receivables, payables and short-term borrowings
denominated in currencies other than the functional currency of the Company and
its subsidiaries. During the year, the Company hedged substantially all of these
exposures by entering into forward exchange contracts and purchased and written
currency options. The Company principally hedges the following foreign
currencies: Irish pound, Japanese yen, Singapore dollar, French franc, Italian
lira, Mexican peso, Spanish peseta, British pound and Australian dollar.
At September 30, the stated or notional amounts of the Company's
outstanding forward exchange contracts and purchased currency options,
classified as held for purposes other than trading, were as follows:
- --------------------------------------------------------------------------------
1997 1996
------------------------
Forward exchange contracts $630,363 $720,076
Purchased currency options:
Colombian peso put, U.S. dollar call $ 4,000 $ 2,300
Brazilian real put, U.S. dollar call -- 15,000
Mexican peso call, U.S. dollar put -- 12,000
Mexican peso put, U.S. dollar call 39,000 --
================================================================================
44
<PAGE>
At September 30, 1997, $520,453 of the forward exchange contracts mature
within 90 days, $93,188 at various other dates in fiscal 1998 and $16,722 on
January 22, 1999. The purchased currency options at September 30, 1997 expire
within 30 days.
The Company's foreign exchange hedging activities do not generally create
exchange rate risk since gains and losses on these contracts generally offset
losses and gains on the related non-functional currency denominated receivables,
payables and short-term borrowings.
At September 30, 1997, the Company's Brazilian subsidiary entered into an
agreement under which it will pay interest of 21.05% per annum in local currency
on the Brazilian Real equivalent of a notional amount of $21,800 and receive the
Brazilian Real equivalent of 8.65% per annum on the notional amount, plus an
amount equal to the currency devaluation for the period. The fair value of this
instrument, which matures on February 2, 1998, approximated the carrying value
of zero at September 30, 1997.
The Company enters into interest rate swap and interest rate cap
agreements, classified as held for purposes other than trading, in order to
reduce the impact of fluctuating interest rates on its foreign currency
short-term floating rate third party and intercompany debt and investments
outside the United States. At September 30, 1997 and 1996, the Company had
foreign interest rate swap agreements, with maturities at various dates through
1999. Under these agreements, the Company agrees with other parties to pay or
receive fixed rate payments, generally on an annual basis, in exchange for
paying or receiving variable rate payments, generally on a quarterly basis,
calculated on an agreed-upon notional amount. At September 30, the notional
amounts of the Company's outstanding interest rate swap agreements were as
follows:
- --------------------------------------------------------------------------------
1997 1996
------------------------
Interest rate swap agreements $133,357 $104,946
================================================================================
At September 30, 1996, the Company had a foreign interest rate cap
agreement with a notional U.S. dollar equivalent amount of $8,077, which limited
the potential interest rate fluctuations on a portion of the Company's Japanese
yen denominated short-term debt. This agreement effectively entitled the Company
to receive from a financial institution the amount, if any, by which the
Company's interest payments on $8,077 of its floating rate yen denominated
short-term debt exceeded 2%. The cap expired in May 1997.
For additional discussion of derivative instruments, see Financial Review
on pages 24 and 25.
Concentration of Credit Risk
Substantially all of the Company's trade receivables are due from entities in
the health care industry. Due to the large number and diversity of the Company's
customer base, concentrations of credit risk with respect to trade receivables
are limited. The Company does not normally require collateral. The Company is
exposed to credit loss in the event of nonperformance by financial institutions
with which it conducts business. The Company minimizes exposure to such risk,
however, by dealing only with major international banks and financial
institutions.
45
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Shareholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
note
10
Series B,
ESOP
Preferred Common Capital in Unearned
Stock Stock Excess of Retained ESOP
Issued Issued Par Value Earnings Compensation
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at October 1, 1994 $56,331 $170,698 $26,251 $1,752,360 $(41,096)
Net income 251,696
Cash dividends:
Common ($.41 per share) (54,725)
Preferred ($3.835 per share), net of tax benefits (2,695)
Common stock issued for employee stock plans, net 6,251
Repurchase of common stock
Reduction in unearned ESOP compensation for the year 4,155
Adjustment for redemption provisions and other (1,618) 350
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1995 54,713 170,698 32,852 1,946,636 (36,941)
Net income 283,447
Cash dividends:
Common ($.46 per share) (58,147)
Preferred ($3.835 per share), net of tax benefits (2,675)
Common stock issued for:
Employee stock plans, net 17,164
Business acquisition 8,077
Repurchase of common stock
Common stock held in trusts
Retirement of common stock (214) (101) (8,982)
Reduction in unearned ESOP compensation for the year 4,154
Adjustment for redemption provisions and other (1,786) 386
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1996 52,927 170,484 58,378 2,160,279 (32,787)
Net income 300,074
Cash dividends:
Common ($.52 per share) (63,768)
Preferred ($3.835 per share), net of tax benefits (2,647)
Common stock issued for employee stock plans, net 26,942
Repurchase of common stock
Common stock held in trusts
Retirement of common stock (3,239) (2,289) (144,475)
Reduction in unearned ESOP compensation for the year 4,167
Adjustment for redemption provisions and other (1,816) 391
===================================================================================================================================
Balance at September 30, 1997 $51,111 $167,245 $83,422 $2,249,463 $(28,620)
<CAPTION>
Treasury Stock
--------------------------
Shares Amount
<S> <C> <C>
- -----------------------------------------------------------------------------------------
Balance at October 1, 1994 (30,142,262) $ (491,423)
Net income
Cash dividends:
Common ($.41 per share)
Preferred ($3.835 per share), net of tax benefits
Common stock issued for employee stock plans, net 1,047,936 13,538
Repurchase of common stock (11,540,800) (299,723)
Reduction in unearned ESOP compensation for the year
Adjustment for redemption provisions and other 87,746 1,268
- -----------------------------------------------------------------------------------------
Balance at September 30, 1995 (40,547,380) (776,340)
Net income
Cash dividends:
Common ($.46 per share)
Preferred ($3.835 per share), net of tax benefits
Common stock issued for:
Employee stock plans, net 1,456,040 18,202
Business acquisition 331,734 4,176
Repurchase of common stock (8,404,200) (324,970)
Common stock held in trusts (20,707) (904)
Retirement of common stock 214,012 9,297
Reduction in unearned ESOP compensation for the year
Adjustment for redemption provisions and other 96,916 1,400
- -----------------------------------------------------------------------------------------
Balance at September 30, 1996 (46,873,585) (1,069,139)
Net income
Cash dividends:
Common ($.52 per share)
Preferred ($3.835 per share), net of tax benefits
Common stock issued for employee stock plans, net 1,683,547 20,513
Repurchase of common stock (3,239,500) (150,003)
Common stock held in trusts (69,473) (3,117)
Retirement of common stock 3,239,500 150,003
Reduction in unearned ESOP compensation for the year
Adjustment for redemption provisions and other 98,420 1,425
- -----------------------------------------------------------------------------------------
Balance at September 30, 1997 (45,161,091) $(1,050,318)
=======================================================================================
</TABLE>
Common stock held in trusts represent rabbi trusts in connection with the
Company's employee salary and bonus deferral plan and directors' deferral plan.
The excess of cost over par value of common stock retirements is charged
proportionally to Capital in Excess of Par Value and Retained Earnings.
46
<PAGE>
Cumulative Currency Translation Adjustments
Generally, the net assets of foreign operations are translated into U.S. dollars
using current exchange rates. The U.S. dollar results that arise from such
translation, as well as exchange gains and losses on intercompany balances of a
long-term investment nature (net of allocated income taxes), are included in the
cumulative currency translation adjustment account in Shareholders' Equity. The
following is an analysis of the account:
- --------------------------------------------------------------------------------
1997 1996 1995
----------------------------------------
Balance at October 1 $(14,959) $ 6,767 $ 8,573
Translation adjustment (71,911) (21,726) (1,587)
Allocated income taxes -- -- (219)
- --------------------------------------------------------------------------------
Balance at September 30 $(86,870) $(14,959) $ 6,767
================================================================================
Preferred Stock Purchase Rights
In 1995, the Board of Directors adopted a new shareholder rights plan (the "New
Plan") to replace the original rights plan upon its expiration in 1996. In
accordance with the New Plan, each certificate representing a share of
outstanding common stock of the Company also represents one-half of a Preferred
Stock Purchase Right (a "Right"). Each whole Right will entitle the registered
holder to purchase from the Company one two-hundredth of a share of Preferred
Stock, Series A, par value $1.00 per share, at a price of $270. The Rights will
not become exercisable unless and until, among other things, a third party
acquires 20% or more of the Company's outstanding common stock. The Rights are
redeemable under certain circumstances at $.01 per Right and will expire, unless
earlier redeemed, on April 25, 2006. There are 500,000 shares of Preferred Stock
designated Series A, none of which have been issued.
- --------------------------------------------------------------------------------
Commitments and Contingencies
- --------------------------------------------------------------------------------
note
11
Commitments
Rental expense for all operating leases amounted to $48,200 in 1997,
$52,000 in 1996 and $53,000 in 1995. Future minimum rental commitments on
noncancelable leases are as follows: 1998 - $29,000; 1999 - $22,200; 2000 -
$17,200; 2001 - $14,200; 2002 - $11,900 and an aggregate of $19,800 thereafter.
As of September 30, 1997, the Company had entered into certain commitments
for future capital expenditures, aggregating approximately $70,700 which will be
expended over the next several years.
Contingencies
The Company believes that its operations comply in all material respects with
applicable laws and regulations. The Company is a party to a number of Federal
proceedings in the United States brought under the Comprehensive Environmental
Response, Compensation and Liability Act, also known as "Superfund," and similar
state laws. For all sites, there are other potentially responsible parties that
may be jointly or severally liable to pay all cleanup costs. The Company accrues
costs for an estimated environmental liability based upon its best estimate
within the range of probable losses, without considering third-party recoveries.
The Company believes that any reasonably possible losses in excess of accruals
would be immaterial to the Company's financial condition.
The Company, along with a number of other manufacturers, has been named as
a defendant in approximately 75 product liability lawsuits related to natural
rubber latex that have been filed in various state and Federal courts. Cases
pending in Federal court are being coordinated under the matter In re Latex
Gloves Products Liability Litigation (MDL Docket No. 1148) in Philadelphia, and
an analogous procedure has been implemented in the California state courts.
Generally, these actions allege that medical personnel have suffered allergic
reactions ranging from skin irritation to anaphylaxis as a result of exposure to
medical gloves containing natural rubber latex. In 1986, the Company acquired a
business which manufactured, among other things, latex surgical gloves. In 1995,
the Company divested this glove business. The Company intends to mount a
vigorous defense in these lawsuits.
The Company is also involved in other legal proceedings and claims which
arise in the ordinary course of business, both as a plaintiff and a defendant.
In the opinion of the Company, the results of the above matters, individually
and in the aggregate, are not expected to have a material effect on its results
of operations, financial condition or cash flows.
- --------------------------------------------------------------------------------
Stock Plans
- --------------------------------------------------------------------------------
note
12
Stock Option Plans
The Company has stock option plans under which employees have been granted
options to purchase shares of the Company's common stock at prices established
by the Compensation and Benefits Committee of the Board of Directors. The 1990
Stock Option Plan, adopted in 1991, made available 8,000,000 shares, as adjusted
for the two-for-one stock splits in 1996 and 1993, of the Company's common stock
for the granting of options. The 1995 Stock Option Plan, adopted in 1995, made
available an additional
47
<PAGE>
12,000,000 shares, as adjusted for the two-for-one stock split in 1996, of the
Company's common stock for the granting of options. At September 30, 1997,
53,032 and 5,092,654 shares were available for future grant under the 1990 and
1995 Plans, respectively.
A summary of changes in outstanding options is as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
--------------------------- -------------------------- -------------------------
Options Weighted Avg Options Weighted Avg Options Weighted Avg
for Shares Exercise Price for Shares Exercise Price for Shares Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 1 13,525,712 $ 24.30 11,830,092 $ 18.92 10,161,918 $ 16.97
Granted 3,295,072 49.45 3,285,684 40.38 2,817,636 24.87
Exercised (1,629,229) 18.10 (1,395,540) 16.46 (976,742) 15.78
Forfeited, canceled or expired (107,292) 32.73 (194,524) 24.82 (172,720) 18.59
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30 15,084,263 30.41 13,525,712 24.30 11,830,092 18.92
====================================================================================================================================
Exercisable at September 30 9,550,165 23.84 10,937,251 23.33 8,778,116 18.28
====================================================================================================================================
Weighted average fair value of options granted $14.15 $10.49
====================================================================================================================================
Available for grant at September 30 5,145,686 8,331,816 11,422,976
====================================================================================================================================
</TABLE>
The maximum term of options is 10 years. Options outstanding as of September 30,
1997 expire on various dates from June 1998 through May 2007.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
September 30, 1997
------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------------------------------------------------------
Weighted Avg
Number Weighted Avg Remaining Number Weighted Avg
Range of Option Exercise Price Outstanding Exercise Price Contractual Life Exercisable Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$13.05 - $25.10 8,630,915 $19.50 5.7 years 7,339,445 $18.81
37.66 - 49.63 6,453,348 44.99 8.9 years 2,210,720 40.55
- ------------------------------------------------------------------------------------------------------------------------------------
15,084,263 30.41 7.7 years 9,550,165 23.84
====================================================================================================================================
</TABLE>
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company has adopted the disclosure-only provision of the Statement and
applies APB Opinion No. 25 and related interpretations in accounting for its
employee stock plans.
Both the 1995 and 1990 Plans have a provision whereby unqualified options
may be granted at, below, or above market value of the Company's stock. If the
option price is less than the market value of the Company's stock on the date of
grant, the discount is recorded as compensation expense over the service period
in accordance with the provisions of APB Opinion No. 25. There was no such
compensation expense in 1997 or 1996. In 1995 such compensation expense amounted
to $1,961.
Under certain circumstances, the stock option plans permit the optionee
the right to receive cash and/or stock at the Company's discretion equal to the
difference between the market value on the date of exercise and the option
price. This difference would be recorded as compensation expense over the
vesting period.
The following pro forma net income and earnings per share information has
been determined as if the Company had accounted for its 1997 and 1996 stock
based compensation awards using the fair value method. Under the fair value
method, the estimated fair value of awards would be charged against income on a
straight-line basis over the vesting period which generally ranges from zero to
three years. The pro forma effect on net income for 1997 and 1996 is not
representative of the pro forma effect on net income in future years since
compensation cost is allocated on a
48
<PAGE>
straight-line basis over the vesting periods of the grants, which extends beyond
the reported years.
- --------------------------------------------------------------------------------
1997 1996
--------------------------- -----------------------------
As Reported Pro Forma As Reported Pro Forma
- --------------------------------------------------------------------------------
Net Income $ 300,047 $ 290,697 $ 283,447 $ 267,953
Earnings Per Share 2.30 2.26 2.11 2.02
================================================================================
The pro forma amounts and fair value of each option grant is estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants in 1997 and 1996: risk
free interest rates of 6.51% and 5.64% in 1997 and 1996, respectively; expected
dividend yields of 1.42% and 1.64% in 1997 and 1996 respectively; expected lives
of 6 years in 1997 and 1996; expected volatility of 18.0% and 19.2% in 1997 and
1996, respectively.
Other Stock Plans
The Company has a compensatory Stock Award Plan which allows for grants of
common shares to certain key employees. Distribution of 25% or more of each
award, as elected by the grantee, is deferred until after retirement or
involuntary termination. Commencing on the first anniversary of a grant, the
remainder is distributable in five equal annual installments. During 1997,
74,270 shares were distributed. No awards were granted in 1997, 1996 or 1995. At
September 30, 1997, 1,384,770 shares were reserved for future issuance, of which
awards for 334,076 shares have been granted.
The Company has a compensatory Restricted Stock Plan for Non-Employee
Directors which reserves for issuance 150,000 shares of the Company's common
stock. Restricted shares of 780, 4,970 and 7,550 were issued in 1997, 1996 and
1995, respectively, in accordance with the provisions of the plan.
In November 1996, in connection with the discontinuation of pension
benefits that otherwise would have been accrued and provided to directors of the
Company, the Company established the 1996 Directors' Deferral Plan. This Plan
allowed members of the Board of Directors to defer receipt of the lump sum
present value of all their accrued and unpaid past service pension benefits as
of December 1, 1996, in the form of shares of the Company's common stock or
cash. In addition, the Plan provides a means to defer director compensation,
from time to time, on a deferred stock or cash basis. As of September 30, 1997,
55,889 shares were held in trust, of which 6,564 shares represented directors'
compensation in 1997, in accordance with the provisions of the Plan. Under the
Plan, which is unfunded, directors have an unsecured contractual commitment from
the Company to pay directors the amounts due to them under the Plan.
- --------------------------------------------------------------------------------
Business Segment Data
- --------------------------------------------------------------------------------
note
13
The Company's operations are composed of two business segments, Medical
Supplies and Devices and Diagnostic Systems. Distribution of products is both
through distributors and directly to hospitals, laboratories and other end
users.
Medical Supplies and Devices
The major products in this segment are hypodermic products, specially designed
devices for diabetes care, prefillable drug delivery systems, infusion therapy
products and elastic support products and thermometers. The Medical Supplies and
Devices segment also includes disposable scrubs, specialty needles and specialty
and surgical blades.
Diagnostic Systems
The major products in this segment are clinical and industrial microbiology
products, sample collection products, flow cytometry systems for cellular
analysis, tissue culture labware, hematology instruments and other diagnostic
systems, including immunodiagnostic test kits.
Sales to a distributor which supplies the Company's products to many end
users accounted for approximately 10% of revenues in 1997, 11% in 1996 and 13%
of revenues in 1995, and were from both the Diagnostic Systems and Medical
Supplies and Devices segments. No other customer accounted for 10% or more of
revenues in each of the three years presented.
The countries in which the Company has local revenue-generating operations
have been combined into the following geographic areas: the United States,
including Puerto Rico; Europe; and Other, which is composed of Canada, Latin
America, Japan and Asia Pacific.
Segment and geographic area operating income represent revenues reduced by
product costs and operating expenses. Unallocated expenses include costs related
to management of corporate assets, foreign exchange and interest expense, net.
Financial information with respect to business segment and geographic data
for the years ended September 30, 1997, 1996 and 1995 is presented on pages 30
and 31 and is considered to be an integral part of the notes to the consolidated
financial statements.
49
<PAGE>
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information." The
Company is required to adopt the provisions of this Statement no later than its
1999 fiscal year. SFAS No. 131 establishes a new method by which companies will
report operating segment information.
This method is based on the manner in which management organizes the segments
within a company for making operating decisions and assessing performance. The
Company continues to evaluate the provisions of SFAS No. 131 and, upon adoption,
different operating segments may be reported by the Company.
================================================================================
Quarterly Data (Unaudited)
Thousands of dollars, except per share amounts
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1997 1st 2nd 3rd 4th Year
----------------------------------------------------------
Revenues $655,799 $699,207 $706,539 $748,978 $2,810,523
Gross Profit 312,667 346,533 353,794 384,218 1,397,212
Net Income 58,108 82,671 70,148 89,147 300,074
Earnings Per Share .44 .63 .54 .69 2.30
- --------------------------------------------------------------------------------
1996 1st 2nd 3rd 4th Year
----------------------------------------------------------
Revenues $639,935 $705,725 $692,945 $731,151 $2,769,756
Gross Profit 291,189 337,016 341,094 371,280 1,340,579
Net Income 44,522 74,790 77,167 86,968 283,447
Earnings Per Share .32 .55 .58 .66 2.11
- --------------------------------------------------------------------------------
50
<PAGE>
COMMON STOCK PRICES AND DIVIDENDS
By Quarter
- -------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------
High Low Dividends High Low Dividends
--------------------------- -----------------------------
First $45 1/2 $37 $.13 $38 $31 1/16 $.11 1/2
Second 51 5/8 42 5/8 .13 44 9/16 36 13/16 .11 1/2
Third 53 1/4 42 3/4 .13 42 3/4 37 7/16 .11 1/2
Fourth 55 5/8 46 3/4 .13 44 7/8 35 3/8 .11 1/2
- -------------------------------------------------------------------------------
CORPORATE DATA
Annual Meeting
2:30 p.m.
Tuesday, February 10, 1998
1 Becton Drive
Franklin Lakes, NJ 07417-1880
Dividend Reinvestment
The Becton Dickinson Dividend Reinvestment Plan offers shareholders an
opportunity to purchase additional shares, commission-free, through automatic
dividend reinvestment and/or optional cash investments. Additional information
may be obtained by writing to First Chicago Trust Company of New York, Dividend
Reinvestment Plan, Becton Dickinson, P.O. Box 2598, Jersey City, NJ 07303-2598.
Direct Stock Purchase Plan
It is anticipated that in February 1998, the Becton Dickinson Dividend
Reinvestment Plan will be replaced by a new direct stock purchase plan
established through First Chicago Trust Company of New York, which will enhance
the services provided to existing shareholders and facilitate initial
investments in Becton Dickinson shares. Participants in the Dividend
Reinvestment Plan and all shareholders of record will be enrolled automatically
in the new plan and will be sent plan materials. Additional information may be
obtained by calling First Chicago Trust Company of New York at 1-800-317-4445.
Shareholder Information
Shareholders may receive, without charge, a copy of the company's 1997 Annual
Report to the Securities and Exchange Commission on Form 10-K by contacting:
Investor Relations
Becton Dickinson and Company
1 Becton Drive
Franklin Lakes, NJ 07417-1880
Phone: 1-800-284-6845
Transfer Agent and Registrar
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, NJ 07303-2500
Phone: 1-800-519-3111
E-mail: [email protected]
Internet: http://www.fctc.com
Independent Auditors
Ernst & Young LLP
433 Hackensack Avenue
Hackensack, NJ 07601-6371
Phone: (201) 343-4095
EVA(R) is a registered trademark of Stern Stewart & Co.
All other trademarks indicated by CAPITAL LETTERS are the property of, licensed
to, promoted or distributed by Becton Dickinson and Company, its subsidiaries or
related companies.
NYSE Symbol BDX
Listed
BDX NYSE
The New York Stock Exchange
<PAGE>
Exhibit 21
----------
SUBSIDIARIES OF BECTON, DICKINSON AND COMPANY
---------------------------------------------
<TABLE>
<CAPTION>
State of Percentage
Jurisdiction of Voting
of Securities
Name of Subsidiary Incorporation Owned
- ------------------ ------------- -----
<S> <C> <C>
1751 Hancock Street Company California 100%(1)
228 Coshocton, Inc. Nevada 100%
Alchem, Inc. Massachusetts 100%(1)
American Agar and Chemical Company California 100%(1)
B-D (Cambridge, U.K.) Ltd. United Kingdom 100%(1)
Bauer & Black, Inc. Delaware 100%
BBL Realty, Inc. Maryland 100%(1)
BD Holding S. de R.L. de C.V. Mexico 100%(1)
Becton, Dickinson A.G. Switzerland 100%(1)
Becton, Dickinson Aktiebolag Sweden 100%(1)
Becton, Dickinson and Company, Ltd. Ireland 100%
Becton, Dickinson B.V. Netherlands 100%
Becton, Dickinson de Mexico, S.A. de C.V. Mexico 100%(1)
Becton, Dickinson France, S.A. France 100%
Becton, Dickinson Warenvertriebs Ges.m.b.H. Austria 100%(1)
Becton, Dickinson GmbH Germany 100%(1)
Becton, Dickinson Industrias Cirurgicas, S.A. Brazil 100%(1)
Becton, Dickinson Italia S.p.A. Italy 100%(1)
Becton, Dickinson U.K. Limited United Kingdom 100%(1)
Becton, Dickinson U.K. Holdings Limited United Kingdom 100%(1)
Becton, Dickinson (Royston) Limited United Kingdom 100%(1)
Becton Dickinson, S.A. Spain 100%(1)
Becton Dickinson (Mauritius) Limited Mauritius 100%(1)
Becton Dickinson (Pty) Ltd. South Africa 100%(1)
Becton Dickinson (Thailand) Limited Thailand 100%(1)
Becton Dickinson AcuteCare, Inc. Massachusetts 100%(1)
Becton Dickinson AcuteCare Holdings, Inc. Delaware 100%
Becton Dickinson Asia Limited Hong Kong 100%(1)
Becton Dickinson Asia Pacific Limited British Virgin Islands 100%
Becton Dickinson Benelux N.V. Belgium 100%(1)
Becton Dickinson Canada Inc. Canada 100%(1)
Becton Dickinson Cellular Imaging Systems B.V. Netherlands 100%(1)
Becton Dickinson Czechia s.r.o. Czech Republic 100%(1)
Becton Dickinson de Colombia Ltda. Colombia 100%(1)
Becton Dickinson del Uruguay S.A. Uruguay 100%(1)
Becton Dickinson Diagnostics Inc. Delaware 100%
Becton Dickinson Distribution Center N.V. Belgium 100%(1)
Becton Dickinson Enterprises Incorporated New Jersey 100%(1)
Becton Dickinson Foreign Sales Corporation Barbados 100%(1)
Becton Dickinson Hellas S.A. Greece 100%(1)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Becton Dickinson Hungary Kft. Hungary 100%(1)
Becton Dickinson India Pvt. Ltd. India 100%(1)
Becton Dickinson Infusion Therapy Systems Inc.,
S.A. de C.V. Mexico 100%(1)
Becton Dickinson Infusion Therapy Systems Inc. Delaware 100%
Becton Dickinson Insulin Syringe, Ltd. Cayman Islands 100%(1)
Becton Dickinson Ithalat Ihracat Ltd. Sirketi Turkey 100%(1)
Becton Dickinson Korea, Inc. Korea 100%
Becton Dickinson Medical (S) Pte Ltd. Singapore 100%(1)
Becton Dickinson Medical Devices Co. Ltd.,Suzhou P.R.C. 90%
Becton Dickinson Medical Products Pte. Ltd. Singapore 100%
Becton Dickinson Monoclonal Center, Inc. Delaware 100%
Becton Dickinson New Zealand New Zealand 100%(1)
Becton Dickinson O.Y. Finland 100%(1)
Becton Dickinson Overseas Services Ltd. Nevada 100%
Becton Dickinson Pen Limited Ireland 100%
Becton Dickinson Penel Limited Cayman Islands 100%(1)
Becton Dickinson Philippines, Inc. Philippines 100%(1)
Becton Dickinson Polska Ltd. Sp. z.o.o. Poland 100%(1)
Becton Dickinson Pty. Ltd. Australia 100%(1)
Becton Dickinson Sdn.Bhd. Malaysia 100%(1)
Becton Dickinson Venezuela, C.A Venezuela 100%(1)
Becton Dickinson Worldwide, Inc. Delaware 100%
Bedins Ltd. Bermuda 100%(1)
Belvedere, Inc. New Hampshire 100%(1)
Benex Ltd. Ireland 100%
Beta - Lab Limited United Kingdom 100%(1)
BMS Realty, Inc. Maryland 100%(1)
Cascade Medical Leasing, Inc. Oregon 100%(1)
Cell Analysis Systems, Inc. Illinois 100%
Collaborative Biomedical Products, Inc. Delaware 100%
Controladora S. de R.L. de C.V Mexico 100%(1)
D.H. Farms Company Michigan 100%(1)
D.L.D., Ltd. Bermuda 100%(1)
D.L.D. Company Delaware 100%(1)
Dantor S.A. Uruguay 100%(1)
Difco Laboratories GmbH Germany 100%(1)
Difco Laboratories Incorporated Michigan 100%
Difco Laboratories Incorporated U.S. Virgin Islands 100%(1)
Difco Laboratories Incorporated Wisconsin 100%(1)
Difco Laboratories Limited United Kingdom 100%(1)
Difco Microbiology Systems, Inc. Michigan 100%(1)
Digestive Ferments Company Michigan 100%(1)
DWS, Inc. Oregon 100%
EPV S.A. de C.V. Mexico 100%(1)
JLI Leasing, Inc. Maryland 100%(1)
Johnston Ferguson Vestal, Inc. Maryland 100%
Johnston Laboratories, Inc. Maryland 100%
Laboratorios Difco,Ltda. Brazil 60%(1)
Lee Laboratories Inc. Georgia 100%(1)
Med-Safe Systems, Inc. California 100%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
MICROPETTE, Inc. Delaware 100%
Nippon Becton Dickinson Company, Ltd. Japan 100%(1)
Pasco Laboratories Inc. Colorado 100%(1)
PharMingen California 100%
PharMingen Canada Inc. Canada 100%(1)
PharMingen Deutschland GmbH Germany 100%(1)
PharMingen SPC California 100%(1)
Phase Medical, Inc. California 100%(1)
Promedicor de Mexico, S.A. de C.V. Mexico 100%(1)
Rindanor BD Sociodad Anomina Uruguay Uruguay 100%(1)
Southeastern Animal Resources, Inc. Georgia 100%(1)
Visitek Limited United Kingdom 100%(1)
</TABLE>
(1) owned by a wholly-owned subsidiary of Becton, Dickinson and Company.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement Nos.
33-22871, 33-23055, 33-33791, 33-40787, 33-53375, 33-58367, 33-64115, 333-11885
and 333-16091 on Form S-8, and Registration Statement Nos. 333-23559 and 333-
38193 on Form S-3 of Becton, Dickinson and Company and the related Prospectuses
of our report dated November 6, 1997, with respect to the consolidated
financial statements and schedule of Becton, Dickinson and Company included in
this Annual Report (Form 10-K) for the year ended September 30, 1997.
/s/ Ernst & Young LLP
------------------------------
Ernst & Young LLP
Hackensack, New Jersey
December 12, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Company's Consolidated Financial Statements for the twelve months ended
September 30, 1997, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 112,639
<SECURITIES> 28,316
<RECEIVABLES> 624,418
<ALLOWANCES> 28,733
<INVENTORY> 438,337
<CURRENT-ASSETS> 1,312,609
<PP&E> 2,549,828
<DEPRECIATION> 1,299,123
<TOTAL-ASSETS> 3,080,252
<CURRENT-LIABILITIES> 678,197
<BONDS> 665,449
0
51,111
<COMMON> 167,245
<OTHER-SE> 1,167,077
<TOTAL-LIABILITY-AND-EQUITY> 3,080,252
<SALES> 2,810,523
<TOTAL-REVENUES> 2,810,523
<CGS> 1,413,311
<TOTAL-COSTS> 1,413,311
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,289
<INTEREST-EXPENSE> 51,134
<INCOME-PRETAX> 422,640
<INCOME-TAX> 122,566
<INCOME-CONTINUING> 300,074
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 300,074
<EPS-PRIMARY> 2.30
<EPS-DILUTED> 2.27
</TABLE>
