SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission File Number 1-1136
BRISTOL-MYERS SQUIBB COMPANY
(Exact name of registrant as specified in its charter)
Delaware 22-079-0350
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
345 Park Avenue, New York, N.Y. 10154
(Address of principal executive offices)
Telephone: (212) 546-4000
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 [ ]
At September 30, 1995, there were 504,566,630 shares outstanding of the
Registrant's $.10 par value Common Stock.
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BRISTOL-MYERS SQUIBB COMPANY
INDEX TO FORM 10-Q
September 30, 1995
Page No.
--------
Part I - Financial Information:
Condensed Financial Statements (Unaudited):
Consolidated Balance Sheet - September 30, 1995
and December 31, 1994 2 - 3
Consolidated Statement of Earnings for the three
and nine months ended September 30, 1995 and 1994 4
Consolidated Statement of Cash Flows for the nine
months ended September 30, 1995 and 1994 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 12
Part II - Other Information 13 - 17
Signatures 18
Exhibit:
Exhibit 27 - Financial Data Schedule E-27-1
- 1 -
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BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET - ASSETS
(Unaudited, in millions of dollars except share amounts)
September 30, December 31,
1995 1994
------------- ------------
Current Assets:
Cash and cash equivalents $ 1,674 $ 1,642
Time deposits and marketable
securities 510 781
Receivables, net of allowances 2,189 2,043
Finished goods 891 781
Work in process 168 233
Raw and packaging materials 379 383
------- -------
Inventories 1,438 1,397
Prepaid expenses 799 847
------- -------
Total Current Assets 6,610 6,710
------- -------
Property, Plant and Equipment 6,123 5,836
Less: Accumulated depreciation 2,333 2,170
------- -------
3,790 3,666
------- -------
Insurance Recoverable 961 968
Excess of cost over net tangible assets
received in business acquisitions 1,178 939
Other Assets 843 627
------- -------
Total Assets $13,382 $12,910
======= =======
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BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET -
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited, in millions of dollars except share amounts)
September 30, December 31,
1995 1994
------------- ------------
Current Liabilities:
Short-term borrowings $ 699 $ 725
Accounts payable 759 693
Accrued expenses 1,720 1,481
Product liability 296 635
U.S. and foreign income taxes
payable 737 740
------- -------
Total Current Liabilities 4,211 4,274
Product Liability 1,224 1,201
Other Liabilities 998 1,087
Long-Term Debt 632 644
------- -------
Total Liabilities 7,065 7,206
------- -------
Stockholders' Equity:
Preferred stock, $2 convertible series:
Authorized 10 million shares; issued
and outstanding 19,552 in 1995 and
21,857 in 1994, liquidation value
of $50 per share - -
Common stock, par value of $.10 per share:
Authorized 1.5 billion shares; issued
540,183,404 in 1995 and 540,173,669
in 1994 54 54
Capital in excess of par value of
stock 383 397
Cumulative translation adjustments (316) (301)
Retained earnings 8,431 7,600
------- -------
8,552 7,750
Less cost of treasury stock -
35,616,774 common shares in
1995 and 32,887,848 in 1994 2,235 2,046
------- -------
Total Stockholders' Equity 6,317 5,704
------- -------
Total Liabilities and Stockholders'
Equity $13,382 $12,910
======= =======
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BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited, in millions of dollars except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1995 1994 1995 1994
------ ------ ------- ------
Net Sales $3,413 $2,932 $10,159 $8,736
------ ------ ------- ------
Expenses:
Cost of products sold 930 760 2,716 2,246
Marketing, selling,
administrative and other 826 706 2,633 2,239
Advertising and product
promotion 406 318 1,182 972
Research and development 293 274 876 806
------ ------ ------ ------
2,455 2,058 7,407 6,263
------ ------ ------ ------
Earnings Before Income Taxes 958 874 2,752 2,473
Provision for income taxes 269 253 798 729
------ ------ ------ ------
Net Earnings $ 689 $ 621 $1,954 $1,744
====== ====== ====== ======
Earnings Per Common Share $1.36 $1.22 $3.86 $3.43
===== ===== ===== =====
Average Common Shares
Outstanding (in millions) 506 509 507 509
=== === === ===
Dividends Per Common Share $.74 $.73 $2.22 $2.19
==== ==== ===== =====
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BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions of dollars)
Nine Months Ended
September 30,
------------------
1995 1994
------ ------
Cash Flows From Operating Activities:
Net earnings $1,954 $1,744
Depreciation and amortization 259 242
Other operating items 34 3
Receivables (147) (65)
Inventories (33) (55)
Prepaid expenses (15) 7
Accounts payable 69 (85)
Accrued expenses 162 54
Product liability (316) (230)
Income taxes 91 109
Other liabilities (201) (78)
------ ------
Net Cash Provided by Operating Activities 1,857 1,646
------ ------
Cash Flows From Investing Activities:
Proceeds from sales of time deposits and
marketable securities 336 34
Purchases of time deposits and marketable
securities (66) (447)
Additions to fixed assets (332) (381)
Purchases of businesses and other investments (361) (657)
Proceeds from sale of business - 285
Other, net (23) (6)
------ ------
Net Cash Used in Investing Activities (446) (1,172)
------ ------
Cash Flows From Financing Activities:
Short-term borrowings (43) 536
Long-term debt (7) 31
Issuances of common stock under stock plans 41 21
Purchases of treasury stock (244) (506)
Dividends paid (1,123) (1,112)
------ ------
Net Cash Used in Financing Activities (1,376) (1,030)
------ ------
Effect of Exchange Rates on Cash (3) (22)
------ ------
Increase/(Decrease) in Cash and Cash Equivalents 32 (578)
Cash and Cash Equivalents at Beginning of
Period 1,642 2,421
------ ------
Cash and Cash Equivalents at End of Period $1,674 $1,843
====== ======
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BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
Basis of Presentation
- ---------------------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments
(consisting only of normal adjustments) necessary for a fair
presentation of the financial position of Bristol-Myers Squibb
Company (the "Company") at September 30, 1995 and December 31,
1994, the results of operations for the three and nine months ended
September 30, 1995 and 1994, and cash flows for the nine months
ended September 30, 1995 and 1994. These condensed consolidated
financial statements should be read in conjunction with the
consolidated financial statements and the related notes included in
the Company's 1994 Annual Report on Form 10-K. In general, the
business of the Company's industry segments is not seasonal.
Third Quarter Results of Operations
- ------------------------------------
Sales
- -----
Worldwide sales for the third quarter of 1995 increased 16% over
the prior year to $3,413. Excluding the three acquisitions during
the last year, sales for the quarter increased 11%. The
consolidated sales growth resulted from a 14% increase due to
volume, a 1% increase due to the favorable effect of foreign
currency translation, and a 1% increase in selling prices.
Domestic sales increased 12% and international sales increased 23%
(21% excluding the favorable effect of foreign currency
translation). All four of the Company's industry segments reported
sales increases in both domestic and international markets.
Worldwide sales for the third quarter of 1994 increased 2% compared
to the third quarter of 1993, reflecting a 1% increase due to
volume, a 1% increase due to the favorable effect of foreign
currency translation, with no effect due to changes in selling
prices.
Industry Segments
- -----------------
Three Months Ended September 30,
-------------------------------------
Net Sales % Change
------------------ ------------------
1995 1994 1995 1994
------- ------- ------- -------
Pharmaceutical Products $1,932 $1,682 15% 2%
Medical Devices 458 407 13% (2%)(a)
Nonprescription
Health Products 623 492 27% 1%
Toiletries and Beauty Aids 400 351 14% 11%
------ ------
Total Company $3,413 $2,932 16% 2%
====== ======
(a) Excluding the effect of businesses divested in 1994, sales
increased 6%.
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BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
Sales in the pharmaceutical products segment, which is the largest
segment at 57% of total company sales, increased 15% over the third
quarter of 1994 to $1,932. Sales growth resulted from a 13% increase
in volume, a 1% increase due to changes in selling prices and a 1%
increase due to the favorable effect of foreign currency translation.
Sales of cardiovascular drugs, the largest product group in the
segment, increased 5% to $721. Sales of captopril, an angiotensin
converting enzyme (ACE) inhibitor sold primarily under the trademark
CAPOTEN* and the Company's largest selling product, decreased 2% to
$376, due to increased competition in the ACE inhibitor category and
the loss of patent exclusivity in Germany in February 1995.
PRAVACHOL*, the Company's leading cholesterol-lowering agent, and
MONOPRIL*, a second generation ACE inhibitor with once-a-day dosage,
contributed to the increase in cardiovascular sales. In the U.S.,
PRAVACHOL* benefited from a change in the clinical pharmacology
section of its labeling to reflect a 67% reduction in the incidence of
fatal and non-fatal heart attacks in hypercholesterolemic patients.
Anti-infective drug sales increased 11% to $393 due to sales of
ZERIT*, an antiretroviral drug approved by the FDA in June 1994,
introductory sales of MAXIPIME*, launched in Japan in August 1995 and
strong sales growth of CEFZIL* and broad spectrum penicillins. In the
Company's line of anti-cancer drugs, sales increased 20% to $409.
TAXOL* (paclitaxel), which continues to benefit from the April 1994
approval for its use in the treatment of breast cancer after failure
of combination chemotherapy for metastatic disease or relapse within
six months of adjuvant chemotherapy, increased 62% over the prior
year. Sales of PARAPLATIN* and PLATINOL* increased in domestic and
international markets. Sales of central nervous system drugs
increased due to introductory sales of SERZONE*, the Company's newly
launched antidepressant which offers a favorable side effect profile,
and increases in sales of BUSPAR*, the Company's novel anti-anxiety
agent and STADOL NS*, a prescription nasal spray analgesic.
Dermatological drug sales increased primarily due to strong sales of
DOVONEX*, a vitamin D3 analogue for the treatment of moderate
psoriasis. Glucophage, a new oral anti-diabetes agent for Type II
non-insulin dependent diabetes introduced in the second quarter of
1995, contributed to the sales growth for the segment. For the third
quarter of 1994, sales of the pharmaceutical products segment
increased 2% over the third quarter of 1993 primarily as a result of
increases in sales of cardiovascular, anti-cancer, central nervous
system and dermatological drugs.
In the medical devices segment, sales increased 13% to $458. In
January 1995, the Company acquired Calgon Vestal Laboratories, a skin
care and infection control products business. Excluding the effect of
that acquisition, sales increased 5%, reflecting a 3% increase due to
volume and a 2% increase due to the favorable effect of foreign
currency translation, with no effect due to changes in selling prices.
Sales of ostomy care products increased due to the growth of the
ACTIVE LIFE/COLODRESS* and the SUR-FIT/COMBIHESIVE* product lines.
Worldwide sales of prosthetic implants increased 3% with growth of the
Insall/Burstein II Modular Total Knee System and the CENTRALIGN*
Precoat Hip Prosthesis. The NEXGEN* Complete Knee Solution, the
* Indicates brand names of products which are registered trademarks
owned by the Company.
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<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
Company's advanced knee replacement system introduced in the first
quarter, has received strong initial acceptance. In the Company's line
of wound care products, sales increased reflecting volume growth of
DUODERM* products. For the third quarter of 1994, medical devices
segment sales decreased 2% over the prior year. Excluding the effect
of divested businesses, sales increased 6% primarily due to increased
sales of prosthetic implants, ostomy and wound care products.
Sales of the nonprescription health products segment increased 27% to
$623. In September 1994, the Company acquired the remaining ownership
interest of the UPSA Group, the leading maker and marketer of
analgesics in France and Belgium and a world leader in effervescent
technology. Excluding the acquisition of UPSA, sales increased 14%,
reflecting a 15% increase due to volume and a 1% decrease in selling
prices. Exchange rate fluctuations had no effect on sales growth for
the quarter. ENFAMIL* and PROSOBEE* infant formula sales increased
with the addition of new sole-source contracts in late 1994 and 1995
under the federal government's Women, Infants and Children (WIC)
Program including New York, Florida, Georgia, California and the
Western States Alliance. Sales of LACTOFREE*, a milk-based, lactose-free
infant formula, and NUTRAMIGEN* infant formula also increased, as
did the Company's line of SUSTAGEN* products. Sales of analgesics
also increased due to EXCEDRIN* in the U.S., BUFFERIN* in Japan and
EFFERALGAN* in Europe. For the third quarter of 1994, the
nonprescription health products segment sales increased 1% over the
prior year, primarily due to increases in ENFAMIL*, LACTOFREE*,
NUTRAMIGEN* and EXCEDRIN*.
Sales of the toiletries and beauty aids segment increased 14% over the
prior year to $400. In August 1994, the Company acquired Matrix
Essentials, Inc., the leading manufacturer in North America of
professional hair care and beauty products sold exclusively in beauty
salons. Excluding the acquisition of Matrix, sales increased 7%,
reflecting a 5% increase due to volume, a 3% increase due to selling
prices, and a 1% decrease due to the unfavorable effect of foreign
currency translation. Sales of the Company's haircoloring products
were strong, reflecting worldwide growth of NICE 'N EASY*, LOVING
CARE* and the continued success of NATURAL INSTINCTS*. Sales of hair
care products increased due to the launch of the HERBAL ESSENCES*
complete line of shampoos and conditioners, as well as the addition of
the SYSTEME BIOLAGE*, MATRIX ESSENTIALS* and VAVOOM!* lines from
Matrix. Skin care products sales increased primarily due to strong
international volume growth of SEA BREEZE*. For the third quarter of
1994, sales of the toiletries and beauty aids segment increased 11%
over the prior year primarily due to the acquisition of Matrix
Essentials and increased sales of haircoloring and haircare products.
Cost of Products Sold and Operating Expenses
- --------------------------------------------
Total costs and expenses for the quarters ended September 30, 1995 and
1994 as a percentage of sales were 71.9% and 70.2%, respectively,
increasing primarily due to increased costs associated with recent
acquisitions and lower gross margins as a result of increased
- 8 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
participation in the WIC program. Cost of products sold increased to
27.2% of sales from 25.9% in 1994. Marketing, selling, administrative
and other expenses as a percentage of sales were 24.2% in 1995 and
24.1% in 1994. Expenditures for advertising and promotion in support
of new and existing products increased 28% to $406 from $318 in 1994
and, as a percentage of sales, increased to 11.9% from 10.8% in 1994
primarily due to spending by acquisitions, as well as spending in
support of new product launches. Research and development expenses
increased 7% to $293 from $274 in 1994, and as a percentage of sales
were 8.6% compared to 9.3%. Pharmaceutical research and development
spending increased 2% over the prior year and as a percentage of
pharmaceutical sales, was 12.5% compared to 14.1% in 1994.
On September 1, 1995, the Company acquired A/S GEA Farmaceutisk
Fabrik, a leading manufacturer and marketer of branded generic
pharmaceuticals for the Scandinavian market.
During the second quarter, research alliances with the following
companies were announced: Somatix Therapy Corporation, a biotechnology
company specializing in gene therapy; SIBIA, Inc., a biotechnology
company engaged in the development of products based on cloned
receptor and functional assay technology; and ChromaXome Corporation,
a company that uses DNA technology to tap novel sources of chemical
diversity. In October, 1995, the Company announced research
collaborations with Ixsys, Inc., a biopharmaceutical company engaged
in the development of molecular design technologies. In November,
1995, the Company made an additional equity investment in Cadus
Pharmaceutical Corporation, a biotechnology company that specializes
in developing novel drug screening techniques.
Earnings
- --------
Earnings before income taxes for the third quarter increased 10% to
$958 from $874 in 1994. Net earnings increased 11% to $689 from $621
and earnings per share increased 11% to $1.36 from $1.22 in 1994. The
effective tax rate on earnings before taxes decreased to 28.1% in 1995
from 28.9% in 1994 reflecting the benefit of increased earnings in
lower tax jurisdictions.
Year-to-Date Results of Operations
- ----------------------------------
Sales
- -----
Worldwide sales for the first nine months of 1995 increased 16% over
the prior year to $10,159. Excluding the three acquisitions during
the last year, sales increased 10% for the nine months. The
consolidated sales growth resulted from a 14% increase due to volume
and a 2% increase due to the favorable effect of foreign currency
translation. Changes in selling prices had no effect on sales growth.
Domestic sales increased 10%, and international sales increased 26%
(21% excluding the favorable effect of foreign currency translation).
Worldwide sales for the first nine months of 1994 increased 4%
compared to the prior year, reflecting a 3% increase due to volume and
a 1% increase due to selling prices. Exchange rate fluctuations had
- 9 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
no effect on sales growth for the nine months.
Industry Segments
- -----------------
Nine Months Ended September 30,
-------------------------------------
Net Sales % Change
------------------ ------------------
1995 1994 1995 1994
------- ------- ------- -------
Pharmaceutical Products $5,773 $5,114 13% 7%
Medical Devices 1,394 1,237 13% (1%)(a)
Nonprescription
Health Products 1,801 1,425 26% (1%)
Toiletries and Beauty Aids 1,191 960 24% 1%
------- ------
Total Company $10,159 $8,736 16% 4%
======= ======
(a) Excluding the effect of businesses divested in 1994, sales
increased 5%.
Sales of the pharmaceutical products segment increased 13% to $5,773,
reflecting an 11% increase due to volume and a 2% increase due to the
favorable effect of foreign currency translation. Changes in selling
prices had no effect on sales growth. Domestic sales increased 7% and
international sales increased 20% (11% excluding acquisitions and
foreign currency translation). Cardiovascular drug sales increased 5%
to $2,163. Sales of CAPOTEN* increased 2% to $1,156 as the benefit
from new indications for the treatment of diabetic nephropathy and
left ventricular dysfunction were partially offset by increasing
competition in the ACE inhibitor market. In the U.S., the expiration
date of the CAPOTEN* patent was redefined by legislation implementing
the GATT treaty to February 1996, although the subject of ongoing
litigation. PRAVACHOL*, MONOPRIL*, and SOTALOL* also reported strong
worldwide increases. Sales of anti-infectives increased 14% to $1,230
primarily due to the strong growth of DURICEF* and CEFZIL*,
particularly in international markets, and the introductory sales of
ZERIT* and MAXIPIME*. Increases in sales of anti-cancer drugs were
very strong, primarily due to the continued growth of TAXOL*, and the
strong performance of PARAPLATIN* and PLATINOL*. Sales of the
Company's central nervous system drugs increased, reflecting the
introductory sales of SERZONE*, as well as the strong growth of
BUSPAR* and STADOL NS*. Dermatological drug sales increased primarily
due to strong sales of DOVONEX*. For the first nine months of 1994,
sales of the pharmaceutical products segment increased 7% over the
first nine months of the prior year primarily as a result of increases
in sales of cardiovascular, anti-cancer and central nervous system
drugs partially offset by decreases in anti-infectives.
Sales of the medical devices segment increased 13% to $1,394.
Excluding the acquisition of Calgon Vestal and the sales of divested
businesses, sales increased 7%, with a 3% increase due to volume and a
4% increase due to the favorable effect of foreign currency
translation. Domestic sales increased 11% (excluding acquisitions and
divestitures, sales remained at prior year levels) and international
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<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
sales increased 15% (6% excluding acquisitions, divestitures and
foreign currency translation). Increases in sales of the SUR-FIT/
COMBIHESIVE* and the ACTIVE LIFE/COLODRESS* product lines led to
the increase in sales of ostomy care products. Worldwide sales of
prosthetic implants increased due to growth overseas and continued
success in the U.S. of the Insall/Burstein II Modular Total Knee
System. Increased sales of wound care products resulted from the
success of the DUODERM* product line. For the first nine months of
1994, medical devices segment sales decreased 1% over the prior year.
Excluding the effect of divested businesses, sales increased 5%
primarily as a result of sales growth in prosthetic implants, ostomy
and wound care products.
In the nonprescription health products segment, sales increased 26% to
$1,801. Excluding the acquisition of UPSA, sales increased 11%,
with a 10% increase due to volume and a 1% increase due to the
favorable effect of foreign exchange. Changes in selling prices had
no effect on sales growth. Domestic sales increased 7% and
international sales increased 59% (17% excluding acquisitions and
foreign currency translation). Sales of infant formulas increased
primarily due to the Company's increased participation in the federal
government's WIC program. Sales of analgesics were strong due to
increased sales of EXCEDRIN* in the U.S., BUFFERIN* in Japan and
EFFERALGAN* in Europe. For the first nine months of 1994,
nonprescription health products segment sales decreased 1%, primarily
due to decreased sales of analgesics and cough/cold remedies which
were partially offset by increases in sales of infant formulas.
Sales of the toiletries and beauty aids segment increased 24% to
$1,191. Excluding the acquisition of Matrix, sales increased 8%
reflecting a 6% increase due to volume, a 2% increase due to selling
prices, and no effect due to foreign currency translation. Domestic
sales increased 26% (6% excluding the effect of acquisitions) and
international sales increased 20% (14% excluding acquisitions and the
unfavorable effect of foreign currency translation). Sales growth of
the Company's haircoloring products was led by NATURAL INSTINCTS*,
NICE 'N EASY* and LOVING CARE*. Increases in sales of shampoos and
conditioners benefited from the introduction of HERBAL ESSENCES* as
well as the addition of the SYSTEME BIOLAGE*, MATRIX ESSENTIALS* and
VAVOOM!* lines from Matrix. For the first nine months of 1994, sales
of the toiletries and beauty aids segment increased 1% over the prior
year, primarily due to increases in sales of NICE 'N EASY*, LASTING
COLOR BY LOVING CARE* and ULTRESS* haircoloring products and SEA
BREEZE* skin care products.
Cost of Product Sold and Operating Expenses
- -------------------------------------------
Total costs and expenses for the nine months ended September 30, 1995
as a percentage of sales increased to 72.9% from 71.7% for the same
period of 1994 primarily as a result of acquired businesses. Cost of
products sold increased to 26.7% of sales from 25.7% in 1994.
Marketing, selling, administrative and other expenses, as a percentage
of sales, were 25.9% compared to 25.6% in 1994. Expenditures for
advertising and promotion in support of new and existing products were
$1,182 compared to $972 in the prior year, an increase of 22%
- 11 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
primarily due to spending by acquisitions, as well as spending in
support of new product launches. Research and development increased
9% to $876 compared to $806 in the prior year, and as a percentage of
sales were 8.6% in 1995 and 9.2% in 1994. Pharmaceutical research and
development spending increased 6% over prior year levels and as a
percentage of pharmaceutical sales was 12.8% compared to 13.6% in
1994.
Earnings
- --------
Earnings before income taxes for the first nine months increased 11%
to $2,752 from $2,473 in 1994, and pretax margins decreased to 27.1%
from 28.3% primarily due to increased costs associated with recent
acquisitions and lower gross margins as a result of increased
participation in the WIC program. Net earnings increased 12% to
$1,954 from $1,744 and earnings per share increased 13% to $3.86 from
$3.43 in 1994. The effective tax rate on earnings before taxes
decreased to 29.0% in 1995 from 29.5% in 1994 reflecting the benefit
of increased earnings in lower tax jurisdictions.
Financial Position
- ------------------
The balance sheet at September 30, 1995 and the statement of cash
flows for the nine months then ended reflect the Company's strong
financial position. The Company continues to maintain a high level of
working capital totaling $2,399 at September 30, 1995.
Internally generated funds continue to be the Company's primary source
for financing expenditures for new plant and equipment. Additions to
fixed assets for the nine months ended September 30, 1995 were $332
compared to $381 during the same period of 1994.
During the nine months ended September 30, 1995, the Company purchased
3,668,000 shares of its common stock at a total cost of $244.
Reference is made to Part II, Item 1 - Legal Proceedings in which
developments are described for various lawsuits, claims and
proceedings in which the Company is involved.
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<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
PART II - OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings
- --------------------------
Various lawsuits, claims and proceedings of a nature considered normal
to its business are pending against the Company and certain of its
subsidiaries. The most significant of these are reported in the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, and material developments in such matters are
described in the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1995 and June 30, 1995, and below.
Breast Implant Litigation
- -------------------------
The Company and its subsidiary, Medical Engineering Corporation
("MEC"), together with certain other companies, are defendants in
numerous breast implant product liability suits, including a class
action pending in the United States District Court in Birmingham,
Alabama (Honorable Sam C. Pointer, Jr.). As of November 1, 1995 there
were approximately 20,000 plaintiffs with pending suits against the
Company and its subsidiaries. Typically the plaintiffs allege
personal injuries and seek compensatory and punitive damages.
On September 1, 1994 Judge Pointer approved a settlement of the class
action, subject to various conditions, involving payments totalling
$4.25 billion by the defendants over 30 years. The settlement
provided, among other things, that if the total amount of approved
current disease compensation claims as defined in the settlement
agreement against all defendants exceeded $1.2 billion, scheduled
benefits would be reduced and claimants would have a second
opportunity to withdraw or opt out from the settlement.
On October 7, 1995, Judge Pointer issued an order declaring that class
members in the breast implant class action settlement would be
accorded such a second opt-out right because the value of current
claims would likely far exceed the $1.2 billion set aside for such
claims, that negotiations were not successful in eliminating the need
for a reduction in benefits under the program, that large numbers of
class members would opt out and thus defendants would withdraw from
the settlement.
Under the Order, class members would be permitted to opt out and
pursue litigation beginning on or about December 1, 1995. The court
stated, however, that class members would not be required to take
immediate action to file suit to preserve their claims, for the class
action would be maintained and the statute of limitations would remain
suspended until a class member opts out. The court also indicated
that a modified settlement program may be offered by the Company,
Baxter Healthcare and 3M Company.
The Board of Directors of the Company recently conditionally
authorized management to enter into such a modified settlement
program. Baxter Healthcare, 3M Company, McGhan Medical Corporation
and Union Carbide Corporation are also expected to participate.
This fifteen-year settlement program, if approved by the district
- 13 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
PART II - OTHER INFORMATION
---------------------------
court and any appellate courts, would provide benefits to those breast
implant recipients, other than foreign claimants, who have had at
least one breast implant manufactured by one of the settling
defendants (or their predecessors or subsidiaries). Several kinds of
benefits would be available for eligible participants: (1) for current
claimants, compensation ranging from $10,000 to $50,000 based on
disease and disability definitions of the original settlement, plus
supplemental benefits of an additional $15,000 to $50,000 for
claimants with ruptured implants; (2) for current claimants seeking
higher benefits and for other registrants, compensation ranging from
$75,000 to $250,000 based on new, more stringent disease and
disability definitions; and (3) although the settling defendants are
not recommending removal of implants absent some specific medical
reason, a $3,000 payment for those class members (other than late
registrants) who seek removal of implants. In addition, current
claimants would be eligible for an advance payment of $5,000, and
other existing registrants would be eligible for an advance payment of
$1,000. For certain current claimants, benefits would be payable
regardless of the number of claimants seeking compensation, regardless
of the total dollar value of approved claims, and regardless of the
outcome of appeals from the order approving the settlement. For other
claimants, benefits would be subject to an aggregate $755 million cap
for all participating companies over the fifteen year life of the
program.
The settlement notice is expected to be disseminated in December 1995;
it will provide for opt-out rights for class members, which must be
exercised within 45 days after they receive notice of the status of
their registration and claim. Certain class members who had not
previously registered by certain deadlines will have the opportunity
to opt out provided they register by April 1, 1996. In the event the
dollar value of claims subject to the cap exceeds $755 million,
claimants may be afforded additional opt-out rights but without the
right to assert punitive or other statutory multiple damage claims.
It is not possible on any reliable basis to estimate how many class
members will participate in or opt out of the settlement.
The cost of the settlement is dependent upon the number of class
members that participate, the kinds of claims asserted and approved
under the settlement, and their dollar value. In light of the
uncertainties attendant to these and other factors, it is not possible
to achieve any precision at this time in estimating the cost of the
settlement to the Company. The court has advised that approximately
440,000 women with implants of all manufacturer companies had
registered with the claims office under the original settlement,
including approximately 57,000 foreign class members. However, since
all women with implants were urged by the court to register, the
number of registrants will not necessarily indicate the number of
women who have filed or will file claims against the settlement funds.
In July of 1995, the Company entered into a $20.5 million (U.S. funds)
class action settlement with plaintiff representatives in the
provinces of Ontario and Quebec. The class includes persons who have
or had MEC breast implants and who reside in Ontario and Quebec or who
received their MEC implants there. The settlement has been approved
by the provincial courts of Ontario and Quebec. The Company has the
right to withdraw from the settlement depending upon the number of
- 14 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
PART II - OTHER INFORMATION
---------------------------
claimants who opt out or participate in the program.
The Company's insurers have been notified of the breast implant claims
and the settlement and certain insurers have reserved their rights or
declined to confirm coverage. In 1993, the Company commenced
litigation in state court, Jefferson County, Texas, against most of
the Company's insurers, seeking damages and a declaration of coverage.
A trial of this insurance coverage case is expected in 1996.
Judge Pointer reported that as of February 28, 1995, 7,270 United
States women and 2,174 foreign women had elected to opt out of the
original settlement as to all defendants. With respect to such opt
outs by women from the United States, the Company has estimated that
approximately 3,000 women may assert claims based upon MEC implants,
approximately 2,000 of whom reside in Texas. The Company has, at this
time, identified approximately 300 of the foreign opt-outs as having
MEC implants. A number of the opt-outs cannot, at this time, be
identified as having implants of any particular manufacturer. The
exact number of lawsuits that will remain in the event the settlement
becomes effective is unknown at this time.
The cost to the Company of resolving opt-out claims is subject to a
number of uncertainties in addition to the unknown quantity and
quality of such claims. While there have been large judgments, the
relatively few trials against breast implant manufacturers have
produced mixed results, and additional trials may affect the outlook.
The Company has maintained throughout this litigation that breast
implants do not cause disease and recent medical and scientific data
supports the Company's position. The results of continuing medical
research and a variety of additional factors, including the success of
other legal defenses, may substantially affect the cost of resolving
opt out cases.
In the fourth quarter of 1993, the Company recorded a charge of $500
million before taxes ($310 million after taxes) in respect of breast
implant claims. The charge consisted of $1.5 billion for potential
liabilities and expenses, offset by $1 billion of expected insurance
proceeds. In the fourth quarter of 1994, the Company recorded an
additional special charge of $750 million before taxes ($488 million
after taxes) related to breast implant product liability claims.
Although the revised settlement has just been reached and its effect
cannot at present be predicted, the Company believes that after its
consequences are analyzed and more information becomes available, an
additional charge to earnings may likely be required with respect to
breast implant litigation which may have a material effect on the
Company's results of operations for the year. Such charge should not
have a material adverse effect on the Company's liquidity or
consolidated financial position.
Infant Formula Matters
- ----------------------
The Company, one of its subsidiaries, and others are defendants in 25
antitrust actions in 19 states filed on behalf of purported statewide
classes of indirect purchasers of infant formula products and by the
Attorneys General of Louisiana, Minnesota, Mississippi and Texas
alleging a price fixing conspiracy and other violations of state
antitrust or deceptive trade practices laws and seeking penalties and
- 15 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
PART II - OTHER INFORMATION
---------------------------
other relief. The state courts in Colorado, Florida, Nevada, North
Carolina and Tennessee have dismissed the complaints, but the
plaintiffs have or are expected to appeal those dismissals. On June
29, 1995, the Texas Supreme Court handed down a decision in the
Company's favor, holding that the plaintiffs, as indirect purchasers,
were barred from proceeding under the Texas Deceptive Trade Practices-
Consumer Protection Act. On October 10, 1995, a trial in which the
Company and Abbott Laboratories are defendants began in state court in
Wichita, Kansas and is expected to continue through early December.
Courts in Wisconsin and South Dakota have also certified classes of
indirect purchasers of infant formula. Class certification motions
have been denied in Minnesota and Michigan. The civil and criminal
inquiries by the Canadian Bureau of Competition Policy into alleged
anticompetitive practices by the Company and certain other members of
the Canadian infant formula industry are ongoing.
Pharmaceutical Pricing Litigation
- ---------------------------------
The Company, along with more than 30 other pharmaceutical
manufacturers, drug wholesalers and pharmacy benefit managers, is a
defendant in over 100 actions brought by a class of retail pharmacists
and by over 3,000 independent and chain pharmacies in various federal
courts seeking damages and injunctive relief under the federal
antitrust laws for alleged antitrust violations in the pricing and
marketing of brand-name prescription drugs. The federal actions have
been transferred for pre-trial purposes to the United States District
Court for the Northern District of Illinois, where fact discovery has
been completed, and discovery of expert witnesses is proceeding. The
court has indicated that trial of the consolidated class actions will
begin on April 1, 1996. Additional actions continue to be filed. In
the California state court litigation, petitions for writ of mandate
concerning orders that certified a class of independent California
retail pharmacies/pharmacists and a class of California consumers who
purchased brand name prescription drugs from independent California
pharmacies have been denied. In the Alabama state court litigation,
the plaintiffs have purported to amend their complaint to add class
action allegations. In the Wisconsin state court litigation, the
Court has denied the defendants' motion to dismiss plaintiffs'
complaint, but has required plaintiffs to replead. In the Washington
state court litigation, the Court entered an order dismissing all of
the plaintiff's claims, and the plaintiff has appealed. An additional
action claiming damages on behalf of a purported class of consumers
has been filed in state court in Arizona.
- 16 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
PART II - OTHER INFORMATION
----------------------------
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit (listed by number corresponding to the Exhibit Table of
Item 601 in Regulation S-K).
27. Bristol-Myers Squibb Company Financial Data Schedule.
Page E-27-1.
(b) Reports on Form 8-K.
The Registrant did not file any reports on Form 8-K during the quarter
ended September 30, 1995.
- 17 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BRISTOL-MYERS SQUIBB COMPANY
----------------------------
(Registrant)
Date November 13, 1995 /s/ Harrison M. Bains, Jr.
---------------------------- -----------------------------
Harrison M. Bains, Jr.
Vice President and Treasurer
Date November 13, 1995 /s/ Frederick S. Schiff
---------------------------- -----------------------------
Frederick S. Schiff
Vice President and Controller
- 18 -
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
Exhibit 27 for Bristol-Myers Squibb for the period ended 9/30/95
</LEGEND>
<MULTIPLIER>1000000
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Dec-31-1995<F1>
<PERIOD-END> Sep-30-1995
<CASH> 1,674
<SECURITIES> 510
<RECEIVABLES> 2,189 <F2>
<ALLOWANCES> 0
<INVENTORY> 1,438
<CURRENT-ASSETS> 6,610
<PP&E> 6,123
<DEPRECIATION> 2,333
<TOTAL-ASSETS> 13,382
<CURRENT-LIABILITIES> 4,211
<BONDS> 632
0
0
<COMMON> 54
<OTHER-SE> 6,263
<TOTAL-LIABILITY-AND-EQUITY> 13,382
<SALES> 10,159
<TOTAL-REVENUES> 10,159
<CGS> 2,716
<TOTAL-COSTS> 2,716
<OTHER-EXPENSES> 4,691
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69
<INCOME-PRETAX> 2,752
<INCOME-TAX> 798
<INCOME-CONTINUING> 1,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,954
<EPS-PRIMARY> 3.86
<EPS-DILUTED> 0
<FN>
<F1> Items reported as "zero" are not applicable or are immaterial to
the consolidated financial position of the Company.
<F2> Receivables are reported net of allowances for doubtful accounts.
</TABLE>
