<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 16, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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, 1998 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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1 BECTON DRIVE 07417-1880
FRANKLIN LAKES, NEW JERSEY (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
(201) 847-6800
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
<S> <C>
Common Stock, Par Value $1.00 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
</TABLE>
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, 1998, 248,183,293 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 $10,512,801,743.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's Annual Report to Shareholders for the
fiscal year ended September 30, 1998 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 9, 1999 are incorporated by reference into
Part III hereof.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
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 the Company's performance, including future
revenues, products and income and events or developments that the Company
expects to occur or anticipates occurring in the future. All such statements
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 practices or regulation, as well as other factors discussed
herein and in other Company 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 44-45 of the Company's Annual Report to Shareholders for the fiscal
year ended September 30, 1998 (the "1998 Annual Report"), and is incorporated
herein by reference as part of Exhibit 13.
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, 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 (including
reagents for cellular analysis), tissue culture labware, hematology
instruments and other diagnostic systems, including immunodiagnostic test
kits.
3
<PAGE>
ACQUISITION OF BUSINESSES
In December 1997, the Company acquired Visitec, a manufacturer of opthalmic
surgical products. In January 1998, the Company acquired the IntelliCode
Intelligent Bar Coding Systems division of MedPlus, Inc., a producer of
electronic bar coding products. In February 1998, the Company acquired Tru-Fit
Marketing Corporation, a manufacturer of sports health care products. In April
1998, the Company acquired the Medical Devices Division ("MDD"), a leading
European marketer of intravenous catheters for infusion therapy, from The BOC
Group. Also, in May 1998, the Company acquired Concepts in Healthcare, Inc.
which provides consulting services to the healthcare industry. In September
1998, the Company acquired Boin Medica Co., Ltd., a Korean manufacturer of
medical devices, including hypodermic products. The operating results of these
businesses, from their respective dates of acquisition, are reflected in the
Consolidated Financial Statements incorporated herein by reference as part of
Exhibit 13.
In addition, in October 1998, the Company acquired MDI Instruments, Inc., a
company with patented electronic devices for the detection of ear fluids and
infections, and in December 1998, the Company acquired Glentech, Inc., a
reagent developer and manufacturer of cell biology products.
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 Brazil, China, France, Germany, India,
Ireland, Japan, Korea, Mexico, Pakistan, Singapore, Spain, Sweden and the
United Kingdom, and construction of a hypodermic syringe manufacturing
facility in India is scheduled for completion in December 1998.
Foreign economic conditions and exchange rate fluctuations have caused the
profitability from foreign revenues to fluctuate more than the 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 11% of total Company revenues in fiscal
1998, 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, at Becton Dickinson Technologies 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 $217,900,000 on
research and development during the fiscal year ended September 30, 1998, and
$180,626,000 and $154,220,000, respectively, during the two immediately
preceding fiscal years. Research and development spending in fiscal years 1998
and 1997 included the write-off of acquired in-process research and
development of $30,000,000 and $14,750,000, respectively.
4
<PAGE>
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, technology, trade secrets, know-how and trademarks in the
United States and other countries. The Company is also licensed under domestic
and foreign patents, patent applications, technology, 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, technology,
trademark, intellectual property asset or 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, 1998, the Company had approximately 21,700 employees, of
whom approximately 10,100 were employed in the United States. The Company
believes that its employee relations are satisfactory.
5
<PAGE>
ITEM 2. PROPERTIES.
The executive offices of the Company are located in Franklin Lakes, New
Jersey. The Company owns and leases approximately 11,903,445 square feet of
manufacturing, warehousing, administrative and research facilities throughout
the world. The domestic facilities, including Puerto Rico, comprise
approximately 5,462,325 square feet of owned and 1,664,576 square feet of
leased space. The foreign facilities comprise approximately 3,379,136 square
feet of owned and 1,397,408 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, Florida, Georgia, Illinois, Indiana, Louisiana, Maryland,
Massachusetts, Michigan, Missouri, Nebraska, New Hampshire, New Jersey, New
York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas,
Utah, Virginia, Wisconsin, and Puerto Rico.
The foreign facilities are grouped as follows:
--Canada includes approximately 68,930 square feet of leased space.
--Europe and Eastern Europe, Middle East and Africa includes facilities in
Austria, Belgium, the Czech Republic, Denmark, England, Finland, France,
Germany, Greece, Hungary, Ireland, Italy, Kenya, the Netherlands, Poland,
Russia, Saudi Arabia, South Africa, Spain, Sweden, Switzerland, Turkey, and
the United Arab Emirates and is comprised of approximately 1,420,000 square
feet of owned and 775,330 square feet of leased space.
--Latin America includes facilities in Argentina, Bolivia, Brazil, Chile,
Colombia, Guatemala, Mexico, Panama, Paraguay, Peru, Uruguay, and Venezuela
and is comprised of approximately 1,158,010 square feet of owned and
226,940 square feet of leased space.
--Asia Pacific includes facilities in Australia, China, Hong Kong, India,
Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore,
South Korea, Taiwan, Thailand, and Vietnam and is comprised of
approximately 801,120 square feet of owned and 326,210 square feet of
leased space.
6
<PAGE>
The table below summarizes property information by business segment:
<TABLE>
<CAPTION>
BUSINESS SEGMENT
----------------
------------------------------------------
MEDICAL
DIAGNOSTIC SUPPLIES AND
CATEGORY CORPORATE SYSTEMS DEVICES MIXED(A) TOTAL
-------- --------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Leased
Facilities............ 1 16 45 98 160
Square feet........... 1,080 330,779 939,285 1,790,840 3,061,984
Manufacturing square
footage.............. -- 61,802 381,930 -- 443,732
Manufacturing
facilities........... -- 4 9 -- 13
Owned
Facilities............ 6 26 20 9 61
Square feet........... 471,260 3,187,567 3,645,103 1,537,531 8,841,461
Manufacturing square
footage.............. -- 1,450,880 2,217,331 473,053 4,141,264
Manufacturing
facilities........... -- 21 20 4 45
Total
Facilities............ 7 42 65 107 221
Square feet........... 472,340 3,518,346 4,584,388 3,328,371 11,903,445
Manufacturing square
footage.............. -- 1,512,682 2,599,261 473,053 4,584,996
Manufacturing
facilities........... -- 25 29 4 58
</TABLE>
- --------
(A) Facilities used by both business segments.
ITEM 3. LEGAL PROCEEDINGS.
The Company, along with a number of other manufacturers, has been named as a
defendant in approximately 196 products 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 is vigorously defending these
lawsuits.
The Company, along with another manufacturer and several medical products
distributors, has been named as a defendant in nine product liability lawsuits
relating to health care workers who allegedly sustained accidental needle
sticks, but have not become infected with any disease. The cases have been
filed on behalf of an unspecified number of health care workers in nine
different states, seeking class action certification under the laws of these
states. To date, no class has been certified in any of these cases. The
actions are pending in state court in Texas, under the caption Calvin vs.
Becton Dickinson et al. (Case No. 342-173329-98, Tarrant County District
Court), filed on April 9, 1998; in Federal Court in Ohio, under the caption
Grant vs. Becton Dickinson et al. (Case No. C2 98-844, Southern District of
Ohio), filed on July 22, 1998; in state court in California, under the caption
Chavez vs. Becton Dickinson (Case No. 722978, San Diego County Superior
Court), filed on August 4, 1998; in state court in Illinois, under the caption
McCaster vs. Becton Dickinson et al. (Case No. 98L09478, Cook County Circuit
Court), filed on August 13, 1998; in state court in Oklahoma, under the
caption Palmer vs. Becton Dickinson et al. (Case No. CJ-98-685, Sequoyah
County District Court), filed on October 27, 1998; in state court in Alabama,
under the caption Daniels vs. Becton Dickinson et al. (Case No. CV 1998 2757,
Montgomery County Circuit Court), filed on October 30, 1998; in state court in
Florida, under the caption Delgado vs. Becton Dickinson et al. (Case No. 98-
5608, Hillsborough County Circuit Court), filed on November 9, 1998; in state
court in South Carolina, under the caption Bales vs. Becton Dickinson et al.
(Case No. 98-CP-40-4343, Richland County Court of Common Pleas), filed on
November 25, 1998; and in state court in New Jersey, under the caption
Swartley vs. Becton Dickinson et al. (Case No. L-9449-98, Camden County
Superior Court), filed on December 7, 1998.
7
<PAGE>
Generally, these actions allege that health care workers have sustained
needle sticks using hollow-bore needle devices manufactured by the Company
and, as a result, require medical testing, counseling and/or treatment.
Several actions additionally allege that the health care workers have
sustained mental anguish. In addition, in the Chavez matter, the plaintiff
asserts a claim for unfair competition, alleging the Company has suppressed
the market for safety-engineered products through various means. Plaintiffs
seek money damages in all actions. The plaintiff in the Chavez matter, in
addition to money damages, seeks disgorgement of profits the Company has
purportedly obtained as a result of alleged unfair competition.
The pending class actions are in preliminary stages. The Company intends to
vigorously oppose class certification and defend these lawsuits.
The Company, along with another manufacturer, a group purchasing
organization ("GPO") and three hospitals, has been named as a defendant in an
antitrust action brought pursuant to the Texas Free Enterprise Act ("TFEA").
The action is pending in state court in Texas, under the caption Retractable
Technologies Inc. vs. Becton Dickinson and Company et al. (Case No. 533*JG98,
Brazoria County District Court), filed on August 4, 1998. Plaintiff, a
manufacturer of retractable syringes, alleges that the Company's contracts
with GPOs exclude plaintiff from the market in syringes and blood collection
products, in violation of the TFEA. Plaintiff also alleges that the Company
has conspired with other manufacturers to maintain its market share in these
products. Plaintiff seeks money damages. The pending action is in preliminary
stages. The Company intends to mount a vigorous defense in this action.
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.
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.
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. In June 1998, the Company entered into a Consent Order with
the NJDEP for a full and final settlement of these matters with the payment of
a $345,000 penalty, without any admission of liability.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF DECEMBER 1, 1998)
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>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Clateo Castellini........... 63 Director, Chairman of the Board, President
and Chief Executive Officer since June 1994,
and prior thereto, Sector President--
Medical.
John W. Galiardo............ 64 Director, Vice Chairman of the Board and
General Counsel since June 1994, and prior
thereto, Vice President and General Counsel.
Robert F. Adrion............ 57 President--Worldwide Infusion Therapy and
Injection Systems since October 1998;
President--Worldwide Infusion Therapy since
October 1995; President--Becton Dickinson
Vascular Access from July 1994 to September
1995; and prior thereto, Vice President--
Research and Development, Becton Dickinson
Vascular Access.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Richard Brajer.............. 38 President--Worldwide Sample Collection since
October 1998; President--Infusion Therapy
Europe from February 1998 to September 1998;
Vice President/General Manager--Consumer
Products Europe from October 1995 to January
1998; Director, North America Marketing,
Diabetes Health Care from October 1993 to
September 1995; Director, Corporate
Strategic Planning from July 1991 to
September 1993; and prior thereto, Director,
Business Planning and Development Medical
Sector.
Jean-Luc Butel.............. 42 President--Worldwide Consumer Health Care
since October 1998; Vice President/General
Manager, North American Consumer Health Care
from January 1998 to September 1998;
President, Nippon Becton Dickinson from
October 1994 to January 1998; and prior
thereto, General Manager Microbiology,
Nippon Becton Dickinson.
Gary M. Cohen............... 39 Executive Vice President since July 1998;
President--Becton Dickinson Europe and
Worldwide Sample Collection from October
1997 to June 1998; 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........ 48 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......... 45 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.
William A. Kozy............. 46 Senior Vice President--Company Manufacturing
since October 1998; President--Worldwide
Injection Systems from October 1996 to
October 1998; President--Worldwide Blood
Collection from July 1995 to September 1996;
and prior thereto, Division President--
Vacutainer Systems.
Edward J. Ludwig............ 47 Executive Vice President since July 1998;
Senior Vice President--Finance and Chief
Financial Officer from July 1995 to June
1998; 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............ 55 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.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Deborah J. Neff............. 45 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.
Mark C. Throdahl............ 47 Senior Vice President since July 1995;
Sector President--Drug Delivery from October
1994 to June 1995; President--Nippon Becton
Dickinson from May 1991 to September 1994;
and prior thereto, Director--Corporate
Planning.
Kenneth R. Weisshaar........ 48 Senior Vice President--Finance and Chief
Financial Officer since July 1998;
President--Worldwide Consumer Health Care
from October 1997 to June 1998; 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, 1998, there were approximately 10,058 shareholders of record. The
balance of the information required by this item appears under the caption
"Common Stock Prices and Dividends" on page 66 of the Company's 1998 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 "Seven-
Year Summary of Selected Financial Data" on page 43 of the Company's 1998
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 35-42 of the Company's 1998
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
page 37 of the "Financial Review" section of the Company's 1998 Annual Report,
and in Notes 1 and 10 to the consolidated financial statements contained in
the Company's 1998 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 is included on pages 44-45 and pages
48-64 of the Company's 1998 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.
10
<PAGE>
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 and Exchange
Commission not later than 120 days after September 30, 1998 (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 1998 Annual Report at the pages indicated in parentheses, are
incorporated by reference in Item 8 hereof:
Consolidated Statements of Income--Years ended September 30, 1998, 1997 and
1996 (page 48)
Consolidated Balance Sheets--September 30, 1998 and 1997 (page 49)
Consolidated Statements of Cash Flows--Years ended September 30, 1998, 1997
and 1996 (page 50)
Notes to Consolidated Financial Statements (pages 51-64)
(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 16)
11
<PAGE>
All other schedules for which provisions are 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 17, 18 and 19 hereof for a list of all management
contracts, compensatory plans and arrangements required by this item (Exhibit
Nos. 10(a)(i) through 10(m)), and all other Exhibits filed or incorporated by
reference as a part of this report.
(b) Reports on Form 8-K
On August 4, 1998, the registrant filed a report on Form 8-K for purposes of
filing certain agreements and instruments executed in connection with a public
offering by the registrant of its 6.7% Debenture due August 1, 2028. On July
27, 1998 the registrant filed a report on Form 8-K (as amended by a report on
Form 8-K/A filed by the registrant on July 29, 1998) for purposes of reporting
its results of operations for the third quarter ended June 30, 1998. No other
reports on Form 8-K were filed by the registrant during the three-month period
ended September 30, 1998.
12
<PAGE>
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, 1998
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW ON THE 16TH DAY OF DECEMBER, 1998 BY THE
FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.
<TABLE>
<CAPTION>
NAME CAPACITY
---- --------
<S> <C>
/s/ Clateo Castellini Chairman of the Board, President,
______________________________________ Chief Executive Officer and Director
CLATEO CASTELLINI (Principal Executive Officer)
/s/ Kenneth R. Weisshaar Senior Vice President-Finance and
______________________________________ Chief Financial Officer (Principal Financial
KENNETH R. WEISSHAAR 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
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
NAME CAPACITY
---- --------
<S> <C>
/s/ Gloria M. Shatto Director
______________________________________
GLORIA M. SHATTO
/s/ Alfred Sommer Director
______________________________________
ALFRED SOMMER
/s/ Raymond S. Troubh Director
______________________________________
RAYMOND S. TROUBH
/s/ Margaretha af Ugglas Director
______________________________________
MARGARETHA AF UGGLAS
</TABLE>
14
<PAGE>
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, 1998 and 1997, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended September
30, 1998 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 5, 1998
15
<PAGE>
BECTON, DICKINSON AND COMPANY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ---------- --------- ---------- ----------
ADDITIONS
CHARGED
BALANCE AT TO COSTS BALANCE AT
BEGINNING AND END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1998
Against trade receivables:
For doubtful accounts............. $20,234 $ 9,406 $ 4,901(A) $24,739
For cash discounts................ 8,499 33,646 31,366 10,779
------- ------- ------- -------
Total............................ $28,733 $43,052 $36,267 $35,518
======= ======= ======= =======
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
======= ======= ======= =======
</TABLE>
- --------
(A)Accounts written off.
16
<PAGE>
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 Report
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, 1996 3(a) to the registrant's Quarterly
Report on Form 10-Q for the period
ended June 30, 1996
3(a)(iii) Amendment to the Restated Certificate Incorporated by reference to Exhibit
of Incorporation, as of August 10, 3(a)(iii) to the registrant's
1998 Quarterly Report on Form 10-Q for the
period ended June 30, 1998
3(b) By-Laws, as amended February 10, 1998 Incorporated by reference to Exhibit
3(ii) to the registrant's Quarterly
Report on Form 10-Q for the period
ended March 31, 1998
4(a) Indenture, dated as of December 1, Incorporated by reference to Exhibit 4
1982, between the registrant and to Registration Statement No. 2-80707
Manufacturers 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 4(b) to Registration Statement No.
registrant and Manufacturers Hanover 33-5663 on Form S-3 filed by the
Trust Company registrant
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
registrant and The Chase Manhattan registrant on
Bank (formerly known as Chemical Bank, January 12, 1995
the successor by merger to
Manufacturers 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
Manhattan Bank registrant on July 31, 1997 (the
registrant 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 on
First Chicago Trust Company of New December 14, 1995
York, which includes as Exhibit A
thereto, the Form of Right Certificate
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>
17
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------- ----------- ----------------
<S> <C> <C>
10(b) Certified Resolution authorizing Incorporated by reference to Exhibit
certain payments to certain corporate 10(k) to the registrant's Annual
officers in the event of a discharge, Report on Form 10-K for the fiscal
resignation due to removal from year ended September 30, 1986
position 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 Incorporated by reference to Exhibit
related Collateral Assignment covering 10(e) to the registrant's Annual
the providing to corporate officers of Report on Form 10-K for the fiscal
a life insurance policy in an amount year ended September 30, 1987
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 Incorporated by reference to Exhibit
restated effective February 11, 1992 10(d) to the registrant's Annual
Report on Form 10-K for the fiscal
year ended September 30, 1992
10(e) 1997 Management Incentive Plan Incorporated by reference to Exhibit
10(e) to the registrant's Annual
Report on Form 10-K for the fiscal
year ended September 30, 1997
10(f) 1982 Unqualified Stock Option Plan, as Incorporated by reference to Exhibit
amended and restated February 8, 1994 10(g) to the registrant's Annual
Report on Form 10-K for the fiscal
year ended September 30, 1994
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.
1996 333-11885 on Form S-8 filed by the
registrant
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
registrant
10(h) 1990 Stock Option Plan, as amended and Incorporated by reference to Exhibit
restated February 8, 1994 10(i) to the registrant's Annual
Report on Form 10-K for the fiscal
year ended September 30, 1994
10(i) Retirement Benefit Restoration Plan Filed with this report
and related Benefit Restoration Plan
Trust, as amended and restated as of
November 22, 1994
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>
18
<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) 1995 Stock Option Plan, as amended and Filed with this report
restated January 27, 1998
10(l) 1998 Stock Option Plan Incorporated by reference to Exhibit
10.1 to the registrant's Quarterly
Report on Form 10-Q/A for the period
ended March 31, 1998
10(m) Australian, French and Spanish addenda Filed with this report
to the Becton, Dickinson and Company
Stock Option Plans
13 Portions of the registrant's Annual Filed with this report
Report to Shareholders for fiscal year
1998
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.
19
<PAGE>
Exhibit (10)(i)
BECTON, DICKINSON AND COMPANY
RETIREMENT BENEFIT RESTORATION PLAN
Restatement effective November 22, 1994
<PAGE>
Table of Contents
Section 1 Purpose and Effective Date........................... 1
Section 2 Definitions.......................................... 2
Section 3 Participation........................................ 4
Section 4 Retirement Benefits.................................. 5
Section 5 Vesting and Payment.................................. 6
Section 6 Source of Payment.................................... 7
Section 7 Administration and Interpretation of the Plan........ 8
Section 8 Amendment and Termination............................ 9
Section 9 Designation of Beneficiaries......................... 10
Section 10 General Provisions................................... 11
<PAGE>
BECTON DICKINSON AND COMPANY
RETIREMENT BENEFIT RESTORATION PLAN
SECTION I
PURPOSE AND EFFECTIVE Date
1.1 The purpose of the Becton, Dickinson and Company Retirement Benefit
Restoration Plan is to restore to participating employees the benefits
that would be payable to them under the Becton, Dickinson and Company
Retirement Plan in the absence of benefit limitations required under
such Plan by the Internal Revenue Code.
1.2 This Plan is effective November 22, 1994 and supersedes the provisions
of the prior version of the Plan, effective October 1, 1989.
1
<PAGE>
SECTION 2
Definitions
When used herein, the following terms shall have the following meanings:
2.1 "Act" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.2 "Beneficiary" means the beneficiary or beneficiaries who, pursuant to
the provisions of Section 9, are to receive the amount, if any, payable
under this Plan upon the death of a Participant.
2.3 "Board of Directors" means the Board of Directors of the Company.
2.4 "Change in Control" of the Company means any of the following events:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), other than a trustee or other
fiduciary holding securities under an employee benefit
plan of the Company, or a corporation owned, directly or
indirectly by the stockholders of the Company in
substantially the same proportions, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of
the Company representing 25% or more of the combined
voting power of the Company's then outstanding
securities, or
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board
of Directors and any new director whose election by the
Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the
period or whose election or nomination for election was
previously so approved, cease for any reason to
constitute a majority thereof; or
(iii) substantially all the assets of the Company are disposed
of by the Company pursuant to a merger, consolidation,
partial or complete liquidation, a sale of assets
(including stock of a subsidiary) or otherwise, but not
including a reincorporation or similar transaction
resulting in a change only in the form of ownership of
such assets.
2.5 "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References in the Plan to a Code Section shall be deemed to refer
to any successor provision of the Code, as appropriate.
2
<PAGE>
2.6 "Committee" means the Retirement Benefit Restoration Plan Committee
designated by the Board of Directors to administer the Plan pursuant to
Section 7.
2.7 "Company" means Becton, Dickinson and Company, a New Jersey corporation,
or any successor under the provisions of Section 10.2.
2.8 "Deferred Amounts" means any bonus, salary or stock awards electively
deferred by a Participant under any plan of the Company to the extent
that such amounts would be includible in the definition of Total
Compensation under the Retirement Plan if not so deferred.
2.9 "Deferred Amounts Restoration Benefit" means the benefit provided under
Section 4.3 of the Plan.
2.10 "Employee" means an employee of an Employer.
2.11 "Employer" means the Company and any subsidiary or affiliate of the
Company that becomes an Employer in accordance with Section 10.1.
2.12 "Excess Benefit" means the benefit provided under Section 4.1 of the
Plan.
2.13 "Participant" means any employee of an Employer who is entitled to
participate in the Plan in accordance with Section 3.
2.14 "Plan" means the Becton, Dickinson and Company Retirement Benefit
Restoration Plan as set forth herein and as amended and restated from
time to time.
2.15 "Retirement Plan" means, the Becton, Dickinson and Company Retirement
Plan, as it may be amended and restated from time to time.
2.16 "Supplemental Benefit" means the benefit provided under Section 4.2 of
the Plan.
2.17 "Termination of Employment" means the termination of a Participant's
employment with the Company and all subsidiaries and affiliates of the
Company.
2.18 "Total Compensation" means Total Compensation under the Retirement Plan.
3
<PAGE>
SECTION 3
Participation
3.1 Unless the Committee determines otherwise:
(a) Any Employee who participates in the Retirement Plan and whose
benefits under the Retirement Plan are limited pursuant to the
provisions included in the Retirement Plan in order to comply
with Code Section 415 shall be a Participant in this Plan with
respect to benefits payable under Section 4.1.
(b) Any Employee who participates in the Retirement Plan and whose
benefits under the Retirement Plan are limited pursuant to the
provisions included in the Retirement Plan in order to comply
with Code Section 401(a)(17) shall be a Participant in this
Plan with respect to benefits payable under Section 4.2.
(c) Any Employee who participates in the Retirement Plan whose
benefits under the Retirement Plan would be greater if Deferred
Amounts were included in the definition of Total Compensation
under such Plan shall be a Participant in this Plan with respect
to benefits payable under Section 4.3.
3.2 The participation of any Participant may be suspended or terminated by
the Committee at any time, but no such suspension or termination shall
operate to reduce any benefits accrued by the Participant under the Plan
prior to the date of suspension or termination.
4
<PAGE>
SECTION 4
Retirement Benefits
4.1 A Participant's Excess Benefit shall equal the excess (if any) of (i)
the benefit that would have been payable under the Retirement Plan in
respect of the Participant in the absence of the provisions included in
the Retirement Plan in order to comply with Section 415 of the Code,
over (ii) the benefit actually payable in respect of the Participant
under the Retirement Plan.
4.2 A Participant's Supplemental Benefit shall equal the excess (if any) of
(i) the benefit that would have been payable under the Retirement Plan
in respect of the Participant in the absence of the provisions included
in the Retirement Plan in order to comply with Section 401(a)(17) of
the Code and Section 415 of the Code, over (ii) the sum of the
Participant's Excess Benefit and the benefit actually payable in respect
of the Participant under the Retirement Plan.
4.3 A Participant's Deferred Amount Restoration Benefit shall equal the
excess (if any) of (i) the benefit that would have been payable under
the Retirement Plan in respect of the Participant in the absence of the
provisions included in the Retirement Plan in order to comply with
Section 401(a)(17) of the Code and Section 415 of the Code and if
"Deferred Amounts" or any other excludable bonus were included in the
definition of Total Compensation under the Retirement Plan over (ii) the
sum of the Participant's Excess Benefit and Supplemental Benefit and the
benefit actually payable in respect of the Participant under the
Retirement Plan.
4.4 The calculations made in Section 4.1, 4.2 and 4.3 shall reflect the
applicable adjustments under the Retirement Plan for early commencement
and the form of benefit selected.
5
<PAGE>
SECTION 5
Vesting and Payment
5.1 No amount shall be payable to a Participant or his or her Beneficiary
under the Plan to the extent it represents benefits that would have been
forfeited under the vesting provisions of the Retirement Plan if payable
thereunder.
5.2 Except as provided in Sections 5.5 and 5.6, Plan benefits shall be paid
to a Participant (or to his or her Beneficiary in the event of the
Participant's death) in a cash lump sum at the same time as payments
commence under the Retirement Plan (or as soon as practicable
thereafter).
5.3 The amount of the lump-sum payment in respect of a Participant under
Section 5.2 or 5.5 shall equal the actuarial present value (at the time
payment becomes due) of the sum of the Participant's Excess Benefit,
Supplemental Benefit and Deferred Amounts Restoration Benefit, based on
the following assumptions:
(i) the interest rate used by the Pension Benefit Guaranty
Corporation for purposes of calculating the present
value of benefits under single employer plans terminated
on the last day of the month preceding the calendar
quarter in which payment is due under the Plan; and
(ii) the mortality table used under the Retirement Plan for
valuing optional forms of payment at the time payment is
due under the Plan.
5.4 The present value described in Section 5.3 shall include the present
value of the Retirement Plan benefit, using the assumptions described in
Section 5.3, that would be payable absent the limitations effected by
Section 415 of the Code, Section 401(a)(17) of the Code and if
Deferred Amounts were includible in the definition of Total Compensation
under the Retirement Plan, multiplied by the following: 1 - b/c, where
(b) is the actual benefit payable under the Retirement Plan, and (c) is
the sum of (b) plus the amounts described in Sections 4.1, 4.2 and 4.3.
5.5 Notwithstanding the provisions of Section 5.2 to the contrary, each
Participant's benefits shall (to the extent not previously paid) be
payable (i) to the Participant in a cash lump sum as soon as
practicable, but not later than 10 business days, after the
Participant's Termination of Employment following a Change in Control,
or (ii) to the Participant's Beneficiary in a cash lump sum as soon as
practicable following the Participant's death.
5.6 Notwithstanding any other provision of this Plan, the Committee may
defer the distribution of any Plan benefits to a Participant if the
Committee anticipates that the amount of such Plan benefits, or any
portion thereof, would be nondeductible for corporate income tax
purposes to the Company pursuant to Section 162(m) of the Code.
6
<PAGE>
SECTION 6
Source of Payment
6.1 All benefits provided for under the Plan shall be paid in cash from the
general funds of the Company; provided, however, that such benefits
-------- -------
shall be reduced by the amount of any payments made to the Participant
or his or her Beneficiary from any trust or special or separate fund
established by the Company, to the extent such trust or fund is intended
to assure the payment of such benefits. The Company shall not be
required to establish a special or separate fund or other segregation of
assets to assure the payment of Plan benefits, and, if the Company shall
make any investments to aid it in meeting its obligations hereunder, the
Participant and his or her Beneficiary shall have no right, title, or
interest whatever in or to any such investments except as may otherwise
be expressly provided in a separate written instrument relating to such
investments. Nothing contained in this Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a
trust of any kind between the Company and any Participant or
Beneficiary. To the extent that any Participant or Beneficiary acquires
a right to receive payments from the Company hereunder, such right shall
be no greater than the right of an unsecured creditor of the Company.
7
<PAGE>
SECTION 7
Administration and Interpretation of the Plan
7.1 Prior to a Change in Control the Plan shall be administered by the
Retirement Benefit Restoration Plan Committee appointed by the Board of
Directors to administer the Plan. The Committee shall have full
discretion, power and authority to interpret, construe and administer
the Plan, to provide for claims review procedures, and to review claims
for benefits under the Plan. After a Change in Control, the Trustee
shall administer the Plan and shall have the same privileges and rights
as given to the Committee prior to a Change in Control. The Committee's
interpretations and constructions of the Plan and the actions taken
thereunder by the Committee shall be binding and conclusive on all
persons and for all purposes.
7.2 To the extent that the Plan provides benefits which would be provided
under the Retirement Plan but for the limitations imposed by Section 415
of the Code, the Plan is intended to be an "excess benefit plan" within
the meaning of the Act. To the extent that the Plan provides other
benefits, the Plan is intended to be a separate, unfunded deferred
compensation plan "for a select group of management or highly
compensated employees" within the meaning of the Act. Each provision of
the Plan shall be administered, interpreted and construed to carry out
such intention, and any provision that cannot be so administered,
interpreted and construed shall, to that extent, be disregarded.
7.3 The Committee shall establish and maintain Plan records and may arrange
for the engagement of such accounting, actuarial or legal advisors, who
may be advisors to the Company, and make use of such agents and clerical
or other personnel as it shall require or may deem advisable for
purposes of the Plan. The Committee may rely upon the written opinion of
such advisors engaged by the Committee and may delegate to any agent or
to any sub-committee or member of the Committee its authority to perform
any act hereunder, including without limitation those matters involving
the exercise of discretion, provided that such delegation shall be
subject to revocation at any time at the discretion of the Committee.
7.4 To the maximum extent permitted by law, no member of the Board of
Directors or the Committee shall be personally liable by reason of any
contract or other instrument executed by him or her or on his or her
behalf in his or her capacity as a member of the Board of Directors or
the Committee nor for any mistake of judgment made in good faith, and
the Company shall indemnify and hold harmless, directly from its own
assets (including the proceeds of any insurance policy the premiums of
which are paid from the Company's own assets), each member of the
Board of Directors or the Committee and each other officer, employee, or
director of the Company to whom any duty or power relating to the
administration or interpretation of the Plan or to the management or
control of the assets of the Plan may be delegated or allocated, against
any cost or expense (including counsel fees) or liability (including any
sum paid in settlement of a claim with the approval of the
8
<PAGE>
Company) arising out of any act or omission to act in connection with
the Plan unless arising out of such person's own fraud or bad faith.
SECTION 8
Amendment and Termination
8.1 The Plan may be amended, suspended or terminated, in whole or in part,
by the Board of Directors, but no such action shall retroactively impair
or otherwise adversely affect the rights of any person to benefits under
the Plan which have accrued prior to the date of such action.
9
<PAGE>
SECTION 9
Designation of Beneficiaries
9.1 A Participant's Beneficiary under this Plan shall be the person or
persons who would receive the benefit payable upon the Retirement's
death if paid under the Retirement Plan instead of this Plan.
9.2 If the Committee is in doubt as to the right of any person to receive an
amount payable upon a Participant's death, the Committee may retain such
amount, without liability for any interest thereon, until the rights
thereto are determined, or the Committee may pay such amount into any
court of appropriate jurisdiction and such payment shall be a complete
discharge of the liability of the Plan and the Company therefor.
10
<PAGE>
SECTION 10
General Provisions
10.1 Any subsidiary or affiliate of the Company may, upon approval by the
Committee, adopt the Plan and become an Employer under the terms of the
Plan. Each Employer shall bear the costs of the benefits provided under
the Plan with respect to persons employed by it (subject to the
allocation of costs among Employers by the Committee, in the case of
Participants employed by more than one Employer).
10.2 This Plan shall be binding upon and inure to the benefit of the Company,
its subsidiaries and affiliates, and their successors and assigns and
the Participant, his or her Beneficiary or designees and his or her
estate. Nothing in this Plan shall preclude the Company from
consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation which assumes
this Plan and all obligations of the Company hereunder. Upon such a
consolidation, merger or transfer of assets and assumption, the term
"Company" shall refer to such other corporation and this Plan shall
continue in full force and effect.
10.3 Neither the Plan nor any action taken hereunder shall be construed as
giving to a Participant or any employee the right to be retained in the
employ of an Employer or any other subsidiary or affiliate of the
Company or as affecting the right of an Employer or such a subsidiary or
affiliate to dismiss any Participant or employee with or without cause.
10.4 The Company may provide for the withholding from any benefits payable
under this Plan all Federal, state, city or other taxes as shall be
appropriate pursuant to any law or governmental regulation or ruling and
may delay the payment of any benefit until the Participant or
Beneficiary provides payment to the Company of all applicable
withholding taxes.
10.5 No right to any amount payable at any time under the Plan may be
assigned, transferred, pledged, or encumbered, either voluntarily or by
operation of law, except as provided expressly herein as to payments to
a Beneficiary or as may otherwise be required by law.
10.6 If the Committee shall find that any person to whom any amount is or was
payable hereunder is unable to care for his or her affairs because of
illness or accident, or had died, then the Committee, if it so elects,
may direct that any payment due him or her or his or her estate (unless
a prior claim therefor has been made by a duly appointed legal
representative) or any part thereof be paid or applied for the benefit
of such person or to or for the benefit ot his or her spouse, children
or other dependents, an institution maintaining or having, custody of
such person, any other person deemed by the Committee to be a proper
recipient on behalf of such person otherwise entitled to payment, or
any of them, in such manner and proportion as the Committee may deem
proper. Any such payment shall be in complete
11
<PAGE>
discharge of the liability therefor of the Company, the Plan or the
Committee or any member, officer or employee thereof.
10.7 All elections, designations, requests, notices, instructions, and other
communications from a Participant, Beneficiary or other person to the
Committee or the Company pursuant to the Plan shall be in such form as
is prescribed from time to time by the Committee, shall be mailed by
first-class mail or delivered to such location as shall be specified by
the Committee, and shall be deemed to have been given and delivered only
upon actual receipt thereof at such location.
10.8 The benefits payable under this Plan shall be in addition to all other
benefits provided for employees of the Company.
10.9 The captions preceding the sections and articles hereof have been
inserted solely as a matter of convenience and in no way define or limit
the scope or intent of any provisions of the Plan.
10.10 To the extent not preempted by Federal law, this plan shall be governed
by the laws of the State of New Jersey, without regard to the principles
of conflict of laws thereof, as from time to time in effect.
12
<PAGE>
EXHIBIT 10(k)
BECTON, DICKINSON AND COMPANY
1995 STOCK OPTION PLAN, AS AMENDED
AND RESTATED EFFECTIVE JANUARY 27, 1998
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.
-1-
<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.
-2-
<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.
-3-
<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 or a Nonqualified Stock Option shall be at least 100% of the
Fair Market Value of a share of the Stock on the Granting Date.
(c) 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.
(d) 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.
(e) 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.
(f) 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 Grantee, or by the
Grantee's executors, administrators and successors pursuant to Section 8.
(g) 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
-4-
<PAGE>
surrendered in whole or in part, or are canceled in connection with the
grant of new Stock Options.
(h) 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.
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:
-5-
<PAGE>
(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.
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
-6-
<PAGE>
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.
(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;
-7-
<PAGE>
(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.
-8-
<PAGE>
EXHIBIT 10(m)
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(m)
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>
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 10(m)
BECTON, DICKINSON AND COMPANY
1998 STOCK OPTION PLAN
FRENCH ADDENDUM
This Addendum to the Becton, Dickinson and Company 1998 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(m)
BECTON, DICKINSON AND COMPANY
AUSTRALIAN ADDENDUM
This Addendum to each of the Becton, Dickinson and Company 1982 Non-
Qualified Stock Option Plan, the 1990 Stock Option Plan, the 1995 Stock Option
Plan and the proposed 1998 Stock Option Plan (collectively the "Plans") modifies
and supplements the terms and conditions of each of such Plans with respect to
the Stock Options granted to any Grantee subject to taxation by the government
of Australia (an "Australian Optionholder"). Capitalized terms used and not
otherwise defined herein shall have the same meanings as set forth in the Plans.
1. Notwithstanding anything contained in any of the Plans to the contrary, in
no event shall any Stock Appreciation Right be granted in connection with any
Stock Option to an Australian Optionholder under any of the Company's Plans.
<PAGE>
EXHIBIT 10(m)
BECTON, DICKINSON AND COMPANY
1982 UNQUALIFIED STOCK OPTION PLAN
SPANISH ADDENDUM
This Addendum to the Becton, Dickinson and Company (the "Company") 1982
Unqualified Stock Option Plan (the "Plan") modifies and supplements the terms
and conditions of the Plan with respect to the grant of Stock Options to
Employees in Spain ("Spanish Employees"). Capitalized terms used and not
otherwise defined herein shall have the same meanings as set forth in the Plan.
Notwithstanding anything contained in the Plan to the contrary, no Stock
Option shall be granted under the Plan to a Spanish Employee if as a result of
such grant, outstanding Stock Options issued under the Plan and all other stock
option plans of the Company would be held by fifty (50) or more Spanish
Employees.
<PAGE>
EXHIBIT 10(m)
BECTON, DICKINSON AND COMPANY
1990 STOCK OPTION PLAN
SPANISH ADDENDUM
This Addendum to the Becton, Dickinson and Company (the "Company") 1990
Stock Option Plan (the "Plan") modifies and supplements the terms and conditions
of the Plan with respect to the grant of Stock Options to Employees in Spain
("Spanish Employees"). Capitalized terms used and not otherwise defined herein
shall have the same meanings as set forth in the Plan.
Notwithstanding anything contained in the Plan to the contrary, no Stock
Option shall be granted under the Plan to a Spanish Employee if as a result of
such grant, outstanding Stock Options issued under the Plan and all other stock
option plans of the Company would be held by fifty (50) or more Spanish
Employees.
<PAGE>
EXHIBIT 10(m)
BECTON, DICKINSON AND COMPANY
1995 STOCK OPTION PLAN
SPANISH ADDENDUM
This Addendum to the Becton, Dickinson and Company (the "Company") 1995
Stock Option Plan (the "Plan") modifies and supplements the terms and conditions
of the Plan with respect to the grant of Stock Options to Employees in Spain
("Spanish Employees"). Capitalized terms used and not otherwise defined herein
shall have the same meanings as set forth in the Plan.
Notwithstanding anything contained in the Plan to the contrary, no Stock
Option shall be granted under the Plan to a Spanish Employee if as a result of
such grant, outstanding Stock Options issued under the Plan and all other stock
option plans of the Company would be held by fifty (50) or more Spanish
Employees.
<PAGE>
EXHIBIT 10(m)
BECTON, DICKINSON AND COMPANY
1998 STOCK OPTION PLAN
SPANISH ADDENDUM
This Addendum to the Becton, Dickinson and Company (the "Company") 1998
Stock Option Plan (the "Plan") modifies and supplements the terms and conditions
of the Plan with respect to the grant of Stock Options to Employees in Spain
("Spanish Employees"). Capitalized terms used and not otherwise defined herein
shall have the same meanings as set forth in the Plan.
Notwithstanding anything contained in the Plan to the contrary, no Stock
Option shall be granted under the Plan to a Spanish Employee if as a result of
such grant, outstanding Stock Options issued under the Plan and all other stock
option plans of the Company would be held by fifty (50) or more Spanish
Employees.
<PAGE>
EXHIBIT 13
Financial Table of Contents
35 Financial Review
43 Seven-Year Summary of Selected Financial Data
44 Summary by Business Segment
45 Summary by Geographic Area
46 Report of Management
47 Report of Ernst & Young LLP, Independent Auditors
48 Consolidated Statements of Income
49 Consolidated Balance Sheets
50 Consolidated Statements of Cash Flows
51 Notes to Consolidated Financial Statements
Becton Dickinson is a medical technology company that manufactures and sells a
broad range of supplies, devices and systems for use by health care
professionals, medical research institutions, industry 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. The following
references to years relate to the Company's fiscal year, which ends on
September 30.
- --------------------------------------------------------------------------------
Stock Split and Per-Share Data
- --------------------------------------------------------------------------------
In August 1998, the Company distributed shares to effect a
two-for-one stock split to shareholders of record on August 10, 1998. In
December 1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128 "Earnings per Share", which requires presentation of both basic
and diluted earnings per share in the income statement. Share and per-share data
presented in the Financial Review for all periods have been restated to reflect
the stock split and to conform to the SFAS No. 128 requirements.
- --------------------------------------------------------------------------------
Special and Other Charges
- --------------------------------------------------------------------------------
During the third quarter of 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. The Company's plan for
restructuring its manufacturing operations includes the closure of a surgical
blade plant in the United States and the consolidation of certain other
production functions. The write-down of assets includes an impairment loss
related primarily to goodwill associated with prior acquisitions in the manual
microbiology business. The sustained decline in sales volume of this business,
combined with the Company's increased focus on new and developing alternative
technologies, created an impairment indicator that required a reassessment of
recoverability.
The Company also recorded $22 million of charges in 1998, primarily in the third
and fourth quarters, associated with the reengineering of business processes
relating to the enterprise-wide program to upgrade the Company's business
systems. The majority of these charges are 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. Over the next three years, the Company expects to spend
approximately $154 million associated with this program, primarily relating to
hardware and software-related costs which will be substantially capitalized. For
additional discussion of the above charges, see Note 5 of the Notes to
Consolidated Financial Statements.
- --------------------------------------------------------------------------------
Acquisitions
- --------------------------------------------------------------------------------
During 1998, the Company acquired six businesses, primarily in the Medical
segment, for an aggregate of $546 million in cash and up to 595,520 shares of
the Company's common stock, pending the resolution of certain post-closing
matters. These acquisitions include the purchase of the Medical Devices Division
("MDD") of The BOC Group for approximately $457 million in cash, subject to
certain post-closing adjustments. The Company recorded a charge of $30 million
for purchased in-process research and development in connection with this
acquisition. Last year, the Company acquired two businesses in the Diagnostic
Segment, for an aggregate of $217 million in cash. The Company recorded a charge
of $15 million last year for purchased in-process research and development in
connection with these acquisitions. All acquisitions were recorded under the
purchase method of accounting and the results of operations of the acquired
companies are included in the consolidated results of the Company from their
respective acquisition dates. For additional discussion of acquisitions, see
Note 2 of the Notes to Consolidated Financial Statements. The Company continues
to seek 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 11% to $3.1 billion. Excluding the estimated impact of
unfavorable foreign currency translation, worldwide revenues grew 14%, with
acquisitions contributing 7%. The growth in the underlying businesses (which as
used herein excludes the effects of foreign currency translation and
acquisitions in 1998 and 1997) resulted primarily from volume increases and an
improved product mix in both segments.
Health care cost containment remains an important factor in many of the markets
served by the Company. By improving manufacturing and administrative
productivity and leveraging the Company's worldwide presence and capabilities,
the Company's cost to serve its customers has continued to decline. Health care
35
<PAGE>
providers have increasingly demonstrated their preference to enter into
comprehensive purchasing arrangements with the Company to take full advantage of
logistic efficiencies and the aggregation of their buying power. Although such
arrangements typically increase pricing pressures, they ultimately contribute to
manufacturing and administrative efficiencies for the Company.
Medical revenues of $1.7 billion increased 14%. Excluding the estimated impact
of unfavorable foreign currency translation, Medical revenues grew 16%, with
acquisitions contributing 8%. Revenue growth of the underlying businesses was
led by strong sales of infusion therapy and hypodermic products due to market
share gains, and increased sales of prefillable syringes to pharmaceutical
companies. Diabetes health care products also exhibited strong sales growth.
Medical operating income of $320 million decreased 8% compared to 1997.
Excluding special and other charges, the estimated unfavorable impact of foreign
currency translation, and the impact of acquisitions, including related charges
of $30 million recorded in 1998 for purchased in-process research and
development, Medical operating income increased 19%. This performance was
primarily due to revenue growth, improved sales mix and productivity
improvements.
Diagnostic revenues of $1.4 billion increased 8%. Excluding the estimated impact
of unfavorable foreign currency translation, Diagnostic revenues grew 11%, with
acquisitions contributing 7%. Revenue growth of the underlying businesses was
led by continued strong sales of sample collection devices, fueled by the
continued conversion of the market to higher value, lower cost-in-use safety-
engineered products. Sales of FACS brand flow cytometry systems continued to
grow from market share gains and new product introductions. Although overall
revenues of infectious disease products increased as a result of a prior year
acquisition, the growth rate of this business continues to be adversely affected
by cost containment in testing.
Diagnostic operating income of $193 million was about the same as last year.
Excluding special and other charges, the estimated impact of unfavorable foreign
currency translation, and the impact of acquisitions, including related charges
of $15 million recorded in 1997 for purchased in-process research and
development, Diagnostic operating income increased 22%. This performance was
primarily due to an improved sales mix and manufacturing productivity.
On a geographical basis, revenues outside the United States of $1.4 billion
increased 8%. Excluding the estimated impact of unfavorable foreign currency
translation, revenues outside the United States grew 14%, with acquisitions
contributing 8%. Revenue growth of the underlying businesses was led by strong
sales of injection systems products, sample collection devices and FACS brand
flow cytometry systems, particularly in Europe and Latin America. Revenue growth
in the Asia Pacific region, while in excess of 10% excluding the estimated
impact of unfavorable foreign currency translation, was adversely affected by
the continuing slow down of economic growth in this region.
Revenues in the United States were $1.7 billion, an increase of 14%, with
acquisitions contributing 7%. Revenue growth of the underlying businesses was
led by strong increases in sales of sample collection devices, infusion therapy
products and diabetes health care products. FACS brand flow cytometry systems
also exhibited strong sales growth, reflecting market share gains and new
product introductions. As mentioned earlier, sales of infectious disease
products continued to be negatively affected by cost containment in testing.
Gross profit margin was 50.6%, compared with 49.7% last year, reflecting the
Company's continued success in improving manufacturing efficiency, as well as a
more profitable mix of products sold.
Selling and administrative expense of $862 million was 27.6% of revenues.
Excluding the effects of the reengineering charges related to the enterprise-
wide program to upgrade the Company's business systems and the impact of the MDD
acquisition, selling and administrative expense would have been 26.7% of
revenues, compared with last year's ratio of 27.3%. This ratio reflects savings
achieved through the Company's tight spending controls and productivity
improvements.
Investment in research and development increased to $218 million or 7.0% of
revenues, including the $30 million charge for purchased in-process research and
development related to the MDD acquisition. In 1997, the Company recorded a
charge of $15 million for purchased in-process research and development
associated with two acquisitions. Excluding the effect of purchased in-process
research and development in both years, investment in research and development
remained at 6% of revenues, or an increase of 13% over 1997. This increase
includes additional funding directed toward emerging new platforms, such as DNA
probe technology and other new diagnostic platforms, to support the Company's
efforts to accelerate its rate of revenue growth.
Operating income in 1998 of $405 million decreased from last year's $451
million. Excluding the incremental impact of acquisitions and special and other
charges, operating income would have been $544 million, or 18.7% of revenues in
1998. The 1997 operating margin would have been 16.6%, adjusted to exclude last
year's purchased in-process research and development charges. This increase in
operating margin resulted from an improved gross profit margin, as well as a
lower selling and administrative expense ratio.
Net interest expense of $56 million in 1998 was $17 million higher than in 1997,
primarily due to additional borrowings to fund acquisitions.
"Other (expense) income, net" in 1998 included foreign exchange losses of $11
million, including hedging costs, and a gain of $3 million on the sale of an
investment.
The effective tax rate in 1998 was 30.6% compared to 29% in 1997. The increase
is principally due to the lack of a tax benefit associated with a larger
purchased in-process research and development charge recorded in 1998 as
compared to 1997.
36
<PAGE>
Net income was $237 million, compared with $300 million in 1997. Diluted
earnings per share were $.90, compared with $1.15 in 1997. The effects of the
special and other charges and the MDD acquisition, including the purchased in-
process research and development charge recorded in 1998, decreased diluted
earnings per share by $.47, and the estimated impact of unfavorable foreign
currency translation was $.07 per share. Exclusive of these items and the in-
process research and development charges recorded in 1997, diluted earnings per
share grew 19% over last year.
- --------------------------------------------------------------------------------
Financial Instrument Market Risk
- --------------------------------------------------------------------------------
The Company selectively uses financial instruments to manage the impact of
foreign exchange rate and interest rate fluctuations on earnings. The
counterparties to these contracts are highly-rated financial institutions and
the Company does not have significant exposure to any one counterparty. The
Company does not enter into financial instruments for trading or speculative
purposes.
The Company's foreign currency exposure is primarily in Western Europe, Asia
Pacific, Japan, Brazil and Mexico. Foreign exchange risk arises when the Company
enters into transactions in non-hyperinflationary countries, generally on an
intercompany basis, that are denominated in currencies other than the functional
currency. In hyperinflationary countries, principally Mexico, net monetary
assets denominated in local currencies are exposed to foreign exchange risk.
During 1998 and 1997, the Company hedged substantially all of its foreign
exchange exposures primarily through the use of forward contracts and currency
options. These derivative instruments typically have average maturities of less
than six months. As hedges, gains or losses on these derivative instruments are
largely offset by the gains or losses on the underlying hedged transactions.
Therefore, with respect to derivative instruments outstanding at September 30,
1998 and 1997, a 10% appreciation or depreciation of the U.S. dollar from the
September 30, 1998 and 1997 market rates would not have a material effect on the
Company's earnings.
The Company's primary interest rate exposure results from changes in short-term
U.S. dollar interest rates. In an effort to manage interest rate exposures, the
Company strives to achieve an acceptable balance between fixed and floating rate
debt and may enter into interest rate swaps to help maintain that balance. Based
on the Company's overall interest rate exposure at September 30, 1998 and 1997,
a change of 10% in interest rates would not have a material effect on the
Company's earnings or cash flows over a one-year period. An increase of 10% in
interest rates would decrease the fair value of the Company's long-term debt and
interest rate swaps at September 30, 1998 and 1997 by approximately $48 million
and $35 million, respectively. A 10% decrease in interest rates would increase
the fair value of the Company's long-term debt and interest rate swaps at
September 30, 1998 and 1997 by approximately $54 million and $39 million,
respectively.
In 1998, the currencies of many countries in Southeast Asia, in which the
Company maintains operations, depreciated against the U.S. dollar, continuing a
trend which began in the second half of 1997. The Company largely offset the
foreign exchange transaction impact of these devaluations through the hedging of
its exposures in the affected currencies, and therefore, the impact on the
Company was insignificant.
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. Effective January 1, 1998,
the Company no longer considered its Brazilian business to be operating in a
highly inflationary economy as defined by SFAS No. 52 "Foreign Currency
Translation". The Company also manufactures in Mexico and imports various
medical and diagnostic products from affiliates 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 Company anticipates that, effective January
1, 1999, it will no longer consider its Mexican business to be operating in a
highly inflationary economy as defined by SFAS No. 52.
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
- --------------------------------------------------------------------------------
Cash provided by operations continued to be the Company's primary source of
funds to finance operating needs and capital expenditures. In 1998, net cash
provided by operating activities was $501 million, compared with $443 million in
1997.
Capital expenditures were $181 million in 1998, compared with $170 million in
the prior year. Medical capital spending, which totaled $105 million in 1998,
included spending on a new syringe manufacturing facility in India, an
additional pen needle manufacturing line in Ireland, and the expansion of the
prefillable syringe business in Mexico. Funds also were expended for the
acquisition of equipment for the ongoing expansion of the hypodermic and
infusion therapy businesses. Diagnostic capital spending, which totaled $66
million in 1998, included the acquisition of additional equipment by the sample
collection business for capacity expansion for several products with added
safety features. Funds also were expended for the acquisition of equipment for
the Company's new identification and susceptibility testing product, and the new
BDProbeTec ET brand DNA probe diagnostic product. Funds expended outside of the
above segments included those related to the enterprise-wide program to upgrade
the Company's business systems, as discussed earlier. The Company expects
capital expenditures to increase about 20-25% in 1999 over 1998.
The Company expended $537 million, net of cash acquired, for business
acquisitions. The Company intends to use substantial
37
<PAGE>
amounts of the excess cash that is expected to be generated over the next
several years to pursue acquisitions and strategic alliances. In October 1998,
the Company acquired a home health care business for $15 million in cash,
subject to certain post-closing adjustments. The terms of this agreement provide
for additional consideration to be paid if the acquired entity's revenues exceed
certain targeted levels. The maximum amount of the remaining contingent
consideration is approximately $72 million, which if earned, would be payable
over the next four years.
Net cash provided by financing activities was $242 million during 1998 as
compared with a use of cash of $92 million during 1997. This change was due
primarily to a reduction in common share repurchases, as well as net proceeds
received from the issuance of commercial paper in 1998 versus net repayments
in 1997.
In 1998, the Company repurchased 1.8 million of its common shares at an average
cost of $24.34 for a total expenditure of $44 million, compared with repurchases
totaling $150 million in 1997. This reduction in share repurchases was
consistent with the Company's long-standing strategy of allocating funds to meet
the needs of businesses and to finance strategic acquisitions before funding
share repurchases. Although the Company expects to limit its share repurchases
in the future, authorization to repurchase up to an additional 21.3 million
shares remained at September 30, 1998 under a March 24, 1998 Board of
Directors' resolution.
During 1998, total debt increased $352 million, primarily as a result of
increased spending on acquisitions. Short-term debt was 33% of total debt at
year end, compared with 17% in 1997. The change in the percentage was
principally attributable to the use of short-term debt to finance a portion of
the MDD acquisition. The Company's weighted average cost of total debt at the
end of 1998 was 7.3%, compared with 7.6% at the end of last year. Debt to
capitalization at year end increased to 41.4% from 36.3% last year due to
additional borrowings related to acquisitions.
The Company negotiated a one-year, $100 million line of credit to supplement its
existing five-year, $500 million syndicated and committed revolving credit
facility. There were no borrowings outstanding under either facility at
September 30, 1998. These facilities can be used to support the Company's
commercial paper program, under which $205 million was outstanding at September
30, 1998, and for other general corporate purposes. In addition, the Company has
informal lines of credit outside the United States. In July 1998, the Company
issued to the public $200 million of 30-year non-redeemable notes with a coupon
rate of 6.7% and an effective rate of 7.08%. The Company used the net proceeds
to repay a portion of its commercial paper. 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. The Company has available $300 million
under a $500 million shelf registration statement filed in October 1997 for the
issuance of debt securities.
Return on equity decreased to 15.8% in 1998 from 22.1% in 1997, primarily due to
the impact of special and other charges and the MDD acquisition, including the
purchased in-process research and development charge.
- --------------------------------------------------------------------------------
Year 2000 Readiness Disclosure
- --------------------------------------------------------------------------------
General
The Company has developed and is well into implementing a Company-wide Year 2000
plan (the "Plan") with the intent to ensure that its computer equipment and
software and devices with date-sensitive embedded technology will be able to
distinguish between the year 1900 and the year 2000 and will function properly
with respect to all dates, whether in the twentieth or twenty-first centuries
(such functionality is referred to below as being "Year 2000 compliant"). An
inability to function accurately with respect to all such dates could result in
a system failure or disruption of operations, including a temporary inability to
process transactions, receive orders, send invoices or engage in other customary
business practices.
The Company's Plan includes a series of initiatives to ensure that all of the
Company's computer equipment and software will function properly into the next
millennium. "Computer equipment (or hardware) and software" includes systems
generally thought of as information-technology dependent, such as accounting,
data processing, and telephone equipment, as well as systems not obviously
information-technology dependent, such as manufacturing equipment, telecopier
machines, and security systems. These systems may contain embedded technology,
which requires that the Company's Plan include broad identification, assessment,
remediation and testing efforts.
Based upon its identification and assessment efforts to date, the Company
believes that certain of its computer equipment and software will require
replacement or modification. In addition, in the ordinary course of business,
the Company periodically replaces computer equipment and software, and in so
doing, seeks to acquire only Year 2000 compliant software and hardware. The
Company presently believes that its planned modifications or replacements of
certain existing computer equipment and software will be completed on a timely
basis so as to avoid any of the potential Year 2000-related disruptions or
malfunctions of its computer equipment and software that it has identified.
Project
The Company's Plan consists of four major focus areas: information-technology
("IT") systems; non-IT systems; third-party considerations; and products.
The tasks common to each of these areas of focus are: (i) the identification and
assessment of Year 2000 issues; (ii) prioritization of the identified issues;
(iii) assessment of compliance; (iv) remediation; (v) testing; and (vi) design
and implementation of contingency and business continuation plans.
38
<PAGE>
The Company is utilizing both internal and external resources to ensure that it
is Year 2000 compliant prior to any currently anticipated impact of the new
millennium. The following table set forth below summarizes, by focus area, the
current status and projected dates of completion for each of the related tasks:
Estimated % of Completion / Projected Date of Completion
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Focus Area IT Systems Non-IT Systems 3rd Party Considerations Products
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
100% 100% 100% 100%
Identification and Assessment --------- --------- --------- ---------
of Year 2000 Issues Completed Completed Completed Completed
- -------------------------------------------------------------------------------------------------------------------
100% 100% 100% 100%
Prioritization of Identified Issues --------- --------- --------- ---------
Completed Completed Completed Completed
- -------------------------------------------------------------------------------------------------------------------
100% 80% 15% 100%
Assessment of Compliance --------- --------- --------- ---------
Completed June 1999 September 1999 Completed
- -------------------------------------------------------------------------------------------------------------------
60% 30% -- 75%
Remediation --------- --------- --------- ---------
September 1999 June 1999 September 1999 June 1999
- -------------------------------------------------------------------------------------------------------------------
30% 15% -- 75%
Testing --------- --------- --------- ---------
September 1999 June 1999 September 1999 July 1999
- -------------------------------------------------------------------------------------------------------------------
-- -- -- 50%
Contingency and Business --------- --------- --------- ---------
Continuation Plans September 1999 June 1999 September 1999 May 1999
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
IT Systems
The IT Systems section focuses on the Company's computer hardware and software.
The Company estimates that as of October 31, 1998, it had completed
approximately 55% of the effort it believes necessary or prudent to adequately
address the potential Year 2000 issues it has identified in connection with its
IT systems. The balance of the work is underway and is scheduled for completion
on or about September 1999. The testing process is continuous, as hardware or
software is remediated, upgraded or replaced. The Company is in the early stages
of contingency and business continuation planning which it expects to complete
on or about September 1999.
Non-IT Systems
The non-IT Systems section includes the hardware, software and associated
embedded computer technologies that are used to operate Company facilities,
equipment and other activities that are not related to IT systems. The Company
estimates that as of October 31, 1998, it had completed approximately 50% of
the initiatives that it believes necessary or prudent to adequately address
potential Year 2000 issues affecting its non-IT systems. The Company intends to
commence its non-IT systems contingency and business continuation planning in
January 1999 and have all phases of the Plan relating to non-IT systems
completed on or about June 1999.
Third-Party Considerations
The Company is in the process of identifying, prioritizing and communicating
with critical suppliers, distributors and customers to determine the extent to
which the Company may be vulnerable in the event those parties fail to properly
identify and remediate their own Year 2000 issues. Detailed evaluations of the
most critical third parties have been initiated through questionnaires,
interviews, on-site visits and other available means. The Company intends to
monitor the progress made by those parties, test critical system interfaces and
formulate appropriate contingency and business continuation plans to address
third-party issues identified through its evaluations and assessments.
Products
The mission of the products team is to identify any Company products that are
not Year 2000 compliant and determine and implement on a timely basis
appropriate remedial steps. The Company has completed its identification of such
products and estimates that it will have completed the necessary upgrades and
replacements required to make such products Year 2000 compliant by June 1999.
Contingency and business continuation planning with respect to products that may
prove to be non-Year 2000 compliant is scheduled to be completed by May 1999.
Costs
The total cost of the Company's Year 2000 Plan is not expected to be material to
the Company's financial condition. The estimated total cost of the Plan is
approximately $15 million, and is being funded through operating cash flows. As
of September 30, 1998, the Company had incurred approximately $2.5 million in
costs related to its Year 2000 identification, assessment, remediation and
testing efforts. Of the total remaining anticipated costs of the Plan,
approximately $2 million is attributable to the
purchase of new software and hardware and approximately $4 million is
attributable to contingency and business continuation plans. The remaining $6.5
million relates to the repair, reprogramming or modification of hardware and
software, of which approximately $4 million represents the redeployment of
existing resources. None of the Company's other information technology projects
have been delayed or deferred as a result of the implementation of the Plan.
39
<PAGE>
Risks
The Company presently believes it has an effective Plan in place to anticipate
and resolve any potential Year 2000 issues in a timely manner. In the event,
however, that the Company does not properly identify Year 2000 issues or the
compliance assessment, remediation and testing is not conducted on a timely
basis with respect to the Year 2000 issues that are identified, there can be no
assurance that Year 2000 issues will not materially and adversely affect the
Company's results of operations or relationships with third parties. In
addition, disruptions in the economy generally resulting from Year 2000 issues
also could materially and adversely affect the Company. The amount of potential
liability and lost revenue that would be reasonably likely to result from the
failure by the Company and certain key third parties to achieve Year 2000
compliance on a timely basis cannot be reasonably estimated at this time. A
contingency plan has not yet been developed for dealing with the most reasonably
likely worst case scenario, and such scenario has not yet been clearly
identified. The Company expects to complete its analysis and contingency
planning by September 30, 1999.
The estimated costs of the Company's Plan and the dates by which the Company
believes it will have completed each of the phases of the Plan, are based upon
management's best estimates, which rely upon numerous assumptions regarding
future events, including the continued availability of certain resources, third-
party remediation plans, and other factors. These estimates, however, may prove
not to be accurate, and actual results could differ materially from those
anticipated. Factors that could result in material differences include, without
limitation, the availability and cost of personnel with the appropriate training
and experience, the ability to identify, assess, remediate and test all relevant
computer codes and embedded technology, and similar uncertainties. In addition,
Year 2000-related issues may lead to possible third-party claims, the impact of
which cannot yet be estimated. No assurance can be given that the aggregate cost
of defending and resolving such claims, if any, would not have a material
adverse effect on the Company.
- --------------------------------------------------------------------------------
Other Matters
- --------------------------------------------------------------------------------
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 January 1, 1999. 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 believes that the fundamentally non-cyclical 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 1998, inflation did not have a material impact on the Company's overall
operations.
- --------------------------------------------------------------------------------
Litigation
- --------------------------------------------------------------------------------
The Company, along with a number of other manufacturers, has been named as a
defendant in approximately 194 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 is vigorously defending these lawsuits.
The Company, along with another manufacturer and several medical product
distributors, has been named as a defendant in seven product liability lawsuits
relating to health care workers who allegedly sustained accidental needle
sticks, but have not become infected with any disease. The cases have been filed
on behalf of an unspecified number of health care workers in seven different
states, seeking class action certification under the laws of these states. To
date, no class has been certified in any of these cases. The actions are pending
in state court in Texas, under the caption Calvin vs. Becton Dickinson et al.
(Case No. 342-173329-98, Tarrant County District Court), filed on April 9, 1998;
in Federal court in Ohio, under the caption Grant vs. Becton Dickinson et al.
(Case No. C2 98-844, Southern District of Ohio), filed on July 22, 1998; in
state court in California, under the caption Chavez vs. Becton Dickinson (Case
No. 722978, San Diego County Superior Court), filed on August 4, 1998; in state
court in Illinois, under the caption McCaster vs. Becton Dickinson et al. (Case
No. 98L09478, Cook County Circuit Court), filed on August 13, 1998; in state
court in Oklahoma, under the caption Palmer vs. Becton Dickinson et al. (Case
No. CJ-98-685, Sequoyah County District Court), filed on October 27, 1998; in
state court in Alabama, under the caption Daniels vs. Becton Dickinson et al.
(Case No. CV 1998 2757, Montgomery County Circuit Court), filed on October 30,
1998; and in state court in Florida, under the caption Delgado vs. Becton
Dickinson et al. (Case No. 98-5608, Hillsborough County Circuit Court), filed on
November 9, 1998.
Generally, these actions allege that health care workers have sustained needle
sticks using hollow-bore needle devices
40
<PAGE>
manufactured by the Company and, as a result, require medical testing,
counseling and/or treatment. Several actions additionally allege that the health
care workers have suffered mental anguish. In addition, in the Chavez matter,
the plaintiff asserts a claim for unfair competition, alleging that the Company
has suppressed the market for safety-engineered products through various means.
Plaintiffs seek money damages in all actions. The plaintiff in the Chavez
matter, in addition to money damages, seeks disgorgement of profits the Company
has purportedly obtained as a result of alleged unfair competition.
The pending class actions are in preliminary stages. The Company intends to
vigorously oppose class certification and defend these lawsuits.
The Company, along with another manufacturer, a group purchasing organization
("GPO") and three hospitals, has been named as a defendant in an antitrust
action brought pursuant to the Texas Free Enterprise Act ("TFEA"). The action is
pending in state court in Texas, under the caption Retractable Technologies Inc.
vs. Becton Dickinson and Company et al. (Case No. 5333*JG98, Brazoria County
District Court), filed on August 4, 1998. Plaintiff, a manufacturer of
retractable syringes, alleges that the Company's contracts with GPOs exclude
plaintiff from the market in syringes and blood collection products, in
violation of the TFEA. Plaintiff also alleges that the Company has conspired
with other manufacturers to maintain its market share in these products.
Plaintiff seeks money damages. The pending action is in preliminary stages. The
Company intends to mount a vigorous defense in this action.
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.
- --------------------------------------------------------------------------------
Environmental Matters
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
Adoption of New Accounting Standards
- --------------------------------------------------------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130, "Reporting Comprehensive Income". This Statement requires the presentation
of comprehensive income, which consists of net income and other comprehensive
income, and its components in a full set of financial statements. As required,
the Company will adopt the provisions of this Statement in the first quarter of
fiscal year 1999. For additional discussion, see Note 11 of the Notes to
Consolidated Financial Statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This Statement 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. As required by the
Statement, the Company will adopt the provisions of SFAS No. 131 in its fiscal
year-end 1999 financial statements and different operating segments may be
reported by the Company.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits". This Statement standardizes the
disclosure requirements, requires additional information on changes in benefit
obligations and fair values of plan assets, and eliminates certain disclosures.
As required by the Statement, the Company will adopt the new disclosure rules in
its fiscal year-end 1999 financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". The Company is required to adopt the
provisions of this Statement no later than its fiscal year 2000. This Statement
requires that all derivatives be recorded in the balance sheet as either an
asset or liability measured at fair value. The Statement requires that changes
in the derivative's fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. The Company is in the process of
evaluating this Statement and has not yet determined the future impact on the
Company's consolidated financial statements.
- --------------------------------------------------------------------------------
1997 Compared With 1996
- --------------------------------------------------------------------------------
Worldwide revenues for 1997 rose 1.5% to $2.8 billion. Excluding the estimated
impacts of unfavorable foreign currency translation of 3% and the net impact of
acquisitions and divestitures, the resulting growth rate was 5%. This growth
rate resulted primarily from volume increases and an improved product mix in
both segments. Price increases were 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. Medical revenues for 1997 of $1.5 billion
increased 7% over the prior year, excluding the estimated unfavorable impact of
foreign currency translation and the decrease in revenues related to divested
non-
41
<PAGE>
core product lines. Diagnostic revenues for 1997 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%.
The Company's gross profit margin rose to 49.7%, compared with 48.4% in 1996,
reflecting the Company's continued success in improving manufacturing efficiency
as well as a more profitable mix of products sold.
Selling and administrative expense 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 $15 million of charges for purchased in-process research and
development recorded in 1997, research and development was 5.9% of revenues,
compared with 5.6% in 1996. This spending included additional funding for new
blood collection and infusion therapy safety-engineered products, and emerging
new platforms.
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. "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 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.
Diluted earnings per share were $1.15, an increase of 10% over $1.05 in 1996.
The purchased in-process research and development charges recorded in 1997
decreased diluted earnings per share by $.06, and the estimated impact of
unfavorable foreign currency translation was $.08 per share. Adjusting for these
two items, diluted earnings per share grew 23% over 1996.
Cash provided by operations continued to be the Company's primary source of
funds to finance operating needs and capital expenditures. Capital expenditures
were $170 million, compared with $146 million in 1996. Medical and Diagnostic
capital spending totaled $106 million and $50 million, respectively, in 1997.
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 microbiology product line.
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.
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 ratio was principally attributable
to the repayment of short-term debt with the proceeds of the Company's issuances
of long-term debt.
Return on equity increased to 22.1% in 1997, from 20.8% in 1996.
- --------------------------------------------------------------------------------
Forward-Looking Statements
- --------------------------------------------------------------------------------
The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements (as defined under Federal securities laws) made by or
on behalf of our Company. Our Company and its representatives from time to time
may make certain verbal or written forward-looking statements regarding the
Company's performance (including future revenues, products and income), or
events or developments that the Company expects to occur or anticipates
occurring in the future. All such statements 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 practices or regulation, as well as other
factors discussed herein and in other of the Company's filings with the
Securities Exchange Commission.
42
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Seven-Year Summary of Selected Financial Data Becton, Dickinson and Company
Years Ended September 30
Dollars in thousands,
except per-share amounts 1998 1997 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Operations
Revenues $3,116,873 $2,810,523 $2,769,756 $2,712,525 $2,559,461 $2,465,405 $2,365,317
Gross Profit Margin 50.6% 49.7% 48.4% 47.0% 45.3% 44.5% 45.0%
Operating Income 405,432 450,515 431,249 396,650 325,038 270,425 328,592
Interest Expense, Net 56,340 39,373 37,409 42,833 47,624 53,412 49,116
Income Before Income
Taxes and Cumulative
Effect of Accounting
Changes 340,866 422,640 393,676 349,578 296,159 222,894 269,457
Income Tax Provision 104,298 122,566 110,229 97,882 68,985 10,054 68,704
Income Before Cumulative
Effect of Accounting
Changes 236,568 300,074 283,447 251,696 227,174 212,840 200,753
Net Income 236,568 300,074 283,447 251,696 227,174 71,783(A) 200,753
Diluted Earnings Per
Share:
-Before Cumulative
Effect of
Accounting Changes .90 1.15 1.05 .89 .76 .67 .63
-Net Income .90 1.15 1.05 .89 .76 .22(A) .63
Dividends Per Common Share .29 .26 .23 .21 .19 .17 .15
Average Common and Common
Equivalent Shares
Outstanding-
Assuming Dilution
(thousands) 262,128 259,586 267,646 280,350 298,618 313,208 313,442
---------------------------------------------------------------------------------------------------
Financial Position
Current Assets $1,542,762 $1,312,609 $1,276,841 $1,327,518 $1,326,551 $1,150,742 $1,221,209
Current Liabilities 1,091,913 678,197 766,122 720,035 678,321 636,062 713,335
Current Ratio 1.4 1.9 1.7 1.8 2.0 1.8 1.7
Property, Plant and
Equipment, Net 1,302,650 1,250,705 1,244,148 1,281,031 1,376,349 1,403,070 1,429,519
Total Assets 3,846,038 3,080,252 2,889,752 2,999,505 3,159,533 3,087,565 3,177,675
Long-Term Debt 765,176 665,449 468,223 557,594 669,157 680,581 685,081
Shareholders' Equity 1,613,820 1,385,433 1,325,183 1,398,385 1,481,694 1,456,953 1,594,926
Book Value Per Common
Share 6.51 5.68 5.36 5.37 5.27 4.88 5.25
---------------------------------------------------------------------------------------------------
Financial Relationships
Income Before Income
Taxes and Cumulative
Effect of Accounting
Changes as a Percent
of Revenues 10.9% 15.0% 14.2% 12.9% 11.6% 9.0% 11.4%
Return on Total Assets(B) 11.7% 15.9% 15.2% 13.3% 11.5% 9.2%(C) 11.1%
Return on Equity 15.8% 22.1% 20.8% 17.5% 15.5% 13.3%(C) 13.6%
Debt to Capitalization(D) 41.4% 36.3% 34.3% 35.2% 36.1% 37.8% 36.1%
---------------------------------------------------------------------------------------------------
Additional Data
Depreciation and
Amortization $ 228,749 $ 209,771 $ 200,482 $ 207,756 $ 203,705 $ 189,756 $ 169,638
Capital Expenditures 181,416 170,349 145,929 123,760 123,017 184,168 185,559
Research and Development
Expense 217,900 180,626 154,220 144,201 144,227 139,141 125,207
Number of Employees 21,700 18,900 17,900 18,100 18,600 19,000 19,100
Number of Shareholders 9,784 8,944 8,027 7,712 7,489 7,463 7,086
---------------------------------------------------------------------------------------------------
</TABLE>
All average shares outstanding and per-share data have been restated to reflect
the 1998 two-for-one stock split and to conform to the SFAS No. 128
requirements.
(A) Includes after-tax charge of $141,057, or $.45 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.
43
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Summary by Business Segment Becton, Dickinson and Company
(See Note 15 to Financial Statements)
Thousands of dollars 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
Medical Supplies and Devices $ 1,714,952 $ 1,510,881 $ 1,509,417
Diagnostic Systems 1,401,921 1,299,642 1,260,339
-----------------------------------------------------------------------------------
Total Segments $ 3,116,873 $ 2,810,523 $ 2,769,756
===================================================================================
Segment Operating Income
Medical Supplies and Devices $ 320,184(A) $ 349,613 $ 342,015
Diagnostic Systems 193,065(B) 194,611 174,656
-----------------------------------------------------------------------------------
Total Segments 513,249 544,224 516,671
Unallocated Expenses (172,383)(C) (121,584) (122,995)
-----------------------------------------------------------------------------------
Income Before Income Taxes $ 340,866 $ 422,640 $ 393,676
===================================================================================
Identifiable Assets
Medical Supplies and Devices $ 2,092,828 $ 1,324,035 $ 1,337,355
Diagnostic Systems 1,474,501 1,423,612 1,209,970
-----------------------------------------------------------------------------------
Total Segments 3,567,329 2,747,647 2,547,325
Corporate(D) 278,709 332,605 342,427
-----------------------------------------------------------------------------------
Total $ 3,846,038 $ 3,080,252 $ 2,889,752
===================================================================================
Capital Expenditures
Medical Supplies and Devices $ 105,417 $ 106,298 $ 90,918
Diagnostic Systems 65,870 50,390 49,651
-----------------------------------------------------------------------------------
Total Segments 171,287 156,688 140,569
Corporate 10,129 13,661 5,360
-----------------------------------------------------------------------------------
Total $ 181,416 $ 170,349 $ 145,929
===================================================================================
Depreciation and Amortization
Medical Supplies and Devices $ 104,684 $ 88,603 $ 89,727
Diagnostic Systems 113,388 108,971 101,618
-----------------------------------------------------------------------------------
Total Segments 218,072 197,574 191,345
Corporate 10,677 12,197 9,137
-----------------------------------------------------------------------------------
Total $ 228,749 $ 209,771 $ 200,482
===================================================================================
</TABLE>
(A) Includes $43,181 of the special charges discussed in Note 5.
(B) Includes $45,552 of the special charges discussed in Note 5.
(C) Includes $2,212 of the special charges discussed in Note 5.
(D) 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.
44
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Summary by Geographic Area Becton, Dickinson and Company
(See Note 15 to Financial Statements)
Thousands of dollars 1998 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues
United States $ 1,690,282 $ 1,486,701 $ 1,423,883
Europe 873,526 787,335 835,984
Other 553,065 536,487 509,889
-----------------------------------------------------------------------------------
Total(A) $ 3,116,873 $ 2,810,523 $ 2,769,756
===================================================================================
Area Operating Income
United States $ 395,434(B) $ 383,186 $ 349,560
Europe 105,395(C) 147,040 148,812
Other 12,420(D) 13,998 18,299
-----------------------------------------------------------------------------------
Total 513,249 544,224 516,671
Unallocated Expenses (172,383)(E) (121,584) (122,995)
-----------------------------------------------------------------------------------
Income Before Income Taxes $ 340,866 $ 422,640 $ 393,676
===================================================================================
Identifiable Assets
United States $ 1,840,257 $ 1,653,144 $ 1,459,260
Europe 1,128,084 601,398 649,206
Other 598,988 493,105 438,859
-----------------------------------------------------------------------------------
Total 3,567,329 2,747,647 2,547,325
Corporate(F) 278,709 332,605 342,427
-----------------------------------------------------------------------------------
Total $ 3,846,038 $ 3,080,252 $ 2,889,752
===================================================================================
</TABLE>
(A) Interarea revenues to affiliates amounted to $423,370 in 1998, $406,898 in
1997 and $368,834 in 1996. These revenues, which are principally from the
United States, are eliminated in consolidation. Intersegment revenues are
not material.
(B) Includes $56,703 of the special charges discussed in Note 5.
(C) Includes $21,702 of the special charges discussed in Note 5.
(D) Includes $10,328 of the special charges discussed in Note 5.
(E) Includes $2,212 of the special charges discussed in Note 5.
(F) 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.
45
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Income Becton, Dickinson and Company
Years Ended September 30
Thousands of dollars, except per-share amounts 1998 1997 1996
<S> <C> <C> <C>
Operations Revenues $3,116,873 $ 2,810,523 $2,769,756
Cost of products sold 1,541,032 1,413,311 1,429,177
Selling and administrative expense 861,564 766,071 755,110
Research and development expense 217,900 180,626 154,220
Special charges 90,945 -- --
------------------------------------------------------------------------------
Total Operating Costs and Expenses 2,711,441 2,360,008 2,338,507
------------------------------------------------------------------------------
Operating Income 405,432 450,515 431,249
Interest expense, net (56,340) (39,373) (37,409)
Other (expense) income, net (8,226) 11,498 (164)
------------------------------------------------------------------------------
Income Before Income Taxes 340,866 422,640 393,676
Income tax provision 104,298 122,566 110,229
------------------------------------------------------------------------------
Net Income $ 236,568 $ 300,074 $ 283,447
==============================================================================
Earnings Per Basic $.95 $1.21 $ 1.10
Share Diluted $.90 $1.15 $ 1.05
==============================================================================
</TABLE>
See notes to consolidated financial statements
48
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheets Becton, Dickinson and Company
September 30
Thousands of dollars, except per-share amounts 1998 1997
<S> <C> <C>
Assets Current Assets
Cash and equivalents $ 83,251 $ 112,639
Short-term investments 7,390 28,316
Trade receivables, net 726,558 595,685
Inventories 536,791 438,337
Prepaid expenses, deferred taxes and other 188,772 137,632
-------------------------------------------------------------------------------
Total Current Assets 1,542,762 1,312,609
Property, Plant and Equipment, Net 1,302,650 1,250,705
Goodwill, Net 412,070 164,097
Other Intangibles, Net 334,275 167,847
Other 254,281 184,994
-------------------------------------------------------------------------------
Total Assets $3,846,038 $3,080,252
===============================================================================
Liabilities Current Liabilities
Short-term debt $ 385,162 $ 132,440
Accounts payable 208,500 128,476
Accrued expenses 278,964 226,182
Salaries, wages and related items 180,854 145,396
Income taxes 38,433 45,703
-------------------------------------------------------------------------------
Total Current Liabilities 1,091,913 678,197
Long-Term Debt 765,176 665,449
Long-Term Employee Benefit Obligations 326,620 306,514
Deferred Income Taxes and Other 48,509 44,659
Commitments and Contingencies -- --
Shareholders' ESOP convertible preferred stock - $1 par value:
Equity authorized - 1,016,949 shares; issued and
outstanding - 829,815 shares in 1998 and
866,286 shares in 1997 48,959 51,111
Common stock - $1 par value: authorized
640,000,000 shares in 1998 and 320,000,000 in
1997; issued - 332,662,160 shares in 1998 and
167,244,580 shares in 1997 332,662 167,245
Capital in excess of par value -- 83,422
Cumulative currency translation adjustments (83,216) (86,870)
Retained earnings 2,350,781 2,249,463
Unearned ESOP compensation (24,463) (28,620)
Deferred compensation 4,903 --
Common shares in treasury - at cost - 84,818,944
shares in 1998 and 45,161,091 shares in 1997 (1,015,806) (1,050,318)
-------------------------------------------------------------------------------
Total Shareholders' Equity 1,613,820 1,385,433
-------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 3,846,038 $ 3,080,252
===============================================================================
</TABLE>
See notes to consolidated financial statements
49
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows Becton, Dickinson and Company
Years Ended September 30
Thousands of dollars 1998 1997 1996
<S> <C> <C> <C>
Operating Net income $ 236,568 $ 300,074 $ 283,447
Activities Adjustments to net income to derive
net cash provided by operating activities:
Depreciation and amortization 228,749 209,771 200,482
Non-cash special charges 58,445 -- --
Deferred income taxes (32,332) (29,695) (13,497)
Purchased in-process research
and development 30,000 14,750 --
Change in operating assets
(excludes impact of acquisitions):
Trade receivables (77,649) (30,014) (21,589)
Inventories (54,066) (24,074) (10,141)
Prepaid expenses, deferred taxes and other (42,378) 8,301 (20,581)
Accounts payable, income taxes
and other liabilities 133,500 (11,760) 28,596
Other, net 19,925 5,394 13,726
-------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 500,762 442,747 460,443
-------------------------------------------------------------------------------------------
Investing Capital expenditures (181,416) (170,349) (145,929)
Activities Acquisitions of businesses, net of cash acquired (536,501) (200,832) (16,501)
Proceeds from dispositions of businesses -- 24,343 38,027
(Purchases) proceeds of short-term investments, net (3,197) 2,544 5,190
Proceeds from sales of long-term investments 26,709 31,307 29,208
Purchases of long-term investments (18,925) (6,000) (3,125)
Other, net (56,438) (45,079) (16,736)
-------------------------------------------------------------------------------------------
Net Cash Used for Investing Activities (769,768) (364,066) (109,866)
-------------------------------------------------------------------------------------------
Financing Change in short-term debt 127,802 (77,687) 71,103
Activities Proceeds of long-term debt 190,639 292,168 --
Payment of long-term debt (2,951) (118,686) (130,597)
Issuance of common stock 46,013 29,393 35,366
Repurchase of common stock (44,476) (150,003) (325,874)
Dividends paid (75,332) (67,161) (61,660)
-------------------------------------------------------------------------------------------
Net Cash Provided by (Used for)
Financing Activities 241,695 (91,976) (411,662)
-------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and
equivalents (2,077) (9,217) (2,270)
-------------------------------------------------------------------------------------------
Net Decrease in Cash and Equivalents (29,388) (22,512) (63,355)
Opening Cash and Equivalents 112,639 135,151 198,506
-------------------------------------------------------------------------------------------
Closing Cash and Equivalents $ 83,251 $ 112,639 $ 135,151
===========================================================================================
</TABLE>
See notes to consolidated financial statements
50
<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 51
2 Acquisitions 52
3 Employee Stock Ownership Plan (ESOP)/
Savings Incentive Plan 53
4 Benefit Plans 53
5 Special and Other Charges 55
6 Other (Expense) Income, Net 55
7 Income Taxes 55
8 Supplemental Balance Sheet Information 56
9 Debt 57
10 Financial Instruments 57
11 Shareholders' Equity 59
12 Commitments and Contingencies 60
13 Stock Plans 61
14 Earnings Per Share 63
15 Business Segment Data 63
- --------------------------------------------------------------------------------
1 Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
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 principally 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 and is
amortized over periods principally ranging from fifteen to forty years, using
the straight-line method. Other intangibles, which include patents, technology
and other, are amortized over periods principally ranging from three to forty
years, using the straight-line method. Goodwill and other intangibles are
periodically reviewed to assess recoverability from future operations using
undiscounted cash flows. An impairment loss is recognized in operating results
to the extent their carrying value exceeds fair value.
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
In December 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share", which specifies the
computation, presentation and disclosure requirements for earnings per share for
entities with publicly held common stock or potential common stock. This
Statement simplifies the computation of earnings per share by replacing the
previously reported primary and fully diluted earnings per share with basic and
diluted earnings per share, respectively. Unlike primary earnings per share,
basic earnings per share exclude any dilutive effect of options, warrants and
convertible securities. Diluted earnings per share are very similar to the
previously reported fully diluted earnings per share. For all periods, per-share
data has been restated to conform to the SFAS No. 128 requirements and to
reflect a two-for-one stock split, the shares for which were distributed in
August 1998.
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
51
<PAGE>
exposures. The Company does not use derivative financial instruments for trading
or speculative purposes.
The Company hedges its foreign currency exposures by entering into offsetting
forward exchange contracts and purchased currency options, when it deems
appropriate. 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 debt and
investments. In connection with issuances of long-term debt, the Company may
also enter into forward rate 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 derivative financial instruments using the deferral
method of accounting when such instruments are intended to hedge an identifiable
firm foreign currency commitment and are designated as, and effective as,
hedges. Foreign exchange exposures arising from certain receivables, payables,
and short-term borrowings that do not meet the criteria for the deferral method
are marked to market. Resulting gains and losses are recognized currently in
Other (expense) income, net, largely offsetting the respective losses and gains
recognized on the underlying exposures.
The Company designates its interest rate hedge agreements as hedges of the
underlying debt. Interest expense on the debt is adjusted to include the
payments made or received under such hedge agreements.
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.
- --------------------------------------------------------------------------------
2 Acquisitions
- --------------------------------------------------------------------------------
During fiscal year 1998, the Company acquired six businesses for an aggregate of
$545,603 in cash and up to 595,520 shares of the Company's common stock, or
297,760 shares on a pre-split basis. At September 30, 1998, 74,440 of these
shares, or 37,220 shares on a pre-split basis, remained in escrow, pending the
resolution of certain post-closing matters. These acquisitions were recorded
under the purchase method of accounting and, therefore, the purchase prices have
been allocated to assets acquired and liabilities assumed based on estimated
fair values. The results of operations of the acquired companies were included
in the consolidated results of the Company from their respective acquisition
dates.
Included in 1998 acquisitions is the purchase of the Medical Devices Division
("MDD") of The BOC Group, which was completed in April, for approximately
$457,000 in cash, subject to certain post-closing adjustments. In connection
with this acquisition, a charge of $30,000 for purchased in-process research and
development was included in the Company's third quarter results. This charge
represented the fair value of certain acquired research and development projects
that were determined to have not reached technological feasibility. The
estimated fair value of assets acquired and liabilities assumed relating to the
MDD acquisition, which is subject to further refinement, is summarized below,
after giving effect to the write-off of purchased in-process research and
development:
- -----------------------------------------
Working capital $ 24,996
Property, plant and equipment 50,907
Other intangibles 172,472
Goodwill 195,313
Other assets 1,190
Long-term liabilities (18,173)
- -----------------------------------------
Goodwill and other intangibles related to MDD are being amortized on a straight-
line basis over their useful lives, which range from 15 to 25 years. The Company
expects to finalize its plans for combining the acquired MDD businesses with its
existing operations by the middle of fiscal 1999. Any resultant severance and
exit costs will be reflected as an adjustment to the allocation of the purchase
price.
The following unaudited pro forma data summarize the results of operations for
the periods indicated as if the MDD acquisition had been completed as of the
beginning of the periods presented. The pro forma data give effect to actual
operating results prior to the acquisition, adjusted to include the pro forma
effect of interest expense, amortization of intangibles and income taxes. The
1998 pro forma data include the $30,000 for purchased in-process research and
development. These pro forma amounts do not purport to be indicative of the
results that would have actually been obtained if the acquisition occurred as of
the beginning of the periods presented or that may be obtained in the future.
<TABLE>
<CAPTION>
Twelve Months Ended Twelve Months Ended
September 30, 1998 September 30, 1997
- ---------------------------------------------------------------
<S> <C> <C>
Revenues $3,206,837 $3,005,634
Net income 227,664 284,806
Earnings per share:
Basic .91 1.15
Diluted .86 1.09
-------------------------------
</TABLE>
52
<PAGE>
Unaudited pro forma consolidated results after giving effect to the other
businesses acquired during fiscal 1998 would not have been materially different
from the reported amounts for either year.
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 of $217,370 in
cash. These acquisitions were recorded under the purchase method of accounting,
and accordingly, their purchase prices have been allocated to assets acquired
and liabilities assumed based on estimated fair values. Goodwill related to
PharMingen and Difco is being amortized on a straight-line basis over 15 and 20
years, respectively. The results of operations for these acquisitions are
included in the accompanying consolidated financial statements from the
respective dates of acquisition. In connection with the Difco and PharMingen
acquisitions, a charge of $14,750 for purchased in-process research and
development was included in the 1997 results of operations. This charge
represented the fair value of certain acquired research and development projects
that were determined to have not reached technological feasibility. The assumed
liabilities for these acquisitions included approximately $17,500 for severance
and other exit costs associated with the closing of certain Difco facilities,
which are expected to be substantially paid over the next twelve months.
- --------------------------------------------------------------------------------
3 Employee Stock Ownership Plan
(ESOP)/Savings Incentive Plan
- --------------------------------------------------------------------------------
The Company has an Employee Stock Ownership Plan ("ESOP") as part of its
voluntary defined contribution plan (Savings Incentive 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 6.4 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 Incentive Plan follow:
1998 1997 1996
- --------------------------------------------------------------------
Total expense of the Savings
Incentive Plan $ 4,183 $ 4,257 $ 5,115
Compensation expense (included
in total expense above) $ 1,975 $ 2,087 $ 2,693
Dividends on ESOP shares used
for debt service $ 3,235 $ 3,366 $ 3,484
Number of preferred shares allocated
at September 30 373,884 357,465 325,632
============================
The Company guarantees employees' contributions to the fixed income fund of the
Savings Incentive Plan. The amount guaranteed was $88,055 at September 30, 1998.
- --------------------------------------------------------------------------------
4 Benefit Plans
- --------------------------------------------------------------------------------
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:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost: benefits earned
during the year $ 21,436 $ 19,946 $ 20,217
Interest cost on projected
benefit obligation 33,663 31,389 29,204
Return on assets:
Actual gain (29,717) (103,350) (53,055)
Net amortization and deferral (19,302) 65,187 18,014
-------------------------------
Expected return (49,019) (38,163) (35,041)
-------------------------------
Net pension cost $ 6,080 $ 13,172 $ 14,380
===============================
</TABLE>
Rate assumptions used in accounting for the domestic defined benefit plans were:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate:
End of year 6.75% 7.50% 7.75%
Beginning of year 7.50% 7.75% 7.50%
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%
=============================
</TABLE>
53
<PAGE>
The following table sets forth the funded status and amounts recognized in the
consolidated balance sheets at September 30, 1998 and 1997 for the Company's
domestic defined benefit pension plans:
1998 1997
- ----------------------------------------------------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $391,797 $339,139
===================
Accumulated benefit obligation $409,777 $354,440
===================
Projected benefit obligation $517,354 $467,866
Plan assets at fair value 471,118 480,435
-------------------
Plan assets (less than) in excess of projected
benefit obligation (46,236) 12,569
Unrecognized net gain (33,467) (85,336)
Unrecognized net asset at October 1, 1985,
net of amortization (1,213) (1,820)
-------------------
Net pension liability recognized
in the consolidated balance sheets $ 80,916 $ 74,587
===================
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:
1998 1997 1996
- -----------------------------------------------------------------
Service cost: benefits earned
during the year $ 2,239 $ 2,154 $ 2,251
Interest cost on projected benefit
obligation 12,015 11,467 10,925
Net amortization and deferral (5,591) (6,364) (6,334)
---------------------------
Postretirement benefit cost $ 8,663 $ 7,257 $ 6,842
===========================
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, 1998 and 1997 was as follows:
1998 1997
- ---------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $133,737 $123,044
Fully eligible active participants 15,715 14,892
Other active participants 34,180 28,204
-------------------
Total 183,632 166,140
Unrecognized gain from plan amendments 59,685 69,432
Unrecognized actuarial loss (31,576) (21,225)
-------------------
Accrued postretirement benefit liability $211,741 $214,347
===================
At September 30, 1998 and 1997, health care cost trends of 10% and 11%,
respectively, pre-age 65 and 7% and 8%, respectively, post-age 65 were assumed.
These rates were assumed to decrease gradually to an ultimate rate of 5%
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, 1998 by $5,901 and the
postretirement cost for 1998 by $398. The discount rate used to estimate the
postretirement benefit cost was 7.5% in 1998 and 7.75% in 1997. The discount
rate used to estimate the accumulated postretirement benefit obligation at
September 30, 1998 was 6.75% and 7.5% at September 30, 1997.
In February 1998, the Financial Accounting Standards Board issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits". This
Statement standardizes the disclosure requirements, requires additional
information on changes in benefit obligations and fair values of plan assets,
and eliminates certain disclosures. As required by the Statement, the Company
will adopt the new disclosure rules in its year-end 1999 financial statements.
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.
1998 1997 1996
- -------------------------------------------------------------
Postemployment benefit costs $24,000 $25,500 $12,200
=============================
54
<PAGE>
- --------------------------------------------------------------------------------
5 Special and Other Charges
- --------------------------------------------------------------------------------
During the third quarter of 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 Company's plan for restructuring its manufacturing operations included the
closure of a surgical blade plant in the United States and the consolidation of
certain other production functions. The restructuring plan will be substantially
completed over the next twelve to eighteen months, and includes approximately
$35,000 in special charges related primarily to severance and other termination
costs and losses from the disposal of assets. The Company expects that
approximately 350 people will be affected by this plan. As of September 30,
1998, no significant amounts have been charged against the related accruals. The
write-down of assets includes approximately $38,000 in special charges to
recognize an impairment loss related primarily to goodwill associated with prior
acquisitions in the manual microbiology business. The sustained decline in sales
volume of this business, combined with the Company's increased focus on new and
developing alternative technologies, created an impairment indicator that
required a reassessment of recoverability. An impairment loss was recorded as a
result of the carrying value of these assets exceeding their fair value, as
calculated on the basis of discounted estimated future cash flows. The remaining
special charges of approximately $18,000 consisted of various other one-time
charges.
The Company also recorded $22,000 of charges in 1998, primarily in the third and
fourth quarters, associated with the reengineering of business processes
relating to the enterprise-wide program to upgrade its business systems. The
majority of these charges are 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.
- --------------------------------------------------------------------------------
6 Other (Expense) Income, Net
- --------------------------------------------------------------------------------
Other (expense), net in 1998 included foreign exchange losses of $11,038,
including hedging costs, and a gain of $2,909 on the sale of an investment.
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 included income of $8,216 from a net cash
settlement received in connection with one of the Company's patents and foreign
exchange losses of $8,127, including hedging costs.
- --------------------------------------------------------------------------------
7 Income Taxes
- --------------------------------------------------------------------------------
The provision for income taxes is composed of the following charges (benefits):
1998 1997 1996
- -----------------------------------------------------------------
Current:
Domestic:
Federal $ 67,740 $ 81,588 $ 70,769
State and local, including
Puerto Rico 35,078 34,442 33,521
Foreign 33,812 36,231 19,436
-----------------------------
136,630 152,261 123,726
-----------------------------
Deferred:
Domestic (30,349) (15,798) (19,769)
Foreign (1,983) (13,897) 6,272
-----------------------------
(32,332) (29,695) (13,497)
-----------------------------
$104,298 $122,566 $110,229
=============================
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, 1998 and 1997, net current deferred tax assets
of $70,490 and $62,702, respectively, were included in Prepaid expenses,
deferred taxes and other. Net non-current deferred tax assets of $53,712 and
$49,046, respectively, were included in Other non-current assets. Net current
deferred tax liabilities of $3,613 and $8,313, respectively, were included in
Current Liabilities - Income taxes. Net non-current deferred tax liabilities of
$13,527 and $15,389, 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, 1998, the
cumulative amount of such undistributed earnings approximated $983,000 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.
55
<PAGE>
Deferred income taxes at September 30 consisted of:
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------------------------
Assets Liabilities Assets Liabilities Assets Liabilities
<S> <C> <C> <C> <C> <C> <C>
Compensation and benefits $144,719 $ -- $143,665 $ -- $133,061 $ --
Property and equipment -- 100,741 -- 100,169 -- 108,455
Other 147,449 74,026 131,319 74,163 89,853 27,400
---------------------------------------------------------------------
292,168 174,767 274,984 174,332 222,914 135,855
Valuation allowance (10,339) -- (12,606) -- (6,886) --
---------------------------------------------------------------------
$281,829 $174,767 $262,378 $174,332 $216,028 $135,855
=====================================================================
</TABLE>
A reconciliation of the federal statutory tax rate to the Company's effective
tax rate follows:
1998 1997 1996
- -----------------------------------------------------------------
Federal statutory tax rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal tax benefit .1 1.3 1.4
Effect of foreign and
Puerto Rican income (3.7) (5.3) (4.2)
Foreign tax credits (2.4) (2.3) (2.5)
Research tax credit (1.6) (.3) (.3)
Purchased in-process
research and development 3.1 1.2 --
Other, net .1 (.6) (1.4)
------------------------------
30.6% 29.0% 28.0%
------------------------------
The approximate dollar and diluted per-share amounts of tax reductions related
to tax holidays in various countries in which the Company does business were:
1998-$18,000 and $.07; 1997-$17,400 and $.07; and 1996-$17,700 and $.07. The
tax holidays expire at various dates through 2010.
The Company made income tax payments, net of refunds, of $117,321 in 1998,
$151,050 in 1997 and $126,236 in 1996.
The components of Income Before Income Taxes follow:
1998 1997 1996
- -------------------------------------------------------------
Domestic, including Puerto Rico $238,109 $264,910 $231,021
Foreign 102,757 157,730 162,655
----------------------------
$340,866 $422,640 $393,676
============================
- --------------------------------------------------------------------------------
8 Supplemental Balance Sheet Information
- --------------------------------------------------------------------------------
Trade Receivables
Allowances for doubtful accounts and cash discounts netted against trade
receivables were $35,518 and $28,733 at September 30, 1998 and 1997,
respectively.
Inventories 1998 1997
- --------------------------------------------------------------------
Materials $122,232 $ 92,307
Work in process 86,239 79,519
Finished products 328,320 266,511
---------------------
$536,791 $438,337
=====================
Inventories valued under the LIFO method were $285,384 in 1998 and $252,243 in
1997. Inventories valued under the LIFO method would have been higher by
approximately $18,900 in 1998 and $32,200 in 1997, if valued on a current cost
basis.
Property, Plant and Equipment 1998 1997
- --------------------------------------------------------------------
Land $ 72,158 $ 60,912
Buildings 916,353 893,696
Machinery, equipment and fixtures 1,703,788 1,561,521
Leasehold improvements 34,724 33,699
-----------------------
2,727,023 2,549,828
Less allowances for depreciation
and amortization 1,424,373 1,299,123
-----------------------
$1,302,650 $1,250,705
=======================
Goodwill 1998 1997
- --------------------------------------------------------------------
Goodwill $ 498,012 $ 212,870
Less accumulated amortization 85,942 48,773
-----------------------
$412,070 $ 164,097
=======================
Other Intangibles 1998 1997
- --------------------------------------------------------------------
Patents, technology and other $ 488,869 $ 299,420
Less accumulated amortization 154,594 131,573
-----------------------
$334,275 $ 167,847
=======================
56
<PAGE>
- --------------------------------------------------------------------------------
9 Debt
- --------------------------------------------------------------------------------
The components of Short-term debt follow:
1998 1997
- --------------------------------------------------------------------
Loans payable:
Domestic $ 204,875 $ 78,500
Foreign 72,038 46,281
Current portion of long-term debt 108,249 7,659
-----------------------
$ 385,162 $ 132,440
=======================
Domestic loans payable consists of commercial paper. Foreign loans payable
consists of short-term borrowings from financial institutions. The weighted
average interest rates for loans payable were 5.9% and 5.5% at September 30,
1998 and 1997, respectively. The Company has a $500,000 syndicated and committed
revolving credit facility, which expires in November 2001. In March 1998, the
Company entered into a 364 day $100,000 committed facility. Both of these
facilities can be used to support the Company's commercial paper borrowing
program and for other general corporate purposes. Restrictive covenants under
these agreements include a minimum tangible net worth level. There were no
borrowings outstanding under either facility at September 30, 1998. In addition,
the Company had unused foreign lines of credit pursuant to informal arrangements
of approximately $193,000 and $197,000 at September 30, 1998 and 1997,
respectively.
The components of Long-Term Debt follow:
1998 1997
- ------------------------------------------------------------------------
Domestic notes due through 2015
(average year-end interest rate: 5.8% - 1998;
5.9% - 1997) $ 17,003 $ 15,614
Foreign notes due through 2011
(average year-end interest rate: 6.9% - 1998;
6.2% - 1997) 19,692 16,493
9.95% Notes due March 15, 1999 -- 100,000
8.80% Notes due March 1, 2001 100,000 100,000
9.45% Guaranteed ESOP Notes due through
July 1, 2004 28,481 33,342
6.90% Notes due October 1, 2006 100,000 100,000
8.70% Debentures due January 15, 2025 100,000 100,000
7.00% Debentures due August 1, 2027 200,000 200,000
6.70% Debentures due August 1, 2028 200,000 --
-------------------
$765,176 $665,449
===================
In July 1998, the Company issued $200,000 of 6.70% Debentures due on August 1,
2028. The effective yield of the debentures including the results of an interest
rate hedge and other financing costs was 7.08%. In July 1997, the Company issued
$200,000 of 7% notes due on August 1, 2027, with an effective yield including
the results of an interest rate hedge and other financing costs of 7.23%. 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%.
The Company has available $300,000 under a $500,000 shelf registration statement
filed in October 1997 for the issuance of debt securities.
The aggregate annual maturities of long-term debt during the fiscal years ending
September 30, 2000 to 2003 are as follows: 2000 - $6,993; 2001 - $107,613;
2002 - $9,978; 2003 - $9,006.
The Company capitalizes interest costs as a component of the cost of
construction in progress. The following is a summary of interest costs:
1998 1997 1996
- -------------------------------------------------------------------------------
Charged to operations $65,584 $51,134 $54,162
Capitalized 10,011 6,469 5,368
--------------------------
$75,595 $57,603 $59,530
==========================
Interest paid, net of amounts capitalized, was $64,160 in 1998, $48,573 in 1997,
and $59,053 in 1996.
- -------------------------------------------------------------------------------
10 Financial Instruments
- -------------------------------------------------------------------------------
Fair Value of Financial Instruments
Cash equivalents, short-term investments and short-term debt are carried at cost
which approximates fair value. Other investments are classified as available-
for-sale securities. 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.
57
<PAGE>
The estimated fair values of the Company's financial instruments at September
30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
- -----------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
---------------------------------------
<S> <C> <C> <C> <C>
Assets:
Other investments (non-current) (A) $ 17,125 $ 6,115 $ 9,000 $ 8,380
Purchased currency options (B) 51 101 279 233
Liabilities:
Long-term debt $765,176 $832,250 $665,449 $698,852
Forward exchange contracts (C) 948 393 5,979 5,270
Interest rate swaps 77 498 130 (462)
=======================================
</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 currency
options. The Company's foreign currency risk exposure is primarily in Western
Europe, Asia Pacific, Japan, Brazil and Mexico.
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:
1998 1997
- --------------------------------------------------
Forward exchange contracts $742,995 $639,334
Purchased currency options 8,500 43,000
====================
At September 30, 1998, $661,833 of the forward exchange contracts mature within
90 days and $81,162 at various other dates in fiscal 1999. The purchased
currency options at September 30, 1998 expire within 125 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.
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 short-term third-party and
intercompany debt and investments outside the United States. At September 30,
1998 and 1997, 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.
The notional amounts of the Company's outstanding interest rate swap agreements
were $12,000 and $133,357 at September 30, 1998 and 1997, respectively.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This Statement requires that all
derivatives be recorded in the balance sheet as either an asset or liability
measured at its fair value and that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. The Company is in the process of evaluating this statement and has not yet
determined the future impact on its consolidated financial statements. The
Company is required to adopt the provisions of this Statement no later than the
beginning of its fiscal year 2000.
Concentration Of Credit Risk
Substantially all of the Company's trade receivables are due from public and
private entities involved in health care. 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.
58
<PAGE>
- --------------------------------------------------------------------------------
11 Shareholders' Equity
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Capital
Series B, in
ESOP Excess
Preferred Common of Unearned
Stock Stock Par Retained ESOP Deferred Treasury Stock
--------------------------
Issued Issued Value Earnings Compensation Compensation Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1995 $54,713 $ 85,349 $118,201 $1,946,636 $(36,941) $ -- (20,273,690) $ (776,340)
Net income 283,447
Cash dividends:
Common ($.23
per share) (58,147)
Preferred
($3.835 per
share), (2,675)
net of tax benefits
Common stock issued
for:
Employee
stock plans, net 17,164 828,731 18,202
Business
acquisition 8,077 165,867 4,176
Repurchase of common
stock (4,752,100) (324,970)
Common stock held in
trusts (20,707) (904)
Retirement of common
stock (214) (101) (8,982) 214,012 9,297
Reduction in unearned
ESOP compensation for the
year 4,154
Adjustment for
redemption
provisions (1,786) 386 55,232 1,400
Two-for-one stock
split 85,349 (85,349) (23,090,930)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30,
1996 52,927 170,484 58,378 2,160,279 (32,787) -- (46,873,585) (1,069,139)
Net income 300,074
Cash dividends:
Common ($.26 per
share) (63,768)
Preferred ($3.835 per
share),
net of tax benefits (2,647)
Common stock issued
for employee stock plans,
net 26,942 1,683,547 20,513
Repurchase of common
stock (3,239,500) (150,003)
Common stock held in
trusts (69,473) (3,117)
Retirement of common
stock (3,239) (2,289) (144,475) 3,239,500 150,003
Reduction in unearned
ESOP compensation for the
year 4,167
Adjustment for
redemption
provisions (1,816) 391 98,420 1,425
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30,
1997 51,111 167,245 83,422 2,249,463 (28,620) -- (45,161,091) (1,050,318)
Net income 236,568
Cash dividends:
Common ($.29 per
share) (71,265)
Preferred ($3.835 per
share),
net of tax benefits (2,592)
Common stock issued
for:
Employee stock plans,
net 49,303 2,469,852 29,817
Business acquisition 15,314 297,760 3,886
Repurchase of common
stock (913,500) (44,476)
Common stock held in
trusts 4,903 (14,769) (882)
Retirement of common
stock (914) (730) (42,832) 913,500 44,476
Reduction in unearned
ESOP compensation for the
year 4,157
Adjustment for
redemption
provisions (2,152) 461 130,845 1,691
Two-for-one stock
split 166,331 (147,770) (18,561) (42,541,541)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30,
1998 $48,959 $332,662 $ -- $2,350,781 $(24,463) $4,903 (84,818,944) $(1,015,806)
====================================================================================================================================
</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.
59
<PAGE>
On July 28, 1998, the Board of Directors authorized a two-for-one stock split,
the shares for which were distributed on August 20, 1998 to shareholders of
record on August 10, 1998. Par value remained at $1.00 per common share, and the
number of authorized common shares increased from 320,000,000 to 640,000,000
shares. The stock split was recorded by reclassifying $166,331, the par value of
the additional shares resulting from the split, from Capital in excess of par
value and Retained earnings to Common stock. All per-share data and all
references to average shares outstanding in the Annual Report have been restated
to reflect the split for all periods presented.
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No.
130 "Reporting Comprehensive Income". SFAS No. 130 requires the presentation of
comprehensive income, which consists of net income and other comprehensive
income, and its components in a full set of financial statements. Foreign
currency translation adjustments would be included as a component of other
comprehensive income. Additional items may be included in other comprehensive
income in the future. The Company is required to adopt the provisions of this
Statement no later than its 1999 fiscal year. The Company plans to display
comprehensive income and its components in a Statement of Shareholders' Equity
beginning in fiscal year 1999.
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, are included in the cumulative currency translation
adjustment account in Shareholders' Equity. The following is an analysis of the
account:
1998 1997 1996
- -------------------------------------------------------------------
Balance at October 1 $(86,870) $(14,959) $ 6,767
Translation adjustment 3,654 (71,911) (21,726)
--------------------------------
Balance at September 30 $(83,216) $(86,870) $(14,959)
================================
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-quarter 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.
- --------------------------------------------------------------------------------
12 Commitments and Contingencies
- --------------------------------------------------------------------------------
Commitments
Rental expense for all operating leases amounted to $44,800 in 1998, $48,200 in
1997 and $52,000 in 1996. Future minimum rental commitments on noncancelable
leases are as follows: 1999 - $30,900; 2000 - $22,300; 2001 - $18,100;
2002 - $13,500; 2003 - $6,500 and an aggregate of $20,700 thereafter.
As of September 30, 1998, the Company has certain future capital commitments,
aggregating approximately $66,900, 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 194 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 is vigorously defending these lawsuits.
The Company, along with another manufacturer and several medical product
distributors, has been named as a defendant in six product liability lawsuits
relating to health care workers who allegedly sustained accidental needle
sticks, but have not become infected with any disease. The cases have been filed
on behalf of an unspecified number of health care workers in six
60
<PAGE>
different states, seeking class action certification under the laws of these
states. To date, no class has been certified in any of these cases. The actions
are pending in state court in Texas, under the caption Calvin vs. Becton
Dickinson et al. (Case No. 342-173329-98, Tarrant County District Court), filed
on April 9, 1998; in Federal court in Ohio, under the caption Grant vs. Becton
Dickinson et al. (Case No. C2 98-844, Southern District of Ohio), filed on July
22, 1998; in state court in California, under the caption Chavez vs. Becton
Dickinson (Case No. 722978, San Diego County Superior Court), filed on August 4,
1998; in state court in Illinois, under the caption McCaster vs. Becton
Dickinson et al. (Case No. 98L09478, Cook County Circuit Court), filed on August
13, 1998; in state court in Oklahoma, under the caption Palmer vs. Becton
Dickinson et al. (Case No. CJ-98-685, Sequoyah County District Court), filed on
October 27, 1998; and in state court in Alabama, under the caption Daniels vs.
Becton Dickinson et al. (Case No. CV 1998 2757, Montgomery County Circuit
Court), filed on October 30, 1998.
Generally, these actions allege that health care workers have sustained needle
sticks using hollow-bore needle devices manufactured by the Company and, as a
result, require medical testing, counseling and/or treatment. Several actions
additionally allege that the health care workers have suffered mental anguish.
In addition, in the Chavez matter, the plaintiff asserts a claim for unfair
competition, alleging that the Company has suppressed the market for safety-
engineered products through various means. Plaintiffs seeks money damages in all
actions. The plaintiff in the Chavez matter, in addition to money damages, seeks
disgorgement of profits the Company has purportedly obtained as a result of
alleged unfair competition.
The pending class actions are in preliminary stages. The Company intends to
vigorously oppose class certification and defend these lawsuits.
The Company, along with another manufacturer, a group purchasing organization
("GPO") and three hospitals, has been named as a defendant in an antitrust
action brought pursuant to the Texas Free Enterprise Act ("TFEA"). The action is
pending in state court in Texas, under the caption Retractable Technologies Inc.
vs. Becton Dickinson and Company et al. (Case No. 5333*JG98, Brazoria County
District Court), filed on August 4, 1998. Plaintiff, a manufacturer of
retractable syringes, alleges that the Company's contracts with GPOs exclude
plaintiff from the market in syringes and blood collection products, in
violation of the TFEA. Plaintiff also alleges that the Company has conspired
with other manufacturers to maintain its market share in these products.
Plaintiff seeks money damages. The pending action is in its preliminary stages.
The Company intends to mount a vigorous defense in this action.
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.
The Company has developed a Company-wide Year 2000 plan (the "Plan") to, among
other things, prepare its computer equipment and software and devices with date-
sensitive embedded technology for the year 2000. The estimated costs of the
Company's Plan and the dates by which the Company believes it will have
completed each phase of the Plan, are based upon management's best estimates,
which rely upon numerous assumptions regarding future events, including the
continued availability of certain resources, third-party remediation plans, and
other factors. These estimates, however, may prove not to be accurate, and
actual results could differ materially from those anticipated. Factors that
could result in material differences include, without limitation, the
availability and cost of personnel with appropriate training and experience, the
ability to identify, assess, remediate and test all relevant computer codes and
embedded technology, and similar uncertainties. In addition, Year 2000-related
issues may lead to possible third-party claims, the impact of which cannot yet
be estimated. No assurance can be given that the aggregate cost of defending and
resolving such claims, if any, would not have a material adverse effect on the
Company.
- --------------------------------------------------------------------------------
13 Stock Plans
- --------------------------------------------------------------------------------
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,
1995 and 1998 Stock Option Plans made available 16,000,000, 24,000,000 and
10,000,000 shares of the Company's common stock for the granting of options,
respectively. At September 30, 1998, shares available for future grant under the
1990, 1995, and 1998 Plans were 158,514, 5,852,786, and 9,950,000, respectively.
All stock plan data has been retroactively restated to reflect the two-for-one
stock splits in 1998, 1996 and 1993, where applicable.
61
<PAGE>
A summary of changes in outstanding options is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Options for Average Options for Average Options for Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 1 30,168,526 $15.20 27,051,424 $12.15 23,660,184 $ 9.46
Granted 4,843,750 29.64 6,590,144 24.72 6,571,368 20.19
Exercised (4,593,739) 9.92 (3,258,458) 9.05 (2,791,080) 8.23
Forfeited, canceled or expired (513,678) 23.05 (214,584) 16.36 (389,048) 12.41
----------------------------------------------------------------------------------------
Balance at September 30 29,904,859 $18.22 30,168,526 $15.20 27,051,424 $12.15
========================================================================================
Exercisable at September 30 23,266,773 $15.90 19,100,330 $11.92 21,874,502 $11.66
========================================================================================
Weighted average fair value of options
granted $ 9.40 $ 7.08 $ 5.24
========================================================================================
Available for grant at September 30 15,961,300 10,291,372 16,663,632
========================================================================================
</TABLE>
The maximum term of options is ten years. Options outstanding as of September
30, 1998 expire on various dates from May 1999 through May 2008.
<TABLE>
<CAPTION>
September 30, 1998
-----------------------------------------------------------------------------------
Options Outstanding Options Exercisable
-----------------------------------------------------------------------------------
Weighted Weighted Average Weighted
Range Of Number Average Remaining Number Average
Option Exercise Price Outstanding Exercise Price Contractual Life Exercisable Exercise Price
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$6.52 - $12.55 13,036,193 $10.02 4.9 years 11,966,836 $ 9.79
18.83 - 24.81 12,069,036 22.53 7.9 years 11,299,937 22.38
29.35 - 34.83 4,799,630 29.64 9.3 years -- --
-----------------------------------------------------------------------------------
29,904,859 $18.22 7.6 years 23,266,773 $15.90
===================================================================================
</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.
The 1990 Plan has 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
1998, 1997 or 1996.
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 1998, 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 1998, 1997 and 1996 is not
representative of the pro forma effect on net income in future years since
compensation cost is allocated on a straight-line basis over the vesting periods
of the grants, which extends beyond the reported years.
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $236,568 $216,680 $300,074 $290,697 $283,447 $267,953
Earnings Per Share:
Basic .95 .87 1.21 1.17 1.10 1.04
Diluted .90 .82 1.15 1.11 1.05 1.00
=======================================================================
</TABLE>
62
<PAGE>
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 1998, 1997 and 1996: risk free
interest rates of 5.55%, 6.51% and 5.64%, respectively; expected dividend yields
of 1.28%, 1.42% and 1.64% respectively; expected volatility of 24.4%, 18.0% and
19.2% respectively; and expected lives of 6 years for each year presented.
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
following retirement, the remainder is distributable in five equal annual
installments. During 1998, 132,276 shares were distributed. No awards were
granted in 1998, 1997 or 1996. At September 30, 1998, 2,637,264 shares were
reserved for future issuance, of which awards for 535,876 shares have been
granted.
The Company has a compensatory Restricted Stock Plan for Non-Employee Directors
which reserves for issuance 300,000 shares of the Company's common stock.
Restricted shares of 1,560 and 9,940 were issued in 1997 and 1996, respectively,
in accordance with the provisions of the plan. No restricted shares were issued
in 1998.
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, 1998, 126,630 shares were
held in trust, of which 14,852 shares represented Directors' compensation in
1998, 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.
- --------------------------------------------------------------------------------
14 Earnings Per Share
- --------------------------------------------------------------------------------
For the years ended September 30, 1998, 1997, and 1996, the following table sets
forth the computations of basic and diluted earnings per share, restated to
reflect the 1998 two-for-one stock split and to conform to the SFAS No. 128
requirements (shares in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $236,568 $300,074 $283,447
Preferred stock dividends (3,235) (3,366) (3,484)
-------------------------------
Income available to common
shareholders (A) 233,333 296,708 279,963
Preferred stock dividends using
"if converted" method 3,235 3,366 3,484
Additional ESOP contribution
using "if converted" method (1,000) (1,124) (1,288)
-------------------------------
Income available to common
shareholders after assumed
conversions (B) $235,568 $298,950 $282,159
===============================
Average common shares
outstanding (C) 245,700 245,230 253,418
Dilutive stock equivalents
from stock plans 11,117 8,812 8,486
Shares issuable upon conversion
of preferred stock 5,311 5,544 5,742
-------------------------------
Average common and common
equivalent shares outstanding
assuming dilution (D) 262,128 259,586 267,646
===============================
Basic earnings per share (A/C) $ .95 $ 1.21 $ 1.10
===============================
Diluted earnings per share (B/D) $ .90 $ 1.15 $ 1.05
===============================
</TABLE>
- --------------------------------------------------------------------------------
15 Business Segment Data
- --------------------------------------------------------------------------------
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.
63
<PAGE>
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 11% of revenues in 1998, 10% in 1997 and 11% of
revenues in 1996, 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, 1998, 1997 and 1996 is presented on pages 44 and
45 and is considered to be an integral part of the notes to the consolidated
financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information". 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. As required by the Statement, the Company will adopt the provisions
of SFAS No. 131 in its year-end 1999 financial statements and different
operating segments may be reported by the Company.
<TABLE>
<CAPTION>
Quarterly Data (Unaudited)
Thousands of dollars, except per-share amounts
1998
- ------------------------------------------------------------------------------------------------------------------------------------
1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C>
Revenues $701,640 $738,433 $833,561 $843,239 $3,116,873
Gross Profit 346,837 374,353 414,554 440,097 1,575,841
Net Income (Loss) 64,321 92,335 (9,985)(A) 89,897 236,568 (A)
Earnings (Loss) Per Share(B):
Basic .26 .37 (.04) .36 .95
Diluted .25 .35 (.04) .34 .90
============================================================
1997
- ------------------------------------------------------------------------------------------------------------------------------------
1st 2nd 3rd 4th Year
<S> <C> <C> <C> <C> <C>
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(B):
Basic .23 .33 .28 .36 1.21
Diluted .22 .32 .27 .34 1.15
============================================================
</TABLE>
(A) Includes $90,945 of special charges and a charge of $30,000 for
purchased in-process research and development.
(B) Restated to reflect 1998 two-for-one stock split and to conform to SFAS No.
128 requirements.
64
<PAGE>
Financial Statements
corporate data
Annual Meeting
2:30 p.m.
Tuesday, February 9, 1999
1 Becton Drive
Franklin Lakes, NJ 07417-1880
Direct Stock Purchase Plan
The Direct Stock Purchase Plan replaced the Becton Dickinson Dividend
Reinvestment Plan in February 1998. This plan, established through First Chicago
Trust Company of New York, enhances the services provided to existing
shareholders and facilitates initial investments in Becton Dickinson shares.
Additional information may be obtained by calling First Chicago Trust Company of
New York at 1-800-955-4743.
NYSE Symbol
BDX
Web Site
http://www.bd.com
Shareholder Information
Shareholders may receive, without charge, a copy of the company's 1998 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
Internet: http://www.ey.com
The trademarks indicated by CAPITAL LETTERS are the property of, licensed to,
promoted or distributed by Becton Dickinson and Company, its subsidiaries or
related companies.
common stock prices and dividends
<TABLE>
<CAPTION>
By Quarter
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997
---------------------------------------------------------------------------------------------------------
High Low Dividends High Low Dividends
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First $26 11/16 $20 15/16 $.07 1/4 $22 3/4 $18 1/2 $.06 1/2
Second 35 11/16 24 3/8 .07 1/4 25 13/16 21 5/16 .06 1/2
Third 39 9/32 33 13/16 .07 1/4 26 5/8 21 3/8 .06 1/2
Fourth 43 13/16 33 1/16 .07 1/4 27 13/16 23 3/8 .06 1/2
</TABLE>
Data for both years have been restated to reflect the 1998 two-for-one stock
split.
<PAGE>
EXHIBIT 21
<TABLE>
<CAPTION>
SUBSIDIARIES OF BECTON, DICKINSON AND COMPANY
---------------------------------------------
Name of Subsidiary State of Jurisdiction Percentage of Voting
------------------ of Incorporation Securities Owned
---------------------- ----------------------
<S> <C> <C>
1751 Hancock Street, Inc. California 100% (1)
228 Coshocton, Inc. Nevada 100%
Alchem, Inc. Massachusetts 100% (1)
American Agar and Chemical Company California 100% (1)
Bauer & Black, Inc. Delaware 100%
BBL Realty, Inc. Maryland 100% (1)
B-D (Cambridge, U.K.) Ltd. United Kingdom 100% (1)
BD Holding S. de R.L. de C.V. Mexico 100% (1)
BDX INO LLC Delaware 100%
Becton Dickinson AcuteCare Holdings, Inc. Delaware 100%
Becton Dickinson AcuteCare, Inc. Massachusetts 100% (1)
Becton Dickinson Asia Limited Hong Kong 100% (1)
Becton Dickinson Asia Pacific Limited British Virgin Islands 100%
Becton Dickinson Austria GmbH Austria 100% (1)
Becton Dickinson Benelux N.V. Belgium 100% (1)
Becton Dickinson Canada Inc. Canada 100% (1)
Becton Dickinson Caribe, Ltd. Cayman Islands 100% (1)
Becton Dickinson Cellular Imaging Systems B.V. Netherlands 100% (1)
Becton Dickinson Colombia Ltda. Colombia 100% (1)
Becton Dickinson Critical Care Systems PTE LTD. Singapore 100%
Becton Dickinson Czechia s.r.o. Czech Republic 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 Guatemala S.A. Guatemala 100% (1)
Becton Dickinson Hellas S.A. Greece 100% (1)
Becton Dickinson Holdings GmbH Germany 100% (1)
Becton Dickinson Holdings N.V. Belgium 100% (1)
Becton Dickinson Hungary Kft. Hungary 100% (1)
Becton Dickinson India Pvt. Ltd. India 100% (1)
Becton Dickinson Infusion Therapy AB Sweden 100% (1)
Becton Dickinson Infusion Therapy A/S Denmark 100% (1)
Becton Dickinson Infusion Therapy B.V. Netherlands 100% (1)
Becton Dickinson Infusion Therapy GmbH Germany 100% (1)
Becton Dickinson Infusion Therapy Holdings AB Sweden 100% (1)
Becton Dickinson Infusion Therapy Holdings Inc. Delaware 100%
Becton Dickinson Infusion Therapy Holdings Inc., S.A. de C.V. Mexico 100% (1)
Becton Dickinson Infusion Therapy UK Limited United Kingdom 100% (1)
Becton Dickinson Infusion Therapy Systems Inc. Delaware 100%
Becton Dickinson Infusion Therapy Holdings UK Limited United Kingdom 100% (1)
Becton Dickinson Insulin Syringe, Ltd. Cayman Islands 100% (1)
Becton Dickinson Ithalat Ltd. Sirketi Turkey 100% (1)
Becton Dickinson Korea, Inc. Korea 100%
Becton Dickinson Korea Holding, Inc. Delaware 100%
Becton Dickinson Malaysia, Inc. Oregon 100%
Becton Dickinson (Mauritius) Limited Mauritius 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 Medizintechnik GmbH & Co. KG Germany 100% (1)
Becton Dickinson Monoclonal Center, Inc. Delaware 100%
Becton Dickinson Ltd. 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)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Becton Dickinson Pty. Ltd. Australia 100% (1)
Becton Dickinson (Pty) Ltd. South Africa 100% (1)
Becton Dickinson Sdn. Bhd. Malaysia 100% (1)
Becton Dickinson Service (Pvt.) Ltd. Pakistan 51%
Becton Dickinson (Thailand) Limited Thailand 100% (1)
Becton Dickinson Venezuela, C.A. Venezuela 100% (1)
Becton Dickinson Venture LLC Delaware 100%
Becton Dickinson Verwaltungs GmbH Germany 100% (1)
Becton Dickinson Worldwide, Inc. Delaware 100%
Becton Dickinson, S.A. Spain 100% (1)
Becton, Dickinson (Royston) Limited United Kingdom 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 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. Holdings Limited United Kingdom 100% (1)
Becton, Dickinson U.K. Limited United Kingdom 100% (1)
Becton, Dickinson Warenvertriebsgesellschaft gmbH Austria 100% (1)
Bedins Ltd. Bermuda 100% (1)
Belvedere, Inc. New Hampshire 100% (1)
Benex Ltd. Ireland 100%
Beta - Lab Limited United Kingdom 100% (1)
Boin Medica Co., Ltd. Korea 100% (1)
Cascade Medical Leasing, Inc. Oregon 100% (1)
Cell Analysis Systems, Inc. Illinois 100%
Collaborative Biomedical Products, Inc. Delaware 100%
D.H. Farms Company Michigan 100% (1)
D.L.D. Company Delaware 100% (1)
D.L.D., Ltd. Bermuda 100% (1)
Dantor S.A. Uruguay 100% (1)
Difco Laboratories GmbH Germany 100% (1)
Difco Laboratories Incorporated Michigan 100%
Difco Laboratories Incorporated Wisconsin 100% (1)
Difco Laboratories Limited United Kingdom 100% (1)
Difco Microbiology Systems, Inc. Michigan 100% (1)
Digestive Ferments, Inc. Michigan 100% (1)
EPV S.A. de C.V. Mexico 100% (1)
Franklin Lakes Enterprises, L.L.C. New Jersey 100%
Healthcare Holdings AB Sweden 100% (1)
IBD Holdings LLC Delaware 50%
JLI Leasing, Inc. Maryland 100% (1)
Johnston Ferguson Vestel, Inc. Maryland 100%(1)
Johnston Laboratories, Inc. Maryland 100%
Lee Laboratories Inc. Georgia 100% (1)
MDI Instruments, Inc. Delaware 100%
Med-Safe Systems, Inc. California 100%
Micropette, Inc. Delaware 100%
Nippon Becton Dickinson Company, Ltd. Japan 100% (1)
Pasco Laboratories Inc. Colorado 100% (1)
PharMingen Canada Inc. Canada 100% (1)
PharMingen SPC California 100% (1)
PharMingen, Inc. California 100%
Phase Medical, Inc. California 100% (1)
Promedicor de Mexico, S.A. de C.V. Mexico 100% (1)
Southeastern Animal Resources, Inc. Georgia 100% (1)
Tru-Fit Marketing Corporation Massachusetts 100% (1)
Visitec 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, 333-16091 and 333-46089 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 5, 1998, 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, 1998.
/s/ Ernst & Young LLP
_____________________________________
Ernst & Young LLP
Hackensack, New Jersey
December 14, 1998
<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> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 83251
<SECURITIES> 7390
<RECEIVABLES> 762076
<ALLOWANCES> 35518
<INVENTORY> 536791
<CURRENT-ASSETS> 1542762
<PP&E> 2727023
<DEPRECIATION> 1424373
<TOTAL-ASSETS> 3846038
<CURRENT-LIABILITIES> 1091913
<BONDS> 765176
<COMMON> 332662
0
48959
<OTHER-SE> 1232199
<TOTAL-LIABILITY-AND-EQUITY> 3846038
<SALES> 3116873
<TOTAL-REVENUES> 3116873
<CGS> 1541032
<TOTAL-COSTS> 1541032
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9406
<INTEREST-EXPENSE> 65584
<INCOME-PRETAX> 340866
<INCOME-TAX> 104298
<INCOME-CONTINUING> 236568
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 236568
<EPS-PRIMARY> 0.95<F1>
<EPS-DILUTED> 0.90<F1>
<FN>
<F1> Reflects two-for-one stock split effective August 1998. Prior Financial
Data Schedules have not been restated for the stock split.
</FN>
</TABLE>
