<PAGE>
As filed with the Securities and Exchange Commission on December 10, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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, 1999 Commission file number 1-4802
Becton, Dickinson and Company
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
New Jersey 22-0760120
<S> <C>
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<CAPTION>
1 Becton Drive
<S> <C>
Franklin Lakes, New Jersey 07417-1880
(Address of principal executive offices) (Zip code)
</TABLE>
(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
statement incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of November 30, 1999, 251,227,907 shares of the registrant's common stock
were outstanding and the aggregate market value of such common stock held by
nonaffiliates of the registrant was approximately $6,849,829,412.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the registrant's Annual Report to Shareholders for the
fiscal year ended September 30, 1999 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 8, 2000 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 performance of Becton, Dickinson and
Company (BD), including future revenues, products and income or events or
developments that BD expects to occur or anticipates occurring in the future.
All such statements are based upon current expectations of BD 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 from any
forward-looking statement include, but are not limited to, competitive
factors, changes in regional, national or foreign economic conditions, changes
in interest or foreign currency exchange rates, delays in product
introductions, Year 2000 issues, and changes in health care or other
governmental regulation, as well as other factors discussed herein and in BD's
filings with the Securities and Exchange Commission.
PART I
Item 1. Business.
General
Becton, Dickinson and Company was incorporated under the laws of the State
of New Jersey in November 1906, as successor to a New York business started in
1897. Its executive offices are located at 1 Becton Drive, Franklin Lakes, New
Jersey 07417-1880 and its telephone number is (201) 847-6800. All references
herein to "BD" or the "Company" refer to Becton, Dickinson and Company and its
domestic and foreign subsidiaries unless otherwise indicated by the context.
BD is engaged principally in the manufacture and sale of a broad line of
supplies, devices and systems used by health care professionals, medical
research institutions and the general public.
Business Segments
BD's operations consist of three worldwide business segments: Medical
Systems, Biosciences, and Preanalytical Solutions. Information with respect to
the Company's business segments appears on page 47 of the Company's Annual
Report to Shareholders for the fiscal year ended September 30, 1999 (the "1999
Annual Report"), and is incorporated herein by reference as part of Exhibit
13.
Medical Systems
The major products in this segment are hypodermic products, specially
designed devices for diabetes care, prefillable drug delivery systems and
infusion therapy products. This segment also includes anesthesia and surgical
products, ophthalmic surgery devices, critical care systems, elastic support
products and thermometers.
Biosciences
The major products in this segment are clinical and industrial microbiology
products, cellular analysis systems, research and clinical reagents for
cellular and nucleic acid analysis, cell culture labware, and growth media,
hematology instruments and other diagnostic systems, including
immunodiagnostic test kits.
Preanalytical Solutions
The major products in this segment are specimen collection products and
services, including specimen management systems. This segment also includes
consulting services and customized, automated bar-code systems for patient
identification and point-of-care data capture.
<PAGE>
Acquisition of Businesses
During fiscal 1999, BD acquired ten businesses, including the following:
<TABLE>
<CAPTION>
<S> <C>
. December 1998 Glentech, Inc., a developer and manufacturer of monoclonal antibodies
used for researchers studying signal transduction and cell signaling
biology;
. January 1999 Luther Medical Products, Inc., a manufacturer of extended dwell
peripheral catheters;
. February 1999 Biometric Imaging, Inc., a manufacturer of cellular analysis systems;
. June 1999 Critical Device Corporation, a manufacturer of needleless intravenous
access products;
. July 1999 SAF-T-MED, Inc., a developer of safety-needle technology; and
. August 1999 Clontech Laboratories, Inc., a developer and manufacturer of reagents for
gene-based drug discovery technology and molecular biology research.
</TABLE>
The operating results of these businesses, from their respective dates of
acquisition, are reflected in the Consolidated Financial Statements
incorporated by reference as part of Exhibit 13.
Foreign Operations
BD'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 BD 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. BD has manufacturing
operations outside the United States in Brazil, China, France, Germany, India,
Ireland, Japan, Korea, Mexico, Pakistan, Singapore, Spain, Sweden and the
United Kingdom. Information with respect to the Company's geographic areas
appears on page 48 of the 1999 Annual Report, and is incorporated herein by
reference as part of Exhibit 13.
Foreign economic conditions and exchange rate fluctuations have caused the
profitability from foreign revenues to fluctuate more than the profitability
from domestic revenues. BD 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
BD's products and services are marketed in the United States both through
independent distribution channels and directly to end-users. BD'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 from all business segments
to many end-users, accounted for approximately 11% of total Company revenues
in fiscal 1999. Order backlog is not material to BD's business inasmuch as
orders for BD products generally are 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
BD 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. BD also retains individual consultants to support its efforts in
specialized fields. The Company spent $254,016,000 on research and development
during the fiscal year ended September 30, 1999, and $217,900,000 and
$180,626,000, respectively, during the two immediately preceding fiscal years.
Research and development spending in fiscal years 1999, 1998 and 1997 included
the write-off of acquired in-process research and development of $48,800,000,
$30,000,000 and $14,750,000, respectively. Information with respect to the
Company's write-off of acquired in-process research and development appears on
pages 33 and 34 of the 1999 Annual Report, and is incorporated herein by
reference as part of Exhibit 13.
2
<PAGE>
Competition
A number of companies, some of which are more specialized than BD, compete
in the medical technology field. In each such case, competition involves only
a part of the Company's product lines. Competition in BD's markets is based on
a combination of factors, including price, quality, service, reputation,
distribution and promotion. Ongoing investments in research, quality
management, quality improvement, product innovation 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 BD's competitors have greater financial
resources than BD. BD also is faced with competition from products
manufactured outside the United States.
Intellectual Property and Licenses
BD owns significant intellectual property, including patents, patent
applications, technology, trade secrets, know-how, copyrights and trademarks
in the United States and other countries. BD is also licensed under domestic
and foreign patents, patent applications, technology, trade secrets, know-how,
copyrights and trademarks owned by others. In the aggregate, these
intellectual property assets and licenses are of material importance to the
Company's business. BD does not believe, however, that any single patent,
technology, trademark, intellectual property asset or license is material in
relation to BD's business as a whole.
Raw Materials
BD 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
BD'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. BD 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.
BD 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, 1999, BD had approximately 24,000 employees, of whom
approximately 10,700 were employed in the United States. BD believes that its
employee relations are satisfactory.
Item 2. Properties.
The executive offices of the Company are located in Franklin Lakes, New
Jersey. BD owns and leases approximately 12,858,043 square feet of
manufacturing, warehousing, administrative and research facilities throughout
the world. The domestic facilities, including Puerto Rico, comprise
approximately 5,380,525 square
3
<PAGE>
feet of owned and 1,928,445 square feet of leased space. The foreign
facilities comprise approximately 3,853,883 square feet of owned and 1,695,190
square feet of leased space. Sales offices and distribution centers included
in the total square footage are also located throughout the world.
Operations in each of the Company's business segments are conducted at both
domestic and foreign locations. Particularly in the international marketplace,
facilities often serve more than one business segment and are used for
multiple purposes, such as administrative/sales, manufacturing and/or
warehousing/distribution. BD generally seeks to own its manufacturing
facilities, although some are leased. Most of BD's administrative, sales and
warehousing/distribution facilities are leased.
BD 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, Kentucky, Maryland,
Massachusetts, Michigan, Missouri, Nebraska, New Jersey, New York, North
Carolina, Ohio, South Carolina, Tennessee, Texas, Utah, Virginia, Wisconsin,
and Puerto Rico.
The foreign facilities are grouped as follows:
--Canada includes approximately 105,866 square feet of leased space.
--Europe and Eastern Europe, Middle East and Africa include facilities
in Austria, Belgium, the Czech Republic, Denmark, Egypt, England,
Finland, France, Germany, Greece, Hungary, Ireland, Italy, Ivory
Coast, Kenya, the Netherlands, Poland, Russia, South Africa, Spain,
Sweden, Switzerland, Turkey, and the United Arab Emirates and are
comprised of approximately 1,712,871 square feet of owned and 862,688
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 1,158,014 square feet
of owned and 333,037 square feet of leased space.
--Asia Pacific includes facilities in Australia, China, Hong Kong,
India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, the
Philippines, Singapore, South Korea, Taiwan, Thailand, and Vietnam and
is comprised of approximately 982,998 square feet of owned and 393,599
square feet of leased space.
The table below summarizes property information by business segment:
<TABLE>
<CAPTION>
Medical Preanalystical
Category Corporate Biosciences Systems Solutions Mixed(A) Total
-------- --------- ----------- --------- -------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Leased
Facilities............. 3 19 124 3 9 158
Square feet............ 45,055 548,628 1,829,153 7,558 1,193,241 3,623,635
Manufacturing square
footage............... -- 38,378 334,103 -- -- 372,481
Manufacturing
facilities............ -- 5 9 -- -- 14
Owned
Facilities............. 3 21 24 3 9 60
Square feet............ 471,260 2,051,974 4,310,882 650,643 1,749,649 9,234,408
Manufacturing square
footage............... -- 884,850 2,603,060 397,327 512,720 4,397,957
Manufacturing
facilities............ -- 16 23 3 4 46
Total
Facilities............. 6 40 148 6 18 218
Square feet............ 516,315 2,600,602 6,140,035 658,201 2,942,890 12,858,043
Manufacturing square
footage............... -- 923,228 2,937,163 397,327 512,720 4,770,438
Manufacturing
facilities............ -- 21 32 3 4 60
</TABLE>
- --------
(A) Facilities used by all business segments.
4
<PAGE>
Item 3. Legal Proceedings.
BD, along with a number of other manufacturers, has been named as a
defendant in approximately 310 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, New Jersey and New York. 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.
BD, along with another manufacturer and several medical products
distributors, has been named as a defendant in eleven product liability
lawsuits relating to health care workers who allegedly sustained accidental
needle sticks, but have not become infected with any disease. The case brought
in California under the caption Chavez vs. Becton Dickinson (Case No. 722978,
San Diego County Superior Court), filed on August 4, 1998 was dismissed in a
judgment filed March 19, 1999 which has been appealed by plaintiffs. The Case
brought in Florida under the caption Delgado vs. Becton Dickinson et al. (Case
No. 98-5608, Hillsborough County Circuit Court) filed on July 24, 1998 was
voluntarily withdrawn by the plaintiffs on March 8, 1999. Cases have been
filed on behalf of an unspecified number of health care workers in nine other
states, seeking class action certification under the laws of these states. To
date, no class has been certified in any of these cases. The nine remaining
actions are pending in state court in Texas, under the caption Usrey 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 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
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; in state court in Pennsylvania, under the caption Brown vs. Becton
Dickinson et al. (Case No. 03474, Philadelphia County Court of Common Pleas)
filed on November 27, 1998; and in state court in New Jersey, under the
caption Pollak Swartley vs. Becton Dickinson et al. (Case No. L-9449-98,
Camden County Superior Court), filed on December 7, 1998; and in state court
in New York, under the caption Benner vs. Becton Dickinson et al. (Case No.
99-111372, Supreme Court of the State of New York) filed on June 1, 1999.
Generally, these remaining 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. Plaintiffs seek money damages in all remaining
actions.
In June 1999, a class certification hearing was held in the matter of Usrey
vs. Becton, Dickinson et al., which was first filed in Texas state court on
April 9, 1998, under the caption Calvin vs. Becton Dickinson et al. The Court
has advised the parties by letter received October 27, 1999 that it believes
that it is appropriate to address the issues in the case by way of a class
action under Texas procedural law. The Court has scheduled a meeting with the
parties' counsel in mid-December to discuss the wording of an appropriate
order.
BD continues to oppose class action certification in this and the other
remaining cases and will continue vigorously to defend these lawsuits,
including pursuing all appropriate rights of appeal.
BD, 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
5
<PAGE>
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.
BD is a party to a number of federal proceedings in the United States
brought under the Comprehensive Environmental Response, Compensation and
Liability Act, also known as Superfund, and similar state laws. The Company
also is involved in other legal proceedings and claims which arise in the
ordinary course of business, both as a plaintiff and a defendant.
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.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Executive Officers of the Registrant (as of December 1, 1999)
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................ 64 Director, Chairman of the Board, and
Chief Executive Officer since June
1994; Director, Chairman of the
Board, President and Chief Executive
Officer from June 1994 to May 1999;
and prior thereto, Sector President--
Medical.
John W. Galiardo................. 65 Director, Vice Chairman of the Board
and General Counsel since June 1994,
and prior thereto, Vice President and
General Counsel.
Richard O. Brajer................ 39 President--Worldwide Preanalytical
Solutions since July 1999;
President--Worldwide Sample
Collection from October 1998 to July
1999; 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 1994 to September 1995; and
prior thereto, Director, Corporate
Strategic Planning.
Gary M. Cohen.................... 40 President--Worldwide Medical Systems
since May 1999; Executive Vice
President from July 1998 to May 1999;
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.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Vincent A. Forlenza.............. 46 Senior Vice President-Technology,
Strategy and Development since
February 1999; President--Worldwide
Microbiology Systems from October
1996 to January 1999; President--
Diagnostic Instrument Systems from
October 1995 to September 1996; and
prior thereto, Division President--
Becton Dickinson Advanced
Diagnostics.
James V. Jerbasi................. 61 Vice President--Human Resources since
February 1999, and prior thereto,
Director of International Human
Resources.
Edward J. Ludwig................. 48 President since May 1999; Executive
Vice President from July 1998 to May
1999; 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.
Deborah J. Neff.................. 46 President--Worldwide Biosciences
since February 1999; President--
Worldwide Immunocytometry Systems
from October 1996 to January 1999;
President--Becton Dickinson
Immunocytometry Systems from January
1995 to September 1996; Vice
President--General Manager from
October 1992 to December 1994; and
prior thereto, Vice President--
Operations.
</TABLE>
7
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
BD's common stock is listed on the New York Stock Exchange. As of November
30, 1999, there were approximately 11,500 shareholders of record. The balance
of the information required by this item appears under the caption "Common
Stock Prices and Dividends" on the inside back cover of the Company's 1999
Annual Report and is incorporated herein by reference as part of Exhibit 13.
Pursuant to the terms of the Stock Purchase Agreement and Plan of Merger and
Reorganization dated September 3, 1997 (the "Merger Agreement") entered into
by the Company in connection with the acquisition of Critical Device
Corporation, a California corporation ("CDC"), on June 22, 1999 (the "Closing
Date") the former shareholders of CDC received 327,767 shares of the Company's
common stock, par value $1.00 per share ("Common Stock"). An additional 29,755
shares of Common Stock was deposited in escrow to secure the indemnification
and other obligations of the former shareholders of CDC. Pursuant to the terms
of the Merger Agreement, the former shareholders of CDC may receive up to an
additional $10,000,000 in shares of Company Common Stock during the ten year
period after the Closing Date based upon sales of certain products.
The Common Stock issued to the former shareholders of CDC was offered and
sold pursuant to the exemption from registration provided by Section 4(2) of
the Securities Act of 1933, as amended (the "Securities Act"), for
transactions not involving a public offering of securities. In connection with
the offer and sale, the Company relied upon the fact that the offering was
made to only three offerees (the former shareholders of CDC) and did not
involve any general advertising or solicitation, the offerees were
sophisticated investors, the size of the offering was small in relation to the
Company's market capitalization, and the Company had taken reasonable steps to
prevent resale of the Common Stock by the former shareholders of CDC in
violation of the Securities Act.
Item 6. Selected Financial Data.
The information required by this item is included under the caption "Eight-
Year Summary of Selected Financial Data" on page 26 of the Company's 1999
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 18-25 of the Company's 1999
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 20 of the "Financial Review" section of the Company's 1999 Annual Report,
and in Notes 1 and 10 to the consolidated financial statements contained in
the Company's 1999 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 page 13 herein and on
pages 28-48 of the Company's 1999 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.
8
<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, 1999 (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 BD included in the
Company's 1999 Annual Report at the pages indicated in parentheses, are
incorporated by reference in Item 8 hereof:
Consolidated Statements of Income--Years ended September 30, 1999, 1998
and 1997 (page 28)
Consolidated Statements of Comprehensive Income--Years ended September
30, 1999, 1998 and 1997 (page 29)
Consolidated Balance Sheets--September 30, 1999 and 1998 (page 30)
Consolidated Statements of Cash Flows--Years ended September 30, 1999,
1998 and 1997 (page 31)
Notes to Consolidated Financial Statements (pages 32-48)
(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 14)
9
<PAGE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities Exchange Act of 1934 are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(a)(3) Exhibits
See Exhibit Index on pages 15, 16 and 17 hereof for a list of all management
contracts, compensatory plans and arrangements required by this item (Exhibit
Nos. 10(a)(i) through 10(n)), and all other Exhibits filed or incorporated by
reference as a part of this report.
(b) Reports on Form 8-K
On September 30, 1999 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 7.15% Notes due October 1, 2009. On
September 29, 1999, the registrant filed a report on Form 8-K for purposes of
reporting an amendment to its by-laws. On August 27, 1999 the registrant filed
a report on Form 8-K for purposes of reporting the completion of the
acquisition of Clontech Laboratories, Inc. On August 10, 1999 the registrant
filed a report on Form 8-K for purposes of reporting the revised agreement for
the acquisition of Clontech Laboratories, Inc. On July 22, 1999 the registrant
filed a report on Form 8-K for purposes of reporting its results of operations
for the third quarter ended June 30, 1999.
10
<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
By: /s/ John W. Galiardo
----------------------------------
John W. Galiardo
Vice Chairman of the Board and
General Counsel
Dated: December 10, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on the 10th day of December, 1999 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,
___________________________________________ Chief Executive Officer and
Clateo Castellini Director (Principal Executive
Officer)
/s/ Edward J. Ludwig Director and President
___________________________________________
Edward J. Ludwig
/s/ Richard M. Hyne Vice President and Controller
___________________________________________ (Principal Financial and
Richard M. Hyne 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
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Name Capacity
---- --------
<S> <C>
/s/ Richard W. Hanselman Director
___________________________________________
Richard W. Hanselman
/s/ Frank A. Olson Director
___________________________________________
Frank A. Olson
/s/ Willard J. Overlock, Jr. Director
___________________________________________
Willard J. Overlock, Jr.
/s/ James E. Perrella Director
___________________________________________
James E. Perrella
/s/ Alfred Sommer Director
___________________________________________
Alfred Sommer
/s/ Raymond S. Troubh Director
___________________________________________
Raymond S. Troubh
/s/ Margaretha af Ugglas Director
___________________________________________
Margaretha af Ugglas
</TABLE>
12
<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, 1999 and 1998, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended September
30, 1999, 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
New York, New York
November 4, 1999
13
<PAGE>
BECTON, DICKINSON AND COMPANY
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED SEPTEMBER 30, 1999, 1998, and 1997
(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>
1999
Against trade receivables:
For doubtful accounts........... $24,739 $13,244 $ 3,208(A) $34,775
For cash discounts.............. 10,779 38,292 34,810 14,261
------- ------- ------- -------
Total......................... $35,518 $51,536 $38,018 $49,036
======= ======= ======= =======
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
======= ======= ======= =======
</TABLE>
- --------
(A) Accounts written off.
14
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Method of Filing
------- ----------- ----------------
<C> <S> <C>
3(a)(i) Restated Certificate of Incorporated by reference to Exhibit
Incorporation, as amended 3(a) to the registrant's Annual Report
January 22, 1990 on Form 10-K for the fiscal year ended
September 30, 1990
3(a)(ii) Amendment to the Restated Incorporated by reference to Exhibit
Certificate of 3(a) to the registrant's Quarterly
Incorporation, as of Report on Form 10-Q for the period ended
August 5, 1996 June 30, 1996
3(a)(iii) Amendment to the Restated Incorporated by reference to Exhibit
Certificate of 3(a)(iii) to the registrant's Quarterly
Incorporation, as of Report on Form 10-Q for the period ended
August 10, 1998 June 30, 1998
3(b) By-Laws, as amended as of Filed with this report
November 23, 1999
4(a) Indenture, dated as of Incorporated by reference to Exhibit 4
December 1, 1982, between to Registration Statement No. 2-80707 on
the registrant and Form S-3 filed by the registrant
Manufacturers Hanover
Trust Company
4(b) First Supplemental Incorporated by reference to Exhibit
Indenture, dated as of 4(b) to Registration Statement No. 33-
May 15, 1986, between the 5663 on Form S-3 filed by the registrant
registrant and
Manufacturers Hanover
Trust Company
4(c) Second Supplemental Incorporated by reference to Exhibit
Indenture, dated as of 4(c) to Form 8-K filed by the
January 10, 1995, between registrant on January 12, 1995
the registrant and The
Chase Manhattan Bank
(formerly known as
Chemical Bank, the
successor by merger to
Manufacturers Hanover
Trust Company)
4(d) Indenture, dated as of Incorporated by reference to Exhibit
March 1, 1997, between 4(a) to Form 8-K filed by the registrant
the registrant and The on July 31, 1997 (the registrant hereby
Chase Manhattan Bank 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 Incorporated by reference to Exhibit 1
as of November 28, 1995, to Form 8-K filed by the registrant on
between the registrant December 14, 1995
and First Chicago Trust
Company of New York,
which includes as Exhibit
A thereto, the Form of
Right Certificate
10(a)(i) Employment Agreement, Incorporated by reference to Exhibit
dated June 18, 1986, 10(b)(i) to the registrant's Annual
between the registrant Report on Form 10-K for the fiscal year
and Clateo Castellini ended September 30, 1986
10(a)(ii) Employment Agreement, Incorporated by reference to Exhibit
dated June 18, 1986, 10(b)(ii) to the registrant's Annual
between the registrant Report on Form 10-K for the fiscal year
and John W. Galiardo ended September 30, 1986
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Method of Filing
------- ----------- ----------------
<C> <S> <C>
10(b) Certified Resolution Incorporated by reference to Exhibit
authorizing certain payments 10(k) to the registrant's Annual
to certain corporate Report on Form 10-K for the fiscal
officers in the event of a year ended September 30, 1986
discharge, resignation due
to removal from position or
a significant change in such
officers' respective duties
within two years after a
change in control of the
registrant
10(c)(i) Form of Split Dollar Incorporated by reference to Exhibit
Agreement and related 10(e) to the registrant's Annual
Collateral Assignment Report on Form 10-K for the fiscal
covering the providing to year ended September 30, 1987
certain corporate officers
of a life insurance policy
in an amount equal to two
times base salary in lieu of
full participation in the
registrant's group life
insurance program
10(c)(ii) Form of Endorsement Method Filed with this report
Split Dollar Agreement
covering the providing to
certain corporate officers
of a life insurance policy
in an amount equal to two
times base salary in lieu of
full participation in the
registrant's group life
insurance program
10(d) Stock Award Plan, as amended Incorporated by reference to Exhibit
and restated effective 10(d) to the registrant's Annual
February 11, 1992 Report on Form 10-K for the fiscal
year ended September 30, 1992
10(e) 1997 Management Incentive Incorporated by reference to Exhibit
Plan 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 Incorporated by reference to Exhibit
Option Plan, as amended and 10(g) to the registrant's Annual
restated February 8, 1994 Report on Form 10-K for the fiscal
year ended September 30, 1994
10(g)(i) Salary and Bonus Deferral Incorporated by reference to Exhibit
Plan, as amended and 4 to Registration Statement No. 333-
restated as of August 15, 11885 on Form S-8 filed by the
1996 registrant
10(g)(ii) 1996 Directors' Deferral Incorporated by reference to Exhibit
Plan 4 to Registration Statement No. 333-
16091 on Form S-8 filed by the
registrant
10(h) 1990 Stock Option Plan, as Incorporated by reference to Exhibit
amended and restated 10(i) to the registrant's Annual
February 8, 1994 Report on Form 10-K for the fiscal
year ended September 30, 1994
10(i) Retirement Benefit Incorporated by reference to Exhibit
Restoration Plan and related 10(i) to the registrant's Annual
Benefit Restoration Plan Report on Form 10-K for the fiscal
Trust, as amended and year ended September 30, 1998.
restated as of November 22,
1994
10(j)(i) 1994 Restricted Stock Plan Incorporated by reference to Exhibit
for Non-Employee A to the registrant's Proxy Statement
Directors dated January 5, 1994
10(j)(ii) Amendment to the 1994 Incorporated by reference to Exhibit
Restricted Stock 10(j)(ii) to the registrant's Annual
Plan for Non-Employee Report on Form 10-K for the fiscal
Directors as of year ended September 30, 1996
November 26, 1996
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description Method of Filing
------- ----------- ----------------
<C> <S> <C>
10(k) 1995 Stock Option Plan, as amended and Incorporated by reference to Exhibit
restated January 27, 1998 10(k) to the registrant's Annual
Report on Form 10-K for the fiscal
year ended September 30, 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 Incorporated by reference to Exhibit
to the Becton, Dickinson and Company 10(m) to the registrant's Annual
Stock Option Plans Report on Form 10-K for the fiscal
year ended September 30, 1998
10(n) Indian addendum to the Becton, Dickinson Filed with this report
and Company Stock Option Plans
13 Portions of the registrant's Annual Filed with this report
Report to Shareholders for fiscal year
1999
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.
17
<PAGE>
BY-LAWS
of
BECTON, DICKINSON AND COMPANY
A New Jersey Corporation
as Amended November 23, 1999
ARTICLE I
Offices
-------
The registered office of Becton, Dickinson and Company ("Company") shall be
in the Borough of Paramus, County of Bergen, State of New Jersey or such other
place within or without the State of New Jersey as the Board of Directors may
designate. The Company may also establish and have such other offices within or
without the State of New Jersey, as the Board of Directors may designate or its
business may require.
ARTICLE II
Meetings of Shareholders
------------------------
SECTION 1. PLACE OF MEETINGS. Meetings of the shareholders shall be held
at the registered office of the Company in New Jersey, or at such other place,
within or without the State of New Jersey, as may be designated by the Board of
Directors and stated in the notice of the meeting.
SECTION 2.A. ANNUAL MEETINGS. The annual meeting of shareholders for the
election of directors and the transaction of such other business as may be
related to the purposes set forth in the notice of the meeting shall be held at
such time as may be fixed by the Board of Directors.
B. SPECIAL MEETING FOR ELECTION OF DIRECTORS. If the annual meeting of
shareholders is not held on the date designated, the Board of Directors may call
a special meeting of the shareholders for the election of directors and the
transaction of other business.
C. SPECIAL MEETINGS. Special meetings of the shareholders may be called by
the Board of Directors or by the Chairman of the Board or by the President, and
shall be called by the Chairman of the Board or by the President upon written
request of a majority of the Directors then in office, which request shall state
the time, place and purpose of the meeting.
D. ADVANCE NOTICE OF BUSINESS TO BE TRANSACTED AT ANNUAL MEETINGS OF
SHAREHOLDERS. No business may be transacted at an annual meeting of
shareholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any shareholder of the Company (i) who is a
-1-
<PAGE>
shareholder of record on the date of the giving of the notice provided for in
this Section 2.D. and on the record date for the determination of shareholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 2.D.
In addition to any other applicable requirements, for business to be properly
brought before an annual meeting by a shareholder, such shareholder must have
given timely notice thereof in proper written form to the Secretary of the
Company.
To be timely, a shareholder's notice to the Secretary must be delivered to or
mailed and received at the principal executive offices of the Company not less
than 90 days nor more than 120 days prior to the anniversary date of the
immediately preceding annual meeting of shareholders; provided however, that in
----------------
the event that the annual meeting is called for on a date that is not within 30
days before or after such anniversary date, notice by the shareholder in order
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or such public disclosure of the date of the annual meeting
was made, whichever first occurs.
To be in proper written form, a shareholder's notice to the Secretary must
set forth as to each matter such shareholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name and record address of such shareholder, (c) the class or
series and number of shares of capital stock of the Company that are owned
beneficially or of record by such shareholder, (d) a description of all
arrangements or understandings between such shareholder and any other person or
persons (including their names) in connection with the proposal of such business
by such shareholder and any material interest of such shareholder in such
business and (e) a representation that such shareholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of shareholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 2.D, provided, however, that, once business has been
-----------------
properly brought before the annual meeting in accordance with such procedures,
nothing in Section 2.D, shall be deemed to preclude discussion by any
shareholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
SECTION 3. QUORUM. The presence, in person or by proxy, of the holders of
shares representing a majority of the votes entitled to be cast at a meeting
shall constitute a quorum. The shareholders present in person or by proxy at a
duly organized meeting may continue to do business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum. If a quorum not be present or represented at any meeting, the
shareholders present in person, or by proxy, shall have power to adjourn the
meeting without notice until the required voting shares shall be represented.
At such adjourned meeting with the requisite amount
-2-
<PAGE>
of voting shares represented, any business may be transacted which might have
been transacted at the meeting as originally notified.
SECTION 4. NOTICE OF MEETINGS. A written notice of each annual or special
meeting of the shareholders of the Company, signed by the Chairman of the Board
or the President or the Secretary, which shall state the time, place and purpose
of such meeting, shall be delivered personally or mailed, not less than 10 days
nor more than 60 days before the date of any such meeting, to each shareholder
of record entitled to vote at such meeting. If mailed, the notice shall be
directed to the shareholder at his address as it appears on the records of the
stock transfer agent. Any shareholder, in person or by proxy, may at any time
by a duly signed statement in writing to that effect, waive any statutory or
other notice of any meeting, whether such statement be signed before or after
such meeting.
SECTION 5. VOTING. At all meetings of the shareholders, each holder of
common stock having the right to vote, and present at the meeting in person or
by proxy, shall be entitled to one vote for each full share of common stock of
the Company entitled to vote and registered in his name. Each holder of
preferred stock of any series shall have such voting powers, if any, as the
Board of Directors shall have fixed by resolution prior to the issuance of any
shares of such series. Whenever any action is to be taken by vote of the
shareholders, it shall be authorized by a majority of the votes cast at a
meeting of the shareholders by the holders of shares entitled to vote,
unless a greater plurality is required by law or the Certificate of
Incorporation.
SECTION 6. PROXIES. Any shareholder of record entitled to vote may be
represented at any annual or special meeting of the shareholders by a duly
appointed proxy. All proxies shall be written and properly signed, but shall
require no other attestation, and shall be filed with the Secretary of the
meeting before being voted.
SECTION 7. ORGANIZATION. The Chairman of the Board, or in the absence of
the Chairman of the Board, the Vice Chairman or the President, shall act as
chairman of the meeting at all meetings of the shareholders. The Secretary, or
in his absence one of the Assistant Secretaries, shall act as secretary of the
meeting. In case none of the officers above designated to act as Chairman or
Secretary of the meeting shall be present, a chairman or a secretary of the
meeting, as the case may be, shall be chosen by a vote of the shareholders.
SECTION 8. ORDER OF BUSINESS. The order of business at all meetings of the
shareholders shall be as determined by the Chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present may
be changed by a vote of the shareholders.
-3-
<PAGE>
ARTICLE III
Directors
---------
SECTION 1. QUALIFICATIONS. Each Director shall be at least 21 years of age,
a shareholder of record of the Company, and shall be elected in the manner
provided by these By-Laws.
SECTION 2. DUTIES AND POWERS. The Board of Directors shall control and
manage the business and affairs of the Company, and shall exercise all powers of
the Company and perform all acts which are not required to be exercised or
performed by the shareholders. The Directors may adopt such rules and
regulations for the conduct of their meetings and the management of the Company
as they may deem proper.
SECTION 3. PLACE OF MEETINGS. Meetings of the Board of Directors shall be
held at the principal office of the Company or at such other place within or
without the State of New Jersey, as the Chairman of the Board or the Board may
designate.
SECTION 4. TELEPHONE MEETINGS. Any or all Directors may participate in a
meeting of the Board or a committee of the Board by means of conference
telephone or any means of communication by which all persons participating in
the meeting are able to hear each other.
SECTION 5. NOTICE OF MEETINGS There shall be an annual meeting of the
Board of Directors held without notice immediately following the annual meeting
of shareholders, or as soon thereafter as convenient, at the same place as the
annual meeting of shareholders unless some other location is designated by the
Chairman of the Board or by the President. Regular meetings, without notice,
may be held at such time and place as the Board of Directors may designate. The
Chairman of the Board or the President may call any special meeting of the Board
of Directors, and shall do so whenever requested in writing by at least one-
third of the Directors. Notice of each special meeting shall be mailed to
each director at least four days before the date on which the meeting is to be
held, or be telephoned or sent to each Director by telegraph, telex, TWX,
cable, wireless or similar means of communication, or be delivered in person,
not later than the day before the date on which such meeting is to be held. The
Board of Directors may meet to transact business at any time and place without
notice, provided that each director shall be present, or that any Director or
Directors not present shall waive notice in writing, either before or after such
meeting. The attendance of any Director at a meeting without protesting prior to
the conclusion of the meeting the lack of notice of such meeting shall
constitute a waiver of notice by him. Neither the business to be transacted
at, nor the purpose of, any meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting. Notice of an adjourned
meeting need not be given if the time and place are fixed at the meeting
adjourning and if the period of adjournment does not exceed 10 days in any one
adjournment.
SECTION 6. QUORUM. A majority of the Directors then in office shall
constitute a quorum for the transaction of business, but the Director or
Directors present, if less than a quorum, may adjourn any meeting from time to
time until such quorum shall be present. All
-4-
<PAGE>
questions coming before the Board of Directors shall be determined and decided
by a majority vote of the Directors present, unless the vote of a greater number
is required by statute, the Certificate of Incorporation or these By-Laws.
SECTION 7. ACTION WITHOUT A MEETING. The Board of Directors may act without
a meeting if, prior or subsequent to such action, each Director shall consent in
writing to such action. Such written consent or consents shall be filed with
the minutes of the proceedings of the Board of Directors.
SECTION 8. COMPENSATION OF DIRECTORS. The Board may, by the affirmative
vote of a majority of the Directors then in office, fix reasonable fees or
compensation of the Directors for services to the Company, including attendance
at meetings of the Board of Directors or Committees of the Board. Nothing
herein contained shall be construed to preclude any Director from serving the
Company in any other capacity and receiving compensation therefor. Each
Director shall be entitled to receive reimbursement for reasonable
expenses incurred in the performance of his duties.
ARTICLE IV
Committees
----------
SECTION 1. HOW CONSTITUTED AND POWERS. The Board of Directors, by
resolution of a majority of the Directors then in office, shall appoint from
among its members the committees enumerated in the By-laws and may appoint one
or more other committees. The Board shall designate one member of each committee
its chairman. To the extent provided in the By-law or any resolution conferring
or limiting its powers each committee shall have and may exercise all the
authority of the Board, except that no committee shall:
(a) make, alter, or repeal any By-law of the Company;
(b) elect, appoint or remove any Director, or elect, appoint or remove any
corporate officer;
(c) submit to shareholders any action that requires approval of
shareholders;
(d) amend or repeal any resolution adopted by the Board of Directors which
by its terms is amendable or repealable only by the Board;
(e) act on matters assigned to other committees appointed by the Board of
Directors;
(f) declare or pay any dividends or issue any additional shares of
authorized and unissued capital stock; or
(g) create, dissolve or fill any vacancy on any committee appointed by the
Board of Directors.
-5-
<PAGE>
The Board, by resolution of a majority of the Directors then in office may fill
any vacancy in any committee; appoint one or more alternate members of any
committee to act in the absence or disability of members of such committees with
all the powers of such absent or disabled members; or remove any director from
membership on any committee.
SECTION 2. EXECUTIVE COMMITTEE. The Executive Committee shall consist of
not less than 3 members. During the intervals between meetings of the Board of
Directors and subject to Section 1 of this Article, the Executive Committee
shall possess and may exercise all the powers and authority of the Board of
Directors in the control and management of the business and affairs of the
Company.
SECTION 3. FINANCE AND INVESTMENT COMMITTEE. The Finance and Investment
Committee shall consist of not less than four members. The Finance and
Investment Committee shall regularly review the financial and accounting affairs
of the Company and shall:
(i) monitor the Company's financial structure and recommend to the Board
appropriate debt or equity financing to meet the Company's long-term
objectives;
(ii) review and approve the Company's dividend policy and recommend to the
Board appropriate dividend action;
(iii) review and approve financial plans, capital expenditure budgets and
capital expenditures (including leases) that on an individual basis
exceed $10 million and that are not included in the capital
expenditure budget;
(iv) review and approve purchases and dispositions of real property;
provided, that notwithstanding the foregoing or anything contained in
--------
clause (iii) above to the contrary, any two executive officers of the
Company acting together shall have the power, without the need for
any approval of the Finance and Investment Committee or the Board, to
approve, execute and effect from time to time (A) acquisitions of
real property that on an individual basis have purchase prices of up
to and including $25 million, and (B) dispositions of real property
that on an individual basis have sale prices of up to and including
$25 million and do not result in a pre-tax loss of $5 million or more
on the consolidated books of the Company;
(v) review and recommend appropriate Board action with respect to
acquisitions and divestitures of assets (including, without
limitation, stock and other equity interests in corporations,
partnerships or other entities and intellectual property rights, but
excluding individual purchases and dispositions of real property and
acquisitions of assets approved pursuant to clause (iii) above) that,
individually or in the aggregate, in one or more of a series of
related transactions, have a purchase or sale price, as applicable,
equal to or greater than $10 million; and
-6-
<PAGE>
(vi) review and approve (A) the establishment of a subsidiary in a country
in which the Company has no other subsidiary if the operation of such
subsidiary would involve an investment of more than $2.5 million, (B)
the dissolution of a subsidiary that would result in a pre-tax loss
of $5 million or more on the consolidated books of the Company, (C)
the establishment of a subsidiary in a country in which the Company
has an existing subsidiary if the operation of such new subsidiary
would involve an investment of more than $25 million, and (D) any
change in capital of a subsidiary that exceeds $25 million or that
would result in a pre-tax charge of $5 million or more on the
consolidated books of the Company.
The Finance and Investment Committee also shall (i) act as fiduciary of the
Company's employee benefit plans in the United States and Puerto Rico which
require funding, and (ii) be responsible for the selection of fund managers and
trustees, the establishment and implementation of funding and investment
policies and guidelines, and for the fiscal management and control of all such
plans of the Company and its subsidiaries in the United States and Puerto Rico.
SECTION 4. AUDIT COMMITTEE. The Audit Committee shall consist of not less
than 3 members, none of whom are officers or employees of the Company or any
subsidiary, and a majority of whom are not former officers of the Company or any
subsidiary.
The Audit Committee shall (i) recommend to the Board of Directors each year a
firm of independent accountants to be the auditors of the Company for the
ensuing fiscal year; (ii) review and discuss with the auditors and report to the
Board of Directors thereon, prior to the annual meeting of shareholders, the
plan and results of the annual audit of the Company; (iii) review and discuss
with the auditors their independence, fees, functions and responsibilities, the
internal auditing, control, and accounting systems of the Company and
other related matters as the Committee from time to time deems necessary or
desirable; and (iv) direct and supervise investigations into matters within the
scope of its duties.
SECTION 5. COMPENSATION AND BENEFITS COMMITTEE. The Compensation and
Benefits Committee (the "Committee") shall consist of not less than three
members, all of whom are to be "nonemployee directors" within the meaning of
Rule 16b-3(b)(3) under the Securities Exchange Act of 1934.
The Compensation and Benefits Committee shall: (i) review annually the
overall compensation program for the Company's corporate officers, including the
executive officers; (ii) approve the compensation of the executive officers,
including, but not limited to, regular or periodic compensation and additional
or year-end compensation; (iii) review and approve all consulting or employment
contracts of the Company or of any subsidiary with any corporate officer,
including any executive officer, or with any Director, provided, that any such
contract with any Director must also be approved by the Board of Directors; (iv)
serve as the granting and administrative committee for the Company's stock
option and stock award plans; and (v) perform such other duties as may from time
to time be assigned by the Board of Directors with respect to executive
compensation.
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<PAGE>
In addition, the Committee shall: (i) oversee the administration of
employee benefits and benefit plans for the Company and its subsidiaries; (ii)
review and approve, or recommend to the Board, new benefits or changes in
existing benefits; and (iii) appoint from among the management of the Company
committees to administer such employee benefits and benefit plans.
SECTION 6. CORPORATE RESPONSIBILITY COMMITTEE. The Corporate Responsibility
Committee shall review the Company's policies and procedures affecting its role
as a responsible corporate citizen, including, but not limited to, those
relating to issues such as equal employment opportunity and community relations,
to health, safety and environmental matters, and to proper business practices.
SECTION 7. CORPORATE GOVERNANCE COMMITTEE. The Corporate Governance
Committee shall consist of not less than four members and shall be responsible
for considering and making recommendations to the Board in its areas of
responsibility, which are:
(i) To recommend to the Board candidates for election as directors at
the annual meeting of shareholders or to fill vacancies on the
Board;
(ii) To make recommendations concerning the composition, organization and
functions of the Board and the performance, qualifications, conduct,
including memberships on other boards, and compensation of
directors;
(iii) To consider matters of corporate governance and board practices and
develop and periodically review a Statement of Corporate Governance
Principles for the Company;
(iv) To monitor and recommend the functions and charters of the various
committees of the Board;
(v) To make recommendations on the structure of Board meetings;
(vi) To recommend matters for consideration by the Board;
(vii) To review periodically the Company's shareholder rights plan; and
(viii) To review periodically the Company's by-laws and certificate of
incorporation.
SECTION 8. MEETINGS AND PROCEDURES. Each committee may make its own rules
of procedure and shall meet as provided by such rules or by resolution of the
Board of Directors, and shall also meet at the call of the chairman of the
committee, the Chairman of the Board, the President, or a majority of the
members of the committee.
A majority of the members of a committee shall constitute a quorum. The
affirmative vote of a majority of all of the members shall be necessary for the
adoption of a resolution or to approve any matter within the scope of the
authority of a committee. Minutes of the proceedings
-8-
<PAGE>
of a committee shall be recorded in a book provided for that purpose and filed
with the Secretary of the Company. A committee may act without a meeting if,
prior or subsequent to such action, each member shall consent in writing to such
action. Such written consent or consents shall be filed with the minutes of the
proceedings of the committee.
Action taken by a committee, with or without a meeting, shall be reported to
the Board of Directors at its next regular meeting following such committee
action; except that, when the meeting of the Board is held within 2 days after
the committee action, such report, if not made at the first meeting, shall be
made to the Board at its second meeting following such action.
ARTICLE V
Officers
--------
SECTION 1. ENUMERATION, APPOINTMENT AND REMOVAL. The corporate officers of
the Company shall be a Chairman of the Board, a Vice Chairman of the Board, a
President, one or more Executive Vice Presidents, one or more Senior Vice
Presidents, one or more Sector Presidents, one or more Group Presidents, one or
more Vice Presidents, a Controller, a Treasurer, a Secretary and such other
corporate officers (including assistant corporate officers) as the Board
of Directors may deem necessary or desirable for the transaction of the business
of the Company. In its discretion, the Board of Directors may leave unfilled
any office except those of the President, Treasurer, and Secretary, and should
any vacancy occur among said officers by death, resignation or otherwise, the
same shall be filled at the next regular meeting of the Board of Directors or at
a special meeting. Any two or more offices may be held by the same person. The
Board of Directors, by resolution adopted by a majority of the Directors, then
in office, shall designate the Chairman of the Board or the President to serve
as the Chief Executive Officer of the Company.
The corporate officers shall be elected at the first meeting of the Board of
Directors after the annual election of Directors, and shall hold office until
the next succeeding annual meeting of the Board of Directors, subject to the
power of the Board of Directors to remove any corporate officer at pleasure
by an affirmative vote of the majority of the Directors then in office.
Every corporate officer shall have such authority and perform such duties in
the management of the Company as may be provided in these By-laws, or such
duties consistent with these By-laws as may be assigned by the Board of
Directors or the Chief Executive Officer.
SECTION 2. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall be
elected from among the members of the Board of Directors and shall have general
charge and supervision over and responsibility for the business and affairs of
the Company. He shall keep the Board of Directors fully informed concerning
those areas in his charge, and shall perform such other duties as may be
assigned to him by the Board of Directors. In the absence or disability of the
Chairman of the Board and of the Vice Chairman of the Board, the Chief Executive
Officer shall have all the powers and perform all the duties of the Chairman of
the Board.
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<PAGE>
SECTION 3. CHAIRMAN OF THE BOARD The Chairman of the Board shall preside
at all meetings of the Board of Directors and of the shareholders and shall
perform such other duties as these By-laws or the Board of Directors
may prescribe.
SECTION 4. VICE CHAIRMAN OF THE BOARD. In the absence or disability of the
Chairman of the Board, the Vice Chairman of the Board shall have all the powers
and perform all the duties of the Chairman of the Board. He shall perform such
other duties as may be assigned to him by the Board of Directors or Chairman of
the Board.
SECTION 5. PRESIDENT. The President shall have such powers and perform such
duties as may be provided by statute, these By-laws, and as may be assigned by
the Board of Directors or the Chief Executive Officer.
SECTION 6. TREASURER. The Treasurer shall have the care and custody of the
Company funds and securities, maintain banking relationships and execute credit
and collection policies. He shall perform such other duties and possess such
other powers as are incident to his office.
SECTION 7. SECRETARY. The Secretary shall attend all meetings of the Board
of Directors and of the shareholders, and shall record all proceedings of such
meetings in books to be kept for that purpose. The Secretary shall give, or
cause to be given, notice of all meetings of the shareholders and the Board of
Directors. He shall have the custody of the seal of the Company and shall affix
the same to all instruments requiring it, and attest the same. He shall perform
such other duties and possess such other powers as are incident to his office.
ARTICLE VI
Certificate of Capital Stock
----------------------------
SECTION 1. FORM AND TRANSFERS. The interest of each shareholder of the
Company shall be evidenced by certificates for shares of capital stock,
certifying the number of shares represented thereby and in such form as the
Board of Directors may from time to time prescribe.
Transfers of shares of the capital stock of the Company shall be made only on
the books of the Company, which shall include the books of the stock transfer
agent, by the registered holder thereof, or by his attorney authorized by power
of attorney duly executed and filed with the Secretary of the Company, or a
transfer agent appointed as provided in Section 4 of this Article, and on
surrender of the certificate or certificates for such shares properly endorsed
and the payment of all taxes thereon. The person in whose name shares of capital
stock stand on the books of the Company shall be deemed the owner thereof for
all purposes. The Board may, from time to time, make such additional rules and
regulations as it may deem expedient concerning the issue, transfer, and
registration of certificates for shares of the capital stock of the Company.
-10-
<PAGE>
Certificates shall be signed by, or in the name of the corporation by, the
Chairman or Vice Chairman of the Board, or the President or a Vice-President,
and may be countersigned by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the corporation and may be sealed with
the seal of the corporation or a facsimile thereof. Any or all signatures upon
a certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon such
certificate, shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of its issue.
SECTION 2. FIXING RECORD DATE. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
an adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining the shareholders entitled
to receive payment of any dividend or allotment of any right, or for the purpose
of any other action, the Board of Directors shall fix a date not more than 60
days nor less than 10 days before the date of any such meeting, nor more than 60
days prior to any other action, as the record date for any such determination of
shareholders.
SECTION 3. LOST, STOLEN, DESTROYED, OR MUTILATED CERTIFICATES. No
certificate for shares of capital stock in the Company shall be issued in place
of any certificate alleged to have been lost, destroyed or stolen, except on
production of evidence of such loss, destruction or theft and on delivery to the
Company, if the Board of Directors shall so require, of a bond of indemnity upon
such terms and secured by such surety as the Board of Directors may in its
discretion require. A new certificate may be issued without requiring any bond
when, in the judgment of the Board of Directors, it is proper to do so.
SECTION 4. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
appoint one or more transfer agents and one or more registrars, and may require
all certificates of capital stock to bear the signature or signatures of any of
them. One corporation may serve as both transfer agent and registrar.
SECTION 5. EXAMINATION OF BOOKS BY SHAREHOLDERS. So far as it is not
inconsistent with the law of New Jersey, the Board of Directors shall have power
to determine, from time to time, whether and to what extent and at what times
and places and under what conditions and regulations the books and records
of account, minutes of the proceedings of the shareholders, Board of Directors
and any committee of the Company, and other documents of the Company, or any of
them, shall be open to inspection of the shareholders.
SECTION 6. VOTING SHARES OF OTHER CORPORATIONS. Unless otherwise ordered
by the Board of Directors, the Chairman of the Board and the President, or
either of them, shall have full power and authority on behalf of the Company to
attend and to act and to vote at any meeting of Shareholders of any corporation
in which this Company may hold stock, and at any such meeting shall possess and
may exercise any and all rights and powers incident to the ownership of such
stock, and which, as the owner thereof, this Company might have
-11-
<PAGE>
possessed and exercised if present. The Board of Directors, by resolution, from
time to time, may confer like powers upon any other person or persons.
ARTICLE VII
Dividends
---------
Dividends shall be declared and paid at such times and in such amounts as the
Board of Directors may in its absolute discretion determine and designate,
subject to the restrictions and limitations imposed by law.
ARTICLE VIII
Signatures
----------
Unless otherwise required by law, by the Certificate of Incorporation, by
these By-laws, or by resolution of the Board of Directors, the Chief Executive
Officer, the President or any Executive Vice President, Senior Vice President,
Sector President, Group President, or Vice President, or the Controller or the
Treasurer of the Company may enter into and execute in the name of the Company,
contracts or other instruments in the regular course of business, or contracts
or other instruments not in the regular course of business which are authorized
either generally or specifically by the Board of Directors, and the Secretary or
an Assistant Secretary shall affix the Company seal thereto and attest the same,
if required.
ARTICLE IX
Fiscal Year
-----------
The fiscal year of the Company shall begin on the 1st day of October in each
year and end on the September 30th next succeeding.
ARTICLE X
Directors May Contract With Company
-----------------------------------
Any Director or corporate officer may be a party to or may be interested in
any agreement or transaction of this Company by which he may personally benefit,
with the same force and effect as if he were either an entire stranger to the
Company or to the Board of Directors, provided the fact that he is so interested
or may personally benefit shall be disclosed or shall have been known to the
majority of the Board of Directors; and further provided that such agreement or
transaction shall be approved or ratified by the affirmative vote of a majority
of the Directors not so interested or benefited.
ARTICLE XI
Indemnification
---------------
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<PAGE>
The Company shall indemnify to the full extent authorized or permitted by the
New Jersey Business Corporation Act, any corporate agent (as defined in said
Act), or his legal representative, made, or threatened to be made, a party to
any action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that he is or was a corporate agent of this
Company.
ARTICLE XII
Amendments
----------
These By-laws may be altered, amended or repealed by the shareholders or by a
majority vote of the Directors then in office. Any By-law adopted, amended or
repealed by the shareholders may be amended or repealed by a majority vote of
the Directors then in office unless the resolution of the shareholders adopting
such By-law expressly reserves the right to amend or repeal it to the
shareholders.
ARTICLE XIII
Force and Effect of By-Laws
---------------------------
These By-laws are subject to the provisions of the New Jersey Business
Corporation Act and the Company's Certificate of Incorporation, as it may be
amended from time to time. If any provision in these By-laws is inconsistent
with a provision in that Act or the Certificate of Incorporation, the provision
of that Act or the Certificate of Incorporation shall govern to the extent of
such inconsistency.
-13-
<PAGE>
Exhibit 10cii
Endorsement Method
Split Dollar Agreement
THIS AGREEMENT, made as of this ____________ day of ____________ 1999 by and
between BECTON DICKINSON AND COMPANY, a Corporation with its principal place of
business at FRANKLIN LAKES, NEW JERSEY, (hereinafter referred to as the
"Corporation"), and "EXECUTIVE" hereinafter referred to as the "Executive").
WHEREAS, the Executive is a valued employee of the Corporation and the
Corporation wishes to secure, for itself, the benefits of a continuing
association with the Executive; and
WHEREAS, the Executive is expected to perform his or her duties in a capable and
efficient manner, resulting in substantial growth and productivity to the
Corporation; and
WHEREAS, the experience of the Executive is such that assurance of his or her
continued services is essential to the future growth and profitability of the
Corporation.
Now, THEREFORE, in consideration of the mutual covenants contained herein, the
parties hereto agree as follows:
INSURANCE COVERAGE
1. The Corporation will enter into various contracts of insurance on the
life of the Executive which are listed on Exhibit A. ("Policies")
PREMIUM PAYMENTS
2. On or before the due date of each premium payment on the Policies, or
within the grace period provided therein, the Corporation shall pay the
full amount of the premium to the insurance company providing the insurance
coverage.
BENEFICIARY DESIGNATION
3. Contemporaneously with the execution of this Agreement, the Executive
has executed a Beneficiary Designation form setting forth the name or names
of the beneficiary or beneficiaries ("Beneficiary") entitled to receive
benefits hereunder. The Executive shall have the right, from time to time,
to change the Beneficiary by executing a Beneficiary Designation form and
submitting it to the Corporation.
DEATH BENEFITS
4. The Executive shall be entitled to the following as a Death Benefit:
a. In the event of the Executive's death prior to Retirement (as
defined in paragraph 5.), the Beneficiary shall receive from the
death proceeds an amount equal to two times the Executive's current
annual salary determined as of the most recent Plan Anniversary
Date, less fifty thousand dollars ($50,000).
b. In the event of the Executive's death after Retirement, the
Beneficiary shall receive from the death proceeds an amount equal to
two times salary, determined as of the Executive's date of
Retirement.
c. Notwithstanding anything herein to the contrary, if the Executive
commits suicide within two (2) years of the date of purchase of the
Policies, the Death Benefit, if any, to be received hereunder shall
not exceed the benefit provided under the applicable Policies.
All death proceeds of the Policies remaining after the payment of
Death Benefits to the Beneficiary shall be paid directly to the
Corporation.
<PAGE>
RETIREMENT
5. Retirement shall mean the first day of the month in which the Executive
ceases employment with the Corporation and such termination is, under the
terms of the Corporation's Pension Plan (or its successor) either:
a. on or after the Executive's normal Retirement date with a normal or
late Retirement pension; or
b. on or after attaining age 55, with at least ten years of service.
PLAN ANNIVERSARY DATE
6. Plan Anniversary Date shall be every April 1, subsequent to the date
this Agreement is executed.
TERMINATION OF AGREEMENT
7. This Agreement shall terminate 30 days after the first to occur of the
following events; (a) upon the giving of prior written notice of
termination by either party to the other party to this Agreement, with or
without the consent of the other party; or (b) the date of the Executive's
termination of employment for any reason other than retirement. During such
30-day period prior to the termination of this Agreement, the Executive
shall have the right to purchase the Policies from the Corporation by
payment of the Corporate Interest in the Policies. The Corporate Interest
in the Policies shall be equal to the lesser of (a) the sum of all premiums
paid by Corporation less any policy loans, cash withdrawals, or refunds of
unearned premiums, or (b) the tabular cash value of the Policies at the end
of the period for which premiums have been paid plus the cash value of any
paid-up additions, if any. Upon receipt of the Corporate Interest in the
Policies, Corporation shall execute such documents as may be required by
the Insurer to transfer ownership of the Policies to Executive.
Notwithstanding the first sentence of this paragraph, this Agreement shall
terminate immediately upon receipt of the Corporate Interest in the
Policies and transfer of ownership of the Policies to Executive. In the
event of the termination of this Agreement under any circumstances whereby
Executive cannot, or does not, purchase the Policies, Executive agrees to
execute such documents as may be required by the Insurer to designate
Corporation as sole beneficiary of the Policies (and Executive shall have
no further right or interest in the Policies).
OWNERSHIP OF POLICY
8. The Corporation shall be the sole and absolute owner of the Policies,
and may exercise all ownership rights granted to the owner thereof by the
terms of the Policies, except as may be provided herein. In addition, the
Corporation shall keep possession of the Policies, but agrees, from time to
time, to make the Policies available to the Executive.
BORROWING
9. The Corporation shall not have the right to borrow the cash value of the
Policies without the consent of the Executive. In any event, amounts
borrowed from the cash value by the Corporation shall be limited to the
amount of premiums paid by the Corporation to date and, shall not reduce
the amount payable to the Beneficiary. The Corporation agrees to repay the
borrowed amounts to the extent required to ensure the full payment of the
Death Benefits to the Beneficiary.
STATUS OF AGREEMENT
10. The benefits payable under this Agreement shall be independent of, and
in addition to, any other employment agreement that may exist from time to
time between the parties hereto, or any other compensation payable by the
Corporation to the Executive, whether as salary, bonus or otherwise. This
Agreement shall not be deemed to constitute a contract of employment
between the parties hereto, nor shall any provision hereof restrict the
right of the Corporation to discharge the Executive, or restrict the right
of the Executive to terminate his employment.
RELOCATION AND AMENDMENT
11. This Agreement may be revoked or be amended in whole or in part by a
written agreement signed by both of the parties hereto.
<PAGE>
CONSTRUCTION
12. This Agreement is a New Jersey contract and shall be construed and
enforced in accordance with the laws of the State of New Jersey.
FIDUCIARY
13. The person serving from time to time as the [Vice President, Personnel]
of the Corporation shall serve as the named Fiduciary and administrator
("Fiduciary") of the split-dollar arrangement established pursuant to this
Agreement. The Fiduciary shall have full power to administer this
Agreement, and the Fiduciary's actions with respect hereto shall be binding
and conclusive upon all persons for all purposes; subject to Item 14. The
fiduciary shall not be liable to any person for any action taken or omitted
in connection with its responsibilities, rights and duties under this
Agreement unless attributable to willful misconduct or lack of good faith.
CLAIMS PROCEDURE
14. Any controversy or claim arising out of or relating to this Agreement
shall be filed with the Fiduciary which shall make all determinations
concerning such claim. Any decision by the Fiduciary denying such claim
shall be in writing and shall be delivered to all parties in interest. Such
decision shall set forth the reasons for denial in plan language. Pertinent
provisions of the Agreement shall be cited and, where appropriate, an
explanation as to how the Executive or the beneficiary can perfect the
claim will be provided. This notice of denial of benefits will be provided
within 90 days of the Fiduciary's receipt of the Executive's claim for
benefits. If the Fiduciary fails to notify the Executive of the decision
regarding such claim, the claim shall be considered denied, and the
Executive shall then be permitted to proceed with his appeal as provided in
this Section.
An Executive who has been completely or partially denied a benefit shall be
entitled to appeal this denial of his claim by filing a written statement
of his position with the Fiduciary no later than sixty (60) days after
receipt of the written notification of such claim denial. The Fiduciary
shall schedule an opportunity for a full and fair review of the issue
within thirty (30) days of receipt of the appeal.
The decision on review shall set forth specific reasons for the decision,
and shall cite specific references to the pertinent Agreement provisions on
which the decision is based.
Following his review of any additional information submitted by the
Executive, either through the hearing process or otherwise, the Fiduciary
shall render a decision on his review of the denied claim in the following
manner:
(a) The Fiduciary shall make his decision regarding the merits of the
denied claim within 60 days following his receipt of the request for
review (or within 120 days after such receipt, in a case where there
are special circumstances requiring extension of time for reviewing
the appealed claim). He shall deliver the decision to the claimant in
writing. If an extension of time for reviewing the appealed claim is
required because of special circumstances, written notice of the
extension shall be furnished to the Executive prior to the
commencement of the extension. If the decision on review is not
furnished within the prescribed time, the claim shall be deemed denied
on review.
(b) The decision on review shall set forth specific reasons for the
decision, and shall cite specific references to the pertinent
Agreement provisions on which the decision is based.
IN WITNESS WHEREOF, the said Corporation has caused this Agreement to be signed
in its corporate name by its duly authorized officer, and properly attested to,
and the said Executive has hereunto set his hand, all as of the day and year
first above written.
ATTEST:
BECTON DICKINSON AND COMPANY
<PAGE>
By:
WITNESS:
"EXECUTIVE"
<PAGE>
BECTON, DICKINSON AND COMPANY
INDIAN ADDENDUM
This Addendum to each of the Becton, Dickinson and Company 1990 Stock
Option Plan, as amended and restated, the 1995 Stock Option Plan, as amended and
restated, and the 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 India (an "Indian 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 Indian Optionholder be permitted to
exercise stock options granted to him or her under any of the Company's
Plans if such exercise would involve an outward remittance of foreign
exchange from India in excess of U.S. $10,000 over a five-year period,
without the prior requisite approval of the Reserve Bank of India.
<PAGE>
Financial Review Becton, Dickinson and Company
- --------------------------------------------------------------------------------
Company Overview
- --------------------------------------------------------------------------------
Becton Dickinson and Company ("BD") 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. We focus strategically on achieving growth in three worldwide
business segments--BD Medical Systems ("Medical"), BD Biosciences
("Biosciences") and BD Preanalytical Solutions ("Preanalytical"). Our products
are marketed in the United States both through independent distribution channels
and directly to end-users. Our products are marketed outside the United States
through independent distribution channels and sales representatives, and, in
some markets, directly to end-users.
We now generate close to 50% of our revenues outside the United States.
Demand for health care products and services continues to be strong worldwide,
despite the ongoing focus on health care cost containment around the world. The
health care marketplace continues to be competitive and consolidation in our
customer base has resulted in recent pricing pressures, particularly in the
Medical segment. We will continue to manage these issues by capitalizing on our
market-leading positions in many of our product offerings and by leveraging our
cost structure. The health care environment favors good continued growth in
medical delivery systems due to new products and opportunities. In particular,
the U.S. market is poised for broad scale conversion to advanced protection
devices due to the growing awareness of benefits of protecting health care
workers against accidental needlesticks and a high level of current legislative
and regulatory activity favoring conversion. We are a leader in a number of
platforms in the Biosciences segment. In the last few years, we made key
acquisitions in the areas of immunology, cell biology and molecular biology.
Growth in research products is driven by the expansion in genomic research and
increased pharmaceutical and government spending in this area. In the
Preanalytical segment, we have strong market-leading positions. We also have
opportunities for further growth in this segment. For example, nearly half of
the world's population lives in medical markets that do not currently use
evacuated blood collection systems, one of our principal products in this
segment.
We continue to improve operating effectiveness by focusing on four key
initiatives. The first is "One Company" selling which takes advantage of our
broad market presence to cross-sell our products to our medical and clinical
customers. The second initiative is "One Company" manufacturing, where we are
leveraging our worldwide manufacturing network to improve our cost
effectiveness. The third area is procurement, where we are making efforts
across our operations to be more focused and systematic. Finally, efforts
continue to implement an enterprise-wide program to upgrade our business
information systems ("Genesis") which began in 1998 and are expected to be
completed by the end of year 2001. Anticipated benefits from this project
include inventory reductions, operating improvements and more complete and
timely access to information throughout our enterprise.
Our financial results and the operating performance of our segments are
discussed below. The following references to years relate to our fiscal year,
which ends on September 30.
- --------------------------------------------------------------------------------
Special and Other Charges
- --------------------------------------------------------------------------------
We recorded special charges in 1999 and 1998 associated with two restructuring
programs. The third quarter 1999 special charges of $76 million were associated
with the exiting of product lines and other activities, primarily in the area of
home health care, the impairment of assets, and an enhanced voluntary retirement
incentive program. We also recorded charges of $27 million in cost of products
sold in the third quarter of 1999 to reflect the write-off of inventories and to
provide appropriate reserves for expected future returns relating to the exited
product lines. We have completed implementation of the exit plans. We also
reversed $6 million of 1998 special charges in the third quarter of 1999 as a
result of our decision not to exit certain activities as originally planned.
The 1998 special charges of $91 million were primarily associated with
the restructuring of certain manufacturing operations and the write-down of
impaired assets. The plan for restructuring our manufacturing operations
included the closure of a surgical blade plant in the United States, scheduled
for the latter part of fiscal year 2001. We also recorded $22 million of
charges in 1998 associated with the reengineering component of Genesis. The
majority of these charges were included in selling and administrative expense.
For additional discussion of the above charges, see Note 5 of the Notes
to Consolidated Financial Statements.
- --------------------------------------------------------------------------------
Acquisitions
- --------------------------------------------------------------------------------
During 1999, we acquired ten businesses for an aggregate of $382 million in cash
and 357,522 shares of our common stock. We also granted options to purchase an
aggregate of 73,074 shares of our common stock to eligible employees of one of
the acquired companies. These acquisitions included the August 1999 purchase for
$201 million in cash, subject to certain post-closing adjustments, of Clontech
Laboratories, Inc. ("Clontech"). Clontech is a privately-held company serving
the life sciences market in the areas of gene-based life science research and
drug discovery. We recorded a total charge of $49 million for purchased in-
process research and development in connection with the current year
acquisitions, of which $32 million related to the Clontech acquisition. These
charges represented the fair value of certain acquired research and development
projects relating to gene chip technology, gene expression, gene cloning and
fluorescent gene reporter
18
<PAGE>
Becton, Dickinson and Company
tools which were determined not to have reached technological feasibility and
which do not have alternative future uses. During 1998, we acquired six
businesses for an aggregate of $546 million in cash and 595,520 shares of our
common stock. These acquisitions included the Medical Devices Division ("MDD")
of the BOC Group for approximately $457 million in cash. In connection with this
acquisition, we recorded a charge of $30 million in 1998 for purchased
in-process research and development relating to projects associated with the
development of medical catheters and other devices. All acquisitions were
recorded using the purchase method of accounting and the results of operations
of the acquired companies are included in our consolidated results from their
respective acquisition dates.
- --------------------------------------------------------------------------------
Revenues and Earnings
- --------------------------------------------------------------------------------
Worldwide revenues in 1999 were $3.4 billion, an increase of 10% over 1998, with
acquisitions contributing 5%. The impact of foreign currency translation on
revenue growth was not significant. Underlying revenue growth, which excludes
the effects of foreign currency translation and acquisitions in 1999 and 1998,
resulted primarily from volume increases in all segments.
Medical revenues in 1999 increased 12% over 1998 to $1.9 billion with
acquisitions contributing 8%. Underlying revenue growth was led by strong sales
of prefillable syringes to pharmaceutical companies and increased sales of
infusion therapy products, particularly advanced protection devices.
Underperformance of home health care products unfavorably affected revenue
growth in 1999.
Medical operating income in 1999 was $343 million, an increase of 7%
compared to 1998. Excluding the impact in both years of special and other
charges, and the incremental impact of acquisitions, including related charges
of $30 million recorded in 1998 for purchased in-process research and devel-
opment, Medical operating income increased 5%. Revenue growth and productivity
improvements were partially offset by increased investment in the areas of
advanced protection devices and home health care and the impact of cost contain-
ment pricing pressures. As discussed above, we decided to exit several product
lines in the home health care area during the third quarter of 1999.
Biosciences revenues in 1999 increased 7% over 1998 to $986 million with
acquisitions contributing 2%. Underlying revenue growth was led by market share
gains in flow cytometry products fueled by the continued introduction of
innovative new products. Infectious disease product revenues continue to be
adversely affected by cost containment in testing in the United States.
Biosciences operating income in 1999 was $76 million, a decrease of 1%
compared to 1998. Excluding the impact in both years of special and other
charges, and the incremental impact of acquisitions, including related charges
of $49 million recorded in 1999 for purchased in-process research and devel-
opment, Biosciences operating income increased 8%. This performance reflects an
improved sales mix, as well as manufacturing and operational productivity
gains. These gains were partially offset by increased research and development
spending, particularly in the area of genomic research, and reengineering and
other costs relating to Genesis.
Preanalytical revenues in 1999 increased 6% over 1998 to $509 million.
Significant volume increases in advanced protection devices were partially
offset by cost containment pricing pressures in several markets.
Preanalytical operating income of $124 million in 1999 represented a 7%
increase compared to 1998. Excluding the impact in both years of special and
other charges, and the incremental impact of acquisitions, Preanalytical
operating income increased 9% primarily due to revenue growth. Savings achieved
through productivity improvements and expense control programs were partially
offset by increased investment for advanced protection programs and cost con-
tainment pricing pressures.
On a geographical basis, revenues outside the United States in 1999
increased 17% to $1.7 billion with acquisitions contributing 8%. The impact of
foreign currency translation on revenue growth was not significant in 1999.
Underlying revenue growth was led by strong sales of prefillable syringes in
Europe and FACS brand flow cytometry systems and infectious disease diagnostic
products in Japan. Underlying revenue growth in the Asia Pacific region was led
by strong increases in sales of hypodermic and infusion therapy products.
Revenues in the United States in 1999 were $1.7 billion, an increase of
3% over 1998. Sales of FACS brand flow cytometry systems, infusion therapy
products, and sample collection devices demonstrated good growth. As mentioned
above, sales of infectious disease products continued to be negatively
affected by cost containment in testing. Underperformance of home health care
products also unfavorably affected revenue growth.
Gross profit margin was 49.9% in 1999, compared with 50.6% last year.
Excluding the impact of other charges relating to the exited product lines, as
discussed above, gross profit margin was 50.7% in 1999.
Selling and administrative expense of $932 million in 1999 was 27.3% of
revenues. Excluding reengineering and other charges relating to Genesis, selling
and administrative expense in 1999 was 26.8% of revenues. The prior year's ratio
was 27.6%, or 27.0% excluding reengineering charges for Genesis. Savings
achieved through spending controls and productivity improvements offset
increased investment relating to advanced protection programs and the impact of
acquisitions.
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Financial Review Becton, Dickinson and Company
Investment in research and development in 1999 increased to $254
million, or 7.4% of revenues, including the $49 million charge for purchased in-
process research and development related to current year acquisitions. In 1998,
we recorded a charge of $30 million for purchased in-process research and
development associated with the MDD acquisition. Excluding the effect of
purchased in-process research and development in both years, investment in
research and development was 6% of revenues, or an increase of 9% over 1998.
This increase includes additional funding directed toward the development of
advanced protection devices and new diagnostic platforms.
Operating income in 1999 was $445 million, compared to last year's $405
million. Excluding the impact of special and other charges and purchased in-
process research and development charges, operating income would have been
17.4% of revenues in 1999. Operating income of $405 million in 1998 also
included certain charges, as discussed above.
Net interest expense of $72 million in 1999 was $16 million higher than
in 1998, primarily due to additional borrowings to fund acquisitions.
"Other (expense) income, net" in 1999 was $1 million of net expense,
compared to $8 million of net expense in 1998, primarily due to lower foreign
exchange losses, gains on the sale of assets, as well as settlements in 1999.
The effective tax rate in 1999 was 26.0%, compared to 30.6% in 1998. The
decrease is principally due to a $7 million favorable tax judgment in Brazil and
a favorable mix in income among tax jurisdictions, partially offset by the lack
of a tax benefit associated with a larger purchased in-process research and
development charge recorded in 1999 as compared to 1998.
Net income in 1999 was $276 million, compared to $237 million in 1998.
Diluted earnings per share in 1999 were $1.04, compared to $.90 in 1998.
Excluding the special and other charges and purchased in-process research and
development charges, diluted earnings per share in 1999 were $1.49. Diluted
earnings per share of $.90 in 1998 also included certain charges, as discussed
above.
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Financial Instrument Market Risk
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We selectively use 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 we do not have
significant exposure to any one counterparty. We do not enter into financial
instruments for trading or speculative purposes.
Our foreign currency exposure is primarily in Western Europe, Asia
Pacific, Japan, Brazil and Mexico. Foreign exchange risk arises when we enter
into transactions in non-hyperinflationary countries, generally on an
intercompany basis, that are denominated in currencies other than the func-
tional currency. During 1999 and 1998, we hedged substantially all of our
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. 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,
1999 and 1998, a 10% appreciation or depreciation of the U.S. dollar from the
September 30, 1999 and 1998 market rates would not have a material effect on our
earnings.
Our primary interest rate exposure results from changes in short-term
U.S. dollar interest rates. In an effort to manage interest rate exposures, we
strive 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 our
overall interest rate exposure at September 30, 1999 and 1998, a change of 10%
in interest rates would not have a material effect on our earnings or cash flows
over a one-year period. An increase of 10% in interest rates would decrease the
fair value of our long-term debt and interest rate swaps at September 30, 1999
and 1998 by approximately $54 million and $48 million, respectively. A 10%
decrease in interest rates would increase the fair value of our long-term debt
and interest rate swaps at September 30, 1999 and 1998 by approximately $61
million and $54 million, respectively.
We manufacture products in Brazil for sale in that country and for
export. In addition, we import products from affiliates for distribution within
Brazil. Effective January 1, 1998, we no longer considered our Brazilian
business to be operating in a highly inflationary economy as defined by
Statement of Financial Accounting Standard ("SFAS") No. 52 "Foreign Currency
Translation." Over the course of 1999, the Brazilian Real devalued by 62%. We
were able to offset the foreign exchange transaction impact of the devaluation
by hedging our exposure with foreign exchange forward contracts and options.
Consequently, the impact of the devaluation on our earnings was minimal. We also
manufacture in Mexico and import various products from affiliates for sale in
Mexico. In past years, the Mexican economy had experienced periods of high
inflation, recession and currency instability. More recently, Mexico's economy
and currency have shown signs of stabilizing. Effective January 1, 1999, we no
longer considered our Mexican business to be operating in a highly inflationary
economy as defined by SFAS No. 52.
20
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Becton, Dickinson and Company
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Liquidity and Capital Resources
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Cash provided by operations continued to be our primary source of funds to
finance operating needs and capital expenditures. In 1999, net cash provided by
operating activities was $432 million, compared to $501 million in 1998.
Capital expenditures were $312 million in 1999, compared to $181
million in the prior year. Medical capital spending, which totaled $188 million
in 1999, included spending for capacity expansion for advanced protection
devices and continued spending on a new syringe manufacturing facility in India.
Funds also were expended for capacity expansion for prefillable syringes in
Mexico and France. Biosciences capital spending, which totaled $42 million in
1999, included spending on new manufacturing facilities. Preanalytical spend-
ing, which totaled $54 million, included spending on additional capacity for
advanced protection devices. Funds expended outside of the above segments
included amounts related to Genesis. We expect capital expenditures to increase
about 10 to 15% in 2000, primarily to fund increased capacity expansion for
advanced protection devices.
Over the last three years, we have expended approximately $1.1 billion
for business acquisitions. We expect our acquisition activity to slow
considerably in 2000 as we focus on integrating recently acquired businesses
into existing operations.
Net cash provided by financing activities was $365 million during 1999,
as compared to $242 million during 1998. This change was primarily due to the
elimination of common share repurchases and to increased issuance of commercial
paper in 1999, compared with 1998, offset by the repayment of long-term debt.
In 1999, we did not repurchase any of our common shares, compared with
repurchases totaling $44 million in 1998. This reduction in share repurchases
was consistent with our long-standing strategy of allocating funds to meet the
needs of businesses and to finance strategic acquisitions before funding share
repurchases. In April 1999, the Executive Committee of our Board of Directors
rescinded a March 24, 1998 resolution which had authorized repurchase of our
stock, under which 21.3 million shares remained to be repurchased.
During 1999, total debt increased $435 million, primarily as a result of
increased spending on acquisitions. Short-term debt was 40% of total debt at
year end, compared to 33% at the end of 1998. The change in this percentage was
principally attributable to the use of short-term debt to finance a portion of
our acquisition activities. Our weighted average cost of total debt at the end
of 1999 was 6.5%, compared to 7.3% at the end of last year. Debt to
capitalization at year end increased to 47.2%, from 41.4% last year, due to
additional borrowings related to acquisitions. We anticipate generating excess
cash in 2000 which we expect to use to repay debt.
In 1999, we negotiated a new 364-day $300 million syndicated line of
credit to supplement both our existing five-year, $500 million syndicated and
committed revolving credit facility and an additional $100 million credit line.
There were no borrowings outstanding under any of these facilities at September
30, 1999. These facilities can be used to support our commercial paper program,
under which $573 million was outstanding at September 30, 1999, and for other
general corporate purposes. In addition, we have informal lines of credit
outside the United States. In September 1999, we issued to the public $200
million of 10-year 7.15% notes at an effective yield of 7.34%. We utilized the
proceeds to repay commercial paper issued in connection with the Clontech
acquisition. In September 1999, Moody's adjusted our long-term debt rating from
"A1" to "A2," while reaffirming our "P-1" commercial paper rating, and
characterized our ratings outlook as stable. Standard and Poor's reaffirmed our
"A+" long-term debt rating and our "A-1" commercial paper rating, while
changing our rating outlook to negative. We continue to have a high degree of
confidence in our ability to refinance maturing short-term and long-term debt,
as well as to incur substantial additional debt, if required.
Return on equity increased to 16.3% in 1999, from 15.8% in 1998.
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Year 2000 Readiness Disclosure
- --------------------------------------------------------------------------------
General
We designed and implemented a company-wide Year 2000 plan to ensure that our
computer equipment and software and devices with date-sensitive embedded
technology would be Year 2000-compliant. In other words, we wanted to ensure
that this equipment and software and these devices would be able to distinguish
between the year 1900 and the year 2000 and would function properly with respect
to all dates, whether in the twentieth or twenty-first centuries.
Our plan included a series of initiatives to ensure that all of our
computer equipment and software will function properly into the next millennium.
Computer equipment (or hardware) and software includes systems generally thought
to depend on information technology, such as accounting, data processing and
telephone equipment. It also includes systems that do not obviously depend on
information technology, such as manufacturing equipment, telecopier machines and
security systems. Since these systems may contain embedded technology, our plan
included broad identification, assessment, remediation and testing efforts.
Based upon our identification, assessment, remediation and testing
efforts to date, we believe we have completed all modifications to and
replacements of our computer equipment and software that are necessary to avoid
any of the potential Year 2000-related disruptions or malfunctions that have
been identified.
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Financial Review Becton, Dickinson and Company
In addition, as we periodically replace computer equipment and software in the
ordinary course of business, we seek to acquire only Year 2000-compliant
software and hardware.
Project
Our plan includes four major areas of focus: information technology, or "IT"
systems; non-IT systems; third-party considerations; and products.
The tasks common to each of these areas of focus are:
. the identification and assessment of Year 2000 issues
. prioritization of the identified issues
. assessment of compliance
. remediation
. testing
. design and implementation of contingency and business continuation
plans.
We utilized, and will continue to utilize, both internal and external
resources to ensure that we are Year 2000-compliant prior to any impact of the
new millennium that is currently anticipated. We have completed all the tasks we
have identified to date relating to the areas of focus and goals described
below. Through these efforts, we have sought not only to avoid any Year 2000-
related disruption of our operations but also to ensure that our products, and
those of our third-party suppliers, are Year 2000-compliant.
Year 2000 Areas of Focus and Goals
IT Systems
We have reviewed our computer equipment and software to ensure that it is Year
2000-compliant, and as necessary, we have modified or replaced this equipment
and software. In addition we have established contingency and business contin-
uation plans in the event of disruption in our IT systems.
Non-IT Systems
We have sought to ensure that the hardware, software and associated embedded
computer technologies that are used to operate our facilities and equipment, as
well as other activities that are not related to IT systems, are Year 2000-
compliant. We believe we have undertaken and completed all reasonable
initiatives that are necessary or prudent to address potential Year 2000 issues
affecting our non-IT systems. We have also completed contingency and business
continuation planning to ensure that products and services will continue with a
minimum of disruption if a problem arises that cannot be directly controlled or
predicted.
Third-Party Considerations
We have identified, prioritized and communicated with critical suppliers,
distributors and customers to determine the extent to which we 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 completed through questionnaires, interviews, on-site visits and other
available means. We monitor the progress made by those parties, and we have
tested critical system interfaces. We have identified alternative vendors, if
available, to provide Year 2000-compliant products and services if needed.
Where vendors provide services or products for which few or no alternatives are
available, we have formulated contingency and business continuation plans to
address potential third-party issues identified through its evaluations and
assessments.
Products
Most of our products do not contain date-sensitive embedded technology. For
those that do, we have performed remediation and testing efforts and will
continue testing through the balance of the year, as appropriate. In addition,
we have identified some of our products that are already in use by customers
and that contain date-sensitive technology. For these products, we have
undertaken the additional step of distributing and installing any requisite
remediating product upgrades and/or replacements. We believe we have deployed
approximately 100% of these customer product upgrades. Each segment of the
Company has developed contingency and business continuation planning with
respect to its products.
Costs
The estimated total cost of the plan is approximately $18 million, which has
been, and will continue to be, funded through operating cash flows. As of
September 30, 1999, we had incurred approximately $14 million in costs related
to our Year 2000 project. We anticipate that the remaining costs of the plan
include $2 million allocated to unanticipated contingencies and $2 million for
internal and external project-related costs. Of the total remaining costs of the
plan, $1 million represents the redeployment of existing resources. None of our
other information technology projects has been delayed or deferred as a result
of the implementation of the plan.
Risks
We believe we have an effective plan in place to anticipate and resolve any
potential Year 2000 issues affecting us and our products, as well as those of
third-party suppliers, in a timely manner. We cannot assure you, however, that
Year 2000 issues will not materially and adversely affect our results of opera-
tions, cash flows or relationships with third parties in the event that
. we have not properly identified our Year 2000 issues
or the potential business disruption among third par-
ties with whom we conduct significant business, or
. our compliance assessment, remediation and testing
activities, and our deployment of product upgrades,
have not effectively addressed all relevant Year 2000
issues affecting us and our products.
In addition, disruptions in the economy generally resulting from Year
2000 issues could materially and adversely affect us. At this time we cannot
reasonably estimate the amount of potential liability and lost revenue that
would be reasonably
22
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Becton, Dickinson and Company
likely to result from the failure by us and certain key third parties to
achieve Year 2000 compliance on a timely basis.
The estimated costs of our plan and our belief that we 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 requisite training and experience; the ability
to appropriately identify, assess, remediate and test all devices, 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 we cannot yet estimate. We cannot assure you that the aggregate cost of
defending and resolving such claims, if any, would not have a material adverse
effect on us.
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Other Matters
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On January 1, 1999, eleven member countries of the European Union began the
transition to the euro as a common currency. Prior to the full implementation of
the new currency on January 1, 2002, there is a transition period during which
parties may use either their national currencies or the euro. We have completed
the necessary system modifications to accommodate euro-denominated transactions
with suppliers and customers. We are continuing to convert historical
information from the respective national currencies to the euro. We believe that
the creation of the euro will not significantly change our foreign exchange
market risk. The adoption of a common European currency may result in changes to
competitive practices, product pricing and marketing strategies. Although we
are unable to quantify these effects, if any, management currently does not
anticipate that the euro conversion will have a material adverse impact on our
results of operations, financial condition or cash flows.
We believe that the fundamentally non-cyclical nature of our core
products, our international diversification and our 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 us of economic and political
dislocations in the countries in which we do business, including the effects of
possible health care system reforms. In 1999, inflation did not have a material
impact on our overall operations.
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Litigation
- --------------------------------------------------------------------------------
We, along with a number of other manufacturers, have been named as a defendant
in approximately 300 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, New Jersey and New York. Generally, these actions allege that med-
ical 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, we acquired a business which manufactured, among other things,
latex surgical gloves. In 1995, we divested this glove business. We are
vigorously defending these lawsuits.
We, along with another manufacturer and several medical product
distributors, have been named as a defendant in eleven product liability
lawsuits relating to health care workers who allegedly sustained accidental
needle sticks, but have not become infected with any disease. The case brought
in California under the caption Chavez vs. Becton Dickinson (Case No. 722978,
San Diego County Superior Court), filed on August 4, 1998 was dismissed in a
judgment filed March 19, 1999 which has been appealed by plaintiffs. The case
brought in Florida under the caption Delgado vs. Becton Dickinson et al. (Case
No. 98-5608, Hillsborough County Circuit Court), filed on July 24, 1998 was
voluntarily withdrawn by the plaintiffs on March 8, 1999. Cases have been filed
on behalf of an unspecified number of health care workers in nine other states,
seeking class action certification under the laws of these states. To date, no
class has been certified in any of these cases. The nine remaining actions are
pending in state court in Texas, under the caption Usrey 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 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 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; in state court in Pennsylvania, under the
caption Brown vs. Becton Dickinson et al. (Case No. 03474, Philadelphia County
Court of Common Pleas), filed on November 27, 1998; in state court in New
Jersey, under the caption Pollak, Swartley vs. Becton Dickinson et al. (Case No.
L-9449-98, Camden County Superior Court), filed on December 7, 1998;
23
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Financial Review Becton, Dickinson and Company
and in state court in New York, under the caption Benner vs. Becton Dickinson et
al. (Case No. 99-111372, Supreme Court of the State of New York), filed on June
1, 1999.
Generally, these remaining actions allege that health care workers have
sustained needle sticks using hollow-bore needle devices manufactured by us and,
as a result, require medical testing, counseling and/or treatment. Several
actions additionally allege that the health care workers have sustained mental
anguish. Plaintiffs seek money damages in all remaining actions.
In June 1999, a class certification hearing was held in the matter of
Usrey vs. Becton Dickinson et al. which first was filed in Texas state court on
April 9, 1998, under the caption Calvin vs. Becton Dickinson et al. The Court
has advised the parties by letter received on October 27, 1999, that it believes
that it is appropriate to address the issues in the case by way of a class
action under Texas procedural law. The Court has scheduled a meeting with the
parties' counsel in mid-December to discuss the wording of an appropriate order.
We continue to oppose class action certification in these cases and will
continue vigorously to defend these lawsuits, including pursuing all appropriate
rights of appeal.
We, along with another manufacturer, a group purchasing organization
("GPO") and three hospitals, have 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 our contracts with GPOs exclude plaintiff
from the market in syringes and blood collection products, in violation of the
TFEA. Plaintiff also alleges that we have conspired with other manufacturers to
maintain our market share in these products. Plaintiff seeks money damages. The
pending action is in preliminary stages. We intend to mount a vigorous defense
in this action.
We are also involved in other legal proceedings and claims which arise
in the ordinary course of business, both as a plaintiff and a defendant.
In our opinion, the results of the above matters, individually and in
the aggregate, are not expected to have a material effect on our results of
operations, financial condition or cash flows.
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Environmental Matters
- --------------------------------------------------------------------------------
We believe that our operations comply in all material respects with applicable
laws and regulations. We are a party to a number of Federal proceedings in the
United States brought under the Comprehensive Environment Response, Compensa-
tion 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. We accrue costs for an estimated
environmental liability based upon our best estimate within the range of
probable losses, without considering possible third-party recoveries. We believe
that any reasonably possible losses in excess of accruals would not have a
material effect on our results of operations, financial condition, or cash
flows.
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Adoption of New Accounting Standards
- --------------------------------------------------------------------------------
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities." We
are required to adopt the provisions of this Statement no later than its fiscal
year 2000. This Statement provides guidance on the financial reporting of start-
up and organization costs and requires such costs, as defined, to be expensed as
incurred. Adoption of this Statement is not expected to have a material impact
on our results of operations or financial condition.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." We are required to adopt the provisions of
this Statement no later than the beginning of its fiscal year 2001. This
Statement requires that all derivatives be recorded in the balance sheet as
either an asset or liability measured at fair value and that changes in fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. We are in the process of evaluating this Statement and have
not yet determined the future impact on our consolidated financial statements.
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1998 Compared With 1997
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Worldwide revenues for 1998 rose 11%, to $3.1 billion. Excluding the estimated
impact of unfavorable foreign currency translation, worldwide revenues grew 14%
with acquisitions contributing 7%. Underlying revenue growth, which excludes the
effects of foreign currency translation and acquisitions in 1998 and 1997,
resulted primarily from volume increases and an improved product mix in all
segments. Medical revenues for 1998 were $1.7 billion, an increase of 14% over
1997. Underlying revenue growth in the Medical segment was led by strong sales
of infusion therapy and hypodermic products and increased sales of prefillable
syringes to pharmaceutical companies. Biosciences revenues for 1998 of $924
million represented an increase of 8% over 1997. Underlying revenue growth in
the Biosciences segment was led by strong sales of FACS brand flow cytometry
systems. Preanalytical revenues for 1998 were $478 million, an increase of 7%,
primarily due to continued strong sales of sample collection devices fueled by
the conversion of the market to advanced protection devices.
24
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Becton, Dickinson and Company
Gross profit margin was 50.6% in 1998, compared with 49.7% in 1997,
reflecting our 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, compared to 27.3% in 1997, and was unfavorably affected by the 1998
reengineering charges related to Genesis. Investment in research and development
in 1998 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, we 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 our efforts to accelerate our rate of revenue
growth.
Operating income in 1998 of $405 million decreased from $451 million in
1997. Excluding the special and other charges in 1998 and purchased in-process
research and development in 1998 and 1997, operating income would have been
17.6% of revenues in 1998, compared to 16.6% in 1997. 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. "Other (expense) income, 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 in 1997 were foreign exchange losses
of $5 million, including hedging costs.
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.
Net income in 1998 was $237 million, compared to $300 million in 1997.
Diluted earnings per share were $.90, compared to $1.15 in 1997. The effects of
the special and other charges and the purchased in-process research and develop-
ment charge recorded in 1998 decreased diluted earnings per share by $.40, 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 13% over 1997.
Capital expenditures were $181 million, compared to $170 million in
1997. Medical, Biosciences and Preanalytical capital spending totaled $105
million, $38 million and $28 million, respectively, in 1998.
We expended $537 million, net of cash acquired, for business
acquisitions in 1998, compared to $201 million in 1997.
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.
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 to 17% at the end of 1997. The change in this percentage was
principally attributable to the use of short-term debt to finance a portion of
the MDD acquisition.
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 purchased in-
process research and development charge.
- --------------------------------------------------------------------------------
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 BD. BD and its representatives from time to time may make certain
verbal or written forward-looking statements regarding BD's performance
(including future revenues, products and income), or events or developments that
BD expects to occur or anticipates occurring in the future. All such statements
are based upon current expectations of BD 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 BD's
filings with the Securities Exchange Commission.
25
<PAGE>
Becton, Dickinson and Company
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Eight-Year Summary of Selected Financial Data
Years Ended September 30
Dollars in millions,
except per-share amounts 1999 1998 1997 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operations
Revenues $3,418.4 $3,116.9 $2,810.5 $2,769.8 $2,712.5 $2,559.5 $2,465.4 $2,365.3
Research and Development
Expense 254.0 217.9 180.6 154.2 144.2 144.2 139.1 125.2
Operating Income 445.2 405.4 450.5 431.2 396.7 325.0 270.4 328.6
Interest Expense, Net 72.1 56.3 39.4 37.4 42.8 47.6 53.4 49.1
Income Before Income Taxes
and Cumulative Effect
of Accounting Changes 372.7 340.9 422.6 393.7 349.6 296.2 222.9 269.5
Income Tax Provision 96.9 104.3 122.6 110.2 97.9 69.0 10.1 68.7
Net Income 275.7 236.6 300.1 283.4 251.7 227.2 71.8(A) 200.8
Basic Earnings Per Share 1.09 .95 1.21 1.10 .92 .77 .22(A) .65
Diluted Earnings Per Share 1.04 .90 1.15 1.05 .89 .76 .22(A) .63
Dividends Per Common Share .34 .29 .26 .23 .21 .19 .17 .15
Financial Position
Current Assets $1,683.7 $1,542.8 $1,312.6 $1,276.8 $1,327.5 $1,326.6 $1,150.7 $1,221.2
Current Liabilities 1,329.3 1,091.9 678.2 766.1 720.0 678.3 636.1 713.3
Property, Plant and
Equipment, Net 1,431.1 1,302.7 1,250.7 1,244.1 1,281.0 1,376.3 1,403.1 1,429.5
Total Assets 4,437.0 3,846.0 3,080.3 2,889.8 2,999.5 3,159.5 3,087.6 3,177.7
Long-Term Debt 954.2 765.2 665.4 468.2 557.6 669.2 680.6 685.1
Shareholders' Equity 1,768.7 1,613.8 1,385.4 1,325.2 1,398.4 1,481.7 1,457.0 1,594.9
Book Value Per Common Share 7.05 6.51 5.68 5.36 5.37 5.27 4.88 5.25
Financial Relationships
Gross Profit Margin 49.9% 50.6% 49.7% 48.4% 47.0% 45.3% 44.5% 45.0%
Return on Revenues 8.1% 7.6% 10.7% 10.2% 9.3% 8.9% 8.6%(C) 8.5%
Return on Total Assets (B) 10.9% 11.7% 15.9% 15.2% 13.3% 11.5% 9.2%(C) 11.1%
Return on Equity 16.3% 15.8% 22.1% 20.8% 17.5% 15.5% 13.3%(C) 13.6%
Debt to Capitalization (D) 47.2% 41.4% 36.3% 34.3% 35.2% 36.1% 37.8% 36.1%
Additional Data
Number of Employees 24,000 21,700 18,900 17,900 18,100 18,600 19,000 19,100
Number of Shareholders 11,433 9,784 8,944 8,027 7,712 7,489 7,463 7,086
Average Common and
Common Equivalent Shares
Outstanding-Assuming
Dilution (millions) 264.6 262.1 259.6 267.6 280.4 298.6 313.2 313.4
Depreciation and
Amortization $258.9 $228.7 $209.8 $200.5 $207.8 $203.7 $189.8 $169.6
Capital Expenditures 311.5 181.4 170.3 145.9 123.8 123.0 184.2 185.6
</TABLE>
(A) Includes cumulative effect of accounting changes of $141.1 ($.47 per basic
share; $.45 per diluted share).
(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.
26
<PAGE>
Report of Management
The following consolidated financial statements have been prepared by
management in conformity with generally accepted accounting principles and
include, where required, amounts based on the best estimates and judgments of
management. The integrity and objectivity of data in the financial statements
and elsewhere in this Annual Report are the responsibility of management.
In fulfilling its responsibilities for the integrity of the data
presented and to safeguard the Company's assets, management employs a system of
internal accounting controls designed to provide reasonable assurance, at
appropriate cost, that the Company's assets are protected and that transactions
are appropriately authorized, recorded and summarized. This system of control is
supported by the selection of qualified personnel, by organizational assignments
that provide appropriate delegation of authority and division of
responsibilities, and by the dissemination of written policies and procedures.
This control structure is further reinforced by a program of internal audits,
including a policy that requires responsive action by management.
The consolidated financial statements have been audited by Ernst & Young
LLP, independent auditors, whose report follows. Their audits were conducted in
accordance with generally accepted auditing standards and included a review and
evaluation of the Company's internal accounting controls to the extent they
considered necessary for the purpose of expressing an opinion on the
consolidated financial statements. This, together with other audit procedures
and tests, was sufficient to provide reasonable assurance as to the fairness of
the information included in the consolidated financial statements and to support
their opinion thereon.
The Board of Directors monitors the internal control system, including
internal accounting controls, through its Audit Committee which consists of five
outside Directors. The Audit Committee meets periodically with the independent
auditors, internal auditors and financial management to review the work of each
and to satisfy itself that they are properly discharging their responsibilities.
The independent auditors and internal auditors have full and free access to the
Audit Committee and meet with its members, with and without financial
management present, to discuss the scope and results of their audits including
internal control, auditing and financial reporting matters.
/s/ Clateo Castellini
Clateo Castellini
Chairman of the Board
and Chief Executive Officer
/s/ Edward J. Ludwig
Edward J. Ludwig
President
/s/ Richard M. Hyne
Richard M. Hyne
Vice President and Controller
Report of Ernst & Young, LLP
Independent Auditors
To the Shareholders and Board of Directors
Becton, Dickinson and Company
We have audited the accompanying consolidated balance sheets of Becton,
Dickinson and Company as of September 30, 1999 and 1998, and the related
consolidated statements of income, comprehensive income, and cash flows for
each of the three years in the period ended September 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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 are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 referred to above present
fairly, in all material respects, the consolidated financial position of Becton,
Dickinson and Company at September 30, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1999, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
New York,New York
November 4, 1999
27
<PAGE>
Becton, Dickinson and Company
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Consolidated Statements of Income
Years Ended September 30
Thousands of dollars, except per-share amounts 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Revenues $3,418,412 $3,116,873 $2,810,523
Cost of products sold 1,711,666 1,541,032 1,413,311
Selling and administrative expense 931,929 861,564 766,071
Research and development expense 254,016 217,900 180,626
Special charges 75,553 90,945 -
- -----------------------------------------------------------------------------------------------------------
Total Operating Costs and Expenses 2,973,164 2,711,441 2,360,008
- -----------------------------------------------------------------------------------------------------------
Operating Income 445,248 405,432 450,515
Interest expense, net (72,052) (56,340) (39,373)
Other (expense) income, net (541) (8,226) 11,498
- -----------------------------------------------------------------------------------------------------------
Income Before Income Taxes 372,655 340,866 422,640
Income tax provision 96,936 104,298 122,566
- -----------------------------------------------------------------------------------------------------------
Net Income $ 275,719 $ 236,568 $ 300,074
===========================================================================================================
Earnings Per Share
Basic $ 1.09 $ .95 $ 1.21
Diluted $ 1.04 $ .90 $ 1.15
===========================================================================================================
</TABLE>
See notes to consolidated financial statements
28
<PAGE>
Becton, Dickinson and Company
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Consolidated Statements of Comprehensive Income
Years Ended September 30
Thousands of dollars 1999 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $ 275,719 $ 236,568 $ 300,074
- --------------------------------------------------------------------------------------------------------
Other Comprehensive Income, Net of Tax
Foreign currency translation adjustments (96,548) 3,654 (71,911)
Unrealized losses on investments (2,879) - -
- --------------------------------------------------------------------------------------------------------
Other Comprehensive Income (99,427) 3,654 (71,911)
- --------------------------------------------------------------------------------------------------------
Comprehensive Income $ 176,292 $ 240,222 $ 228,163
========================================================================================================
</TABLE>
See notes to consolidated financial statements.
29
<PAGE>
Becton, Dickinson and Company
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Consolidated Balance Sheets
September 30
Thousands of dollars, except per-share amounts 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and equivalents $ 59,932 $ 83,251
Short-term investments 4,660 7,390
Trade receivables, net 812,544 726,558
Inventories 642,533 536,791
Prepaid expenses, deferred taxes and other 164,056 188,772
- --------------------------------------------------------------------------------------------------------
Total Current Assets 1,683,725 1,542,762
Property, Plant and Equipment, Net 1,431,149 1,302,650
Goodwill, Net 526,942 412,070
Core and Developed Technology, Net 329,460 214,167
Other Intangibles, Net 178,285 120,108
Other 287,397 254,281
- --------------------------------------------------------------------------------------------------------
Total Assets $4,436,958 $3,846,038
========================================================================================================
Liabilities
Current Liabilities
Short-term debt $ 631,254 $ 385,162
Accounts payable 209,365 208,500
Accrued expenses 284,097 278,964
Salaries, wages and related items 181,203 180,854
Income taxes 23,403 38,433
- --------------------------------------------------------------------------------------------------------
Total Current Liabilities 1,329,322 1,091,913
Long-Term Debt 954,169 765,176
Long-Term Employee Benefit Obligations 344,068 326,620
Deferred Income Taxes and Other 40,711 48,509
Commitments and Contingencies - -
Shareholders' Equity
ESOP convertible preferred stock-$1 par value: authorized-
1,016,949 shares; issued and outstanding-791,821 shares in 1999
and 829,815 shares in 1998 46,717 48,959
Preferred stock, series A-$1 par value: authorized-500,000 shares;
none issued - -
Common stock-$1 par value: authorized-640,000,000 shares;
issued-332,662,160 shares in 1999 and 1998 332,662 332,662
Capital in excess of par value 44,626 -
Retained earnings 2,539,020 2,350,781
Unearned ESOP compensation (20,310) (24,463)
Deferred compensation 5,949 4,903
Common shares in treasury-at cost-81,864,329 shares in 1999
and 84,818,944 shares in 1998 (997,333) (1,015,806)
Accumulated other comprehensive income (182,643) (83,216)
- --------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 1,768,688 1,613,820
- --------------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $4,436,958 $3,846,038
========================================================================================================
</TABLE>
See notes to consolidated financial statements
30
<PAGE>
Becton, Dickinson and Company
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
Years Ended September 30
Thousands of dollars 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 275,719 $ 236,568 $300,074
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 258,863 228,749 209,771
Non-cash special charges 57,538 58,445 -
Deferred income taxes 4,575 (32,332) (29,695)
Purchased in-process research and development 48,800 30,000 14,750
Change in operating assets (excludes impact of acquisitions):
Trade receivables (94,371) (77,649) (30,014)
Inventories (131,592) (54,066) (24,074)
Prepaid expenses, deferred taxes and other (24,520) (42,378) 8,301
Accounts payable, income taxes and other liabilities 17,009 133,500 (11,760)
Other, net 19,771 19,925 5,394
- -------------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 431,792 500,762 442,747
- -------------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures (311,547) (181,416) (170,349)
Acquisitions of businesses, net of cash acquired (374,221) (536,501) (200,832)
Proceeds from dispositions of businesses - - 24,343
Proceeds (purchases) of short-term investments, net 3,452 (3,197) 2,544
Proceeds from sales of long-term investments - 26,709 31,307
Purchases of long-term investments (25,065) (18,925) (6,000)
Capitalized internal-use software (65,036) (25,605) -
Other, net (43,431) (30,833) (45,079)
- -------------------------------------------------------------------------------------------------------------------
Net Cash Used for Investing Activities (815,848) (769,768) (364,066)
- -------------------------------------------------------------------------------------------------------------------
Financing Activities
Change in short-term debt 346,772 127,802 (77,687)
Proceeds of long-term debt 197,534 190,639 292,168
Payment of long-term debt (118,332) (2,951) (118,686)
Issuance of common stock 26,803 46,013 29,393
Repurchase of common stock - (44,476) (150,003)
Dividends paid (88,050) (75,332) (67,161)
- -------------------------------------------------------------------------------------------------------------------
Net Cash Provided by (Used for) Financing Activities 364,727 241,695 (91,976)
- -------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and equivalents (3,990) (2,077) (9,217)
- -------------------------------------------------------------------------------------------------------------------
Net Decrease in Cash and Equivalents (23,319) (29,388) (22,512)
- -------------------------------------------------------------------------------------------------------------------
Opening Cash and Equivalents 83,251 112,639 135,151
- -------------------------------------------------------------------------------------------------------------------
Closing Cash and Equivalents $ 59,932 $ 83,251 $112,639
===================================================================================================================
</TABLE>
See notes to consolidated financial statements
31
<PAGE>
Notes to Consolidated Becton, Dickinson and Company
Financial Statements
Thousands of dollars, except per-share amounts
Index
Note Subject Page
- ------------------------------------------------------------
1 Summary of Significant Accounting Policies 32
2 Acquisitions 33
3 Employee Stock Ownership Plan/Savings
Incentive Plan 34
4 Benefit Plans 35
5 Special and Other Charges 37
6 Other (Expense) Income, Net 38
7 Income Taxes 38
8 Supplemental Balance Sheet Information 39
9 Debt 40
10 Financial Instruments 41
11 Shareholders' Equity 42
12 Comprehensive Income 43
13 Commitments and Contingencies 43
14 Stock Plans 45
15 Earnings Per Share 46
16 Segment Data 47
- ------------------------------------------------------------
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. Depreciation and amortization are principally provided on the
straight-line basis over estimated useful lives which range from 20 to 45 years
for buildings, four to 10 years for machinery and equipment and three to 20
years for leasehold improvements. Depreciation expense was $158,202, $149,957,
and $148,007 in fiscal 1999, 1998, and 1997, respectively.
Intangibles
Goodwill and core and developed technology arise from acquisitions. Goodwill is
amortized over periods principally ranging from 10 to 40 years, using the
straight-line method. Core and developed technology is amortized over periods
ranging from 15 to 20 years, using the straight-line method. Other intangibles,
which include patents and other, are amortized over periods principally ranging
from three to 40 years, using the straight-line method. Intangibles are
periodically reviewed to assess recoverability from future operations using
undiscounted cash flows. To the extent carrying values exceed fair values, an
impairment loss is recognized in operating results.
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
Basic earnings per share are computed based on the weighted average number of
common shares outstanding. Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates or assumptions affect reported assets, liabilities, revenues and
expenses as reflected in the financial statements. Actual results could differ
from these estimates.
Derivative Financial Instruments
Derivative financial instruments are utilized by the Company in the management
of its foreign currency and interest rate exposures. The Company does not use
derivative financial instruments for trading or speculative purposes.
32
<PAGE>
The Company hedges its foreign currency exposures by entering into
offsetting forward exchange contracts and 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 Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," the Company accounts for stock-
based employee compensation using the intrinsic value method prescribed by
Accounting Principles Board Opinion ("APB") 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.
Start-up Costs
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities." The
Company is required to adopt the provisions of this Statement no later than its
fiscal year 2000. This Statement provides guidance on the financial reporting of
start-up and organization costs and requires such costs, as defined, to be
expensed as incurred. Adoption of this Statement is not expected to have a
material impact on the Company's results of operations or financial condition.
- ------------------------------------------------------------
2 Acquisitions
- ------------------------------------------------------------
During fiscal year 1999, the Company acquired 10 businesses for an aggregate of
$381,530 and 357,522 shares of the Company's stock. The Company also granted
options to purchase 73,074 shares of the Company's common stock to eligible
employees of one of the acquired companies. The 1999 results of operations
included charges of $48,800 for purchased in-process research and development in
connection with three of these acquisitions. These charges represented the fair
value of certain acquired research and development projects that were determined
to have not reached technological feasibility and do not have alternative future
uses. Unaudited pro forma consolidated results after giving effect to the
businesses acquired during fiscal 1999 would not have been materially different
from the reported amounts for either 1999 or 1998.
Included in 1999 acquisitions is the purchase of Clontech Laboratories,
Inc. ("Clontech"), which was completed in August, for approximately $201,000 in
cash, subject to certain post-closing adjustments. In connection with this
acquisition, a charge of $32,000 for purchased in-process research and
development was included in the results of operations for the Biosciences
segment, as noted above. The estimated fair value of assets acquired and
liabilities assumed relating to the Clontech 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 $12,518
Property, plant and equipment 7,364
Goodwill 97,336
Core and developed technology 67,940
Other intangibles 21,660
Other assets 3,630
Deferred income taxes and other (41,821)
- -------------------------------------------
Intangibles related to Clontech are being amortized on a straight-line
basis over their useful lives, which range from 10 to 15 years.
During fiscal year 1998, the Company acquired six businesses for an
aggregate of $545,603 in cash and 595,520 shares of the Company's common stock,
or 297,760 shares on a pre-split basis.Included in 1998 acquisitions is the
purchase of the Medical Devices Division ("MDD") of The BOC Group for
approximately $457,000 in cash. In connection with this acquisition, a charge
of $30,000 for purchased in-process research and development was included in the
1998 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 and do not have alternative future uses.
Intangibles related to MDD are being amortized on a straight-line basis over
their useful lives, which range from 15 to 25 years.
33
<PAGE>
The assumed liabilities for the MDD acquisition included approximately $14,300
for severance and exit costs associated with the integration of certain MDD
administrative functions. As of September 30, 1999, approximately $2,200 of
these reserves remained, which are expected to be substantially paid over the
next six months.
The following unaudited pro forma data summarize the results of operations
for the years ended September 30, 1998 and 1997 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.
1998 1997
- ------------------------------------------------------
Revenues $3,206,837 $3,005,634
Net income 227,664 284,806
Earnings per share:
Basic .91 1.15
Diluted .86 1.09
===========================
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. Goodwill related to PharMingen and Difco is being amortized on a
straight-line basis over 15 and 20 years, respectively. 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 and
do not have alternative future uses. The assumed liabilities for these
acquisitions included approximately $17,500 for severance and other exit costs
associated with the closing of certain Difco facilities. As of September 30,
1999, approximately $6,100 of these reserves remained, which are expected to be
substantially paid over the next six months.
All 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
for the acquired companies were included in the consolidated results of the
Company from their respective acquisition dates.
- ------------------------------------------------------------
3 Employee Stock Ownership Plan
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.
For the plan year ended June 30, 1999, preferred shares accumulated in the
trust in excess of the Company's matching obligation due to the favorable
performance of the Company's common stock over the past several years. As a
result, the Company matched up to an additional 1% of each eligible
participant's salary. This increase in the Company's contribution was
distributed in September 1999.
Selected financial data pertaining to the ESOP/Savings Incentive Plan
follow:
1999 1998 1997
- ------------------------------------------------------------------------------
Total expense of the Savings
Incentive Plan $3,851 $4,183 $4,257
Compensation expense
(included in total expense above) $1,845 $1,975 $2,087
Dividends on ESOP shares used
for debt service $3,114 $3,235 $3,366
Number of preferred shares
allocated at September 30 411,727 373,884 357,465
===================================
The Company guarantees employees' contributions to the fixed income fund
of the Savings Incentive Plan. The amount guaranteed was $88,304 at September
30, 1999.
34
<PAGE>
- ------------------------------------------------------------
4 Benefit Plans
- ------------------------------------------------------------
The Company has defined benefit pension plans covering substantially all of its
employees in the United States and certain foreign locations. The Company also
provides certain postretirement health care and life insurance benefits to
qualifying domestic retirees. Postretirement benefit plans in foreign countries
are not material.
In January 1999, the Compensation and Benefits Committee of the Company's
Board of Directors approved design changes to the U.S. pension plan to reflect a
pension equity formula. As a result, the U.S. pension plan was remeasured as of
January 31, 1999, and the net periodic pension cost in 1999 and the benefit
obligations at September 30, 1999 reflect the adoption of this change. No
changes were made in the revaluation to the economic assumptions established at
September 30, 1998.
The change in benefit obligation, change in plan assets, funded status,
and amounts recognized in the consolidated balance sheets at September 30, 1999
and 1998 for these plans were as follows:
<TABLE>
<CAPTION>
Other Postretirement
Pension Plans Benefits
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 648,526 $ 560,264 $ 183,633 $ 166,140
Service cost 33,204 27,912 3,147 2,239
Interest cost 41,007 40,242 11,935 12,015
Plan amendments (22,933) 1,573 - 3,435
Benefits paid (63,003) (44,318) (12,294) (11,267)
Actuarial (gain) loss (18,480) 42,948 (4,591) 11,071
Acquisitions - 17,894 - -
Curtailment gain (1,917) - - -
Other, primarily translation (1,813) 2,011 - -
-------------------------------------------------
Benefit obligation at end of year $ 614,591 $ 648,526 $ 181,830 $ 183,633
=================================================
Change in plan assets:
Fair value of plan assets at beginning of year $ 583,963 $ 572,190 $ - $ -
Actual return on plan assets 66,804 33,480 - -
Employer contribution 13,789 8,917 - -
Benefits paid (63,003) (44,318) - -
Acquisitions - 11,199 - -
Other, primarily translation (3,044) 2,495 - -
-------------------------------------------------
Fair value of plan assets at end of year $ 598,509 $ 583,963 $ - $ -
=================================================
Funded status:
Unfunded benefit obligation $ (16,082) $ (57,724) $(181,830) $(183,633)
Unrecognized net transition obligation (asset) 952 (373) - -
Unrecognized prior service cost (22,213) 677 (53,664) (59,685)
Unrecognized net actuarial (gain) loss (58,866) (27,795) 19,812 31,577
-------------------------------------------------
Accrued benefit cost $ (96,209) $ (85,215) $(215,682) $(211,741)
=================================================
Amounts recognized in the consolidated balance sheets consisted of:
Prepaid benefit cost $ 11,161 $ 8,533 $ - $ -
Accrued benefit cost (107,370) (93,748) (215,682) (211,741)
-------------------------------------------------
Net amount recognized $ (96,209) $ (85,215) $(215,682) $(211,741)
=================================================
</TABLE>
Foreign pension plan assets at fair value included in the preceding table
were $124,099 and $112,845 at September 30, 1999 and 1998, respectively. The
foreign pension plan projected benefit obligations were $137,836 and $130,921 at
September 30, 1999 and 1998, respectively.
35
<PAGE>
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $48,635, $39,809 and $20,519, respectively as of
September 30, 1999, and $38,847, $33,380 and $11,389, respectively as of
September 30, 1998.
Net pension and postretirement expense included the following components:
<TABLE>
<CAPTION>
Pension Plans Other Postretirement Benefits
- -----------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Components of net pension and
postretirement costs:
Service cost $ 33,204 $ 27,912 $ 26,303 $ 3,147 $ 2,239 $ 2,154
Interest cost 41,007 40,242 37,370 11,935 12,015 11,467
Expected return on plan assets (60,837) (54,300) (44,071) - - -
Amortization of prior service cost (687) 86 118 (6,021) (6,312) (6,312)
Amortization of loss (gain) (306) (2,331) (34) 1,460 721 (52)
Amortization of net obligation (598) (626) (773) - - -
Curtailment charges (1,917) - - - - -
------------------------------------------------------------------------------------
Net pension and postretirement costs $ 9,866 $ 10,983 $ 18,913 $10,521 $ 8,663 $ 7,257
====================================================================================
</TABLE>
Net pension expense attributable to foreign plans included in the
preceding table was $8,721, $4,902 and $5,741 in 1999, 1998 and 1997,
respectively.
As discussed in Note 5, the Company recorded special charges in 1999
relating to an enhanced voluntary retirement incentive program. These charges
included $7,828 and $5,412 of special termination benefits relating to pension
benefits and postretirement benefits, respectively.
The assumptions used in determining benefit obligations were as follows:
<TABLE>
<CAPTION>
Other Postretirement
Pension Plans Benefits
- -----------------------------------------------------------------------------------------------
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Discount rate:
U.S. plans 7.75% 6.75% 7.75% 6.75%
Foreign plans (average) 6.18% 6.10% - -
Expected return on plan assets:
U.S. plans 11.00% 10.00% - -
Foreign plans (average) 7.31% 7.23% - -
Rate of compensation increase:
U.S. plans 4.25% 5.25% 4.25% 5.25%
Foreign plans (average) 3.85% 3.80% - -
</TABLE>
At September 30, 1999 and 1998, health care cost trends of 9% and 10%,
respectively, pre-age 65 and 6% and 7%, respectively, post-age 65 were assumed
in the valuation of postretirement health care benefits. These rates were
assumed to decrease gradually to an ultimate rate of 6% beginning in 2003 for
pre-age 65 and 2000 for post-age 65. A one percentage point increase in health
care cost trend rates in each year would increase the accumulated postretirement
benefit obligation as of September 30, 1999 by $6,265 and the aggregate of the
service cost and interest cost components of 1999 annual expense by $489. A one
percentage point decrease in the health care cost trend rates in each year would
decrease the accumulated postretirement benefit obligation as of September 30,
1999 by $5,928 and the aggregate of the 1999 service cost and interest cost by
$462.
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. Postemployment benefit costs were $22,842, $24,015, and $25,532 in 1999,
1998 and 1997, respectively.
36
<PAGE>
- ------------------------------------------------------------
5 Special and Other Charges
- ------------------------------------------------------------
The Company recorded special charges in fiscal 1999 and 1998 associated with two
restructuring programs, primarily designed to improve the Company's cost
structure, refocus certain businesses, and write down impaired assets.
During the third quarter of 1999, the Company recorded special charges of
$75,553. Of these charges, $46,125 were associated with the write-off of
intangibles, as well as other costs relating to the Company's decision to exit
certain product lines, primarily in the area of home health care within the BD
Medical Systems segment. The Company had completed its implementation of the
exit plans by year-end. The Company also reversed $6,300 of 1998 special charges
in 1999 as a result of the decision not to exit certain activities as had
originally been planned.
Fiscal 1999 special charges also included $17,857, primarily for the
write-down of certain investment assets related to various product development
ventures, primarily in the BD Medical Systems segment, that the Company will no
longer pursue. The Company's decision to refocus certain businesses and the
continued decline in sales volume for selected products indicated impairment,
which required a reassessment of the recoverability of the underlying assets. An
impairment loss was recorded as a result of the carrying amounts of these assets
exceeding their recoverable values, based on discounted future cash flow
estimates.
Special charges in 1999 also included $17,871 in special termination and
severance benefits associated with an enhanced retirement incentive program.
This program was offered in April 1999 to 176 employees meeting certain age and
service requirements at selected locations. Responses to this offer were due by
May 25, 1999. The related expenses for separation pay and enhanced pension and
retirement benefits were recorded to special charges upon acceptance by 133
participants.
The Company also recorded $26,868 of charges in Cost of products sold in
1999, to reflect the write-off of inventories and to provide appropriate
reserves for expected future returns relating to the exited product lines
discussed earlier.
During 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 restructuring plan included approximately
$35,000 in special charges related primarily to severance and other termination
costs and losses from the disposal of assets. As discussed earlier, the Company
reversed $6,300 of these charges in 1999 as a result of the decision not to exit
certain activities as had originally been planned. As of September 30, 1999,
approximately 95 positions have been eliminated, and the Company expects that an
additional 150 people will be affected by this plan. The plan for restructuring
the Company's manufacturing operations included the closure of a surgical blade
plant in the United States, scheduled for the latter part of fiscal year 2001.
The remaining 1998 restructuring accruals related to this closure consist
primarily of severance.
The write-down of assets in 1998 included approximately $38,000 in special
charges to recognize an impairment loss related primarily to goodwill associated
with prior acquisitions in the BD Biosciences segment. The sustained decline in
sales volume of manual microbiology products within this segment, 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, 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.
A summary of the activity for the accruals and other components of
special charges follows:
<TABLE>
<CAPTION>
Accrual Activity Special Total
----------------------------------- Termination Asset Special
Severance Restructuring Other Benefits Writedowns Charges
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998 Special Charges $13,000 $4,500 $15,100 $2,400 $55,945 $90,945
Payments (500) (50) (2,400) =============================
-----------------------------------
Accrual Balance at September 30, 1998 12,500 4,450 12,700
1999 Special Charges(A) 5,600 11,700 2,500 $13,200 $42,553 $75,553
Payments (5,000) (6,900) (9,100) ==============================
-----------------------------------
Accrual Balance at September 30, 1999 $13,100 $9,250 $6,100
===================================
</TABLE>
(A) Includes reversals of 1998 special charges of $1,500 for severance and
$4,800 for asset writedowns.
37
<PAGE>
The Company also recorded $22,000 of charges in 1998 associated with the
reengineering of business processes relating to the enterprise wide program to
upgrade its business systems. The majority of these charges were included in
Selling and administrative expense. This program will develop a platform of
common business practices for the Company and will coordinate the installation
of a global software system to provide more efficient access to worldwide
business information.
- ------------------------------------------------------------
6 Other (Expense) Income, Net
- ------------------------------------------------------------
Other (expense), net in 1999 included foreign exchange losses of $9,154,
including hedging costs. Other (expense), net also included $2,654 of gains on
the sale of assets and income of $2,610 associated with settlements.
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.
- ------------------------------------------------------------
7 Income Taxes
- ------------------------------------------------------------
The provision for income taxes is composed of the following charges (benefits):
1999 1998 1997
- --------------------------------------------------------------------
Current:
Domestic:
Federal $27,303 $ 67,740 $ 81,588
State and local, including
Puerto Rico 12,127 35,078 34,442
Foreign 52,931 33,812 36,231
----------------------------------
92,361 136,630 152,261
----------------------------------
Deferred:
Domestic 15,138 (30,349) (15,798)
Foreign (10,563) (1,983) (13,897)
----------------------------------
4,575 (32,332) (29,695)
----------------------------------
$96,936 $104,298 $122,566
==================================
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, 1999 and 1998, net current deferred tax assets
of $60,119 and $70,490, respectively, were included in Prepaid expenses,
deferred taxes and other. Net non-current deferred tax assets of $3,890 and
$53,712, respectively, were included in Other non-current assets. Net current
deferred tax liabilities of $1,067 and $3,613, respectively, were included in
Current Liabilities-Income taxes. Net non-current deferred tax liabilities of
$4,003 and $13,527, 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, 1999, the
cumulative amount of such undistributed earnings approximated $1,152,000 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.
Deferred income taxes at September 30 consisted of:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------
Assets Liabilities Assets Liabilities Assets Liabilities
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Compensation and benefits $150,214 $ - $144,719 $ - $143,665 $ -
Property and equipment - 92,608 - 100,741 - 100,169
Purchase acquisition
adjustments - 104,269 - 29,618 - 21,822
Other 187,626 70,867 147,449 44,408 131,319 52,341
-----------------------------------------------------------------------
337,840 267,744 292,168 174,767 274,984 174,332
Valuation allowance (11,157) - (10,339) - (12,606) -
-----------------------------------------------------------------------
$326,683 $267,744 $281,829 $174,767 $262,378 $174,332
=======================================================================
</TABLE>
38
<PAGE>
A reconciliation of the federal statutory tax rate to the Company's
effective tax rate follows:
1999 1998 1997
- -------------------------------------------------------------------
Federal statutory tax rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal tax benefit .4 .1 1.3
Effect of foreign and Puerto Rican
income and foreign tax credits (10.8) (6.1) (7.6)
Research tax credit (2.5) (1.6) (.3)
Purchased in-process research and
development 4.6 3.1 1.2
Other, net (.7) .1 (.6)
---------------------------
26.0% 30.6% 29.0%
===========================
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: 1999-$30,400 and $.11; 1998-$18,000 and $.07; and 1997-$17,400 and $.07.
The tax holidays expire at various dates through 2010.
The Company made income tax payments, net of refunds, of $80,334 in 1999,
$117,321 in 1998, and $151,050 in 1997.
The components of Income Before Income Taxes follow:
1999 1998 1997
- ----------------------------------------------------------------------------
Domestic, including Puerto Rico $177,520 $238,109 $264,910
Foreign 195,135 102,757 157,730
--------------------------------------
$372,655 $340,866 $422,640
======================================
- ------------------------------------------------------------
8 Supplemental Balance Sheet Information
- ------------------------------------------------------------
Trade Receivables
Allowances for doubtful accounts and cash discounts netted
against trade receivables were $49,036 and $35,518 at September 30, 1999 and
1998, respectively.
Inventories 1999 1998
- ----------------------------------------------------------------
Materials $160,332 $122,232
Work in process 94,627 86,239
Finished products 387,574 328,320
----------------------
$642,533 $536,791
======================
Inventories valued under the LIFO method were $354,071 in 1999 and
$285,384 in 1998. Inventories valued under the LIFO method would have been
higher by approximately $17,000 in 1999 and $18,900 in 1998, if valued on a
current cost basis.
Property, Plant and Equipment 1999 1998
- -----------------------------------------------------------
Land $ 64,497 $ 72,158
Buildings 938,859 916,353
Machinery, equipment and fixtures 1,888,169 1,703,788
Leasehold improvements 41,279 34,724
-----------------------
2,932,804 2,727,023
Less allowances for depreciation
and amortization 1,501,655 1,424,373
-----------------------
$1,431,149 $1,302,650
=======================
Goodwill 1999 1998
- -----------------------------------------------------------
Goodwill $ 636,362 $ 498,012
Less accumulated amortization 109,420 85,942
-----------------------
$ 526,942 $ 412,070
=======================
Core and Developed Technology 1999 1998
- -----------------------------------------------------------
Core and developed technology $ 353,207 $ 222,800
Less accumulated amortization 23,747 8,633
-----------------------
$ 329,460 $ 214,167
=======================
Other Intangibles 1999 1998
- -----------------------------------------------------------
Patents and other $ 337,871 $ 266,069
Less accumulated amortization 159,586 145,961
-----------------------
$ 178,285 $ 120,108
=======================
39
<PAGE>
- --------------------------------------------------------------------------------
9 Debt
- --------------------------------------------------------------------------------
The components of Short-term debt follow:
1999 1998
- -------------------------------------------------------
Loans payable:
Domestic $572,810 $204,875
Foreign 51,289 72,038
Current portion of long-term debt 7,155 108,249
-------------------
$631,254 $385,162
===================
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 5.3% and 5.9% at September 30,
1999 and 1998, respectively. The Company has available a $500,000 syndicated and
committed revolving credit facility, which expires in November 2001. In August
1999, the Company entered into a 364-day $300,000 committed facility. In March
1999, the Company renewed a 364-day $100,000 committed facility. All of these
facilities support the Company's commercial paper borrowing program and can also
be used for other general corporate purposes. Restrictive covenants under these
agreements include a minimum interest coverage ratio. There were no borrowings
outstanding under these facilities at September 30, 1999. In addition, the
Company had unused short-term foreign lines of credit pursuant to informal
arrangements of approximately $243,000 and $193,000 at September 30, 1999 and
1998, respectively.
The components of Long-Term Debt follow:
1999 1998
- -------------------------------------------------------------------
Domestic notes due through 2015
(average year-end interest rate: 5.5%-1999;
5.8%-1998) $ 16,596 $ 17,003
Foreign notes due through 2011
(average year-end interest rate: 4.6%-1999;
6.9%-1998) 14,435 19,692
8.80% Notes due March 1, 2001 100,000 100,000
9.45% Guaranteed ESOP Notes due through
July 1, 2004 23,138 28,481
6.90% Notes due October 1, 2006 100,000 100,000
7.15% Debentures due October 1, 2009 200,000 -
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 200,000 200,000
-------------------
$954,169 $765,176
===================
In September 1999, the Company issued $200,000 of 7.15% debentures due on
October 1, 2009, with an effective yield including the results of an interest
rate hedge and other financing costs of 7.34%. 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%.
The Company has available $100,000 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, 2001 to 2004 are as follows: 2001-$107,223; 2002-$7,509;
2003-$7,740; 2004-$4,371.
The Company capitalizes interest costs as a component of the cost of
construction in progress. The following is a summary of interest costs:
1999 1998 1997
- ---------------------------------------------------
Charged to operations $76,738 $65,584 $51,134
Capitalized 14,655 10,011 6,469
---------------------------
$91,393 $75,595 $57,603
===========================
Interest paid, net of amounts capitalized, was $77,681 in 1999, $64,160 in
1998, and $48,573 in 1997.
40
<PAGE>
- --------------------------------------------------------------------------------
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.
The estimated fair values of the Company's financial instruments at
September 30, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
Assets: -----------------------------------------
<S> <C> <C> <C> <C>
Other investments (non-current) (A) $ 15,413 $ 10,534 $ 17,125 $ 6,115
Currency options (B) 106 65 51 101
Forward exchange contracts (B) 148 158 - -
Liabilities:
Long-term debt $954,169 $928,809 $765,176 $832,250
Forward exchange contracts (C) - - 948 393
Interest rate swaps - - 77 498
=========================================
</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 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 currency options, classified as held
for purposes other than trading, were as follows:
1999 1998
- ------------------------------------------------
Forward exchange contracts $396,981 $742,995
Currency options 22,000 8,500
================================================
At September 30, 1999, $346,762 of the forward exchange contracts mature
within 90 days and $50,219 at various other dates in fiscal 2000. The currency
options at September 30, 1999 expire within 30 days.
The Company's foreign exchange hedging activities do not generally create
exchange rate risk since gains and losses on these contracts generally offset
losses and gains on the related non-functional currency denominated receivables,
payables and short-term borrowings.
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, the Company had foreign interest rate swap agreements with maturities
at various dates through 1999. Under these agreements, the Company agreed 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
at September 30, 1998. The Company had no interest rate swap agreements
outstanding at September 30, 1999.
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 fair value and that changes in 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 2001.
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 size 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.
41
<PAGE>
- --------------------------------------------------------------------------------
11 Shareholders' Equity
- --------------------------------------------------------------------------------
Changes in certain components of shareholders' equity were as follows:
<TABLE>
<CAPTION>
Series B,
ESOP
Preferred Common Capital in Unearned
Stock Stock Excess of Retained ESOP
Issued Issued Par Value Earnings Compensation
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1996 $52,927 $170,484 $58,378 $2,160,279 $(32,787)
Net income 300,074
Cash dividends:
Common ($.26 per share) (63,768)
Preferred ($3.835 per share),
net of tax benefits (2,647)
Common stock issued for
employee stock plans, net 26,942
Repurchase of common stock
Common stock held in trusts
Retirement of common stock (3,239) (2,289) (144,475)
Reduction in unearned ESOP
compensation for the year 4,167
Adjustment for redemption
provisions (1,816) 391
- -----------------------------------------------------------------------------------------------------------------
Balance at September 30, 1997 51,111 167,245 83,422 2,249,463 (28,620)
Net income 236,568
Cash dividends:
Common ($.29 per share) (71,265)
Preferred ($3.835 per share),
net of tax benefits (2,592)
Common stock issued for:
Employee stock plans, net 49,303
Business acquisition 15,314
Repurchase of common stock
Common stock held in trusts
Retirement of common stock (914) (730) (42,832)
Reduction in unearned ESOP
compensation for the year 4,157
Adjustment for redemption
provisions (2,152) 461
Two-for-one stock split 166,331 (147,770) (18,561)
- -----------------------------------------------------------------------------------------------------------------
Balance at September 30, 1998 48,959 332,662 - 2,350,781 (24,463)
Net income 275,719
Cash dividends:
Common ($.34 per share) (84,936)
Preferred ($3.835 per share),
net of tax benefits (2,544)
Common stock issued for:
Employee stock plans, net 33,134
Business acquisitions 11,008
Common stock held in trusts
Reduction in unearned ESOP
compensation for the year 4,153
Adjustment for redemption provisions (2,242) 484
- -----------------------------------------------------------------------------------------------------------------
Balance at September 30, 1999 $46,717 $332,662 $44,626 $2,539,020 $(20,310)
=================================================================================================================
<CAPTION>
Deferred Treasury Stock
Compensation Shares Amount
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at October 1, 1996 $ - (46,873,585) $(1,069,139)
Net income
Cash dividends:
Common ($.26 per share)
Preferred ($3.835 per share),
net of tax benefits
Common stock issued for
employee stock plans, net 1,683,547 20,513
Repurchase of common stock (3,239,500) (150,003)
Common stock held in trusts (69,473) (3,117)
Retirement of common stock 3,239,500 150,003
Reduction in unearned ESOP
compensation for the year
Adjustment for redemption
provisions 98,420 1,425
- -------------------------------------------------------------------------------------
Balance at September 30, 1997 - (45,161,091) (1,050,318)
Net income
Cash dividends:
Common ($.29 per share)
Preferred ($3.835 per share),
net of tax benefits
Common stock issued for:
Employee stock plans, net 2,469,852 29,817
Business acquisition 297,760 3,886
Repurchase of common stock (913,500) (44,476)
Common stock held in trusts 4,903 (14,769) (882)
Retirement of common stock 913,500 44,476
Reduction in unearned ESOP
compensation for the year
Adjustment for redemption
provisions 130,845 1,691
Two-for-one stock split (42,541,541)
- -------------------------------------------------------------------------------------
Balance at September 30, 1998 4,903 (84,818,944) (1,015,806)
Net income
Cash dividends:
Common ($.34 per share)
Preferred ($3.835 per share),
net of tax benefits
Common stock issued for:
Employee stock plans, net 2,382,641 15,428
Business acquisitions 357,522 2,333
Common stock held in trusts 1,046 (28,670) (1,046)
Reduction in unearned ESOP
compensation for the year
Adjustment for redemption provisions 243,122 1,758
- -------------------------------------------------------------------------------------
Balance at September 30, 1999 $5,949 (81,864,329) $ (997,333)
=====================================================================================
</TABLE>
42
<PAGE>
Common stock held in trusts represents rabbi trusts in connection with the
Company's employee salary and bonus deferral plan and Directors' deferral plan.
In 1998, the Board of Directors authorized a two-for-one stock split. 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.
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 has been issued.
- --------------------------------------------------------------------------------
12 Comprehensive Income
- --------------------------------------------------------------------------------
Effective October 1, 1998, the Company adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income." This Statement specifies the reporting
requirements for comprehensive income, which consists of net income and other
comprehensive income. Other comprehensive income includes foreign currency
translation adjustments and unrealized gains (losses) on investments. In
accordance with the provisions of this Statement, Consolidated Statements of
Comprehensive Income have been included in the fiscal 1999 consolidated
financial statements.
Accumulated other comprehensive income has been reported as a separate
component of Shareholders' Equity, in accordance with the requirements of this
Statement. The components of Accumulated other comprehensive income are as
follows:
1999 1998
- ---------------------------------------------------------
Cumulative currency translation
adjustments $(179,764) $ (83,216)
Unrealized losses on investments (2,879) -
----------------------
$(182,643) $ (83,216)
======================
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 adjustments in Accumulated other comprehensive income.
The tax benefit on Unrealized losses on investments for 1999 was $2,000.
The income taxes related to Foreign currency translation adjustments were not
significant in any year presented, as income taxes were generally not provided
for translation adjustments.
- --------------------------------------------------------------------------------
13 Commitments and Contingencies
- --------------------------------------------------------------------------------
Commitments
Rental expense for all operating leases amounted to $46,000 in 1999, $44,800 in
1998, and $48,200 in 1997. Future minimum rental commitments on noncancelable
leases are as follows: 2000-$29,300; 2001-$26,000; 2002-$20,700; 2003-$12,600;
2004-$11,000 and an aggregate of $53,000 thereafter.
As of September 30, 1999, the Company has certain future capital
commitments aggregating approximately $104,700, which will be expended over the
next several years.
Contingencies
The Company believes that its operations comply in all material respects with
applicable laws and regulations. The Company is a party to a number of Federal
proceedings in the United States brought under the Comprehensive Environmental
Response, Compensation and Liability Act, also known as "Superfund," and similar
state laws. For all sites, there are other potentially responsible parties that
may be jointly or severally liable to pay all cleanup costs. The Company accrues
costs for an estimated environmental liability based upon its best estimate
within the range of probable losses, without considering third-party recoveries.
The Company believes that any reasonably possible losses in excess of accruals
would be immaterial to the Company's financial condition.
43
<PAGE>
Notes Becton, Dickinson and Company
The Company, along with a number of other manufacturers, has been named
as a defendant in approximately 300 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, New Jersey and New York. 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 manufac-
tured, 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 eleven product liability lawsuits
relating to health care workers who allegedly sustained accidental needle
sticks, but have not become infected with any disease. The case brought in
California under the caption Chavez vs. Becton Dickinson (Case No. 722978, San
Diego County Superior Court), filed on August 4, 1998 was dismissed in a
judgment filed March 19, 1999 which has been appealed by plaintiffs. The case
brought in Florida under the caption Delgado vs. Becton Dickinson et al. (Case
No. 98-5608, Hillsborough County Circuit Court), filed on July 24, 1998 was
voluntarily withdrawn by the plaintiffs on March 8,1999. Cases have been filed
on behalf of an unspecified number of health care workers in nine other states,
seeking class action certification under the laws of these states. To date, no
class has been certified in any of these cases. The nine remaining actions are
pending in state court in Texas, under the caption Usrey 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 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 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; in state court in Pennsylvania, under the
caption Brown vs. Becton Dickinson et al. (Case No. 03474, Philadelphia County
Court of Common Pleas), filed on November 27, 1998; in state court in New
Jersey, under the caption Pollak, Swartley vs. Becton Dickinson et al. (Case No.
L-9449-98, Camden County Superior Court), filed on December 7, 1998; and in
state court in New York, under the caption Benner vs. Becton Dickinson et al.
(Case No. 99-111372, Supreme Court of the State of New York), filed on June 1,
1999.
Generally, these remaining 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. Plaintiffs seek money damages in all remaining actions.
In June 1999, a class certification hearing was held in the matter of
Usrey vs. Becton Dickinson et al., which was first filed in Texas state court on
April 9, 1998, under the caption Calvin vs. Becton Dickinson et al. The Court
had advised the parties by letter received on October 27, 1999 that it believes
that it is appropriate to address the issues in the case by way of a class
action under Texas procedural law.
The Company continues to oppose class action certification in these cases
and will continue vigorously to defend these lawsuits, including pursuing all
appropriate rights of appeal.
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.
44
<PAGE>
- --------------------------------------------------------------------------------
14 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, 1999, shares available for future grant under the
1990, 1995, and 1998 Plans were 175,767, 3,336,391, 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.
A summary of changes in outstanding options is as
follows:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------------------------------
Options Weighted Options Weighted
for Average for Average
Shares Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at October 1 29,904,859 $18.22 30,168,526 $15.20
Granted 3,170,821(A) 34.83 4,843,750 29.64
Exercised (2,281,727) 11.37 (4,593,739) 9.92
Forfeited, canceled or expired (671,679) 25.29 (513,678) 23.05
- --------------------------------------------------------------------------------------------------------------------
Balance at September 30 30,122,274 $20.33 29,904,859 $18.22
====================================================================================================================
Exercisable at September 30 26,426,344 $18.37 23,266,773 $15.90
====================================================================================================================
Weighted average fair value of options granted $ 12.77 $ 9.40
====================================================================================================================
Available for grant at September 30 13,462,158 15,961,300
====================================================================================================================
<CAPTION>
1997
Options Weighted
for Average
Shares Exercise Price
- ----------------------------------------------------------------------------------
<S> <C> <C>
Balance at October 1 27,051,424 $12.15
Granted 6,590,144 24.72
Exercised (3,258,458) 9.05
Forfeited, canceled or expired (214,584) 16.36
- ----------------------------------------------------------------------------------
Balance at September 30 30,168,526 $15.20
==================================================================================
Exercisable at September 30 19,100,330 $11.92
==================================================================================
Weighted average fair value of options granted $ 7.08
==================================================================================
Available for grant at September 30 10,291,372
==================================================================================
</TABLE>
The maximum term of options is ten years. Options outstanding as of September
30, 1999 expire on various dates from May 2000 through March 2009.
(A) The Company granted 73,074 of options to purchase shares of the Company's
common stock to eligible employees of a business acquired in fiscal 1999.
<TABLE>
<CAPTION>
September 30, 1999
- -------------------------------------------------------------------------------------------------------------------------
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>
$ 7.89 - $12.55 11,183,224 $10.25 4.2 Years 11,183,224 $10.25
17.36 - 24.81 11,349,243 22.51 6.9 Years 11,337,395 22.51
29.35 - 41.56 7,589,807 31.91 8.8 Years 3,905,725 29.60
---------------------------------------------------------------------------------------------
30,122,274 $20.33 7.1 Years 26,426,344 $18.37
=============================================================================================
</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 1999, 1998 or 1997.
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 stock-based compensation
awards issued subsequent to October 1, 1995 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 1999,
1998 and 1997 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.
45
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Income $275,719 $247,224 $236,568 $216,680 $300,074 $290,697
Earnings Per Share:
Basic 1.09 .98 .95 .87 1.21 1.17
Diluted 1.04 .93 .90 .82 1.15 1.11
=======================================================================================================================
</TABLE>
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 1999, 1998 and 1997:
risk free interest rates of 4.79%, 5.55%, and 6.51%, respectively; expected
dividend yields of 1.09%, 1.28%, and 1.42%, respectively; expected volatility of
31.0%, 24.4%, and 18.0%, 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 1999, 104,448 shares were distributed. No awards were
granted in 1999, 1998 or 1997. At September 30, 1999, 2,532,816 shares were
reserved for future issuance, of which awards for 431,428 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. In 1997, 1,560 restricted shares were issued in accordance with the
provisions of the plan. No restricted shares were issued in 1999 or 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, 1999,
138,003 shares were held in trust, of which 11,373 shares represented Directors'
compensation in 1999, 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.
- --------------------------------------------------------------------------------
15 Earnings Per Share
- --------------------------------------------------------------------------------
For the years ended September 30, 1999, 1998, and 1997, the following table sets
forth the computations of basic and diluted earnings per share, restated to
reflect the 1998 two-for-one stock split (shares in thousands):
1999 1998 1997
- ----------------------------------------------------------------------
Net income $275,719 $236,568 $300,074
Preferred stock dividends (3,114) (3,235) (3,366)
-----------------------------------
Income available to common
shareholders(A) 272,605 233,333 296,708
Preferred stock dividends-using
"if converted" method 3,114 3,235 3,366
Additional ESOP contribution-
using "if converted" method (821) (1,000) (1,124)
-----------------------------------
Income available to common
shareholders after assumed
conversions(B) $274,898 $235,568 $298,950
===================================
Average common shares
outstanding(C) 249,595 245,700 245,230
Dilutive stock equivalents from
stock plans 9,917 11,117 8,812
Shares issuable upon conversion
of preferred stock 5,068 5,311 5,544
-----------------------------------
Average common and common
equivalent shares outstanding-
assuming dilution(D) 264,580 262,128 259,586
===================================
Basic earnings per share(A/C) $ 1.09 $ .95 $ 1.21
===================================
Diluted earnings per share(B/D) $ 1.04 $ .90 $ 1.15
===================================
46
<PAGE>
- --------------------------------------------------------------------------------
16 Segment Data
- --------------------------------------------------------------------------------
On September 30, 1999, the Company adopted the provisions of SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 establishes a new method for the reporting of operating segment information
based on the manner in which management organizes the segments within a company
for making operating decisions and assessing performance. Segment data has been
restated to conform to the SFAS No. 131 requirements for all periods presented.
The Company's organizational structure is based upon its three principal
business segments: BD Medical Systems ("Medical"), BD Biosciences
("Biosciences"), and BD Preanalytical Solutions ("Preanalytical"). The Company's
segments are managed separately because each requires different technology and
marketing strategies.
The major products in the Medical segment are hypodermic products,
specially designed devices for diabetes care, prefillable drug delivery systems,
infusion therapy products, elastic support products and thermometers. The
Medical segment also includes disposable scrubs, specialty needles, and surgical
blades. The major products in the Biosciences segment are clinical and
industrial microbiology products, flow cytometry systems for cellular analysis,
tissue culture labware, hematology instruments, and other diagnostic systems,
including immunodiagnostic test kits. The major products in the Preanalytical
segment are sample collection products and specimen management systems. This
segment also includes consulting services and customized, automated bar-code
systems.
The Company evaluates performance based upon operating income. Segment
operating income represents revenues reduced by product costs and operating
expenses. The calculations of segment operating income and assets are in accor-
dance with the accounting policies described in Note 1.
Distribution of products is both through distributors and directly to
hospitals, laboratories and other end users. Sales to a distributor which
supplies the Company's products to many end users accounted for approximately
11% of revenues in 1999, 11% in 1998 and 10% of revenues in 1997, and were made
from each of the Company's segments. No other customer accounted for 10% or more
of revenues in each of the three years presented.
<TABLE>
<CAPTION>
Revenues 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Medical Systems $1,923,865 $1,714,952 $1,510,881
Biosciences 985,821 924,157 853,893
Preanalytical Solutions 508,726 477,764 445,749
----------------------------------------------
Total (A) $3,418,412 $3,116,873 $2,810,523
==============================================
Segment Operating Income
- --------------------------------------------------------------------------------
Medical Systems $ 343,433(B) $ 320,184(B) $ 349,613
Biosciences 76,278(C) 77,046(C) 76,071
Preanalytical Solutions 123,890(D) 116,019(D) 118,540
----------------------------------------------
Total Segment Operating Income 543,601 513,249 544,224
Unallocated Expenses(E) (170,946) (172,383) (121,584)
----------------------------------------------
Income Before Income Taxes $ 372,655 $ 340,866 $ 422,640
==============================================
Segment Assets
- --------------------------------------------------------------------------------
Medical Systems $2,258,779 $2,092,828 $1,324,035
Biosciences 1,455,744 1,085,980 1,073,512
Preanalytical Solutions 431,271 388,521 350,100
----------------------------------------------
Total Segment Assets 4,145,794 3,567,329 2,747,647
Corporate and All Other(F) 291,164 278,709 332,605
----------------------------------------------
Total Assets $4,436,958 $3,846,038 $3,080,252
==============================================
Capital Expenditures
- --------------------------------------------------------------------------------
Medical Systems $ 187,868 $ 105,417 $ 106,298
Biosciences 41,704 37,797 30,586
Preanalytical Solutions 53,822 28,073 19,804
Corporate and All Other 28,153 10,129 13,661
----------------------------------------------
Total $ 311,547 $ 181,416 $ 170,349
==============================================
Depreciation and Amortization
- --------------------------------------------------------------------------------
Medical Systems $ 122,804 $ 104,684 $ 88,603
Biosciences 97,764 87,018 83,992
Preanalytical Solutions 30,013 26,370 24,979
Corporate and All Other 8,282 10,677 12,197
----------------------------------------------
Total $ 258,863 $ 228,749 $ 209,771
==============================================
</TABLE>
(A) Intersegment revenues are not material.
(B) Includes $60,933 in 1999 and $43,181 in 1998 for special charges discussed
in Note 5, as well as a charge of $30,000 in 1998 for purchased in-process
research and development discussed in Note 2.
(C) Includes $4,962 in 1999 and $43,314 in 1998 for special charges discussed in
Note 5, as well as $48,800 in 1999 for purchased in-process research and
development charges discussed in Note 2.
(D) Includes $4,429 in 1999 and $2,238 in 1998 for special charges discussed in
Note 5.
(E) Includes interest, net, foreign exchange, and corporate expenses. Also
includes special charges of $5,229 and $2,212 in 1999 and 1998,
respectively, as discussed in Note 5.
(F) Includes cash and investments and corporate assets.
47
<PAGE>
Geographic Information
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, and International, which is composed of Europe, Canada, Latin
America, Japan and Asia Pacific.
Revenues to unaffiliated customers are based upon the source of the
product shipment. Long-lived assets, which include net property, plant and
equipment, are based upon physical location. Intangible assets are not included
since, by their nature, they do not have a physical or geographic location.
1999 1998 1997
- --------------------------------------------------------
Revenues
United States $1,747,785 $1,690,282 $1,486,701
International 1,670,627 1,426,591 1,323,822
------------------------------------
Total $3,418,412 $3,116,873 $2,810,523
====================================
Long-Lived Assets
United States $ 758,929 $ 683,658 $ 690,336
International 550,588 480,252 419,334
Corporate 121,632 138,740 141,035
------------------------------------
Total $1,431,149 $1,302,650 $1,250,705
====================================
Quarterly Data (Unaudited)
Thousands of dollars, except per-share amounts
<TABLE>
<CAPTION>
1999
- -----------------------------------------------------------------------------------------------------
1st 2nd 3rd 4th Year
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $768,966 $873,964 $873,002 $902,480 $3,418,412
Gross Profit 383,256 444,704 411,679 467,107 1,706,746
Net Income 76,158 90,114 33,124 76,323 275,719(A)
Earnings Per Share:
Basic .30 .36 .13 .30 1.09
Diluted .29 .34 .12 .29 1.04
================================================================
<CAPTION>
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)(B) 89,897 236,568(B)
Earnings (Loss) Per Share:
Basic .26 .37 (.04) .36 .95
Diluted .25 .35 (.04) .34 .90
================================================================
</TABLE>
(A) Includes $75,553 of special charges in the third quarter and $48,800 for
purchased in-process research and development charges.
(B) Includes $90,945 of special charges and a charge of $30,000 for purchased
in-process research and development.
48
<PAGE>
Corporate Information Becton, Dickinson and Company
Board of Directors
- --------------------------------------------------------------------------------
Harry N. Beaty, M.D.(1,4)
Emeritus Dean-Northwestern University Medical School, and Chairman of the Board
and President-Northwestern University Medical Faculty Foundation
Henry P. Becton, Jr.(2,3,6)
President and General Manager - WGBH Educational Foundation
Clateo Castellini(3,5)
Chairman of the Board and Chief Executive Officer - BD
Albert J. Costello(1,6)
Retired Chairman of the Board, President and Chief Executive Officer - W.R.
Grace & Co.
Gerald M. Edelman, M.D., Ph.D.(4,5)
Director - The Neurosciences Institute, Member - The Scripps Research Institute
John W. Galiardo(5)
Vice Chairman of the Board and General Counsel - BD
Richard W. Hanselman(1,3,5)
Corporate Director
Edward J. Ludwig(5)
President - BD
Frank A. Olson(2,4,5)
Chairman of the Board and Chief Executive Officer - The Hertz Corporation
Willard J. Overlock, Jr.(1,2,6)
Retired Partner - Goldman, Sachs & Co.
James E. Perrella(2,3,6)
Chairman of the Board - Ingersoll-Rand Company
Alfred Sommer(3,4)
Dean of the Johns Hopkins School of Hygiene and Public Health, and Professor of
Ophthalmology, Epidemiology and International Health
Raymond S. Troubh(2,3,6)
Financial Consultant
Margaretha af Ugglas(1,4)
Member of the Board - Stockholm University and Jarl Hjalmarson Foundation
Committees Appointed by the Board of Directors
1 - Audit Committee
2 - Compensation and Benefits Committee
3 - Corporate Governance Committee
4 - Corporate Responsibility Committee
5 - Executive Committee
6 - Finance and Investment Committee
Corporate Officers
- --------------------------------------------------------------------------------
Clateo Castellini
Chairman of the Board and Chief Executive Officer
Edward J. Ludwig
President
John W. Galiardo
Vice Chairman of the Board and General Counsel
Richard K. Berman
Vice President and Treasurer
Mark H. Borofsky
Vice President - Taxes
Richard O. Brajer
President - Worldwide Preanalytical Solutions
Gary M. Cohen
President - Worldwide Medical Systems
David T. Durack
Vice President - Corporate Medical Affairs
Vincent A. Forlenza
Senior Vice President - Technology, Strategy and Development
Bridget M. Healy
Vice President and Secretary
Richard M. Hyne
Vice President and Controller
James V. Jerbasi
Vice President - Human Resources
William A. Kozy
Senior Vice President - Company Manufacturing
Deborah J. Neff
President - Worldwide Biosciences
Patricia B. Shrader
Vice President - Regulatory Affairs
Corporate Data
- --------------------------------------------------------------------------------
Annual Meeting
2:30 p.m.
Tuesday, February 8, 2000
1 Becton Drive
Franklin Lakes, NJ 07417-1880
Direct Stock Purchase Plan
The Direct Stock Purchase Plan established through First Chicago Trust Company
of New York, enhances the services provided to existing shareholders and facili-
tates 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
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
Shareholder Information
Shareholders may receive, without charge, a copy of the company's 1999 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
Internet: http://www.bd.com
Independent Auditors
Ernst & Young LLP
787 Seventh Avenue
New York, NY 10019-6085
Phone: (212) 773-3000
Internet: http://www.ey.com
The trademarks indicated by
Italics are the property of, licensed
to, promoted or distributed by
BD, its subsidiaries or related
companies.
Photo page 14: S. Shankar/
U.S. Committee for UNICEF
<TABLE>
<CAPTION>
Common Stock Prices and Dividends
- -----------------------------------------------------------------------------------------------------------------------
By Quarter 1999 1998
-----------------------------------------------------------------------------------------------------
High Low Dividends High Low Dividends
<S> <C> <C> <C> <C> <C> <C>
First $49 5/8 $36 15/16 $.08 1/2 $26 11/16 $20 15/16 $.07 1/4
Second 44 3/16 31 1/2 .08 1/2 35 11/16 24 3/8 .07 1/4
Third 42 29 .08 1/2 39 9/32 33 13/16 .07 1/4
Fourth 30 1/16 25 1/8 .08 1/2 43 13/16 33 1/16 .07 1/4
</TABLE>
49
<PAGE>
Exhibit 21
----------
SUBSIDIARIES OF BECTON, DICKINSON AND COMPANY
---------------------------------------------
<TABLE>
<CAPTION>
Name of Subsidiary State of Jurisdiction Percentage of Voting
------------------ of Incorporation Securities Owned
---------------- ----------------
<S> <C> <C>
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 Advanced Pen Injection Systems GmbH Switzerland 100% (1)
Becton Dickinson Aguettant S.A.S. France 95% (1)
Becton Dickinson Argentina S.R.L. Argentina 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 B.V. Netherlands 100%
Becton Dickinson Benelux N.V. Belgium 100% (1)
Becton Dickinson Canada Inc. Canada 100% (1)
Becton Dickinson Caribe, Ltd. Cayman Islands 100%
Becton Dickinson Catheter Systems Singapore Pte Ltd. Singapore 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% (1)
Becton Dickinson Czechia s.r.o. Czech Republic 100% (1)
Becton Dickinson del Uruguay S.A. Uruguay 100% (1)
Becton Dickinson Distribution Center N.V. Belgium 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 Hungary Kft. Hungary 100% (1)
Becton Dickinson India Limited 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 Systems Inc., S.A. de C.V. Mexico 100% (1)
Becton Dickinson Infusion Therapy UK 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 Ihracat Limited 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. 99%
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)
Becton Dickinson Pty. Ltd. Australia 100% (1)
Becton Dickinson (Pty) Ltd. South Africa 51% (1)
Becton Dickinson Sdn. Bhd. Malaysia 100% (1)
Becton Dickinson Sample Collection GmbH Switzerland 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 West Africa S.A.R.L. The Ivory Coast 100% (1)
Becton Dickinson Worldwide, Inc. Delaware 100% (1)
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, Ltda. Brazil 100% (1)
Becton, Dickinson Italia S.p.A. Italy 100% (1)
B-D U.K. Holdings Limited United Kingdom 100% (1)
Becton Dickinson U.K. Limited United Kingdom 100% (1)
Becton, Dickinson Einmalprodukte GmbH Austria 100% (1)
Bedins Ltd. Bermuda 100% (1)
Benex Ltd. Ireland 100%
Biometric Imaging, Inc. California 100%
Boin Medica Co., Ltd. Korea 100% (1)
Cascade Medical Leasing, Inc. Oregon 100% (1)
Clontech Biotech International, Inc. U.S. Virgin Islands 100% (1)
Clontech Laboratories, Inc. Delaware 100%
Clontech Laboratories Japan, KK Japan 100% (1)
Clontech Laboratories UK Limited United Kingdom 100% (1)
Clontech Laboratories Gmbh Germany 100% (1)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Clontech Laboratories AG Switzerland 100% (1)
Critical Device Corporation California 100%
Collaborative Biomedical Products, Inc. Delaware 100%
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)
Distribuidora Boinpar Ltda. Brazil 100% (1)
EPV S.A. de C.V. Mexico 100% (1)
Franklin Lakes Enterprises, L.L.C. New Jersey 100%
Glentech, Inc. Kentucky 100% (1)
Healthcare Holdings in Sweden AB Sweden 100% (1)
IBD Holdings LLC Delaware 50%
Johnston Laboratories, Inc. Maryland 100%
Life Science Support & Service Company Ltd. Japan 100% (1)
Luther Medical Products, Inc. California 100% (1)
MDI Instruments, Inc. Delaware 100%
Med-Safe Systems, Inc. California 100%
Nippon Becton Dickinson Company, Ltd. Japan 100% (1)
PharMingen SPC California 100% (1)
PharMingen California 100%
Phase Medical, Inc. California 100% (1)
PreAnalytiX GmbH Switzerland 50% (1)
Promedicor de Mexico, S.A. de C.V. Mexico 100% (1)
Saf-T-Med Inc. Delaware 100%
Staged Diabetes Management L.L.C. New Jersey 50%
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 4, 1999, 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 30,1999.
/s/ Ernst & Young LLP
-------------------------------------
Ernst & Young LLP
New York, New York
December 9, 1999
<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-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 59,932
<SECURITIES> 4,660
<RECEIVABLES> 861,580
<ALLOWANCES> 49,036
<INVENTORY> 642,533
<CURRENT-ASSETS> 1,683,725
<PP&E> 2,932,804
<DEPRECIATION> 1,501,655
<TOTAL-ASSETS> 4,436,958
<CURRENT-LIABILITIES> 1,329,322
<BONDS> 954,169
0
46,717
<COMMON> 332,662
<OTHER-SE> 1,389,309
<TOTAL-LIABILITY-AND-EQUITY> 4,436,958
<SALES> 3,418,412
<TOTAL-REVENUES> 3,418,412
<CGS> 1,711,666
<TOTAL-COSTS> 1,711,666
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13,244
<INTEREST-EXPENSE> 76,738
<INCOME-PRETAX> 372,655
<INCOME-TAX> 96,936
<INCOME-CONTINUING> 275,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 275,719
<EPS-BASIC> 1.09
<EPS-DILUTED> 1.04
</TABLE>
