<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
--------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------- ------------
Commission file number 1-4802
--------
Becton, Dickinson and Company
---------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-0760120
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Becton Drive Franklin Lakes, New Jersey 07417-1880
------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(201) 847-6800
------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X. No ____.
-
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class of Common Stock Shares Outstanding as of July 31, 1998
--------------------- --------------------------------------
Common stock, par value $1.00 123,616,042
<PAGE>
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements.
---------------------
Condensed Consolidated Balance Sheets at June 30, 1998 and September
30, 1997
Condensed Consolidated Statements of Operations for the three and nine
months ended June 30, 1998 and 1997
Condensed Consolidated Statements of Cash Flows for the nine months
ended June 30, 1998 and 1997
Notes to Condensed Consolidated Financial Statements
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
<TABLE>
<CAPTION>
June 30, September 30,
Assets 1998 1997
------------------ ----------------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $ 103,422 $ 112,639
Short-term investments 21,160 28,316
Trade receivables, net 677,468 595,685
Inventories (Note 2):
Materials 113,782 92,307
Work in process 89,567 79,519
Finished products 311,804 266,511
------------------ ----------------------
515,153 438,337
Prepaid expenses, deferred taxes and other 172,228 137,632
------------------ ----------------------
Total Current Assets 1,489,431 1,312,609
Property, plant and equipment 2,669,296 2,549,828
Less allowances for depreciation and amortization 1,400,171 1,299,123
------------------ ----------------------
1,269,125 1,250,705
Goodwill, Net 572,244 164,097
Other Intangibles, Net 157,851 167,847
Other 226,583 184,994
------------------ ----------------------
Total Assets $ 3,715,234 $ 3,080,252
================== ======================
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 446,863 $ 132,440
Payables and accrued expenses 631,430 545,757
------------------ ----------------------
Total Current Liabilities 1,078,293 678,197
Long-Term Debt 765,928 665,449
Long-Term Employee Benefit Obligations 329,202 306,514
Deferred Income Taxes and Other 61,866 44,659
Commitments and Contingencies - -
Shareholders' Equity:
Preferred stock 49,458 51,111
Common stock 166,331 167,245
Capital in excess of par value 137,264 83,422
Cumulative currency translation adjustments (120,350) (86,870)
Retained earnings 2,298,007 2,249,463
Unearned ESOP compensation (28,840) (28,620)
Shares in treasury - at cost (1,021,925) (1,050,318)
------------------ ----------------------
Total Shareholders' Equity 1,479,945 1,385,433
------------------ ----------------------
Total Liabilities and Shareholders' Equity $ 3,715,234 $ 3,080,252
================== ======================
</TABLE>
See notes to condensed consolidated financial statements
3
<PAGE>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Thousands of Dollars, Except Per Share Data
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------------------- ----------------------------------
1998 1997 1998 1997
--------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 833,561 $ 706,539 $ 2,273,634 $ 2,061,545
Cost of products sold 419,007 352,745 1,137,890 1,048,551
Selling and administrative 234,418 191,106 619,575 563,090
Research and development 80,859 57,551 169,285 136,618
Special charges 90,945 - 90,945 -
------------- ------------- -------------- --------------
Total Operating Costs and Expenses 825,229 601,402 2,017,695 1,748,259
------------- ------------- -------------- --------------
Operating Income 8,332 105,137 255,939 313,286
Interest expense, net (17,526) (10,116) (39,194) (28,126)
Other (expense) income, net (1,815) 3,779 (7,112) 11,920
------------- ------------- -------------- --------------
Income (Loss) Before Income Taxes (11,009) 98,800 209,633 297,080
Income tax provision (benefit) (1,024) 28,652 62,962 86,153
------------- ------------- -------------- --------------
Net Income (Loss) $ (9,985) $ 70,148 $ 146,671 $ 210,927
============= ============= ============== ==============
Earnings (Loss) Per Share:
Basic $ (.09) $ .57 $ 1.18 $ 1.70
============= ============= ============== ==============
Diluted $ (.09) $ .54 $ 1.12 $ 1.62
============= ============= ============== ==============
Dividends Per Common Share $ .145 $ .13 $ .435 $ .39
============= ============= ============== ==============
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
------------------------------------------------
1998 1997
------------------ ----------------------
<S> <C> <C>
Operating Activities:
Net income $ 146,671 $ 210,927
Adjustments to Net Income to Derive Net Cash
Provided by Operating Activities:
Depreciation and amortization 168,889 154,175
Non-cash special charges 59,308 -
Purchased in-process research and development 30,000 14,750
Change in working capital (74,715) (76,500)
Other, net 30,901 12,885
------------------ ----------------------
Net Cash Provided by Operating Activities 361,054 316,237
------------------ ----------------------
Investing Activities:
Capital expenditures (138,768) (109,411)
Acquisitions of businesses, net of cash acquired (520,768) (187,101)
Proceeds from divestitures of businesses - 24,343
Payment received on note receivable - 4,549
Change in investments, net (5,138) 22,323
Other, net (48,907) (40,870)
------------------ ----------------------
Net Cash Used for Investing Activities (713,581) (286,167)
------------------ ----------------------
Financing Activities:
Change in short-term debt 413,263 145,264
Proceeds of long-term debt - 97,838
Payments of long-term debt (2,524) (117,473)
Issuance of common stock 37,593 26,935
Repurchase of common stock (44,476) (139,230)
Dividends paid (56,523) (51,217)
------------------ ----------------------
Net Cash Provided by(Used for) Financing Activities 347,333 (37,883)
------------------ ----------------------
Effect of exchange rate changes on cash and equivalents (4,023) (6,336)
------------------ ----------------------
Net decrease in cash and equivalents (9,217) (14,149)
Opening Cash and Equivalents 112,639 135,151
------------------ ----------------------
Closing Cash and Equivalents $ 103,422 $ 121,002
================== ======================
</TABLE>
5
<PAGE>
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Amounts in Thousands, Except Per Share Data
June 30, 1998
Note 1 - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion of
the management of the Company, include all adjustments, which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However,
the financial statements do not include all information and footnotes required
for a presentation in accordance with generally accepted accounting principles.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included or
incorporated by reference in the Company's 1997 Annual Report on Form 10-K. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year.
Note 2 - Inventory Valuation
- ----------------------------
An actual valuation of inventory under the LIFO method can be made only at the
end of each fiscal year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management's estimates of
expected year-end inventory levels and costs.
Note 3 - Acquisition of Business
- --------------------------------
In April 1998, the Company completed its acquisition of the Medical Devices
Division ("MDD") of The BOC Group, for approximately $452,000 in cash, subject
to certain post-closing adjustments. The acquisition was recorded under the
purchase method of accounting and, accordingly, MDD's results of operations for
the post-acquisition period have been included in the accompanying consolidated
financial statements. The Company recorded approximately $360,000 in goodwill,
reflecting the allocation of the purchase price to assets acquired and
liabilities assumed based on estimated fair values. In connection with this
acquisition, certain research and development projects acquired were determined
not to have reached technological feasibility. Accordingly, a charge of $30,000
for purchased in-process research and development was included in the third
quarter results. The Company's results for the current quarter also included
approximately $15,000 in charges associated with the integration of this
business.
6
<PAGE>
Note 4 - Restructuring and Other Charges
- ----------------------------------------
During the third quarter of fiscal year 1998, the Company recorded special
charges of $90,945 primarily associated with the restructuring of certain
manufacturing operations and the write-down of impaired assets.
The third quarter results also included approximately $11,000 of reengineering
charges associated with the enterprise-wide program to upgrade the Company's
business systems. The majority of these charges were included in selling and
administrative expense. This program will develop a platform of common business
practices for the Company and will coordinate the installation of a global
software system to provide more efficient access to worldwide business
information.
Note 5 - Subsequent Events
- --------------------------
On July 28, 1998, the Board of Directors authorized a two-for-one common stock
split, payable on August 20, 1998, to shareholders of record on August 10, 1998.
The Board of Directors also approved an increase in the authorized common stock
from 320,000 shares to 640,000 shares in connection with the stock split. Par
value will remain at $1.00 per common share.
On July 29, 1998, the Company issued $200,000 of 6.70% Debentures maturing on
August 1, 2028 with an effective yield of 7.08%, including the effects of an
interest rate hedge and other financing costs. Interest on the Debentures is
payable on February 1 and August 1, beginning February 1, 1999. The Debentures
are not redeemable prior to maturity and will not be entitled to any sinking
fund. The Company used the net proceeds to repay a portion of its outstanding
commercial paper.
7
<PAGE>
Note 6 - Earnings (Loss) per Share
- ----------------------------------
In 1998, the Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share". All share and per share data
for all periods have been presented and, where necessary, restated to conform to
the SFAS No. 128 requirements. The reconciliation between the calculation of
basic and diluted earnings (loss) per share follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------- ----------------------
1998 1997 1998 1997
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Net income (loss) $ (9,985) $ 70,148 $146,671 $210,927
Preferred stock dividends (803) (850) (2,437) (2,549)
--------- --------- --------- ---------
Income (loss) applicable to
common shareholders (A) (10,788) 69,298 144,234 208,378
Preferred stock dividends - using
"if converted" method - 850 2,437 2,549
Additional ESOP contribution -
using "if converted" method - (287) (749) (855)
--------- --------- --------- ---------
Income (loss) applicable to common
shareholders after assumed conversions (B) $(10,788) $ 69,861 $145,922 $210,072
========= ========= ========= =========
Average common shares outstanding (C) 123,302 122,206 122,527 122,724
Dilutive stock equivalents from stock plans - 4,845 5,133 4,420
Shares issuable upon conversion of
preferred stock - 2,796 2,682 2,796
--------- --------- --------- ---------
Average common and common equivalent
shares outstanding - assuming dilution (D) 123,302 129,847 130,342 129,940
========= ========= ========= =========
Basic earnings (loss) per share (A/C) $ ( .09) $ .57 $ 1.18 $ 1.70
========= ========= ========= =========
Diluted earnings (loss) per share (B/D) $ ( .09) $ .54 $ 1.12 $ 1.62
========= ========= ========= =========
</TABLE>
In accordance with SFAS No. 128 requirements, the dilutive effect of potential
common shares is not included in the computation of diluted per share amounts
when a loss from continuing operations is reported. Accordingly, reported basic
and diluted per share amounts are the same for the third quarter of fiscal year
1998.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations.
--------------
Results of Operations
- ---------------------
Third Quarter 1998 vs. Third Quarter 1997
- -----------------------------------------
Third quarter revenues of $834 million exceeded prior year revenues by 18%.
Revenue growth for the quarter was unfavorably affected by the strengthened
dollar versus the prior year, which reduced revenues by an estimated $17
million. Excluding the estimated impact of foreign currency translation,
revenue growth would have been approximately 20%. Medical Supplies and Devices
segment ("Medical") revenues of $474 million increased 24%, or 26% after
excluding the estimated impact of unfavorable foreign currency translation. The
acquisition of MDD in April 1998, discussed in Note 3 to the Condensed
Consolidated Financial Statements ("Financial Statements"), added approximately
$40 million to Medical revenues for the quarter. Diagnostic Systems segment
("Diagnostic") revenues of $359 million increased 11%. Adjusting for the
estimated impact of unfavorable foreign currency translation, Diagnostic
revenues would have increased approximately 14%.
Domestic Medical revenues of $235 million increased 20%. International Medical
revenues of $239 million increased 28% primarily due to the acquisition in the
current quarter, or 32% after excluding the estimated impact of unfavorable
foreign currency translation. Strong growth rates were experienced by all of
the major Medical businesses.
Domestic Diagnostic revenues of $207 million increased 14%, aided by prior year
acquisitions. International Diagnostic revenues of $153 million increased 7%,
but would have increased 14% after excluding the estimated effect of unfavorable
foreign currency translation. All of the Diagnostic businesses reported good
growth rates.
Excluding the effect of the current quarter's acquisition, the reported gross
profit margin of 49.7% would have been almost a full percentage point higher
than in the prior year. This improvement in the gross profit margin, excluding
the acquisition, over last year's third quarter rate of 50.1% reflects a more
profitable mix of products sold as well as continuing productivity improvements.
Selling and administrative expense was $234 million, or 28.1% of revenues.
Excluding the effects of the reengineering charges discussed in Note 4 to the
Financial Statements and of the acquisition in the current quarter, selling and
administrative expense would have been 26.2% of revenues, compared with last
year's third quarter ratio of 27.0%.
Investment of $81 million in research and development, which included a charge
of $30 million for purchased in-process research and development as described in
Note 3 to the Financial Statements, increased 41% over last year's third
quarter amount of $58 million. The prior year's amount also included a charge
of $15 million for purchased in-process research and development
9
<PAGE>
associated with two acquisitions completed during the third quarter of fiscal
year 1997. Excluding the effect of purchased in-process research and development
in both years, investment in research and development increased 19%, primarily
reflecting the continuation of strategic investments in support of the Company's
key businesses.
During the third quarter of fiscal year 1998, the Company recorded special
charges of $91 million primarily associated with the restructuring of certain
manufacturing operations and the write-down of impaired assets. Implementation
of the restructuring plan is expected to be completed by the end of 1999.
Operating income of $8 million decreased from last year's third quarter amount
of $105 million. Excluding the impact in the current quarter of the acquisition
and the restructuring and other charges, referenced in Notes 3 and 4 to the
Financial Statements, respectively, operating margin would have been 18.7%,
compared to last year's third quarter operating margin of 17.0%, adjusted to
exclude purchased in-process research and development. This improvement reflects
an improved gross profit margin as well as a lower selling and administrative
expense ratio.
Net interest expense of $18 million was about $7 million higher than last year
primarily due to additional borrowings to fund recent acquisitions. Other
(expense) income, net decreased $6 million from last year, primarily due to the
absence in the current quarter of one-time gains which occurred in the prior
year.
Excluding the impact of the acquisition and the restructuring and other charges
discussed in Notes 3 and 4 to the Financial Statements, respectively, the third
quarter income tax rate was 29%, consistent with last year's rate. The expected
rate for the full year is 29%, excluding the impact of the acquisition and the
charges.
The Company reported a pretax loss for the quarter of $11 million, which
included the unfavorable impact of $147 million associated with the acquisition
of MDD, and restructuring and other charges referenced in Notes 3 and 4 to the
Financial Statements, respectively. The Company reported a net loss in the
current quarter of $10 million compared with net income of $70 million a year
ago. After adjusting for the effects of the acquisition and the charges
discussed above, net income would have increased 13%. Earnings (loss) per share
were $(.09) compared with last year's $.54 on a diluted basis. After adjusting
for the effects of the acquisition and the charges discussed above, diluted
earnings per share would have been $.73.
Nine Months 1998 vs. Nine Months 1997
- -------------------------------------
Revenues of $2.274 billion were 10% higher than last year's revenues of $2.062
billion. After adjusting for the estimated effect of unfavorable foreign
currency translation, revenues would have increased approximately 14%. Aided by
current year acquisitions, Medical revenues of $1.231 billion increased 11%, or
14% after adjusting for the estimated impact of unfavorable foreign currency
translation. Diagnostic revenues of $1.043 billion increased 9% primarily due
to the full year impact of prior year acquisitions, or 13% after adjusting for
the effect of unfavorable foreign currency translation. Domestic revenues of
$1.232 billion increased 15%, also aided
10
<PAGE>
by the full year impact of prior year acquisitions. International revenues of
$1.041 billion increased 5%, or 12% after excluding the estimated impact of
foreign currency translation, primarily due to the current year acquisition of
MDD.
The gross profit margin of 50.0% was almost a full percentage point higher than
last year's rate of 49.1%. Selling and administrative expense was 27.3% of
revenues. Excluding the impact of the reengineering charges discussed in Note 4
to the Financial Statements and the acquisition of MDD in the third quarter,
selling and administrative expense would have been 26.6%, lower than last year's
rate of 27.3%. Research and development spending of $169 million, which included
$30 million of purchased in-process research and development in the third
quarter, increased 24% over last year's amount of $137 million. The prior year's
amount also included a charge of $15 million for purchased in-process research
and development. Excluding the effect of purchased in-process research and
development in both years, investment in research and development increased 14%.
Operating income of $256 million decreased 18% over the same period last year.
Excluding the impact in the current year of the acquisition and the
restructuring and other charges, referenced in Notes 3 and 4 to the Financial
Statements, respectively, operating margin would have been 17.7%. The prior
year's operating margin would have been 15.9% excluding purchased in-process
research and development. The reasons for these changes are consistent with
those previously discussed in the Third Quarter Results of Operations.
Other (expense) income, net declined $19 million compared with last year,
principally due to higher foreign exchange losses and the absence of one-time
gains which occurred in the prior year.
Net income was $147 million, including the $106 million unfavorable impact of
the acquisition of MDD and the restructuring and other charges discussed in
Notes 3 and 4 to the Financial Statements, respectively, compared with $211
million last year. Diluted earnings per share of $1.12 reflect an $.81 impact
for these items.
Financial Condition
- -------------------
During the first nine months of 1998, cash provided by operations was $361
million, compared with $316 million during the first nine months of last year.
Capital expenditures during the first nine months were $139 million compared
with $109 million during the first nine months of last year. For the full year,
capital expenditures are expected to be approximately $200 million. In the
first quarter, the Company acquired a manufacturer of ophthalmic surgical and
anesthesia products for $40 million in cash. In the second quarter, the
Company acquired the IntelliCode Intelligent Bar Coding Systems division of
MedPlus, Inc. and Tru-Fit Marketing Corporation for an aggregate of $25 million
in cash and up to 297,760 shares of the Company's common stock, subject to
certain post-closing adjustments. In the third quarter, the Company completed
its acquisition of MDD for approximately $452 million in cash, as described in
Note 3 to the Financial Statements.
During the first nine months of 1998, total debt increased to $1.213 billion
from $798 million principally as a result of the financing for the acquisition
in the third quarter. As of June 30, 1998, total debt represented 44.6% of
total capital (shareholders' equity, net non-current
11
<PAGE>
deferred income tax liabilities, and debt) compared with 37.5% a year ago. In
July 1998, the Company issued $200 million of 6.70% Debentures maturing on
August 1, 2028, as further discussed in Note 5 to the Financial Statements. The
net proceeds of this issuance were used to repay a portion of the Company's
outstanding commercial paper. Because of its strong credit rating, the Company
believes it has the capacity to arrange significant additional borrowings should
the need arise.
During the first nine months of 1998, the Company repurchased 913,500 shares of
its common stock for a total expenditure of $44 million. At June 30, 1998,
authorization from the Board of Directors remained in effect to reacquire up to
an additional 10.6 million shares, although the Company expects to limit its
share repurchases for the balance of the year.
At its July 1998 meeting, the Board of Directors authorized a two-for-one stock
split and a related increase in the authorized common stock, as further
discussed in Note 5 to the Financial Statements.
The Company is currently implementing corrective courses of action needed to
prepare its computer systems for the year 2000. The Company expects to spend
approximately $6 million to $10 million to modify and replace its existing
computer software to ensure proper transaction processing in the year 2000 and
beyond. A portion of these costs will represent the redeployment of existing
internal resources and, therefore, are not expected to be incremental. The
Company will expense the costs to modify existing systems and will capitalize
the costs to replace software that is not Year 2000 compliant. The amounts
expensed to date have been immaterial and the costs of the Year 2000 project to
be incurred over the next eighteen months are not expected to have a material
effect on the Company's results of operations or financial position. A
comprehensive evaluation of the impact of the Year 2000 issue on both the
Company's infrastructure and its interface with suppliers, distributors and
customers has been initiated and is expected to be completed in fiscal year
1998. The Company expects its remediation program to be substantially completed
by the middle of 1999. The Company's plans to complete its Year 2000 remediation
work are based on management's best estimate, considering certain assumptions
about future events, including the availability of certain resources, third-
party remediation plans and other factors. The Year 2000 issue presents far-
reaching implications, some of which cannot be anticipated with any degree of
certainty. The Company is actively soliciting statements of compliance from
other entities with which it conducts business to determine and minimize the
extent of its vulnerability to third parties failing to remediate their own Year
2000 issues on a timely basis. There can be no guarantee, however, that the
systems of these other entities will be ready on a timely basis or that any
failure in Year 2000 readiness by another entity would not have an adverse
effect on the Company's systems. The Company currently is defining and
evaluating alternative contingency measures to address issues of non-
preparedness so as to avoid any potential disruptions.
In the second quarter of fiscal year 1998, the Board of Directors approved an
enterprise-wide systems initiative. This project will develop a platform of
common business practices for the Company and will coordinate the installation
of a global software system to provide more efficient access to worldwide
business information. The initiative is expected to cost $160 million over the
next seven years.
12
<PAGE>
On January 1, 1999, the eleven member countries of the European Union will begin
the transition to a common currency, the "euro". These participating countries
expect the euro transition to be completed by July 1, 2002. The Company expects
to have the system modifications necessary to accommodate euro denominated
transactions by the end of fiscal year 1998. The Company is currently
evaluating the impact of the euro conversion on market risk and price
competition. The Company does not expect this conversion to have a material
impact on its results of operations, financial condition or cash flows.
The Company, along with a number of other manufacturers, has been named as a
defendant in 161 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 analogous
procedures have been implemented in the state courts of California, Pennsylvania
and New Jersey. 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.
This interim report on Form 10-Q contains certain forward looking statements
(as defined under Federal securities laws) regarding the Company's performance,
including 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,
year 2000 issues, and changes in health care or other governmental regulation,
as well as other factors discussed herein and in other of the Company's filings
with the Securities and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
-----------------------------------------------------------
There have been no material changes in information reported since the
fiscal year ended September 30, 1997.
13
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
-----------------
On October 10, 1997, the New Jersey Department of Environmental
Protection ("NJDEP") filed three Notices of Civil Administrative Penalty
Assessment against the Company relating to the Company's previously
owned Ivers-Lee division. The NJDEP alleged operating exceedences on
certain air pollution control equipment, failure to submit required
emission reports, and excess usage of certain printing materials, and
sought civil administrative penalties totaling $461,200.00. In June
1998, the Company entered into a Consent Order with NJDEP for a full and
final settlement of these matters with a payment of a $345,000.00
penalty, without an admission of liability.
In addition, 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 also is 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 2. Changes in Securities and Use of Proceeds.
------------------------------------------
Pursuant to the terms of the Agreement and Plan of Merger dated
January 9, 1998 (the "Merger Agreement") entered into by the Company in
connection with its acquisition of Tru-Fit Marketing Corporation, a
Massachusetts corporation ("Tru-Fit"), in this quarter the former
shareholders of Tru-Fit received an additional 12,406 shares of the
Company's common stock, par value $1.00 per share ("Common Stock").
Pursuant to the terms of the Merger Agreement, the former Tru-Fit
shareholders may receive up to an additional 37,220 shares of Common
Stock, pending resolution of potential post-closing adjustments and
indemnification claims to the merger consideration paid under the Merger
Agreement.
The Common Stock issued to the former shareholders of Tru-Fit was
offered and sold pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), for transactions not involving a public offering of securities.
In connection with the offer and sale, the Company relied upon the fact
that the offering was made to only two offerees (the former shareholders
of Tru-Fit) and did not involve any general advertising or solicitation,
the offerees were sophisticated investors, the size of the offering was
small in relation to the Company's market capitalization,
14
<PAGE>
and the Company had taken reasonable steps to prevent resale of the
Common Stock by the former shareholders of Tru-Fit in violation of the
Securities Act.
Item 3. Defaults Upon Senior Securities.
--------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
Not applicable.
Item 5. Other Information.
------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits
3(a)(i) - Restated Certificate of Incorporation
3(a)(ii) - Amendment to the Restated Certificate of
Incorporation, as of August 5, 1996.
3(a)(iii) - Amendment to the Restated Certificate of
Incorporation, as of August 10, 1998.
3(b) - By-Laws, as amended February 10, 1998.
27.1 - Financial Data Schedule.
27.2 - Restated Financial Data Schedule.
b) Reports on Form 8-K
During the three-month period ending June 30, 1998,
the Company filed two Current Reports on Form 8-K
under Item 5 -Other Events:
(i) In a report dated April 3, 1998, the Company
announced the consummation of the acquisition of
the Medical Devices Division of Ohmeda, the
health care business of The BOC Group, Inc.
(ii) In a report dated May 21, 1998, the Company
announced that its Board of Directors had
approved a plan to restructure certain
manufacturing and administrative activities.
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Becton, Dickinson and Company
-----------------------------
(Registrant)
Date August 13, 1998
------------------
/s/ Kenneth R. Weisshaar
---------------------------------
Kenneth R. Weisshaar
Senior Vice President - Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)
16
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Description Method of Filing
- -------------- ----------------- ----------------
3(a)(i) Restated Incorporated by reference
Certificate of to Exhibit 3(a) to the
Incorporation registrant's Annual Report
on Form 10-K for the fiscal
year ended September 30, 1990
3(a)(ii) Amendment to the Incorporated by reference
Restated Certificate to Exhibit 3(a) to the
of Incorporation, registrant's Quarterly Report
as of August 5, 1996 on Form 10-Q for the period
ended June 30, 1996
3(a)(iii) Amendment to the Filed with
Restated Certificate this report
of Incorporation,
as of August 10, 1998
3(b) By-Laws, as amended Incorporated by reference to
February 10, 1998 Exhibit 3(ii) to the registrant's
Quarterly Report on Form 10-Q for
the quarter ended March 31, 1998
27.1 Financial Data Schedule Filed with
this report
27.2 Restated Financial Data Filed with
Schedule this report
17
<PAGE>
EXHIBIT 3(a)(iii)
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
BECTON, DICKINSON AND COMPANY
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:7-15.1(3), 14A:9-2(2) and 14A:9-
4(2) of the New Jersey Business Corporation Act, Becton, Dickinson and Company,
a corporation organized under the laws of the State of New Jersey (the
"Corporation"), executes the following Certificate of Amendment to its Restated
Certificate of Incorporation:
1. The name of the corporation is Becton, Dickinson and Company.
2. The following amendment to the Restated Certificate of Incorporation of
the Corporation (the "Amendment") was approved and duly adopted by the Board of
Directors of the Corporation on the 28th day of July, 1998 to be effective as
provided therein.
"The authorized Common Stock of the Company shall be increased from
320,000,000 shares to 640,000,000 shares and, in connection therewith, the
Restated Certificate of Incorporation of the Company, first sentence of Article
IV, is hereby amended in its entirety, effective at the close of business on
August 10, 1998, to read as follows:
The Corporation is authorized to issue 640,000,000 shares of Common Stock
of a par value of $1.00 per share (the "Common Stock") and 5,000,000 shares
of Preferred Stock of a par value of $1.00 per share (the "Preferred
Stock"), in such series and with such rights, preferences and limitations,
including voting rights, as the Board of Directors may determine."
<PAGE>
3. The Amendment will not adversely affect the rights or preferences of
the holders of outstanding shares of any class or series of stock of the
Corporation and will not result in the percentage of authorized shares that
remains unissued after the share division exceeding the percentage of authorized
shares that were unissued before the share division.
4. On the effective date of the Amendment, (i) each share of Common Stock
of the Corporation which was issued and outstanding or held in Treasury as of
the effective date shall be divided into two fully-paid and non-assessable
shares of Common Stock, par value $1.00 per share, and (ii) each share of Common
Stock allocated to the Corporation's reserves for issuance under its stock
award, restricted stock and stock option plans or otherwise shall be divided
into two shares of Common Stock, par value $1.00 per share.
5. The Amendment and the division of shares of Common Stock of the
Corporation shall become effective at the close of business on the 10th day of
August, 1998.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its Vice President and Secretary on the 28th day of July, 1998.
BECTON, DICKINSON AND COMPANY
By:/s/ Bridget M. Healy
---------------------
Bridget M. Healy
Vice President and Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 103422
<SECURITIES> 21160
<RECEIVABLES> 677468
<ALLOWANCES> 0<F1>
<INVENTORY> 515153
<CURRENT-ASSETS> 1489431
<PP&E> 2669296
<DEPRECIATION> 1400171
<TOTAL-ASSETS> 3715234
<CURRENT-LIABILITIES> 1078293
<BONDS> 765928
<COMMON> 166331
0
49458
<OTHER-SE> 1264156
<TOTAL-LIABILITY-AND-EQUITY> 3715234
<SALES> 2273634
<TOTAL-REVENUES> 2273634
<CGS> 1137890
<TOTAL-COSTS> 1137890
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 46293
<INCOME-PRETAX> 209633
<INCOME-TAX> 62962
<INCOME-CONTINUING> 146671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 146671
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.12
<FN>
<F1>THESE ITEMS ARE CONSOLIDATED ONLY AT YEAR-END
</FN>
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 121002
<SECURITIES> 24796
<RECEIVABLES> 580214
<ALLOWANCES> 0<F1>
<INVENTORY> 444723
<CURRENT-ASSETS> 1307988
<PP&E> 2529726
<DEPRECIATION> 1285439
<TOTAL-ASSETS> 3037983
<CURRENT-LIABILITIES> 849274
<BONDS> 472937
<COMMON> 167455
0
51550
<OTHER-SE> 1123274
<TOTAL-LIABILITY-AND-EQUITY> 3037983
<SALES> 2061545
<TOTAL-REVENUES> 2061545
<CGS> 1048551
<TOTAL-COSTS> 1048551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 37001
<INCOME-PRETAX> 297080
<INCOME-TAX> 86153
<INCOME-CONTINUING> 210927
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 210927
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.62
<FN>
<F1>THESE ITEMS ARE CONSOLIDATED ONLY AT YEAR-END
</FN>
</TABLE>
