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 JUNE 30, 1997
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 June 30, 1997, there were 996,763,586 shares outstanding of the
Registrant's $.10 par value Common Stock.
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BRISTOL-MYERS SQUIBB COMPANY
INDEX TO FORM 10-Q
June 30, 1997
Page No.
--------
Part I - Financial Information:
Condensed Financial Statements (Unaudited):
Consolidated Balance Sheet - June 30, 1997
and December 31, 1996 2 - 3
Consolidated Statement of Earnings for the three and
six months ended June 30, 1997 and 1996 4
Consolidated Statement of Cash Flows for the six
months ended June 30, 1997 and 1996 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 13
Part II - Other Information 14 - 16
Signatures 17
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BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET - ASSETS
(Unaudited, in millions except share amounts)
June 30, December 31,
1997 1996
------------ ------------
Current Assets:
Cash and cash equivalents $ 1,493 $ 1,681
Time deposits and marketable
securities 382 504
Receivables, net of allowances 2,775 2,651
Finished goods 1,125 994
Work in process 201 223
Raw and packaging materials 482 452
---------- ----------
Inventories 1,808 1,669
Prepaid expenses 1,082 1,023
---------- ----------
Total Current Assets 7,540 7,528
---------- ----------
Property, Plant and Equipment 6,783 6,646
Less: Accumulated depreciation 2,808 2,682
---------- ----------
3,975 3,964
---------- ----------
Insurance Recoverable 691 853
Excess of cost over net tangible assets
received in business acquisitions 1,513 1,508
Other Assets 805 832
---------- ----------
Total Assets $14,524 $14,685
========== ==========
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BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET -
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited, in millions except share amounts)
June 30, December 31,
1997 1996
----------- -----------
Current Liabilities:
Short-term borrowings $ 622 $ 513
Accounts payable 968 1,064
Accrued expenses 1,831 1,962
Product liability 800 800
U.S. and foreign income taxes payable 644 711
---------- ----------
Total Current Liabilities 4,865 5,050
Product Liability 791 1,031
Other Liabilities 1,080 1,068
Long-Term Debt 971 966
---------- ----------
Total Liabilities 7,707 8,115
---------- ----------
Stockholders' Equity:
Preferred stock, $2 convertible series:
Authorized 10 million shares; issued and
outstanding 14,172 in 1997 and 15,245 in
1996, liquidation value
of $50 per share - -
Common stock, par value of $.10 per share:
Authorized 2.25 billion shares; issued
1,082,928,242 in 1997 and
1,082,496,016 in 1996 108 108
Capital in excess of par value of stock 416 382
Cumulative translation adjustments (454) (361)
Retained earnings 10,048 9,260
---------- ----------
10,118 9,389
Less cost of treasury stock - 86,164,656
common shares in 1997 and 81,806,550
in 1996 3,301 2,819
---------- ----------
Total Stockholders' Equity 6,817 6,570
---------- ----------
Total Liabilities and Stockholders' Equity $14,524 $14,685
========== ==========
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<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited, in millions except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
--------- --------- --------- ---------
Net Sales $4,064 $3,696 $8,109 $7,365
--------- --------- --------- ---------
Cost of products sold 1,097 962 2,175 1,896
Marketing, selling,
administrative and other 1,057 1,015 2,068 1,999
Advertising and product
promotion 557 487 1,054 914
Research and development 321 309 647 611
--------- --------- --------- ---------
3,032 2,773 5,944 5,420
--------- --------- --------- ---------
Earnings Before Income Taxes 1,032 923 2,165 1,945
Provision for income taxes 294 268 617 564
--------- --------- --------- ---------
Net Earnings $ 738 $ 655 $1,548 $1,381
========= ========= ========= =========
Earnings Per Common Share $.74 $.65 $1.55 $1.37
========= ========= ========= =========
Average Common Shares
Outstanding 996 1,003 998 1,005
========= ========= ========= =========
Dividends Per Common Share $.38 $.375 $.76 $.75
========= ========= ========= =========
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BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions)
Six Months Ended
June 30,
------------------------
1997 1996
--------- ---------
Cash Flows From Operating Activities:
Net earnings $1,548 $ 1,381
Depreciation and amortization 269 254
Other operating items 6 (6)
Receivables (204) (144)
Inventories (206) (119)
Accounts payable (69) 51
Accrued expenses (133) 119
Product liability (240) (295)
Insurance recoverable 162 25
Income taxes (1) 38
Other assets and liabilities (74) (63)
-------- --------
Net Cash Provided by Operating Activities 1,058 1,241
-------- --------
Cash Flows From Investing Activities:
Proceeds from sales of time deposits
and marketable securities 274 308
Purchases of time deposits
and marketable securities (152) (256)
Additions to fixed assets (269) (250)
Acquisition of businesses (37) (271)
Other, net 8 (72)
-------- --------
Net Cash Used in Investing Activities (176) (541)
-------- --------
Cash Flows From Financing Activities:
Short-term borrowings 141 (120)
Long-term debt 6 8
Issuances of common stock under stock plans 179 81
Purchases of treasury stock (627) (430)
Dividends paid (760) (756)
-------- --------
Net Cash Used in Financing Activities (1,061) (1,217)
-------- --------
Effect of Exchange Rates on Cash (9) (4)
-------- --------
Decrease in Cash and Cash Equivalents (188) (521)
Cash and Cash Equivalents at Beginning of Period 1,681 1,645
-------- --------
Cash and Cash Equivalents at End of Period $1,493 $1,124
======== ========
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BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions, 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 June 30, 1997 and December 31,
1996, the results of operations for the three and six months ended June 30,
1997 and 1996, and cash flows for the six months ended June 30, 1997 and 1996.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the related notes included in
the Company's 1996 Annual Report on Form 10-K.
Second Quarter Results of Operations
- ------------------------------------
Sales
- -----
Worldwide sales for the second quarter of 1997 increased 10% (13% excluding the
effect of foreign exchange) over the prior year to $4,064. The consolidated
sales growth resulted from a 13% increase due to volume and a 3% decrease due
to the effect of foreign exchange. Changes in selling prices had no effect
on total sales growth. Domestic sales increased 15% and international sales
increased 4% (11% excluding the effect of foreign exchange). Worldwide sales
for the second quarter of 1996 increased 7% compared to the second quarter of
1995.
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BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions, except per share amounts)
Industry Segments
- ----------------- Three Months Ended June 30,
-------------------------------------------
Net Sales % Change
------------------- -------------------
1997 1996 1997 1996
--------- --------- --------- ---------
Pharmaceutical Products $2,380 $2,092 14 % 7 %
Nonprescription Health Products 685 669 2 % 12 %
Toiletries and Beauty Aids 544 470 16 % 13 %
Medical Devices 455 465 (2) % (4) %
--------- ---------
Total Company $4,064 $3,696 10 % 7 %
========= =========
Sales in the pharmaceutical products segment, which is the largest segment at
59% of total company sales, increased 14% (18% excluding foreign exchange)
over the second quarter of 1996 to $2,380. Sales growth resulted from an 18%
increase in volume and a 4% decrease due to the effect of foreign exchange.
Selling prices had no effect on sales. Domestic pharmaceutical sales increased
26% and international sales increased 9% excluding foreign exchange.
Sales of cardiovascular drugs, the largest product group in the segment,
decreased 1% to $677. Excluding the sales of CAPOTEN*, cardiovascular sales
increased 12%. Sales of PRAVACHOL*, the Company's largest selling product,
increased 21% to $307, with growing evidence of PRAVACHOL's* benefits in
cholesterol-lowering and clinical event reduction. In May, the Long-Term
Intervention with Pravastatin in Ischemic Disease (LIPID) trial was halted
early because of compelling evidence that therapy with PRAVACHOL* significantly
benefited patients enrolled in the trial. Strong growth of the anti-
hypertensive MONOPRIL*, a second generation angiotensin converting enzyme (ACE)
inhibitor with once-a-day dosage, increased sales 28% to $81. Sales growth for
these products was offset by a 22% decline in CAPOTEN* sales.
Sales of anti-cancer drugs increased 29% to $583. Sales of TAXOL* (R)
(paclitaxel), the Company's leading anti-cancer agent, increased 13% to $225.
In June 1997, the Company was allowed a use patent in the U.S. for short
infusion administration in breast and ovarian cancer patients, and the Oncology
Drugs Advisory Committee recommended that the U.S. Food and Drug
Administration (FDA) approve TAXOL* for the treatment of Kaposi's sarcoma, a
* 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, except per share amounts)
rare form of cancer primarily affecting HIV-infected individuals. TAXOL's* five
year Hatch-Waxman exclusivity period in the U.S. will expire in December 1997.
Sales of PARAPLATIN*, an anti-cancer agent, increased 14% to $105. Sales of
the Oncology Therapeutics Network (OTN), a company acquired in September 1996,
contributed $114 to anti-cancer drug sales growth.
Anti-infective drug sales of $535 increased 18% over the prior year. Strong
gains were recorded for ZERIT*, an antiretroviral agent that has benefited
from positive regulatory actions in the U.S., Canada and Europe and from
ongoing clinical trials showing the efficacy of ZERIT* in combination with
other anti-viral agents. Sales of CEFZIL*, used in the treatment of
respiratory infections, increased 31% to $66. Sales of MAXIPIME*, a fourth
generation injectable cephalosporin, were $24, an increase of 136% over the
prior year. Sales of central nervous system drugs increased 26% over the prior
year, primarily as a result of SERZONE*, an antidepressant with a low incidence
of side effects, which recorded strong growth of 96%. In May 1997, studies
presented at the American Psychiatric Association meeting demonstrated that
SERZONE* increased sleep efficacy in people suffering from depression.
Glucophage, an oral medication for treatment of non-insulin dependent diabetes,
continued its strong growth rate with sales increasing 93% to $145.
For the second quarter of 1996, sales of the pharmaceutical products segment
increased 7% over the second quarter of 1995 to $2,092 as a result of increases
in sales of PRAVACHOL*, TAXOL*, MONOPRIL*, SERZONE*, ZERIT* and VIDEX*,
MAXIPIME*, and the introductory sales of Glucophage. Sales growth resulted
from a 10% increase in volume offset by a 3% decrease due to exchange rate
fluctuations. Changes in selling prices had no effect on sales growth.
Sales of the nonprescription health products segment increased 2% to $685,
reflecting a 7% increase due to volume, a 3% decrease due to the effect of
foreign exchange and a 2% decrease due to changes in selling prices. Total
infant formula sales were $296 for the second quarter of 1997, and $310 in the
prior year. LACTOFREE* and ENFAPRO* infant formulas performed well, while
BOOST*, SUSTAGEN* and SUSTACAL* nutritional supplements also contributed to
sales growth. ENFALAC* and ENFALAC AR* were launched in Latin America during
the first six months of 1997. The Company's Mead Johnson subsidiary is the
number one infant formula company in the world. Sales of analgesics increased
primarily due to volume growth of EFFERALGAN*, DAFALGAN*, ASPIRINE UPSA* and
EXCEDRIN*. KERI* skin care products contributed to sales growth domestically,
and in Japan. In April, the Company launched VAGISTAT-1*, the first and only
one-dose over-the-counter (OTC) medication for vaginal yeast infections. In
March 1997, the Company acquired Sal de Uvas PICOT, a leading effervescent
antacid product in Mexico. For the second quarter of 1996, the
nonprescription health products segment sales increased 12% to $669, compared
to the second quarter of 1995, primarily due to increased sales of infant
formulas and analgesics. The increase reflected a 15% increase due to volume,
a 2% decrease due to exchange rate fluctuations and a 1% decrease due to
changes in selling prices.
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<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions, except per share amounts)
Sales of the toiletries and beauty aids segment increased 16% over the prior
year to $544, reflecting a 17% increase due to volume, a 1% increase due to
changes in selling prices and a 2% decrease due to the effect of foreign
exchange. Sales of hair care products increased 25% due to strong market
growth of the HERBAL ESSENCES* and INFUSIUM 23* complete lines of shampoos
and conditioners. Haircoloring products grew 11% over the prior year primarily
due to established products NICE N EASY* and NATURAL INSTINCTS* as well as
CLAIROL HYDRIENCE*, a unique water-based permanent haircolor, launched in
June 1996. Combining success in hair care and haircolor, Clairol is the number
one hair products company in the U.S. SEA BREEZE* skin care products
experienced significant volume growth in the Japanese marketplace. For the
second quarter of 1996, sales of the toiletries and beauty aids segment were
$470, an increase of 13% over the prior year, reflecting a 15% increase due to
volume, a 2% increase due to changes in selling prices and a 4% decrease due
to foreign exchange. This increase was primarily due to volume growth of
haircoloring and hair care products.
In the medical devices segment, sales of $455 were 2% below prior year levels
(an increase of 4% excluding the effect of foreign exchange and the 1996
disposition of certain businesses), reflecting an increase of 1% due to volume
and a 3% decrease due to the effect of foreign exchange. Selling prices had no
effect on sales for the quarter. ConvaTec's growth of 8%, excluding foreign
exchange and the 1996 disposition, leads the medical devices segment as sales
of ostomy and wound care products increased 5% and 14%, respectively, both
excluding foreign exchange. Zimmer sales were at prior year levels due to
significant price pressure and the effect of foreign exchange. The Company's
ConvaTec ostomy and modern wound care products, and Zimmer's knee and hip
prosthetic joint replacements, continue to be world market share leaders. In
July 1997, the Company announced its intention to sell the arthroscopy and
surgical instruments businesses of Zimmer's Linvatec and Hall business units,
as Zimmer will focus on its core businesses of prosthetic implants and fracture
fixation devices. For the second quarter of 1996, medical devices segment
sales of $465 decreased 4% (an increase of 1% excluding foreign exchange).
Volume gains of 4% were offset by a 5% decrease due to exchange rate
fluctuations and a 3% decrease due to changes in selling prices.
Cost of Products Sold and Operating Expenses
- --------------------------------------------
Total costs and expenses for the quarter ended June 30, 1997, as a percentage
of sales, decreased to 74.6% from 75.0%. Cost of products sold increased to
27.0% of sales from 26.0% in 1996 due to changes in product sales mix.
Expenditures for advertising and promotion in support of new and existing
products increased 14% to $557 from $487 in 1996 and, as a percentage of sales,
increased to 13.7% from 13.2% in 1996. This increase is primarily due to
increased spending on direct-to-consumer campaigns for several pharmaceutical
products as well as incremental support of toiletries and beauty aids products.
Marketing, selling, administrative and other expenses increased 4% to $1,057 on
increased spending to support growth products and, as a percentage of sales,
decreased to 26.0% in 1997 from 27.5% in 1996. Research and development
expenditures increased 4% to $321 from $309 in 1996. Pharmaceutical research
and development spending increased 7% over the prior year, and as a percentage
- 9 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions, except per share amounts)
of pharmaceutical sales, was 11.7% compared to 12.4% in the second quarter of
1996.
Earnings
- --------
Earnings before income taxes for the second quarter increased 12% to $1,032
from $923 in 1996. The effective tax rate on earnings before taxes decreased
to 28.5% in the second quarter of 1997 from 29.0% in 1996, reflecting the
benefit of increased earnings in lower tax jurisdictions. Net earnings
increased 13% to $738 from $655 and earnings per share increased 14% to $.74
from $.65 in 1996. The growth in earnings per share exceeded the growth in net
earnings by 1% as a result of the Company's share repurchase program. (In
accordance with Statement of Financial Accounting Standards No. 128, Earnings
Per Share, diluted earnings per share for the quarter was $.73 in 1997 and
$.64 in 1996.)
Year-To-Date Results of Operations
- ----------------------------------
Sales
- -----
Worldwide sales for the first six months of 1997 increased 10% (13% excluding
the effect of foreign exchange) over the prior year to $8,109. The
consolidated sales growth resulted from a 13% increase due to volume and a 3%
decrease due to the effect of foreign exchange. Changes in selling prices had
no effect on total sales growth. Domestic sales increased 13% and
international sales increased 7% (13% excluding the effect of foreign
exchange). Worldwide sales for the six months of 1996 increased 9% compared to
the first six months of 1995.
Industry Segments
- ----------------- Six Months Ended June 30,
------------------------------------------
Net Sales % Change
------------------ ------------------
1997 1996 1997 1996
-------- -------- -------- --------
Pharmaceutical Products $4,796 $4,247 13 % 11 %
Nonprescription Health Products 1,426 1,342 6 % 14 %
Toiletries and Beauty Aids 997 872 14 % 10 %
Medical Devices 890 904 (2) % (3) %
-------- --------
Total Company $8,109 $7,365 10 % 9 %
======== ========
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<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions, except per share amounts)
Pharmaceutical products segment sales were $4,796, an increase of 13% over the
prior year, reflecting a 16% increase due to volume, a 3% decrease due to the
effect of foreign exchange and no effect due to overall changes in selling
prices.
Domestic and international sales experienced strong growth with increases of
20% and 5%, respectively. Excluding the unfavorable effect of foreign
exchange, international sales increased 11% for the six months. Cardiovascular
drug sales of $1,418 remained at prior year levels (excluding the effect of
foreign exchange, sales increased 3%). Excluding the sales of CAPOTEN*,
cardiovascular sales increased 19%. PRAVACHOL* and MONOPRIL* sales grew 35%
and 28%, respectively. Sales growth for these products was offset by a 28%
decline in CAPOTEN* sales, due to the loss of its patent exclusivity in the
U.S. in February 1996 and certain countries in Europe during the second quarter
of 1997. Sales of anti-cancer drugs increased 28% to $1,151 due to strong
sales of TAXOL*, PARAPLATIN* and OTN sales. Anti-infective drug sales
increased 22% to $1,080. Strong gains were recorded for ZERIT*, CEFZIL*,
MAXIPIME* and VIDEX*. Sales of central nervous system drugs including
SERZONE*, an antidepressant which offers a low incidence of side effects, and
BUSPAR*, the Company's novel anti-anxiety agent, continued to experience very
good growth. Glucophage continued to have exceptionally strong growth. For
the first six months of 1996, sales of the pharmaceutical products segment
increased 11% over the prior year primarily as a result of increases in sales
of PRAVACHOL*, MONOPRIL*, anti-cancer and central nervous system drugs.
In the nonprescription health products segment, sales increased 6% to $1,426,
reflecting a 10% increase due to volume, a 3% decrease due to the effect of
foreign exchange and a 1% decrease in selling prices. Domestic sales increased
4% and international sales increased 9% (14% excluding the effect of foreign
exchange). Nutritional product sales increased 5% due to increased sales of
LACTOFREE*, ENFAPRO*, BOOST*, ALACTA NF and SUSTACAL*. Sales of analgesics
increased primarily due to the strong performance of the UPSA Group, driven by
sales of EFFERALGAN*, DAFALGAN* and ASPIRINE UPSA* in Europe. In July 1997,
three FDA Advisory Committees recommended that EXCEDRIN* Extra Strength
headache medication be approved for treatment of migraine headache pain. If
the FDA approves these recommendations, EXCEDRIN* would become the first and
only over-the-counter medication approved for relief of migraine headaches.
KERI* skin care products increased 18% with strong growth domestically, and in
Japan. For the first six months of 1996, nonprescription health products
segment sales increased 14% over the prior year, primarily due to increased
sales of infant formulas and analgesics.
Sales of the toiletries and beauty aids segment increased 14% to $997
reflecting a 15% increase due to volume, a 1% increase in selling prices, and
a 2% decrease due to the effect of foreign exchange. Domestic sales increased
12% and international sales increased 19% (24% excluding the effect of foreign
exchange). Sales of hair care products increased due to strong market growth
of the HERBAL ESSENCES*, INFUSIUM 23* and SYSTEM BIOLAGE* complete
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BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions, except per share amounts)
lines of shampoos and conditioners. Haircoloring product sales experienced
growth primarily due to sales of NICE N' EASY*, NATURAL INSTINCTS*, and CLAIROL
HYDRIENCE*. Sales of skin care products increased primarily due to strong
volume growth of SEA BREEZE* in the Japanese marketplace. For the first six
months of 1996, sales in the toiletries and beauty aids segment increased 10%
over the prior year primarily due to increased sales of haircoloring and hair
care products.
Sales of the medical devices segment decreased 2% to $890. Domestic sales
decreased 4% and international sales increased 1% (8% excluding the effect of
foreign exchange). Sales of ostomy and wound care products from the Company's
ConvaTec subsidiary increased 4% and 11%, respectively, (9% and 15%,
respectively, excluding foreign exchange). Zimmer sales decreased 1% from
prior year levels due to significant price pressure and the effect of foreign
exchange rate fluctuations. For the first six months of 1996, medical devices
segment sales decreased 3% from the prior year as a result of sales declines in
prosthetic implants and ostomy and wound care products.
Cost of Products Sold and Other Operating Expenses
- --------------------------------------------------
Total costs and expenses for the six months ended June 30, 1997 as a percentage
of sales decreased to 73.3% from 73.6% for the same period of 1996. Cost of
products sold increased to 26.8% of sales from 25.7% in 1996 due to changes in
product sales mix. Expenditures for advertising and promotion in support of
new and existing products increased 15% to $1,054 compared to $914 in the
prior year. This increase is primarily due to increased spending on direct-to-
consumer campaigns for several pharmaceutical products as well as incremental
support of toiletries and beauty aids products. Marketing, selling,
administrative and other expenses, as a percentage of sales, were 25.5%
compared to 27.1% in 1996. Research and development expenditures increased 6%
to $647 compared to $611 in the prior year. Pharmaceutical research and
development spending increased 10% over prior year levels, and as a percentage
of pharmaceutical sales, was 11.7% compared to 12.1% in 1996.
Earnings
- -----------
Earnings before income taxes for the six months increased 11% to $2,165 from
$1,945 in 1996. The effective tax rate on earnings before income taxes
decreased to 28.5% in 1997 from 29.0% in 1996 reflecting the benefit of
increased earnings in lower tax jurisdictions. Net earnings increased 12% to
$1,548 from $1,381 in 1996. Earnings per share increased 13% to $1.55 from
$1.37 in 1996. The growth in earnings per share exceeded the growth in net
earnings by 1% as a result of the Company's share repurchase program. (In
accordance with Statement of Financial Accounting Standards No. 128, Earnings
Per Share, diluted earnings per share for the six months was $1.52 in 1997 and
$1.35 in 1996.)
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<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions, except per share amounts)
Financial Position
- ------------------
The balance sheet at June 30, 1997 and the statement of cash flows for the six
months then ended reflect the Company's strong financial position. The Company
continues to maintain a high level of working capital totaling $2.7 billion at
June 30, 1997.
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 six months ended June 30, 1997 were $269 compared to $250 during the
same period of 1996. During the quarter, the company announced it will be
expanding its research and development operations to help meet long-term growth
and performance objectives. These expansion plans include a significant
increase in scientists, physicians and support staff, and the purchase of a
433-acre site in Hopewell Township, N.J.
During the six months ended June 30, 1997, the Company purchased 10.1 million
shares of its common stock at a total cost of $627.
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, 1996, and material developments in
such matters are described in the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1997, and below.
Breast Implant Litigation
- -------------------------
As previously reported in the Company's Form 10-K and its Form 10-Q referred to
above, the Company, together with its subsidiary, Medical Engineering
Corporation (MEC) and certain other companies, has been named as a defendant
in a number of claims and lawsuits alleging damages for personal injuries of
various types resulting from smooth walled breast implants and polyurethane
covered breast implants formerly manufactured by MEC or its predecessors.
These are pending in federal and state courts in the United States and in
certain courts in Canada and Australia. As of July 15, 1997, approximately
25,900 such plaintiffs had filed suit but an as yet undetermined number of
these suits will have been resolved by the Revised Settlement described below.
A number of other manufacturers of breast implants, as well as suppliers of
component parts and other parties, are also defendants in the majority of these
cases. The majority of the suits are presently stayed. Only those filed by
plaintiffs who have opted out of a revised class action settlement approved
by the Honorable Sam C. Pointer, Jr., Chief Judge of the United States District
Court for the Northern District of Alabama, may proceed. Appeals related to
the Revised Settlement are pending.
In early 1996, notices describing the Revised Settlement were mailed to breast
implant recipients, including the approximately 380,000 domestic class members
(with implants of all manufacturers, not just MEC, Baxter and 3M) who
originally registered with the settlement. The claims office has reported
that by early July 1997, substantially all domestic registrants had been sent
Notification of Status letters advising them of their status in the settlement.
As of mid July 1997, the claims office has further reported that about 100,000
of these registrants had submitted proof of manufacturer documentation, which
will enable the claims office to determine whether they have a breast implant
made by MEC, Baxter, 3M or McGhan Medical Corporation. Over 62,000 of these
women have established to the satisfaction of the claims office that they have
an implant of MEC, Baxter or 3M and have chosen to participate in the
settlement. According to the claims office, over 35,700 of these women have
at least one implant manufactured by MEC or a related company.
The claims office reports that as of June 24, 1997, approximately 40,000 of the
original 380,000 domestic registrants (with implants of all manufacturers) had
opted out. The Company has identified approximately 9,100 of the opt-outs as
plaintiffs in pending lawsuits against it. This number is expected to increase
as additional persons opt out of the settlement and/or file suit.
- 14 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
PART II - OTHER INFORMATION
----------------------------------------------
The Company also estimates that approximately 2,000 claims based upon MEC
implants remain from among the domestic class members who previously opted out
of the settlement originally approved in 1994. The majority of those who opted
out have not had to identify the manufacturer of their implants. As a result,
it is not known with any reasonable degree of certainty how many of the
opt-outs actually have potential claims against the Company. Because the
opt-out period for many class members has not expired, and because our
information is incomplete, it is still not possible to estimate on any
reliable and precise basis either the total number of women with MEC implants
who will have opted out after the opt-out period expires, or, of those who
opt out, the number who will file lawsuits against the Company.
The trial related to insurance coverage scheduled in the second quarter of this
year resulted in settlement agreements providing cash or confirming coverage
with certain insurers. Further proceedings remain involving the balance of the
insurers.
Infant Formula Matters
- ----------------------
As previously reported in the Company's 10-K and its Form 10-Q referred to
above, the Company, one of its subsidiaries, and others are or have been
defendants in a number of antitrust actions in various states filed on behalf
of purported statewide classes of indirect purchasers of infant formula
products and by the Attorneys General of Louisiana, Minnesota and Mississippi,
alleging a price fixing conspiracy and other violations of state antitrust or
deceptive trade practice laws and seeking penalties and other relief. The
Company has previously reported reaching settlements and receiving final court
approval in the majority of these cases. The only open cases are in Louisiana
(motion to dismiss pending), Massachusetts (final approval hearing scheduled
for later in 1997), and Missouri (motion to dismiss pending).
Pharmaceutical Pricing Litigation
- ---------------------------------
As previously reported in the Company's Form 10-K and its Form 10-Q referred to
above, the Company is a defendant in numerous antitrust actions brought by
retailers and purported consumer classes against the Company and other
pharmaceutical manufacturers, drug wholesalers and pharmacy benefit managers.
Most of the retailer cases have been coordinated for pretrial purposes in the
United States District Court for the Northern District of Illinois. On June 16,
1997, Judge Kocoras denied plaintiffs' request to schedule an interlocutory
relief hearing in the purported retailer class action filed April 8, 1997
against the manufacturers who had earlier settled with the retailer class. On
May 7, 1997, the Seventh Circuit Court of Appeals denied Ciba-Geigy
Corporation's mandamus on Judge Kocoras' rejection of the original class
settlement; and on May 30, 1997, the Seventh Circuit Court of Appeals dismissed
the appeals of certain retail pharmacy class members challenging the District
Court's approval of the amended class settlement. Certain of those retailers
have sought en banc review of this ruling. On June 25, 1997, the Seventh
- 15 -
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
PART II - OTHER INFORMATION
----------------------------------------------
Circuit heard oral argument on four appeals: defendant manufacturers' appeal
on ILLINOIS BRICK grounds seeking dismissal of retailer damage claims on
indirect purchases; retailer class plaintiffs' two appeals of summary judgments
granted defendant Dupont-Merck and the wholesaler defendants; and class
consumer plaintiffs' appeal in HUGGINS seeking remand of that action to Alabama
state court. On March 14, 1997, an action for damages and injunctive relief
on behalf of Mississippi pharmacy retailers was filed (but not immediately
served) in Chancery Court for the State of Mississippi. A motion to dismiss
is pending. In July 1997, the manufacturer defendants reached an agreement in
principle with plaintiffs' counsel in retailer cases pending in Wisconsin and
Minnesota state courts to resolve the purported class claims of retailers in
those states who had opted out of the federal class. On June 23, 1997, the
intermediate Washington appellate court affirmed the dismissal of the consumer
class complaint. Plaintiffs are seeking review in Washington Supreme Court.
On July 5, 1997, a new purported class action on behalf of North Carolina
consumers was filed in North Carolina state court.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits (listed by number corresponding to the Exhibit Table of Item 601
in Regulation S-K).
Exhibit Number and Description Page
- ------------------------------ -------
12. Ratio of Earnings to Fixed Charges. E-12-1
27. Bristol-Myers Squibb Company Financial Data Schedule. E-27-1
(b) Reports on Form 8-K.
The Registrant did not file any reports on Form 8-K during the quarter ended
June 30, 1997.
- 16 -
<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: August 7, 1997 /s/ Harrison M. Bains, Jr.
---------------------------------
Harrison M. Bains, Jr.
Vice President and Treasurer
Date: August 7, 1997 /s/ Frederick S. Schiff
---------------------------------
Frederick S. Schiff
Vice President and Controller
- 17 -<PAGE>
EXHIBIT 12
RATIO OF EARNING TO FIXED CHARGES
For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income before provision for income taxes and fixed charges
(excluding capitalized interest), and "fixed charges" consist of interest
and debt expense, capitalized interest and one-third of rental expenses
(which the Company believes is a reasonable approximation of the interest
factor of such rental expense).
The following table sets forth the ratio of earnings to fixed charges for the
Company for each of the periods indicated (in millions, except ratio amounts):
Six Months Year Ended December 31,
Ended --------------------------------------
June 30, 1997 1996 1995 1994 1993 1992
------------- --------------------------------------
Earnings:
Earnings before
income taxes $2,165 $4,013 $2,402 $2,555 $2,571 $1,987
Fixed charges 79 136 157 128 118 109
Capitalized interest (7) (15) (15) (15) (14) (13)
------ ------ ------ ------ ------ ------
Total earnings $2,237 $4,134 $2,544 $2,668 $2,675 $2,083
====== ====== ====== ====== ====== ======
Fixed Charges:
Interest and debt
expense $ 50 $ 78 $ 97 $ 68 $ 57 $ 49
Capitalized interest 7 15 15 15 14 13
One-third of rental
expense 22 43 45 45 47 47
------ ------ ------ ------ ------ ------
Total fixed charges $ 79 $ 136 $ 157 $ 128 $ 118 $ 109
====== ====== ====== ====== ====== ======
Ratio of earnings to (a) (b) (c) (d)
fixed charges 28.32 30.40 16.20 20.84 22.67 19.11
====== ====== ====== ====== ====== ======
(a) Earnings in 1995 reflect a $950 million charge before taxes for pending
and future product liability claims and a $310 million charge before
taxes for restructuring. Excluding this charge, the ratio of earnings
to fixed charges for 1995 would have been 24.23.
(b) Earnings in 1994 reflect a $750 million charge before taxes for pending
and future product liability claims. Excluding this charge, the ratio
of earnings to fixed charges for 1994 would have been 26.70.
(c) Earnings in 1993 reflect a $500 million charge before taxes for pending
and future product liability claims. Excluding this charge, the ratio
of earnings to fixed charges for 1993 would have been 26.91.
(d) Earnings in 1992 reflect an $890 million charge before taxes for
restructuring. Excluding this charge, the ratio of earnings to fixed
charges for 1992 would have been 27.28.
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
Exhibit 27 for Bristol-Myers Squibb Company
</LEGEND>
<MULTIPLIER>1000000
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Dec-31-1997<F1>
<PERIOD-END> Jun-30-1997
<CASH> 1493
<SECURITIES> 382
<RECEIVABLES> 2775<F2>
<ALLOWANCES> 0
<INVENTORY> 1808
<CURRENT-ASSETS> 7540
<PP&E> 6783
<DEPRECIATION> 2808
<TOTAL-ASSETS> 14524
<CURRENT-LIABILITIES> 4865
<BONDS> 971
0
0
<COMMON> 108
<OTHER-SE> 6709
<TOTAL-LIABILITY-AND-EQUITY> 14524
<SALES> 8109
<TOTAL-REVENUES> 8109
<CGS> 2175
<TOTAL-COSTS> 2175
<OTHER-EXPENSES> 1701
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> 2165
<INCOME-TAX> 617
<INCOME-CONTINUING> 1548
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1548
<EPS-PRIMARY> 1.55
<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>
