SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.10 Par Value New York Stock Exchange
Pacific Exchange, Inc.
$2 Convertible Preferred Stock, $1 Par Value New York Stock Exchange
Pacific Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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 [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of February 28, 1999 was $124,844,900,316. At February 28,
1999, there were 1,985,569,810 shares of common stock outstanding.
Documents incorporated by reference
Proxy Statement for Annual Meeting of Stockholders on May 4, 1999. Part III
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PART I
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Item 1.BUSINESS.
DESCRIPTION OF BRISTOL-MYERS SQUIBB COMPANY
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General:
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Bristol-Myers Squibb Company ("Bristol-Myers Squibb" or the "Company") was
incorporated under the laws of the State of Delaware in August 1933 under
the name Bristol-Myers Company as successor to a New York business started
in 1887. In 1989, the Bristol-Myers Company changed its name to Bristol-Myers
Squibb Company, as a result of a merger. The Company, through its divisions
and subsidiaries, is a major producer and distributor of pharmaceuticals,
consumer medicines, nutritionals, medical devices and beauty care products.
In general, the business of the Company's segments is not seasonal.
BUSINESS SEGMENTS
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Reference is made to Note 4 Acquisitions and Divestitures and Note 13 Segment
Information in the Notes to Consolidated Financial Statements included in
Part II, Item 8 of this Form 10-K Annual Report.
DESCRIPTION OF SEGMENTS
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MEDICINES:
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This segment includes sales of pharmaceuticals, mainly cardiovascular,
anti-cancer, anti-infective and central nervous system drugs, and consumer
medicines, mainly analgesics.
1998 1997 1996
------ ------- -------
Cardiovascular $3,210 $2,905 $2,816
Anti-cancer 2,925 2,420 1,971
Anti-infective 2,412 2,235 1,856
Central nervous system 1,099 955 760
Analgesics 722 739 718
Other 2,205 1,957 1,727
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Total Segment $12,573 $11,211 $9,848
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The principal products in this segment are:
Cardiovascular:
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PRAVACHOL* pravastatin sodium, an HMG Co-A reductase inhibitor.
Patents expire in the U.S. in October 2005 and in
international markets from 2000 through 2010.
CAPOTEN*/CAPOZIDE* captopril, an angiotensin converting enzyme (ACE)
inhibitor. Patents have expired in the U.S. and in all
significant international markets.
MONOPRIL* fosinopril sodium, a second-generation ACE inhibitor with
convenient once-a-day dosing. U.S. patent expires in
December 2002 and in international markets from 2001
through 2008.
PLAVIX clopidogrel, a platelet inhibitor, co-developed and
jointly marketed with Sanofi S.A.
AVAPRO irbesartan, an angiotensin II receptor antagonist,
co-developed and jointly marketed with Sanofi S.A.
SOTACOR* sotalol, a beta blocker with unique antiarrhythmic
qualities
QUESTRAN* cholestyramine, a cholesterol-reducing agent
CORGARD*/CORZIDE* nadolol, a once-a-day beta blocker used in the treatment
of hypertension and angina pectoris
Anti-cancer:
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TAXOL*(R) paclitaxel, used in the treatment of refractory ovarian
cancer, the second-line treatment of AIDS-related
Kaposi's sarcoma, and in treatment of breast cancer after
failure of combination chemotherapy for metastatic
disease or relapse within six months of adjuvant
chemotherapy. Three hour infusion method of
administration patent expiring from 2012 through 2013.
Hatch-Waxman exclusivity for first line ovarian cancer
expires April 2001.
PARAPLATIN* carboplatin, a chemotherapeutic agent used in the
treatment of ovarian cancer. Patent expires in the U.S.
in April 2004 and in France in June 2000.
PLATINOL* cisplatin, used in the treatment of ovarian, testicular
and advanced bladder cancer
VEPESID* etoposide, used in the treatment of small-cell lung
cancer and refractory testicular cancer
* Indicates brand names of products which are registered trademarks owned
by the Company.
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IFEX* ifosfamide, injectable alkylating agent used as third-line
therapy of germ cell testicular cancer
Anti-infective:
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ZERIT* stavudine, used in the treatment of persons with advanced
HIV disease. Patent expires in the U.S. in June 2008 and
internationally from 2007 through 2008.
CEFZIL* cefprozil, an oral cephalosporin used in the treatment of
respiratory infections and sinusitis
DURICEF* cefadroxil, an oral cephalosporin. U.S. patent expires
March 2002.
VIDEX* didanosine, an antiretroviral drug used in the treatment
of adult and pediatric patients with advanced human
immunodeficiency virus (HIV) infection. Patent expires in
the U.S. in August 2006 and internationally from 2006
through 2009.
MAXIPIME* cefepime, a fourth generation injectable cephalosporin
VELOSEF* cephradine, an oral cephalosporin
AMIKIN* amikacin, an aminoglycoside
AZACTAM* aztreonam, a monobactam antibiotic
Central nervous system:
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BUSPAR* buspirone, a novel anti-anxiety agent that effectively
relieves persistent anxiety with or without accompanying
depressive symptoms. U.S. anxiolytic use patent expires
in May 2000. Other international patents expire in May
1999.
SERZONE* nefazodone, an antidepressant treatment which offers a
low incidence of side-effects. Patent expires in the U.S.
in March 2003 and internationally from 2002 through 2010.
STADOL NS* butorphanol NS, a prescription nasal spray analgesic.
U.S. patent expires August 2001.
Analgesics:
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EXCEDRIN* an analgesic with acetaminophen and caffeine
EFFERALGAN* an analgesic which uses effervescent technology
BUFFERIN* an analgesic with buffered aspirin
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Other:
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GLUCOPHAGE metformin, an oral anti-diabetes agent for type 2
non-insulin-dependent diabetes. Hatch-Waxman exclusivity
expires in March 2000.
DOVONEX* calcipotriene, a vitamin D3 analog for the treatment of
moderate psoriasis
ESTRACE* stradiol, a low-dose estrogen replacement therapy
KERI* a line of moisturizing body lotions and shower and bath
oils
COMTREX* a multi-symptom cold reliever
BEAUTY CARE:
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This segment includes sales of haircoloring and hair care preparations and
other beauty care products.
1998 1997 1996
-------- -------- --------
Hair care $1,179 $ 794 $ 586
Haircolor 894 841 812
Other 232 260 265
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Total Segment $2,305 $1,895 $1,663
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The principal products in this segment are:
NICE 'N EASY* haircolorings
MISS CLAIROL*
HYDRIENCE*
NATURAL INSTINCTS*
ULTRESS*
LOVING CARE*
REVITALIQUE*
HERBAL ESSENCES* complete lines of shampoos and conditioners
AUSSIE*
INFUSIUM 23*
DAILY DEFENSE*
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SYSTEME BIOLAGE* professional hair care products sold
MATRIX ESSENTIALS* exclusively in beauty salons
VITAL NUTRIENTS*
VAVOOM*
MUM* anti-perspirants and deodorants
SEA BREEZE* skin care products
NUTRITIONALS:
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This segment includes sales of infant formulas and other nutritional products.
1998 1997 1996
-------- -------- --------
Infant formulas $1,203 $1,219 $1,201
Other 556 574 493
-------- -------- --------
Total Segment $1,759 $1,793 $1,694
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The principal products in this segment are:
ENFAMIL*/ENFALAC* infant formula products
PROSOBEE*
NUTRAMIGEN*
LACTOFREE*
ENFAPRO* follow-up formula products for older babies
NEXT STEP*
ALACTA NF*
ENFAGROW*
SUSTAGEN* nutritional supplements and specialties
CHOCO MILK*
ISOCAL*
SUSTACAL*
NUTRAMENT*
BOOST*
PLUSSSZ* vitamins
POLY-VI-SOL*
POLY-VI-FLOR*
NATALINS*
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MEDICAL DEVICES:
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This segment includes sales of orthopaedic implants, ostomy and wound care
products and other medical devices.
1998 1997 1996
-------- -------- --------
Orthopaedic implants $ 596 $ 615 $ 644
Ostomy 464 451 452
Other 587 736 764
-------- -------- --------
Total Segment $1,647 $1,802 $1,860
-------- -------- --------
The principal products in this segment are:
NEXGEN* Complete Knee Solution
VERSYS* Hip System
CENTRALIGN* Precoat Hip Prosthesis orthopaedic implants
ACTIVE LIFE/ ostomy care products
COLODRESS*
SUR-FIT/
COMBIHESIVE/SECURE*
DUODERM* wound care products
SOURCES AND AVAILABILITY OF RAW MATERIALS
- -----------------------------------------
Bristol-Myers Squibb, for the most part, purchases the principal raw materials
and supplies used in each industry segment in the open market. Substantially
all such materials are obtainable from a number of sources so that the loss of
any one source of supply would not have a material adverse effect on the
Company.
PATENTS, TRADEMARKS AND LICENSES
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The Company owns or is licensed under a number of patents in the United States
and foreign countries covering products, principally in the medicines
and medical devices segments, and has also developed many brand
names and trademarks for products in each industry segment. The Company
considers the overall protection of its patent, trademark and license rights
to be of material value and acts to protect these rights from infringement.
The Company believes that no single patent or license is of material
importance in relation to the business as a whole.
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COMPETITION, DISTRIBUTION AND CUSTOMERS
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The markets in which Bristol-Myers Squibb competes are generally broad based,
heavily competitive and include many competitors. The principal means of
competition utilized to market the products of Bristol-Myers Squibb include
quality, service, price and product performance. The pharmaceutical products
of the medicines segment and the products of the medical devices segment are
promoted on a national and international basis in medical journals and
directly to the medical profession. The Company is also utilizing
direct-to-consumer advertising for a number of its pharmaceutical products.
Most of the other products of Bristol-Myers Squibb are generally advertised
and promoted on a national and international basis through the use of
television, radio, print media, consumer offers, and window and in-store
displays. Bristol-Myers Squibb's products are principally sold to the
wholesale and retail trade both nationally and internationally. Certain
products of the medicines and medical devices segments are also sold to other
drug manufacturers, hospitals and the medical profession. None of the
segments is dependent upon a single customer, or a few customers, such that
the loss of any one or more would have a material adverse effect on the
segment.
RESEARCH AND DEVELOPMENT
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Research and development is essential to Bristol-Myers Squibb's businesses,
particularly to the Medicines Segment. Management continues to emphasize
leadership, innovation and productivity as strategies for success in the
Research Institute. Pharmaceutical research and development is carried out
by the Bristol-Myers Squibb Pharmaceutical Research Institute which has
major facilities in Princeton, Hopewell and New Brunswick, New Jersey; and
Wallingford, Connecticut. Pharmaceutical research and development is also
carried out at various other facilities in the United States and in Belgium,
France, Italy, Japan, and the United Kingdom.
Bristol-Myers Squibb spent $1,577 million in 1998, $1,385 million in 1997 and
$1,276 million in 1996 on Company sponsored research and development
activities. Pharmaceutical research and development spending, as a percentage
of pharmaceutical sales, was 12.4% in 1998 compared to 12.0% in 1997 and 12.3%
in 1996.
REGULATION
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Most aspects of the Company's business are subject to some degree of
government regulation in the countries in which its operations are
conducted. The Company's policy is to comply fully with all regulatory
requirements applying to its products and operations. For some products,
and in some countries, government regulation is significant and, in general,
there is a trend to more stringent regulation. The Company devotes
significant time, effort and expense addressing the extensive governmental
regulatory requirements applicable to its business. Governmental regulatory
actions can result in the recall or seizure of products, suspension or
revocation of the authority necessary for the production or sale of a product,
and other civil and criminal sanctions.
In the United States, the drug, medical device, diagnostic, food and cosmetic
industries in which the Company operates have long been subject to regulation
by various federal, state and local agencies, primarily as to product
manufacture, safety, efficacy, advertising and labeling. Assuring compliance
with appropriate laws and regulations requires increasing expenditures of time
and resources.
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In addition, governmental bodies in the United States as well as other
countries have expressed concern about costs relating to health care and, in
some cases, have focused attention on the pricing of drugs and on appropriate
drug utilization. Government regulation in these areas already exists in some
countries and may be expanded significantly in the United States and other
countries in the future.
While the Company is unable to predict the extent to which its business may
be affected by future regulatory developments, it believes that its
substantial experience dealing with governmental regulatory requirements and
restrictions on its operations throughout the world and its development of
new and improved products should enable it to compete effectively within this
environment.
EMPLOYEES
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Bristol-Myers Squibb employed approximately 54,700 people at December 31, 1998.
DOMESTIC AND FOREIGN OPERATIONS
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Reference is made to Note 11 Financial Instruments, and Note 13 Segment
Information in the Notes to Consolidated Financial Statements included in
Part II, Item 8 of this Form 10-K Annual Report.
International operations are subject to certain risks which are inherent in
conducting business abroad, including possible nationalization or
expropriation, price and exchange controls, limitations on foreign
participation in local enterprises and other restrictive governmental actions.
In addition, changes in the relative value of currencies take place from time
to time and their effects may be favorable or unfavorable on Bristol-Myers
Squibb's operations. There are currency restrictions relating to repatriation
of earnings in certain countries.
Item 2. PROPERTIES.
Bristol-Myers Squibb's world headquarters is located at 345 Park Avenue,
New York, New York, where it leases approximately 635,500 square feet of
floor space, approximately 301,800 square feet of which is sublet to others.
The headquarters for the Company's segments are as follows: Medicines world
headquarters is located in Princeton, New Jersey; Beauty Care in Stamford,
Connecticut; Nutritionals in Evansville, Indiana; and Medical Devices in
Warsaw, Indiana and Skillman, New Jersey.
Bristol-Myers Squibb manufactures products at forty-three major worldwide
locations with an aggregate floor space of approximately 12,950,000 square
feet. Forty-one facilities are owned by Bristol-Myers Squibb and two are
leased. The following table illustrates the segment and geographic location
of the Company's significant manufacturing facilities.
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Beauty Medical
Medicines Care Nutritionals Devices Total
--------- ------ ------------ ------- -----
United States 8 2 2 3 15
Europe, Mid East and Africa 9 1 1 1 12
Other Western Hemisphere 7 1 2 - 10
Pacific 5 - 1 - 6
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Total 29 4 6 4 43
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Portions of these facilities and other facilities owned or leased by
Bristol-Myers Squibb in the United States and elsewhere are used for research,
administration, storage and distribution. Bristol-Myers Squibb's facilities
are well-maintained, adequately insured and in satisfactory condition.
Item 3. LEGAL PROCEEDINGS.
Breast Implant Litigation
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Reference is made to Note 16 Contingencies in the Notes to Consolidated
Financial Statements included in Part II, Item 8 of this Form 10-K Annual
Report.
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 breast implants formerly manufactured by MEC or a related
company. Of the more than 90,000 claims or potential claims against the
Company in direct lawsuits or through registration in the national class
action Revised Settlement Program (described below), most have been dealt with
through the Revised Settlement, other settlements, or trial. As of January 1,
1999, the Company's contingent liability in respect of breast implant claims
was limited to residual unpaid Revised Settlement Program obligations and to
roughly 6,000 remaining opt-outs who have pursued or may pursue their claims
in court.
As of December 31, 1998, approximately 15,000 United States and 1,300 foreign
breast implant recipients were plaintiffs in lawsuits pending in federal and
state courts in the United States and in certain courts in Canada and
Australia. These figures include the claims of plaintiffs that are in the
process of being settled and/or dismissed. In these lawsuits, about 10,200
U.S. and 400 foreign plaintiffs opted out of the Revised Settlement. The
lawsuits of the 4,800 U.S. plaintiffs who did not opt out are expected to be
dismissed since these plaintiffs are among the estimated 74,000 women with MEC
implants who chose to participate in the nationwide settlement. Of the
remaining opt-out plaintiffs, some have claims based upon products that were
not manufactured and sold by MEC; many others have claims that are in the
process of being settled. Under the terms of the Revised Settlement Program,
additional opt-outs are expected to be minimal since the deadline for U.S.
class members to opt out has passed. In addition, the Company's remaining
obligations under the Revised Settlement Program are limited because most
payments to "Current Claimants" (see below) have already been made, no
additional "Current Claims" may be filed without court approval, and payments
of claims to so-called "Other Registrants" and "Late Registrants" are limited
by the terms of the Revised Settlement Program. The Company believes it will
be able to address remaining opt-out claims as well as expected remaining
obligations under the Revised Settlement Program within its reserves
described below.
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Breast implants were manufactured by several companies, including MEC, which
the Company acquired in 1982. Until 1991, MEC manufactured two types of breast
implants, polyurethane-covered silicone breast implants and smooth-walled
silicone breast implants. In these lawsuits, plaintiffs typically contend
that silicone in breast implants causes systemic disease and/or local
complications. Some plaintiffs with polyurethane-covered silicone breast
implants contend that the polyurethane component causes injury, including
cancer. Most of the disease claims involve non-specific complaints such as
chronic fatigue, aches and pains and other symptoms that commonly affect the
population at large. Many women claim local complications such as rupture,
hardening or contracture, and disfigurement or scarring. The plaintiffs
typically seek compensatory damages for alleged medical conditions and
emotional distress as well as punitive damages. The defendants have based
their defense in part on the lack of credible scientific evidence that breast
implants cause disease. Many large scale epidemiological studies have found
no connection between breast implants and the alleged diseases. Defendants
also contend that warnings set forth in the product literature adequately
advised physicians and surgeons of the risks of local complications.
The Company is a participant in the national class action Revised Settlement
Program approved on December 22, 1995, by the Honorable Sam C. Pointer, Jr.,
Chief Judge of the United States District Court for the Northern District
of Alabama (Lindsey, et al., v. Dow Corning, et al., CV-94-P-11558-S), before
whom all federal breast implant cases were consolidated for pretrial purposes.
The Revised Settlement arises out of the class action settlement approved by
the Court on September 1, 1994. All appeals from the Order approving the
Revised Settlement have been dismissed. On January 16, 1996, the Company,
Baxter Healthcare Corporation and Baxter International (collectively, Baxter),
and Minnesota, Mining and Manufacturing Company (3M) (hereinafter, the
Settling Defendants) each paid $125 million into a court-established fund as
an initial reserve to pay claims under the Revised Settlement. The Company
has made and will make additional contributions to the court-established fund.
The fifteen-year Revised Settlement provides benefits to those U.S. breast
implant recipients who have had at least one breast implant manufactured by
one of the Settling Defendants (or their related companies). Several kinds
of benefits are available for eligible participants with breast implants made
by companies affiliated with the Company, Baxter and 3M: (1) for Current
Claimants, compensation generally 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 and Late Registrants, compensation ranging from $75,000 to $250,000
based on more stringent disease and disability definitions (Long-Term
Benefits); 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.
Current Claimants are eligible for an advance payment of $5,000, and Other
Registrants are eligible for an advance payment of $1,000. Other Registrants
who receive their $1,000 advance payment by June 15, 1999, are eligible for
an additional $2,500 payment if they relinquish their rights to further
benefits under the Revised Settlement and provide a full release of their
breast implant claims. For Current Claimants, benefits are payable regardless
of the number of claimants seeking compensation, and regardless of the total
dollar value of approved claims. For Other and Late Registrants, benefits are
subject to an aggregate $725 million limit for the three Settling Defendants
over the fifteen-year life of the program. The Company's individual aggregate
limit for such benefits is $400 million. In the event the dollar value of the
claims subject to the limit were to exceed this amount, claimants may be
afforded additional opt-out rights but without the right to assert punitive or
other statutory multiple damage claims. The Company's obligations to make
payments under the Revised Settlement are not affected by the number of class
members electing to opt out of the settlement or the number of class members
making claims under it except to the extent of the above-mentioned dollar
limits.
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In addition to individual suits and the Lindsey class action, the Company
continues as a defendant, together with other defendants, in two other class
action proceedings. On April 11, 1996, a class action on behalf of all women
in the Canadian province of British Columbia was certified in the provincial
court of British Columbia on the single issue of whether silicone gel breast
implants are reasonably fit for their intended purpose (Harrington v. Dow
Corning Corporation et al., Supreme Court, British Columbia, C954330). Also,
there is an action pending on behalf of children allegedly exposed to silicone
in utero and through breast milk (Feuer, et al., v. McGhan, et al., U.S.D.C.,
E.D.N.Y., 93-0146), which has not been certified as a class action, and which
names all breast implant manufacturers as defendants and seeks to establish a
medical monitoring fund.
The Company entered into several other settlements of breast implant-related
claims. 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, which had minimal opt-outs, has been
approved by the provincial courts of Ontario and Quebec. In May of 1996, the
Company, together with other Settling Defendants in the Revised Settlement
Program, entered into a $50 million settlement of claims asserted by certain
health insurers based upon payments made or benefits provided by insurers and
represented health plans to participating registrants that allegedly involve
or relate to silicone gel breast implants. The Company has contributed $22.5
million to the settlement, which extinguishes the potential claims of the
majority of the U.S. commercial and non-governmental health care insurer
market against both the defendants and settlement class members. In November
1996, the benefits of the Revised Settlement were extended, with certain
modifications, to foreign breast implant recipients. Pursuant to this
settlement, the Settling Defendants paid (on an equal basis) an aggregate of
$25 million into a court-approved settlement fund as an initial reserve for
payment of foreign claims.
The Company's insurers were notified of the breast implant claims and the
Revised Settlement, and a number reserved their rights or declined coverage.
The Company reached settlement with many of these insurers in connection with
coverage litigation filed by it in state court in Texas. In 1993, the Company
offset its breast implant product liability special charges by $1.0 billion of
expected insurance proceeds (recorded as Insurance Recoverable). The Company
now believes that it will obtain additional amounts of insurance proceeds
above that amount and has recorded an additional Insurance Recoverable in the
fourth quarter of 1998 of approximately $100 million.
While there have been a few large judgments, defendants have won more trials
than they have lost, and the Company's trial experience has been mostly
favorable. The Company has maintained throughout this litigation that breast
implants do not cause disease, and medical and scientific data support the
Company's position. The Company's view has found support in the trial courts.
Courts in several states have ruled to exclude the testimony of plaintiffs'
experts concerning a causal link between silicone gel breast implants and
systemic illness on the ground that it fails to satisfy standards for
reliability under current U.S. Supreme Court guidelines. A national science
panel of four independent experts appointed by Judge Pointer has recently
issued its unanimous report, based on a comprehensive review of the medical
and scientific literature, that there is no evidence linking silicone breast
implants and systemic disease. The Company intends to dispose of the claims
of remaining opt-outs by continuing to implement its plan to settle cases at
values it deems acceptable, and to wage a vigorous defense, including taking
cases to trial, of those cases that do not settle at such values.
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 cases.
The charge consisted of $1.5 billion for potential liabilities and expenses,
offset by $1.0 billion of expected insurance proceeds. In the fourth quarters
of 1994 and 1995, the Company recorded additional special charges of $750
million before taxes ($488 million after taxes) and $950 million before taxes
($590 million after taxes), respectively, related to breast implant product
liability claims. In the fourth quarter of 1998, the Company recorded an
additional special charge to earnings in the amount of $800 million before
taxes and increased its insurance receivable in the amount of $100 million,
resulting in a net charge to earnings of $433 million after taxes in respect
of breast implant product liability claims.
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Infant Formula Matters
- ----------------------
The Company, one of its subsidiaries, and others 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
resolved all of these cases, except for a private action in Louisiana. On
November 6, 1997, the court in Louisiana dismissed the plaintiffs' case. The
plaintiffs appealed the dismissal to the United States Court of Appeals for
the Fifth Circuit. The Company believes that this action is without merit and
that its ultimate disposition will not have a material adverse effect on the
Company's results of operations, liquidity or consolidated financial position.
Prescription Drug Litigation
- ----------------------------
As of December 31, 1998, the Company is a defendant in over 100 actions
brought against the Company and more than 30 other pharmaceutical
manufacturers, drug wholesalers and pharmacy benefit managers in various
federal district courts by certain chain drugstores, supermarket chains and
independent drugstores, suing individually. These cases, which have been
coordinated for pretrial purposes in the United States District Court for the
Northern District of Illinois, seek treble damages and injunctive relief on
account of an alleged antitrust conspiracy concerning the pricing and
marketing of brand name prescription drugs in violation of the Sherman Act
and also assert claims of unlawful price discrimination under the Robinson-
Patman Act. The Company and a number of other pharmaceutical manufacturers
previously settled a class action case brought against it and other
pharmaceutical manufacturers and wholesalers that made similar claims under
the Sherman Act and has also settled claims brought by some of the in
dividual plaintiffs who opted out of the retailer class action. On August 4,
1998, the court denied motions made in the individual retailer cases by
manufacturer defendants, including the Company, for partial summary judgment
dismissing the plaintiffs' Sherman Act damage claims to the extent based on
purchases from wholesalers that occurred more than four years prior to
November 20, 1997, when the court permitted those plaintiffs to amend their
complaints to name wholesalers as defendants. On December 15, 1998, the
United States Court of Appeals for the Seventh Circuit declined to accept an
interlocutory appeal from the ruling denying partial summary judgment. A
trial in the class action case against the manufacturer and wholesaler
defendants who had not settled the class action commenced on September 14,
1998, and ended on November 30, 1998, when the court granted the defendants'
motion for a directed verdict. The class plaintiffs have appealed from that
ruling. Cases brought by retail pharmacies in state court under state law
alleging similar grounds are pending in Alabama, California and Mississippi.
Settlements of cases brought as class actions in state court on behalf of
consumers in those states have received final approval in Arizona, the
District of Columbia, Florida, Kansas, Maine, Michigan, Minnesota, New York,
North Carolina and Wisconsin; settlements of such cases are subject to final
court approval in California and Tennessee. A purported class action on
behalf of consumers in Alabama and eight other states that was brought in
state court in Alabama against the Company and other pharmaceutical
manufacturers remains pending; on December 29, 1998, activity in that case
was stayed pending resolution of certain appeals, including an appeal in the
Alabama retailer case, by the Supreme Court of Alabama. On June 16, 1998, a
purported class action on behalf of consumers in Tennessee and 12 other states
was filed in state court in Tennessee against the Company and other
pharmaceutical manufacturers. On July 6, 1998, a class consisting of
consumers in Tennessee and the other states was conditionally certified,
without notice to the defendants. By order dated November 13, 1998, the court
in that action denied the defendants' motion to vacate the conditional class
certification and also stayed all further proceedings pending further order of
the court. On March 9, 1999, a purported class action on behalf of consumers
in North Dakota was brought in state court in North Dakota against the Company
and other pharmaceutical manufacturers. In the fourth quarter of 1998, the
Company recorded a special charge to earnings in the amount of $100 million
before taxes ($62 million after taxes) in respect of prescription drug
litigation.
12
<PAGE>
Environmental Matters
- ---------------------
The Company, together with others, is a party to, or otherwise involved in,
a number of proceedings brought by the Environmental Protection Agency or
comparable state agencies under the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA or Superfund) or comparable state laws
directed at the cleanup of hazardous waste sites. While it is not possible
to predict with certainty the outcome of these cases, the Company believes
that the ultimate disposition of these matters will not have a material
adverse effect on the Company's results of operations, liquidity or
consolidated financial position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
13
<PAGE>
PART IA
- -------
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The following are the executive corporate officers and the other executive
officers of the Registrant:
Positions and Offices Presently
Name Age Held with the Registrant
- ------ --- -------------------------------
Charles A. Heimbold, Jr. 65 Chairman of the Board, Chief Executive
Officer and Director
Hamed M. Adbou, Ph.D. 58 President, Technical Operations, Worldwide
Medicines Group
Harrison M. Bains, Jr. 55 Treasurer and Vice President, Corporate Staff
Alice C. Brennan 46 Secretary, Head of the Office of Corporate
Conduct and Vice President, Corporate Staff
Peter R. Dolan 43 Senior Vice President, Strategy and
Organizational Effectiveness, Corporate Staff
Donald J. Hayden, Jr. 43 President, Worldwide Medicines Group and
Senior Vice President, Corporate Staff
George P. Kooluris 54 Senior Vice President, Corporate Development,
Corporate Staff
Richard J. Lane 48 President, U.S. Medicines and Global
Marketing
John L. McGoldrick 58 President, Medical Devices Group and General
Counsel and Senior Vice President,
Corporate Staff
Michael F. Mee 56 Chief Financial Officer and Senior Vice
President, Corporate Staff
Christine A. Poon 46 President, International Medicines
Peter S. Ringrose, Ph.D. 53 President, Bristol-Myers Squibb
Pharmaceutical Research Institute
Stephen I. Sadove 47 President, Worldwide Beauty Care and
Nutritionals and Senior Vice President,
Corporate Staff
Frederick S. Schiff 51 Controller and Vice President, Financial
Operations, Corporate Staff
14
<PAGE>
John L. Skule 55 Senior Vice President, Corporate and
Environmental Affairs, Corporate Staff
Charles G. Tharp, Ph.D. 47 Senior Vice President, Human Resources,
Corporate Staff
Kenneth E. Weg 60 Executive Vice President and Director
Persons who hold titles as elected corporate officers of the Registrant were
last elected or reelected to the office held at the general election of
officers by the Registrant's Board of Directors on May 5, 1998. Officers of
the Registrant serve in such capacity at the pleasure of the Board of
Directors of the Registrant.
CHARLES A. HEIMBOLD, JR. - From 1992 to 1996, President of the Registrant.
Mr. Heimbold has been a director of the Registrant since 1989, the Chief
Executive Officer of the Registrant since 1994 and Chairman of the Board of
Directors of the Registrant since 1995.
HAMED M. ABDOU, Ph.D. - From 1993 to 1995, Vice President QA/QC, Technical
Operations PG, a division of the Registrant, and from 1995 to 1997, Senior
Vice President, North America and Intercontinental Manufacturing, Technical
Operations PG, a division of the Registrant. Dr. Abdou has been President,
Technical Operations, Worldwide Medicines Group, a division of the Registrant
since 1997.
HARRISON M. BAINS, JR. - Mr. Bains has been Treasurer and Vice President,
Corporate Staff of the Registrant since 1988.
ALICE C. BRENNAN - Ms. Brennan has been Secretary and Vice President,
Corporate Staff of the Registrant since 1994 and Head of the Office of
Corporate Conduct since 1997.
PETER R. DOLAN - From 1993 to 1995, President, Bristol-Myers Products, a
division of the Registrant, from 1995 to 1996, President, Mead Johnson
Nutritional Group, a division of the Registrant, from 1996 to 1997, President,
Nutritionals and Medical Devices Group, a division of the Registrant and from
1997 to 1998, President, Pharmaceutical Group - Europe, a division of the
Registrant. Mr. Dolan has been Senior Vice President, Strategy and
Organizational Effectiveness, Corporate Staff of the Registrant since 1998.
DONALD J. HAYDEN, JR. - From 1993 to 1994, Vice President & General Manager,
Bristol-Myers Oncology Division, Specialty Pharmaceuticals, a division of the
Registrant, in 1994, Vice President & General Manager, Bristol-Myers Oncology
Division, a division of the Registrant, from 1994 to 1995, Vice President &
General Manager, Bristol-Myers Oncology/Immunology Division, a division of the
Registrant, in 1995, President Oncology & Immunology, a division of the
Registrant, from 1995 to 1997, Senior Vice President, Worldwide Franchise
Management and Business Development, a division of the Registrant, in 1997,
President, Intercontinental Pharmaceutical Group and Senior Vice President,
Worldwide Business Development, Worldwide Medicines Group, a division of the
Registrant and from 1997 to 1998, President, Intercontinental, Worldwide
Medicines Group, a division of the Registrant. Mr. Hayden has been President,
Worldwide Medicines Group, a division of the Registrant, and Senior Vice
President, Corporate Staff since 1998.
15
<PAGE>
GEORGE P. KOOLURIS - Mr. Kooluris has been Senior Vice President, Corporate
Development, Corporate Staff of the Registrant since 1994.
RICHARD J. LANE - From 1993 to 1994, President, Human Health - U.S.,
Merck Co., Inc., in 1994, President, Human Health N.A., Merck & Co., Inc., a
pharmaceutical company, from 1994 to 1995, consultant Schering-Plough
Corporation, a pharmaceutical company, in 1995, Senior Vice President
Marketing Operations, Sandoz Pharmaceuticals, a pharmaceutical, nutritionals
and chemicals company, from 1995 to 1997, Senior Vice President Marketing,
U.S. Pharmaceuticals, a division of the Registrant, in 1997, President, U.S.
Primary Care, a division of the Registrant and from 1997 to 1998, President,
U.S. Pharmaceuticals, a division of the Registrant. Mr. Lane has been
President, U.S. Medicines and Global Marketing, a division of the Registrant
since 1998.
JOHN L. McGOLDRICK - From 1974 to 1994, Partner, McCarter & English, 1995 to
1997, General Counsel and Senior Vice President, Corporate Staff of the
Registrant and from 1997 to 1998, General Counsel and Senior Vice President,
Law and Strategic Planning, Corporate Staff of the Registrant. Mr. McGoldrick
has been General Counsel and Senior Vice President, Corporate Staff of the
Registrant and President, Medical Devices Group, a division of the Registrant
since 1998.
MICHAEL F. MEE - Mr. Mee has been Chief Financial Officer and Senior Vice
President, Corporate Staff of the Registrant since 1994.
CHRISTINE A. POON - From 1994 to 1995, President & General Manager - Canada,
Pharmaceutical Group - Intercontinental, a division of the Registrant, in
1995, Vice President OPS-Planning - Intercontinental & President, Canada, a
division of the Registrant, from 1995 to 1996, Vice President, Northern Region
Latin America, Intercontinental, a division of the Registrant, from 1996 to
1997, Senior Vice President, Intercontinental Northern Region & Canada, a
division of the Registrant, in 1997, President, Latin America and Canada,
Worldwide Pharmaceutical Group, a division of the Registrant and from 1997
to 1998, President, Medical Devices Group, a division of the Registrant. Ms.
Poon has been President, International Medicines, a division of the Registrant
since 1998.
PETER S. RINGROSE, Ph.D. - From 1992 to 1994, Senior Vice President, Medicinal
Research & Development, Europe and from 1994 to 1996, Senior Vice President,
Worldwide Discovery and Medicinal Research & Development, Europe of Pfizer
Inc., a health care company. Dr. Ringrose has been President, Bristol-Myers
Squibb Pharmaceutical Research Institute, a division of the Registrant since
1997.
STEPHEN I. SADOVE - From 1991 to 1994, President, Clairol Incorporated, a
division of the Registrant, from 1994 to 1996, President, Worldwide Clairol,
a division of the Registrant, and from 1996 to 1997, President, Worldwide
Beauty Care, a division of the Registrant. Mr. Sadove has been President,
Worldwide Beauty Care and Nutritionals, a division of the Registrant since
1997 and Senior Vice President, Corporate Staff of the Registrant since 1998.
16
<PAGE>
FREDERICK S. SCHIFF - From 1990 to 1997, Controller and Vice President,
Corporate Staff of the Registrant. Mr. Schiff has been Controller and Vice
President, Financial Operations, Corporate Staff of the Registrant since 1997.
JOHN L. SKULE - From 1993 to 1997, Vice President, Public Affairs, Corporate
Staff of the Registrant. Mr. Skule has been Senior Vice President, Corporate
and Environmental Affairs, Corporate Staff of the Registrant since 1998.
CHARLES G. THARP, Ph.D. - Dr. Tharp has been Senior Vice President, Human
Resources, Corporate Staff of the Registrant since 1993.
KENNETH E. WEG - From 1993 to 1996, President, Bristol-Myers Squibb
Pharmaceutical Group, a division of the Registrant, and from 1997 to 1998,
President, Worldwide Medicines Group, a division of the Registrant. Mr. Weg
has been director and Executive Vice President of the Registrant since 1995
and a member of the Office of the Chairman since 1998.
In addition to the positions and offices heretofore listed, all of the
foregoing executive corporate officers and other executive officers of the
Registrant are directors and/or officers of one or more affiliates of the
Registrant, with the exception of Mr. Skule and Dr. Tharp.
17
<PAGE>
PART II
-------
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
MARKET PRICES
- -------------
Bristol-Myers Squibb common and preferred stocks are traded on the New York
Stock Exchange and the Pacific Exchange, Inc. (symbol: BMY). A quarterly
summary of the high and low market prices is presented below:
1998 1997
------------------------- -------------------------
High Low High Low
---------- ----------- ----------- ----------
Common:
First Quarter $54 1/4 $44 29/32 $34 5/8 $26 5/8
Second Quarter 59 7/32 49 19/32 42 7/8 28 5/8
Third Quarter 62 29/32 48 15/16 44 5/16 35 1/2
Fourth Quarter 66 29/32 46 1/8 49 3/32 40
Preferred:
The Company's preferred stock traded at a high of $906 and a low of $906
during the first quarter of 1998. During the second, third and fourth quarters
of 1998, and all four quarters of 1997, there were no trades of the Company's
preferred stock.
HOLDERS OF COMMON STOCK
- -----------------------
The approximate number of record holders of common stock at December 31, 1998
was 121,840.
The number of record holders is based upon the actual number of holders
registered on the books of Bristol-Myers Squibb at such date and does not
include holders of shares in "street names" or persons, partnerships,
associations, corporations or other entities identified in security position
listings maintained by depository trust companies.
18
<PAGE>
DIVIDENDS
- ---------
Dividend payments per share in 1998 and 1997 were:
Common Preferred
------------------------ -------------------------
1998 1997 1998 1997
--------- ----------- ---------- ---------
First Quarter $ .19 1/2 $ .19 $ .50 $ .50
Second Quarter .19 1/2 .19 .50 .50
Third Quarter .19 1/2 .19 .50 .50
Fourth Quarter .19 1/2 .19 .50 .50
---------- ----------- ---------- ---------
Year $ .78 $ .76 $2.00 $2.00
========== =========== ========== =========
In December 1998, the Board of Directors of the Company declared a quarterly
dividend of $.21 1/2 per share on the common stock of the Company, payable on
February 1, 1999 to shareholders of record as of January 8, 1999, and will be
paid on a pre-split basis. The 1999 indicated annual payment of $.86 per
share represents the twenty-seventh consecutive year that the Company has
raised the dividend on its common stock.
19
<PAGE>
Item 6. SELECTED FINANCIAL DATA.
FIVE-YEAR FINANCIAL SUMMARY
OPERATING RESULTS
- ---------------------------
(in millions, except per share amounts)
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Net Sales $18,284 $16,701 $15,065 $13,767 $11,984
-------- -------- -------- -------- --------
Expenses:
Cost of products sold 4,856 4,464 3,965 3,637 3,122
Marketing, selling and
administrative 4,418 4,173 3,925 3,670 3,166
Advertising and product
promotion 2,312 2,241 1,946 1,646 1,367
Research and development 1,577 1,385 1,276 1,199 1,108
Other(*) 853 (44) (60) 1,213 666
-------- -------- -------- -------- --------
14,016 12,219 11,052 11,365 9,429
-------- -------- -------- -------- --------
Earnings Before Income
Taxes(*) 4,268 4,482 4,013 2,402 2,555
Provision for income taxes 1,127 1,277 1,163 590 713
-------- -------- -------- -------- --------
Net Earnings(*) $ 3,141 $ 3,205 $ 2,850 $ 1,812 $ 1,842
======== ======== ======== ======== ========
Dividends paid on common
and preferred stock $ 1,551 $ 1,515 $ 1,507 $ 1,495 $ 1,485
Earnings per
common share - Basic(*) 1.58 1.61 1.42 .89 .91
Earnings per
common share - Diluted(*) 1.55 1.57 1.40 .89 .90
Dividends per common share .78 .76 .75 .74 .73
(*) Includes a gain on the sale of a business of $201 million before taxes,
$125 million after taxes, in 1998; and $225 million before taxes, $140 million
after taxes, in 1997. Includes a special charge for prescription drug pricing
litigation of $100 million before taxes, $62 million after taxes, or $.03 per
common share, basic and diluted, in 1998. Includes a special charge for
pending and future product liability claims of $700 million before taxes,
$433 million after taxes, or $.22 per common share, basic, and $.21 per common
share, diluted, in 1998; $950 million before taxes, $590 million after taxes,
or $.29 per common share, basic and diluted in 1995; and $750 million before
taxes, $488 million after taxes, or $.24 per common share, basic and diluted
in 1994. Includes a provision for restructuring of $201 million before taxes,
$125 million after taxes, in 1998; $225 million before taxes, $140 million
after taxes, in 1997; and $310 million before taxes, $198 million after taxes,
in 1995.
20
<PAGE>
Item 6. SELECTED FINANCIAL DATA. (Con't.)
FIVE-YEAR FINANCIAL SUMMARY
FINANCIAL POSITION AT DECEMBER 31
- ---------------------------------
(in millions, except per share amounts)
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
Current assets $ 8,782 $ 7,736 $ 7,528 $ 7,018 $ 6,710
Property, plant and
equipment 4,429 4,156 3,964 3,760 3,666
Total assets 16,272 14,977 14,685 13,929 12,910
Current liabilities 5,791 5,032 5,050 4,806 4,274
Long-term debt 1,364 1,279 966 635 644
Total liabilities 8,696 7,758 8,115 8,107 7,206
Stockholders' equity $ 7,576 $ 7,219 $ 6,570 $ 5,822 $ 5,704
Average common shares
outstanding - Basic 1,987 1,992 2,007 2,024 2,035
Average common shares
outstanding - Diluted 2,031 2,042 2,035 2,032 2,039
Reference is made to Note 4 Acquisitions and Divestitures, Note 8 Property,
Plant and Equipment and Note 16 Contingencies, appearing in the Notes to
Consolidated Financial Statements included in Part II, Item 8 of this Form
10-K Annual Report.
21
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Summary
In 1998, Bristol-Myers Squibb achieved record levels of sales, with all four
of the Company's business segments reporting sales increases, excluding the
effects of foreign exchange and divestitures. Worldwide sales grew to $18.3
billion, a 9% increase over 1997. Domestic sales, which represent 61% of
worldwide sales, increased 15% to $11.1 billion, while international sales
increased 2% to $7.2 billion. Sales growth resulted from a 10% increase due
to volume and a 2% increase from changes in selling prices. Exchange rate
fluctuations had an unfavorable effect of 3% on worldwide sales and 7% on
international sales, primarily due to Asian and Latin American currencies.
In 1998, the Company's most important products, most of which experienced
double-digit sales increases on a worldwide basis, made significant
contributions to the Company's sales growth. Two products, PRAVACHOL* and
TAXOL*(R) (paclitaxel), exceeded $1 billion in sales for 1998. An additional
seven products exceeded over a half billion dollars in annual sales. By the
end of 1998, Bristol-Myers Squibb had 64 product lines with more than $50
million in annual sales, 36 of which had more than $100 million in annual
sales.
Earnings before income taxes, excluding the 1998 special charge, increased 13%
to $5.1 billion in 1998. Net earnings, on this basis, increased 13% to $3.6
billion; basic and diluted earnings per share increased 14% to $1.83 and
$1.79, respectively. Net earnings and diluted earnings per share, excluding
special charges, have both increased at a compound annual growth rate of 10%
over the past five years.
Bristol-Myers Squibb's financial position remains strong. At December 31,
1998, the Company held $2.5 billion in cash, time deposits and marketable
securities. Cash provided by operating activities reached an all time high
of $4.1 billion. Returns to shareholders included dividend distributions of
$1.6 billion and treasury stock repurchases of $1.6 billion. Dividends per
common share were $.78 in 1998, increasing from $.76 per share paid in 1997.
The Company's payout ratio was 43%, 47% and 53% of net income in 1998, 1997
and 1996, respectively, excluding the 1998 special charge. In December 1998,
the Company announced another dividend increase, the 27th consecutive year
that dividends have increased. The 1999 indicated annual payment is $.86 per
share, a 10% increase over 1998. Bristol-Myers Squibb's strong financial
position is evidenced further by its triple-A credit rating from both Moody's
and Standard & Poor's, making Bristol-Myers Squibb one of only eight U.S.
industrial companies with this distinction.
Bristol-Myers Squibb's priorities over the past five years have been focused
on growth, productivity and a dynamic operating culture. In 1997, the Company
established a long-term strategic objective to be the number one company in
earnings per share growth year after year within its competitive universe.
To help achieve this objective, the Company is making strategic investments
behind a number of high priority projects. During the year, progress was made
in a number of areas in these projects, including:
22
<PAGE>
* All goals for pharmaceutical research and development were exceeded.
Eleven major regulatory approvals were obtained and nine major dossiers
were filed during the year.
* PRAVACHOL*, a cholesterol-lowering agent, was shown to provide
additional cardiovascular benefits in addition to the established
reduction in deaths from coronary heart disease and the risk of heart
attacks.
* TAXOL*, the Company's leading anti-cancer agent, received a new
indication in combination with cisplatin for first-line ovarian cancer.
* GLUCOPHAGE, the leading branded oral medication for treatment of
non-insulin-dependent (type 2) diabetes, was shown to have an excellent
therapeutic efficacy profile in the treatment of type 2 diabetes and is
the leader in the U.S. Oral Anti-diabetic market.
* HERBAL ESSENCES* became number two in the U.S. shampoo/conditioner
category after only three years on the market.
* The Company's productivity for growth program contributed more than $600
million in incremental benefits.
Total equity market capitalization was $133 billion as of December 31, 1998,
a 42% increase over last year. 1997 equity market capitalization was $94
billion, an increase of 72% over 1996. Total return to stockholders, share
price appreciation together with reinvested dividends, was 43.0% for 1998,
77.0% for 1997 and 32.1% for 1996. The 1998 return compares favorably to the
28.6% return of the Standard & Poor's 500 Index.
On December 1, 1998, the Company's Board of Directors declared a two-for-one
stock split of the common stock of the Company, effective February 1999.
This is the second stock split in the past two years. The Board of Directors
also recommended that an amendment be considered for stockholder approval at
the annual meeting of stockholders to increase the number of authorized shares
of common stock from 2.25 billion to 4.5 billion. All share and per share
information presented herein has been adjusted for the effect of the stock
split.
Net Sales and Earnings
Worldwide sales increased 9% in 1998 to $18.3 billion, compared with increases
of 11% and 9% in 1997 and 1996, respectively. The consolidated sales growth
resulted from a 10% increase due to volume, a 3% decrease due to foreign
exchange rate fluctuations and a 2% increase due to changes in selling prices.
In 1997, the 11% increase in sales reflected a 14% increase due to volume, a
3% decrease due to foreign exchange rate fluctuations and no changes overall
from pricing activity. In 1996, the 9% increase in sales reflected an 11%
increase due to volume, a 2% decrease due to foreign exchange rate
fluctuations and no changes overall from pricing activity. Domestic sales
increased 15% in 1998, 14% in 1997 and 10% in 1996, while international sales
increased 2% in 1998 (9% excluding foreign exchange), 7% in 1997 (15%
excluding foreign exchange) and 9% in 1996 (13% excluding foreign exchange).
In general, the businesses of the Company's industry segments are not seasonal.
As described in Notes 2 and 16 to the financial statements, the Company has
determined the final cost of its breast implant product liability (related to
a previously discontinued business of a subsidiary) and the cost of litigation
for prescription drug pricing cases. Accordingly, in the fourth quarter of
1998, the Company recorded a special charge of $800 million before taxes, $495
million after taxes, or $.24 per diluted share, to augment the reserve for
breast implant liability and for the prescription drug pricing litigation,
offset by expected insurance recoveries. The breast implant component of the
charge is $700 million before taxes ($800 million of liability offset by
insurance receivables of $100 million), and the prescription drug pricing
component is $100 million before taxes. As a result of the special charge,
1998 net earnings were $3,141 million, basic earnings per share were $1.58
and diluted earnings per share were $1.55.
23
<PAGE>
Net earnings, excluding the special charge, were $3,636 million, a 13%
increase over the prior year. Basic earnings per share were $1.83 and diluted
earnings per share were $1.79, both increasing 14% over 1997. In 1997, net
earnings of $3,205 million increased 12% from $2,850 million in 1996. Basic
and diluted earnings per share of $1.61 and $1.57, respectively, increased 13%
and 12%, from $1.42 and $1.40, respectively, in 1996. Net earnings margins,
excluding the special charge, increased to 19.9% in 1998 from 19.2% in 1997
and 18.9% in 1996.
The effective income tax rate on earnings before income taxes was 28.3% in
1998, excluding the special charge, compared to 28.5% and 29.0% in 1997 and
1996, respectively. The effective income tax rate has decreased since 1996
due to increased income in lower tax rate jurisdictions.
As described in Note 4 to the financial statements, in 1998 the Company
completed the acquisition of Redmond Products, Inc., a leading hair care
manufacturer in the United States. The Company also, in 1998, acquired
Phytoervas, a line of premium retail hair care products in Brazil, and Dong-A
Biotech Co., Ltd., a marketer and distributor of pharmaceutical products in
South Korea. In 1997, the Company acquired Abeefe S.A., Peru's largest
pharmaceutical manufacturer and marketer. The Company also, in 1997, acquired
CHOCO MILK*, Mexico's leading milk-based nutritional supplement, and
SAL DE UVAS PICOT*, a leading effervescent antacid product in Mexico.
In 1996, the Company acquired Pharmavit, one of Hungary's leading
manufacturers of over-the-counter medicines, nutritional products and generic
pharmaceuticals. The Company also, in 1996, acquired Argentia S.A., one of
Argentina's largest manufacturers and marketers of ethical pharmaceuticals,
and completed the acquisition of Oncology Therapeutics Network, a
specialty distributor of anti-cancer medicines and related products.
As described in Note 4 to the financial statements, in the first quarter of
1998, the Company divested its BAN brand of anti-perspirants and deodorants.
In the second quarter of 1998, the Company divested A/S GEA, a Denmark-based
generic drug business, and Hexachimie, a specialty chemical manufacturer based
in France. In the fourth quarter of 1997, the Company divested Linvatec
Corporation, its arthroscopy and surgical powered instrument business.
These divestitures resulted in gains before taxes of $201 million in 1998
and $225 million in 1997.
The Company recorded restructuring charges of $201 million in 1998 and $225
million in 1997. These restructuring charges consist primarily of asset
write-downs and employee-related costs related to the consolidation and
closure of plants and facilities.
Expenses
Total costs and expenses as a percentage of sales, excluding the special
charge, were 72.3% in 1998 compared with 73.2% in 1997 and 73.4% in 1996.
As a percentage of sales, cost of products sold remained relatively unchanged
at 26.6% in 1998 compared to 26.7% in 1997. In 1997, cost of products sold
as a percentage of sales increased to 26.7% from 26.3% in 1996, principally
due to incremental lower margin Oncology Therapeutics Network sales,
partially offset by increased sales of higher margin promoted pharmaceutical
products.
Following a 15% increase in advertising and promotion expenses in 1997 due
to product launches and direct-to-consumer campaigns for our high priority
pharmaceutical products, 1998 expenses increased 3% to $2,312 million from
$2,241 million.
24
<PAGE>
Marketing, selling and administrative expenses, as a percentage of sales,
decreased to 24.2% in 1998 from 25.0% in 1997 and 26.1% in 1996. This
decreasing trend is a direct result of the Company's productivity programs
partially offset by increases in pharmaceutical sales force personnel.
The Company's investment in research and development totaled $1,577 million
in 1998, an increase of 14% over 1997, and as a percentage of sales,
increased to 8.6% in 1998 from 8.3% in 1997. This spending level reflects
the Company's commitment to research over a broad range of therapeutic areas
and to clinical development in support of new products. Over the past 10
years, research and development expenses have increased at a compound annual
growth rate of 9%. In 1998, research and development spending dedicated to
the research and development of pharmaceutical products increased 16%, and
was 12.4% of pharmaceutical sales compared to 12.0% and 12.3% in 1997 and
1996, respectively. In 1998, the Company initiated filings with the U.S. Food
and Drug Administration (FDA) for ORZEL, the first oral agent for colorectal
cancer in the U.S., and TEQUIN, a broad-spectrum oral quinolone antibiotic.
Additional filings are expected in 1999 for omapatrilat, a novel
antihypertensive. During 1998, 1997 and 1996, the Company entered into a
number of research alliances, licensing agreements and biotechnology
collaborations. These agreements are providing important new products,
early-stage compounds for further development and new processes that will help
the Company screen for new drugs more effectively.
Business Segments
All four of the Company's business segments - Medicines, Nutritionals, Medical
Devices and Beauty Care - reported sales increases, excluding foreign exchange
and divestitures, during the year.
Sales in the Medicines Segment (Pharmaceuticals and Consumer Medicines), which
is the Company's largest segment at 69% of the total Company, increased 12%
to $12,573 million in 1998. Sales growth resulted from a 13% increase due to
volume and a 2% increase from selling prices, offset by a 3% decrease due to
the effect of foreign exchange rate fluctuations. Domestic sales increased
20% and international sales increased 8%, excluding foreign exchange,
primarily due to volume growth.
Sales of PRAVACHOL*, the Company's largest-selling product, were $1.6 billion,
an increase of 14%. Domestic sales increased 17% to $1,022 million. In
November 1998, results from the landmark LIPID trial were published in the
New England Journal of Medicine showing that PRAVACHOL* improved total
mortality, improved results for patients with unstable angina and reduced
total hospitalizations. In July 1998, additional findings of the Cholesterol
and Recurrent Events (CARE) Trial were published in the Journal of the
American College of Cardiology, demonstrating cardiovascular protection in
women, the subgroup studied, as well as for a broad range of patients. In
June 1998, the FDA cleared enhanced drug interaction labeling for PRAVACHOL*,
for reduced potential to interact with some commonly prescribed medications.
In March 1998, the FDA cleared PRAVACHOL* for use in reducing the risk of
stroke in patients who have had a heart attack and have normal cholesterol
levels. PRAVACHOL* is the only drug of its type indicated to reduce the risk
of a heart attack in patients with and without established coronary heart
disease. Sales of MONOPRIL*, a second generation angiotensin converting
enzyme (ACE) inhibitor with once-a-day dosing, increased 16% to $380 million,
with strong growth in both domestic and international markets and strong
acceptance among managed care organizations in the United States. Products
from the Bristol-Myers Squibb and Sanofi S.A. joint venture, AVAPRO and
PLAVIX, were launched in the fourth quarter of 1997 and first quarter of
1998, respectively. PLAVIX, a platelet aggregation inhibitor for the reduction
of stroke, heart attack and vascular death in atherosclerotic patients,
reached sales of $144 million for the year, and AVAPRO, an angiotensin II
receptor blocker for the treatment of hypertension, had sales of $120 million.
Sales of cardiovascular drugs, the largest product group in the Medicines
segment, increased 11% to $3,210 million. Due to the loss of patent
exclusivity in several European countries in the first quarter of 1997, and
in the United States in February 1996, sales of captopril, an ACE inhibitor
sold primarily under the trademark CAPOTEN*, declined 20% to $636 million.
Excluding CAPOTEN* sales, cardiovascular drug sales increased 22%.
25
<PAGE>
Sales of anti-cancer drugs increased 21% to $2,925 million. Sales of TAXOL*
increased 28% to $1,206 million. In September 1998, the FDA approved
Genentech Inc.'s product, Herceptin(R), as a first-line therapy in combination
with TAXOL* for treatment of patients with metastatic breast cancer. Also
in September, the European Community approved a TAXOL* indication for
non-small cell lung cancer. In May 1998, a U.S.-based cooperative group
study, sponsored under the Bristol-Myers Squibb Cooperative Research and
Development Agreement with the National Cancer Institute, showed that by
adding TAXOL* to a regimen with other commonly used chemotherapy drugs, the
risk of death for women with early-stage breast cancer was reduced by 26%.
This study, which enrolled over 3,000 women, was the first to show such a
significant survival benefit in early-stage breast cancer in over 20 years.
In April 1998, TAXOL*, in combination with cisplatin, was approved by the FDA
for first line treatment of ovarian cancer. Sales of PARAPLATIN*, which is
used in combination therapy for the treatment of ovarian cancer, increased 20%
to $525 million. Sales by the Oncology Therapeutics Network (OTN) were $657
million.
Anti-infective drug sales were $2,412 million, an increase of 8% over the
prior year. Sales of ZERIT*, an antiretroviral agent, increased 38% to $551
million, and sales of VIDEX* grew 7% to $162 million. ZERIT* is the most
commonly prescribed thymidine nucleoside reverse transcriptase inhibitor in
HIV therapy in the United States. In June 1998, the Company announced a large
phase III study to evaluate the safety and efficacy of once-daily dosing of
VIDEX*, as Bristol-Myers Squibb seeks to develop a more convenient dosing
regimen for HIV patients. Sales of CEFZIL*, an oral cephalosporin used in
the treatment of respiratory infections and sinusitis, and MAXIPIME*, a fourth
generation injectable cephalosporin, also contributed to the growth of
anti-infectives.
Sales of central nervous system drugs increased 15% to $1,099 million, due
to the strong growth of BUSPAR*, the Company's novel anti-anxiety agent, and
SERZONE*, an antidepressant. Sales of BUSPAR* increased 20% to $531 million,
while sales of SERZONE* increased 39% to $257 million.
GLUCOPHAGE continued to experience strong growth, with sales increasing 49%
to $861 million. In September 1998, results of the United Kingdom Prospective
Diabetes Study demonstrated the excellent therapeutic efficacy profile of
GLUCOPHAGE in the treatment of type 2 diabetes.
Sales of EXCEDRIN* increased 17% to $241 million following clearance by the
FDA in January 1998 to market EXCEDRIN* Migraine, the first and only
non-prescription medication approved for relief of migraine pain.
In 1997, Medicines Segment sales increased 14% over 1996 levels. Increases in
sales of PRAVACHOL*, TAXOL*, PARAPLATIN*, ZERIT*, MONOPRIL*, BUSPAR*, CEFZIL*,
GLUCOPHAGE, SERZONE*, VIDEX* and volume growth of EFFERALGAN* and ASPIRINE
UPSA* from the UPSA Group were partially offset by decreases in sales of
CAPOTEN*.
26
<PAGE>
The margin on earnings before taxes decreased slightly to 27.8% in 1998 from
27.9% in 1997, as increases, as a percentage of sales, in research and
development expenditures and sales force expenditures were offset
by decreases in advertising and promotional spending and general
administrative expenses, In 1997, the margin on earnings before taxes
decreased to 27.9% from 28.0% in 1996 due to increased investment in
advertising and promotion expenses in support of high priority products and
lower margin sales for OTN.
Sales in the Medical Devices Segment, excluding the December 1997 divestiture
of Zimmer's arthroscopy and surgical powered instrument business, increased 7%
over prior year levels to $1,647 million, reflecting a 10% increase due to
volume, a 3% decrease due the effect of foreign exchange and no effect from
selling prices. Domestic sales increased 9% and international sales increased
6% (11% excluding the effect of foreign exchange). Including the divestiture,
Medical Device sales decreased 9%. The Company's ConvaTec division is the
worldwide market share leader in ostomy and advanced wound care products.
Sales of ostomy and wound care products increased 5% and 9%, respectively,
excluding foreign exchange. Worldwide sales of knee prosthetic joint implants
increased 1% and hip replacement sales decreased 2%, excluding the effect of
foreign exchange.
In 1997, worldwide sales of Medical Devices decreased 3%, an increase of
1% excluding foreign exchange.
The margin on earnings before taxes in the Medical Devices Segment improved
to 20.5% in 1998, from 19.5% in 1997 due to decreases, as a percentage of
sales, in other marketing and general administrative expenses, partially
offset by increases in cost of products sold due to higher costs for products
sold under a distribution agreement with the acquirer of Linvatec. The
margin on earnings before taxes in the Medical Devices Segment decreased to
19.5% in 1997 from 22.5% in 1996, due to incremental manufacturing costs in
connection with recently introduced products.
Sales in the Nutritionals Segment decreased 2% to $1,759 million, reflecting
a 2% increase due to volume, a 6% decrease due to the effect of foreign
exchange rate fluctuations primarily in Asia and a 2% increase due to changes
in selling prices. International sales decreased 7% (an increase of 7%
excluding the effect of foreign exchange), and domestic sales increased 2%.
Mead Johnson continues to be the leader in the worldwide and U.S. infant
formula markets. Total infant formula sales decreased 1% to $1,203 million
(an increase of 2% excluding foreign exchange). Sales of ENFAMIL*, the
Company's largest selling infant formula, decreased 3% to $649 million
worldwide (a decrease of 1% excluding foreign exchange). Gains were recorded
for NUTRAMIGEN* and LACTO FREE* specialty infant formulas. BOOST*, an adult
nutritional beverage, and CHOCO MILK*, a milk-based nutritional supplement
acquired in July 1997, also contributed to sales growth.
In 1997, worldwide sales of Nutritionals increased 6% from 1996 levels,
primarily due to growth of NUTRAMIGEN*, LACTO FREE* and PROSOBEE* specialty
infant formulas, and adult consumer nutritionals.
The margin on earnings before taxes improved to 21.4% in 1998 from 20.6% in
1997, primarily due to a decrease, as a percentage of sales, in cost of
products sold, resulting from improved manufacturing efficiencies and
productivity programs. The margin on earnings before taxes in the Nutritionals
Segment decreased to 20.6% in 1997 from 21.1% in 1996.
27
<PAGE>
Sales in the Beauty Care Segment increased 22% in 1998 to $2,305 million,
reflecting a 22% increase due to volume, a 3% increase due to pricing and a
3% decrease due to foreign exchange rate fluctuations. Excluding the effect
of foreign exchange, international sales increased 26% over 1997, while
domestic sales increased 25%. The Company's Clairol division continues to be
the number one hair products company in the United States. Sales of the
Company's hair care products were especially strong, increasing 49% in 1998,
primarily due to sales of the HERBAL ESSENCES* complete line of shampoos,
conditioners, styling aids and body wash, which increased 60% to $561 million.
HERBAL ESSENCES* is the number two brand in the total shampoo and conditioner
market in the U.S. after only three years on the market, and number three in
body wash after less than two years on the market. The Redmond AUSSIE* brand,
acquired in January 1998, has added more than $100 million in sales for the
year. DAILY DEFENSE* and VITAL NUTRIENTS*, both launched in September 1997,
contributed $82 million and $34 million, respectively, in sales for the year.
Haircoloring product sales increased 6%, benefiting from the continued success
of HYDRIENCE*, NATURAL INSTINCTS*, salon haircolorings and the launch of
REVITALIQUE*, a new premium permanent haircolor.
In 1997, sales in the Beauty Care Segment increased 14% from 1996 levels,
primarily due to increased sales of hair care products, led by HERBAL
ESSENCES*.
The margin on earnings before taxes in 1998 improved to 15.7% from 14.8%
in 1997 and 14.4% in 1996, primarily due to higher volumes and manufacturing
efficiencies due to productivity programs, partially offset by investment
spending behind new product introductions.
Geographic Areas
Bristol-Myers Squibb products are available in virtually every country in
the world; its largest markets are the United States, France, Japan,
Germany and Canada.
Sales in the U.S., net of inter-area sales, increased 15% in 1998.
Sales in the Medicines and Beauty Care Segments, comprised 68% and 15%,
respectively, of the region's sales. Products with strong growth in the
region included GLUCOPHAGE, TAXOL*, PRAVACHOL*, HERBAL ESSENCES*, BUSPAR*,
PARAPLATIN*, and initial sales of PLAVIX and AUSSIE* hair care products.
The margin on earnings before taxes increased to 26.2% in 1998 from 24.5% in
1997 primarily due to decreases, as a percentage of sales, in cost of products
sold, advertising and general administrative expenses. In 1997, sales in
the U.S. increased 14%, net of inter-area sales, primarily due to anti-cancer
and anti-infective drugs from the Medicines Segment, specialty infant formulas
from the Nutritionals Segment and hair care products from the Beauty Care
Segment. The margin on earnings before taxes decreased to 24.5% in 1997 from
26.0% in 1996 primarily due to increases, as a percentage of sales, in cost
of products sold and advertising and promotion expenses.
Sales in Europe, Mid-East and Africa, net of inter-area sales, increased
4% (6% excluding foreign exchange). Medicines Segment comprise nearly 77%
of sales in the region. Products with strong growth in the region included
TAXOL*, ZERIT*, PRAVACHOL*, HERBAL ESSENCES* and initial sales of AVAPRO.
Increases in sales of these products were partially offset by decreases in
sales of CAPOTEN* of $104 million due to the loss of exclusivity in several
European countries in early 1997. The margin on earnings before taxes
decreased to 23.4% in 1998 from 23.8% in 1997 primarily due to increases,
as a percentage of sales, in promotional expenses. In 1997, sales in Europe,
Mid-East and Africa, net of inter-area sales, increased 2% (12% excluding
foreign exchange), due to sales growth of products from the Medicines Segment
including anti-cancer, antiretroviral and analgesic products, and the
introductions of HERBAL ESSENCES* and HYDRIENCE* from the Beauty Care segment.
These increases were partially offset by decreases in sales of CAPOTEN* due
to loss of exclusivity. The margin on earnings before taxes increased to
23.8% in 1997 from 21.9% in 1996 due to manufacturing efficiencies as a result
of the Company's productivity programs.
28
<PAGE>
Sales in Other Western Hemisphere countries, net of inter-area sales,
increased 11% in 1998 (20% excluding foreign exchange). Medicines and Beauty
Care Segments comprised nearly 62% and 18%, respectively, of the region's
sales. Products with strong growth included HERBAL ESSENCES* and CHOCO MILK*,
due to their recent introductions into the region. The margin on earnings
before taxes decreased to 12.8% in 1998 from 14.2% in 1997 reflecting
increases, as a percentage of sales, in cost of products sold. In 1997,
sales in Other Western Hemisphere countries, net of inter-area sales,
increased 25% (26% excluding foreign exchange), due to increased sales of
cardiovascular, anti-cancer and anti-infective drugs from the Medicines
Segment, introductory sales of HYDRIENCE* and HERBAL ESSENCES* from the Beauty
Care Segment, and sales from the acquisitions of CHOCO MILK* and SAL DE UVAS
PICOT*. The margin on earnings before taxes increased to 14.2% in 1997 from
11.1% in 1996, reflecting improved gross margins due to manufacturing
efficiencies.
Sales in the Pacific region increased 5% in 1998, net of inter-area sales
and excluding the effect of foreign exchange. Including foreign exchange,
sales decreased 11% primarily due to currency fluctuations in Japan, the
Philippines, Thailand and Australia and economic downturns in the region.
Medicines and Nutritionals Segments comprised 45% and 22%, respectively, of
the region's sales. Increases in TAXOL* and HERBAL ESSENCES* (launched in
the region in 1997) were offset in part by decreases in infant formulas and
CAPOTEN*, which lost patent exclusivity in Japan in 1997. As a result of
economic downturns and unfavorable fluctuations in exchange rates, earnings
before taxes in the Pacific region were minimal in 1998. In 1997, sales in
the Pacific region, net of inter-area sales, increased 5% (13% excluding
foreign exchange), as a result of increased sales from pharmaceuticals, skin
care products, infant formulas and the launch of HERBAL ESSENCES*. The
margin on earnings before taxes decreased to 3.2% in 1997 from 4.4% in 1996,
primarily as a result of increases, as a percentage of sales, in cost of
products sold and sales force expenses.
Financial Instruments
Cash and cash equivalents, time deposits and marketable securities totaled
$2.5 billion at December 31, 1998, compared to $1.8 billion and $2.2 billion
at December 31, 1997 and 1996, respectively. Working capital was $3.0 billion
at December 31, 1998, compared to $2.7 billion and $2.5 billion at
December 31, 1997 and 1996, respectively. Cash and cash equivalents, time
deposits and marketable securities, and the conversion of other working
capital items are expected to fund near-term operations of the Company.
The Company is exposed to market risk, including changes in currency exchange
rates and interest rates. To reduce these risks, the Company enters into
certain derivative financial instruments where available on a cost-effective
basis to hedge its underlying economic exposure. These instruments also are
managed on a consolidated basis to efficiently net exposures and thus take
advantage of any natural offsets.
It is the Company's policy to hedge certain underlying economic exposures to
reduce foreign exchange and interest rate risk. Derivative financial
instruments are not used for trading purposes. Gains and losses on hedging
transactions are offset by gains and losses on the underlying exposures being
hedged.
29
<PAGE>
Foreign exchange option contracts and, to a lesser extent, forward contracts
are used to hedge anticipated transactions. The Company's primary foreign
currency exposures in relation to the U.S. dollar are the French franc,
Deutsche mark and Japanese yen.
The table below summarizes the Company's outstanding foreign exchange option
contracts as of December 31, 1998. The fair value of option contracts,
which will change over time, is estimated based on forward currency rates
and other relevant market factors. The fair value of option contracts
should be viewed in relation to the fair value of the underlying hedged
transactions and the overall reduction in exposure to adverse fluctuations
in foreign currency exchange rates.
Dollars in Millions
Weighted
Average Notional Carrying Fair
Strike Price Amount Value Value Maturity
------------ -------- -------- ----- --------
Option Contracts Purchased
Right to Sell:
French franc FF 5.60 $342 $6 $ 6 1999
Deutsche mark DM 1.69 388 7 6 1999
Other Currencies Various 312 9 6 1999
Other Contracts Various 265 5 13 1999
------ --- ---
$1,307 $27 $31
====== === ===
At December 31, 1997, the Company held right to sell option contracts with an
aggregate notional amount, carrying value and fair value of $1,035 million,
$17 million and $48 million, respectively. These contracts primarily related
to option contracts with the right to sell French francs and Deutsche marks.
The Company also held right to buy option contracts, primarily to buy Japanese
yen for U.S. dollars and Japanese yen for Deutsche marks, with an aggregate
notional amount, carrying value and fair value of $244 million, $5 million
and $7 million, respectively.
The Company maintains cash and cash equivalents, time deposits and marketable
securities with various financial institutions. These financial institutions
are located primarily in the U.S. and Europe, and Company policy is designed
to limit exposure to any one financial institution.
Recently Issued Accounting Standard
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities
(FAS 133), which becomes effective for financial statements beginning
January 1, 2000. FAS 133 requires that companies recognize all derivatives
as either assets or liabilities on the balance sheet and measure these
instruments at fair value. The Company is currently evaluating this statement
and its impact on the Company's existing accounting policies and financial
reporting disclosures.
30
<PAGE>
Year 2000
The Company has reviewed its information systems for Year 2000 compliance.
The Year 2000 problem arises because many computer systems use only two
digits to represent the year. These programs may not process dates beyond
1999, which may cause miscalculations or system failures.
The Company has a comprehensive compliance program to assess the Year 2000
problem in the processing of data in the Company's information technology
(IT) and non-IT systems, including manufacturing, and research and
development systems. With regard to IT systems, this program has been
implemented, and the assessment as well as the required corrective actions
and testing are substantially complete. With regard to the critical
manufacturing, and research and development systems, the assessment has been
completed, with corrective actions and testing to be substantially completed
by mid-year 1999.
In connection with this compliance program, the Company also has asked
critically important vendors, customers, suppliers, governmental regulatory
authorities and financial institutions, whose incomplete or untimely
resolution of the Year 2000 problem could potentially have a significant
impact on the Company's operations, to assess their Year 2000 readiness.
This assessment has been substantially completed.
Contingency plans are being prepared, where necessary, to minimize any
significant exposures from the failures of these third parties to be Year
2000 compliant. These plans will be substantially completed by mid-year 1999,
and include development of backup procedures, identification of alternate
suppliers, and possible increases in inventory levels.
The Company does not expect the Year 2000 problem, as well as the cost of
the compliance program, to have a material impact on the Company's results
of operations, financial condition or cash flows. However, there can be no
absolute assurance that third parties will convert their systems in a timely
manner and in a way that is compatible with the Company's systems.
Euro Conversion
On January 1, 1999, certain members of the European Union established fixed
conversion rates between their existing currencies and the European Union's
common currency, known as the Euro. The transition period for the introduction
of the Euro will be between January 1, 1999, and January 1, 2002. It is
planned that by July 1, 2002, the participating countries will withdraw all
currencies and use the Euro exclusively.
The Company has committed resources to conduct assessments and to take
corrective actions to ensure it is prepared for the introduction of the Euro.
The Company is currently evaluating methods to address the many areas involved
with the introduction of the Euro, including information management, finance,
legal and tax. This review includes the conversion of information technology,
business and financial systems, evaluating currency risk and the effect on
the Company's financial instruments as well as the impact on the pricing and
the distribution of the Company's products.
The Company believes the effect of the introduction of the Euro, as well as
any related cost of conversion, will not have a material impact on the
Company's results of operations, financial condition and cash flows.
31
<PAGE>
Financial Position
Cash and cash equivalents, time deposits and marketable securities at
December 31, 1998 were denominated primarily in U.S. dollar instruments with
near-term maturities. The average interest yield on cash and cash equivalents
was 4.7% at December 31, 1998 while interest yields on time deposits and
marketable securities averaged 4.5% at December 31, 1998.
Short-term borrowings and long-term debt at December 31, 1998 are denominated
primarily in U.S. dollars; however, a subsidiary of the Company had $167
million of commercial paper outstanding at December 31, 1998. This commercial
paper has original maturities not exceeding 270 days. $116 million is
denominated in ECU's (Euros) and $51 million is denominated in U.S. dollars.
Also included is Japanese yen long-term debt of $284 million.
During 1998, the Company entered into two credit facilities, aggregating
$500 million, with a syndicate of lenders as support for its commercial paper
program. The credit facilities consist of a $250 million, 364-day credit
facility which may be renewed annually with the consent of the lenders for
an additional 364-day period and a $250 million, 5-year credit facility,
extendible at each anniversary date with the consent of the lenders. There
were no borrowings outstanding under the credit facilities at December 31,
1998. In addition, the Company has unused short-term lines of credit with
foreign banks of $494 million.
Disclosures related to short-term borrowings and long-term debt are included
in the notes to the financial statements.
Internally generated cash provided by operations was $4.1 billion in 1998,
$2.5 billion in 1997 and $2.6 billion in 1996. Cash provided by operations
continued to be the Company's primary source of funds to finance operating
needs and expenditures for new plants and equipment. As part of the Company's
ongoing commitment to improve plant efficiency and maintain superior research
facilities, the Company has invested over $2.1 billion in capital expansion
over the past three years.
Cash provided by operations also was used to pay dividends of over $4.5
billion over the past three years, to fund acquisitions at a cost of $663
million over the past three years, and to finance the share repurchase
program. The Company's share repurchase program authorizes the purchase of
common stock from time to time in the open market or through private
transactions as market conditions permit. During 1998, the Company purchased
30.6 million shares of common stock at a cost of $1.6 billion, bringing the
total shares acquired since the program's inception to 277 million. During
the past three years, the Company has repurchased 101 million shares at a
cost of $3.6 billion.
Employment levels at December 1998 increased to 54,700 from 53,600 at December
1997, with increases primarily in pharmaceutical sales force and research and
development personnel.
Return on Stockholders' Equity continued to improve over the last three years
and was 49.2% in 1998, excluding the special charge, 46.5% in 1997 and 46.0%
in 1996.
32
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF EARNINGS, COMPREHENSIVE INCOME and
RETAINED EARNINGS
(in millions, except per share amounts)
Year Ended December 31,
EARNINGS ---------------------------
1998 1997 1996
------- ------- -------
Net Sales $18,284 $16,701 $15,065
------- ------- -------
Expenses:
Cost of products sold 4,856 4,464 3,965
Marketing, selling and administrative 4,418 4,173 3,925
Advertising and product promotion 2,312 2,241 1,946
Research and development 1,577 1,385 1,276
Special charge 800 - -
Provision for restructuring 201 225 -
Gain on sale of a business (201) (225) -
Other 53 (44) (60)
------- ------- -------
14,016 12,219 11,052
------- ------- -------
Earnings Before Income Taxes 4,268 4,482 4,013
Provision for income taxes 1,127 1,277 1,163
------- ------- -------
Net Earnings $ 3,141 $ 3,205 $ 2,850
======= ======= =======
Earnings Per Common Share:
Basic $1.58 $1.61 $1.42
Diluted $1.55 $1.57 $1.40
Average Common Shares Outstanding:
Basic 1,987 1,992 2,007
Diluted 2,031 2,042 2,035
COMPREHENSIVE INCOME
- --------------------
Net Earnings $3,141 $3,205 $2,850
Other Comprehensive Income:
Foreign currency translation (86) (195) (38)
Tax effect (3) 23 4
------ ------ ------
Comprehensive Income $3,052 $3,033 $2,816
====== ====== ======
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF EARNINGS, COMPREHENSIVE INCOME and
RETAINED EARNINGS
(in millions, except per share amounts)
Year Ended December 31,
--------------------------
1998 1997 1996
------ ------ ------
RETAINED EARNINGS
- -----------------
Retained Earnings, January 1 $10,950 $ 9,260 $ 7,917
Net earnings 3,141 3,205 2,850
------- ------- -------
14,091 12,465 10,767
Less dividends 1,551 1,515 1,507
------- ------- -------
Retained Earnings, December 31 $12,540 $10,950 $ 9,260
======= ======= =======
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEET
ASSETS
(dollars in millions)
December 31,
---------------------------
1998 1997 1996
------- ------- -------
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 2,244 $ 1,456 $ 1,681
Time deposits and marketable securities 285 338 504
Receivables, net of allowances 3,190 2,973 2,651
Inventories 1,873 1,799 1,669
Prepaid expenses 1,190 1,170 1,023
------- ------- -------
Total Current Assets 8,782 7,736 7,528
Property, Plant and Equipment 4,429 4,156 3,964
Insurance Recoverable 523 619 853
Excess of cost over net tangible assets
received in business acquisitions 1,587 1,625 1,508
Other Assets 951 841 832
------- ------- -------
Total Assets $16,272 $14,977 $14,685
======= ======= =======
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(dollars in millions)
December 31,
---------------------------
1998 1997 1996
------- ------- -------
LIABILITIES
- -----------
Current Liabilities:
Short-term borrowings $ 482 $ 543 $ 513
Accounts payable 1,380 1,017 1,064
Accrued expenses 2,302 1,939 1,962
Product liability 877 865 800
U.S. and foreign income taxes payable 750 668 711
------- ------- -------
Total Current Liabilities 5,791 5,032 5,050
Other Liabilities 1,541 1,447 2,099
Long-Term Debt 1,364 1,279 966
------- ------- -------
Total Liabilities 8,696 7,758 8,115
------- ------- -------
STOCKHOLDERS' EQUITY
- --------------------
Preferred stock, $2 convertible series:
Authorized 10 million shares; issued and
outstanding 11,684 in 1998, 12,936 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
2,188,316,808 in 1998, 1,083,253,703 in
1997 and 1,082,496,016 in 1996 219 108 108
Capital in excess of par value of stock 1,075 544 382
Cumulative translation adjustments (622) (533) (361)
Retained earnings 12,540 10,950 9,260
------- ------- -------
13,212 11,069 9,389
Less cost of treasury stock - 199,550,532
common shares in 1998, 90,069,383 in
1997 and 81,806,550 in 1996 5,636 3,850 2,819
------- ------- -------
Total Stockholders' Equity 7,576 7,219 6,570
------- ------- -------
Total Liabilities and Stockholders' Equity $16,272 $14,977 $14,685
======= ======= =======
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in millions)
Year Ended December 31,
--------------------------
1998 1997 1996
------ ------ ------
Cash Flows From Operating Activities:
Net earnings $3,141 $3,205 $2,850
Depreciation and amortization 625 591 519
Special charge 800 - -
Provision for restructuring 201 225 -
Gain on sale of a business (201) (225) -
Other operating items (1) 33 (52)
Receivables (253) (479) (262)
Inventories (139) (288) (227)
Accounts payable 376 2 177
Accrued expenses (134) (181) 42
Income taxes 414 318 250
Product liability (715) (795) (514)
Insurance recoverable 196 234 106
Other assets and liabilities (190) (164) (248)
------ ------ ------
Net Cash Provided by Operating Activities 4,120 2,476 2,641
------ ------ ------
Cash Flows From Investing Activities:
Proceeds from sales of time deposits and
marketable securities 309 530 406
Purchases of time deposits and marketable
securities (256) (363) (379)
Additions to fixed assets (788) (767) (601)
Proceeds from sales of businesses 417 370 213
Business acquisitions (93) (254) (316)
Other, net 65 (48) (40)
------ ------ ------
Net Cash Used in Investing Activities (346) (532) (717)
------ ------ ------
Cash Flows From Financing Activities:
Short-term borrowings (81) 81 (78)
Long-term debt 73 328 346
Issuances of common stock under stock plans 140 117 206
Purchases of treasury stock (1,561) (1,162) (852)
Dividends paid (1,551) (1,515) (1,507)
------ ------ ------
Net Cash Used in Financing Activities (2,980) (2,151) (1,885)
------ ------ ------
Effect of Exchange Rates on Cash (6) (18) (3)
------ ------ ------
Increase/(Decrease) in Cash and
Cash Equivalents 788 (225) 36
Cash and Cash Equivalents at Beginning
of Year 1,456 1,681 1,645
------ ------ ------
Cash and Cash Equivalents at End of Year $2,244 $1,456 $1,681
====== ====== ======
The accompanying notes are an integral part of these financial statements.
. 37
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 1 ACCOUNTING POLICIES
- ---------------------------
Basis of Consolidation - The consolidated financial statements include the
accounts of Bristol-Myers Squibb Company and all of its subsidiaries.
Cash and Cash Equivalents - Cash and cash equivalents primarily include
securities with a maturity of three months or less at the time of purchase,
recorded at cost, which approximates market.
Time Deposits and Marketable Securities - Time deposits and marketable
securities are available for sale and are recorded at fair value, which
approximates cost.
Inventory Valuation - Inventories are generally stated at average cost, not
in excess of market.
Capital Assets and Depreciation - Expenditures for additions, renewals and
betterments are capitalized at cost. Depreciation is generally computed by
the straight-line method based on the estimated useful lives of the related
assets.
Excess of Cost over Net Tangible Assets - The excess of cost over net tangible
assets received in business acquisitions is being amortized on a straight-line
basis over periods not exceeding 40 years.
Earnings Per Share - Basic earnings per common share are computed using the
weighted average number of shares outstanding during the year. Diluted
earnings per common share are computed using the weighted average number of
shares outstanding during the year, plus the incremental shares outstanding
assuming the exercise of dilutive stock options.
Note 2 SPECIAL CHARGE
- ----------------------
As described in Note 16, the Company has determined the final cost of its
breast implant product liability (related to a previously discontinued
business of a subsidiary) and the cost of litigation for prescription drug
pricing cases. Accordingly, in the fourth quarter of 1998, the Company
recorded a special charge of $800 million before taxes, $495 million after
taxes, or $.24 per diluted share, to augment the reserve for breast implant
liability and for the prescription drug pricing litigation, offset by expected
insurance recoveries. The breast implant component of the charge is $700
million before taxes ($800 million of liability offset by insurance
receivables of $100 million), and the prescription drug pricing component is
$100 million before taxes.
38
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 3 RESTRUCTURING
- ---------------------
The Company recorded a restructuring charge of $201 million in 1998 and $225
million in 1997. These restructuring charges consist primarily of asset
write-downs and employee-related costs related to the consolidation and
closure of plants and facilities. The restructuring reserve at December 31,
1998 was approximately $150 million.
Note 4 ACQUISITIONS AND DIVESTITURES
- -------------------------------------
In January 1998, the Company acquired Redmond Products, Inc., a leading
hair care manufacturer in the United States.
In March 1998, the Company divested its BAN brand of anti-perspirants and
deodorants, and in June 1998, the Company divested A/S GEA, a Denmark-based
generic drug business, and Hexachimie, a specialty chemical manufacturer
based in France, resulting in a combined pretax gain of $201 million.
In May 1998, the Company acquired Phytoervas, a line of premium retail
shampoos and conditioners in Brazil.
In December 1998, the Company acquired Dong-A-Biotech Co., Ltd., a marketer
and distributor of pharmaceutical products in South Korea.
In 1997, the Company completed the sale of Linvatec Corporation, its
arthroscopy and surgical powered instrument business, resulting in a pretax
gain of $225 million. The Company acquired Abeefe S.A., Peru's largest
pharmaceutical manufacturer and marketer of a broad range of prescription
and nonprescription anti-infective, respiratory, anti-inflammatory and
dermatological products. The Company also acquired CHOCO MILK*, Mexico's
leading milk-based nutritional supplement, and SAL DE UVAS PICOT*, a leading
effervescent antacid product in Mexico.
In 1996, the Company acquired Pharmavit Gyogyszer-es Elelmiszeripari
Reszvenytarsasag, one of Hungary's leading manufacturers of over-the-counter
medicines, nutritional products and generic pharmaceuticals. The Company
also acquired Argentia S.A., one of Argentina's largest manufacturers and
marketers of ethical pharmaceuticals and completed the acquisition of
Oncology Therapeutics Network, a specialty distributor of anti-cancer
medicines and related products.
39
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 5 OTHER INCOME AND EXPENSES
- ---------------------------------
Year Ended December 31,
--------------------------
1998 1997 1996
------- ------- -------
Interest income $ 87 $ 106 $ 95
Interest expense (154) (118) (78)
Other - net 14 56 43
------- ------- -------
$ (53) $ 44 $ 60
======= ======= =======
Cash payments for interest were $157 million, $110 million and $76 million
in 1998, 1997 and 1996, respectively.
Note 6 PROVISION FOR INCOME TAXES
- ----------------------------------
The components of earnings before income taxes were:
Year Ended December 31,
--------------------------------
1998 1997 1996
-------- -------- --------
U.S. $2,623 $2,858 $2,332
Non-U.S. 1,645 1,624 1,681
-------- -------- --------
$4,268 $4,482 $4,013
======== ======== ========
The provision for income taxes consisted of:
Year Ended December 31,
--------------------------------
1998 1997 1996
-------- -------- --------
Current:
U.S. $827 $633 $462
Non-U.S. 346 471 442
-------- -------- --------
1,173 1,104 904
-------- -------- --------
40
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Year Ended December 31,
--------------------------------
1998 1997 1996
-------- -------- --------
Deferred:
U.S. (64) 220 232
Non-U.S. 18 (47) 27
-------- -------- --------
(46) 173 259
-------- -------- --------
$1,127 $1,277 $1,163
======== ======== ========
Income taxes paid during the year were $654 million, $898 million and
$861 million in 1998, 1997 and 1996, respectively.
The Company's provision for income taxes in 1998, 1997 and 1996 was different
from the amount computed by applying the statutory United States Federal
income tax rate to earnings before income taxes, as a result of the following:
% of Earnings
Before Income Taxes
--------------------------------
1998 1997 1996
-------- -------- --------
U.S. statutory rate 35.0% 35.0% 35.0%
Effect of operations in Puerto Rico (2.5) (2.9) (3.4)
Foreign (4.4) (2.6) (2.1)
Special charge (.6) - -
State and local taxes .6 .6 .6
Other (1.7) (1.6) (1.1)
-------- -------- --------
26.4% 28.5% 29.0%
======== ======== ========
Prepaid taxes at December 31, 1998, 1997 and 1996 were $809 million, $818
million and $757 million, respectively. The deferred income tax liability,
included in Other Liabilities, at December 31, 1998, 1997 and 1996 was $277
million, $352 million and $124 million, respectively.
31
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The components of prepaid and deferred income taxes consisted of:
December 31,
------------------------------------
1998 1997 1996
-------- -------- --------
Product liability $248 $154 $383
Postretirement and pension benefits 195 191 129
Restructuring 55 77 88
Depreciation (278) (278) (245)
Other 312 322 278
-------- -------- --------
$532 $466 $633
======== ======== ========
The Company has settled its United States Federal income tax returns with the
Internal Revenue Service through 1991.
United States Federal income taxes have not been provided on substantially
all of the unremitted earnings of non-U.S. subsidiaries, since it is
management's practice and intent to reinvest such earnings in the operations
of these subsidiaries. The total amount of the net unremitted earnings of
non-U.S. subsidiaries was approximately $3.2 billion at December 31, 1998.
Note 7 INVENTORIES
- -------------------
December 31,
---------------------------
1998 1997 1996
------- ------- -------
Finished goods $1,209 $ 1,153 $ 994
Work in process 236 197 223
Raw and packaging materials 428 449 452
------- ------- -------
$1,873 $1,799 $1,669
======= ======= =======
42
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 8 PROPERTY, PLANT AND EQUIPMENT
- -------------------------------------
December 31,
-----------------------------------
1998 1997 1996
-------- -------- --------
Land $ 176 $ 180 $ 160
Buildings 2,875 2,631 2,427
Machinery, equipment and fixtures 3,885 3,646 3,626
Construction in progress 572 544 433
-------- -------- --------
7,508 7,001 6,646
Less accumulated depreciation 3,079 2,845 2,682
-------- -------- --------
$4,429 $4,156 $3,964
======== ======== ========
Note 9 SHORT-TERM BORROWINGS AND LONG-TERM DEBT
- ------------------------------------------------
Included in short-term borrowings were amounts due to banks, primarily
foreign banks, of $272 million, $524 million and $440 million at December 31,
1998, 1997 and 1996, respectively, and current installments of long-term debt
of $43 million, $19 million and $73 million at December 31, 1998, 1997, and
1996, respectively. Also included in short-term borrowings at December 31,
1998, was $167 million of commercial paper outstanding issued by a subsidiary
of the Company. This commercial paper has original maturities not exceeding
270 days and is denominated in ECUs (Euros) and U.S. dollars. The average
interest rate on short-term borrowings was 8.84% and on current installments
of long-term debt was 6.56% at December 31, 1998.
During 1998, the Company entered into two credit facilities, aggregating
$500 million, with a syndicate of lenders as support for its commercial paper
program. The credit facilities consist of a $250 million, 364-day credit
facility, which may be renewed annually with the consent of the lenders for
an additional 364-day period and a $250 million, 5-year credit facility,
extendible at each anniversary date with the consent of the lenders. There
were no borrowings outstanding under the credit facilities at December 31,
1998. In addition, the Company has unused short-term lines of credit with
foreign banks of $494 million.
43
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The components of long-term debt were:
December 31,
--------------------------
1998 1997 1996
------ ------- -------
6.80% Debentures, due in 2026 $ 345 $ 344 344
7.15% Debentures, due in 2023 344 343 343
6.875% Debentures, due in 2097 296 296 -
1.73% & 2.14% Yen Notes, due in 2003 & 2005 109 - -
Various Rate Yen Term Loans, due in 2003 71 70 76
3.51% Deutsche Mark Interest on Yen Principal
Term Loan, due in 2005 50 49 53
5.75% Industrial Revenue Bonds, due in 2024 34 34 34
5.00% Yen Term Loan, due in 2000 29 29 31
Various Rate Term Loans, due in 1999 - 26 -
2.83% Yen Term Loan, due in 2002 25 24 27
Capitalized Leases 29 26 19
Other, 5.69% to 10.25%,due in varying
amounts through 2014 32 38 39
------ ------- -------
$1,364 $1,279 $966
====== ======= =======
Note 10 STOCKHOLDERS' EQUITY
- -----------------------------
On December 1, 1998, the Company's Board of Directors authorized a two-for-one
split of its common stock, effective February 1999. Per common share amounts
in the accompanying consolidated financial statements give effect to the stock
split. The Board of Directors also recommended that an amendment be
considered for stockholder approval at the annual meeting of stockholders to
increase the number of authorized shares of common stock from 2.25 billion
shares to 4.5 billion shares.
44
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Changes in capital shares and capital in excess of par value of stock were:
Capital in
Excess of Par
Shares of Common Stock Value of Stock
---------------------------- (dollars in
Issued Treasury millions)
------------- ----------- --------------
Balance, December 31, 1995 540,185,639 34,953,311 $ 375
Effect of two-for-one
stock split 540,185,639 34,953,311 (54)
Issued pursuant to stock plans,
options and rights 221,032 (6,623,272) (25)
Conversions of preferred stock 31,960 - -
Purchases - 18,523,200 -
Other 1,871,746 - 86
------------- ----------- ------
Balance, December 31, 1996 1,082,496,016 81,806,550 382
Issued pursuant to stock plans
and options 738,151 (8,514,867) 162
Conversions of preferred stock 19,536 - -
Purchases - 16,777,700 -
------------- ----------- ------
Balance, December 31, 1997 1,083,253,703 90,069,383 544
Effect of two-for-one
stock split 1,083,253,703 90,069,383 (108)
Issued pursuant to stock plans
and options 16,931,302 (11,189,998) 700
Conversions of preferred stock 21,230 - -
Purchases - 30,601,764 -
Other 4,856,870 - (61)
------------- ----------- ------
Balance, December 31, 1998 2,188,316,808 199,550,532 $1,075
============= =========== ======
Each share of the Company's preferred stock is convertible into 16.96 shares
of common stock and is callable at the Company's option. The reductions in
the number of issued shares of preferred stock in 1998, 1997 and 1996 were
due to conversions into shares of common stock.
Dividends per common share were $.78 in 1998, $.76 in 1997 and $.75 in 1996.
45
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Stock Compensation Plans
- ------------------------
Under the Company's 1997 Stock Incentive Plan, officers, directors and key
employees may be granted options to purchase the Company's common stock at
no less than 100% of the market price on the date the option is granted.
Options generally become exercisable in installments of 25% per year on each
of the first through the fourth anniversaries of the grant date and have a
maximum term of 10 years. Additionally, the plan provides for the granting
of stock appreciation rights whereby the grantee may surrender exercisable
options and receive common stock and/or cash measured by the excess of the
market price of the common stock over the option exercise price. The plan
also provides for the granting of performance-based stock options to certain
key executives.
Under the terms of the 1997 Stock Incentive Plan, as amended, additional
shares are authorized in the amount of 0.9% of the outstanding shares per
year through 2002. The plan incorporates the Company's long-term performance
awards.
In addition, the 1997 Stock Incentive Plan provides for the granting of up
to 20,000,000 shares of common stock to key employees, subject to restrictions
as to continuous employment except in the case of death or normal retirement.
Restrictions generally expire over a five-year period from date of grant.
Compensation expense is recognized over the restricted period. At December 31,
1998, a total of 2,536,364 restricted shares were outstanding under the plan.
Under the TeamShare Stock Option Plan, all full-time employees, excluding key
executives, meeting certain years of service requirements are granted options
to purchase the Company's common stock at the market price on the date the
options are granted. The Company has authorized 60,000,000 shares for
issuance under the plan. As of December 31, 1998, a total of 59,482,400
options were granted under the plan with generally 800 options granted to
each eligible employee. Individual grants generally become exercisable on or
after the third anniversary of the grant date. As of December 31, 1998,
18,841,100 shares have been exercised under the plan.
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for
its plans. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans other than for restricted stock and
performance-based awards. Had compensation cost for the Company's other stock
option plans been determined based upon the fair value at the grant date for
awards under these plans consistent with the methodology prescribed under
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation, the Company's net income and earnings per share
would have been reduced by approximately $136 million, or $.07 per common
share, basic and diluted, in 1998, $85 million, or $.04 per common share,
basic and diluted, in 1997 and $55 million, or $.03 per common share, basic
and diluted, in 1996. The fair value of the options granted during 1998, 1997
and 1996 was estimated as $11.80 per common share, $6.41 per common share and
$4.26 per common share, respectively, on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
46
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
1998 1997 1996
------- ------- -------
Dividend yield 3.1% 4.3% 4.3%
Volatility 18.2% 19.3% 17.0%
Risk-free interest rate 6.3% 6.5% 6.5%
Assumed forfeiture rate 3.0% 3.0% 3.0%
Expected life (years) 7 7 7
Stock option transactions were:
Weighted
Shares of Common Stock Average
-------------------------- Exercise Price
Available Under of Shares
for Option Plan Under Plan
------------- ----------- --------------
Balance, December 31, 1995 11,813,104 32,254,538 $59.76
Effect of two-for-one stock split 11,813,104 32,254,538 -
Authorized 9,094,182 - -
Granted (16,179,560) 16,179,560 46.92
Exercised - (8,863,078) 27.62
Lapsed 1,788,528 (1,796,826) 33.00
------------- -----------
Balance, December 31, 1996 18,329,358 70,028,732 34.27
Authorized 9,006,205 - -
Granted (11,347,801) 11,347,801 65.77
Exercised - (12,787,811) 30.34
Lapsed 2,284,788 (2,287,820) 45.63
------------- -----------
Balance, December 31, 1997 18,272,550 66,300,902 40.08
Effect of two-for-one stock split 18,272,550 66,300,902 -
Authorized 17,877,318 - -
Granted (35,498,350) 35,498,350 51.40
Exercised - (36,697,942) 16.30
Lapsed 2,382,746 (2,382,746) 34.27
------------- -----------
Balance, December 31, 1998 21,306,814 129,019,466 $29.47
============= ===========
47
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The following table summarizes information concerning currently outstanding
and exercisable options:
Options Outstanding Options Exercisable
----------------------------------- ----------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- ------------ ----------- ----------- -------- ----------- ---------
$10 - $ 20 49,284,336 4.96 $15.51 45,862,418 $15.51
$20 - $ 30 29,702,906 7.26 24.39 11,330,106 23.10
$30 - $ 40 13,915,674 8.18 33.68 3,938,994 33.67
$40 - $ 50 3,709,050 8.89 44.65 79,080 43.45
$50 - up 32,407,500 9.18 51.82 - -
----------- ----------
129,019,466 61,210,598
-========== ==========
At December 31, 1998, 199,155,370 shares of common stock were reserved for
issuance pursuant to stock plans, options and conversions of preferred stock.
Note 11 FINANCIAL INSTRUMENTS
- ------------------------------
Foreign exchange option contracts and, to a lesser extent, forward contracts,
are used to hedge anticipated transactions.
The Company has exposures to net foreign currency denominated assets and
liabilities, which approximated $2,310 million, $2,070 million and $1,640
million at December 31, 1998, 1997 and 1996, respectively, primarily in
Deutsche marks, French francs, Italian lire and Japanese yen. The Company
mitigates the effect of these exposures through third-party borrowings.
The risk of loss associated with the types of foreign exchange option
contracts entered into by the Company is limited to premium amounts paid for
the option contracts. Premiums are deferred in Prepaid Expenses and amortized
in the consolidated statement of earnings (in the Other caption) over the
time frame of the underlying hedged transaction. Gains and losses related
to the option contracts, which qualify as hedges of foreign currency
anticipated transactions, are recognized in earnings when the hedged
transactions are recognized. Gains and losses on foreign exchange forward
contracts are recognized in the basis of the underlying transaction being
hedged.
48
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The notional amounts of the Company's foreign exchange option contracts at
December 31, 1998, 1997 and 1996 were $1,307 million, $1,279 million and
$1,172 million, respectively.
The Company does not anticipate any material adverse effect on its financial
position resulting from its involvement in these instruments, nor does it
anticipate non-performance by any of its counterparties.
At December 31, 1998, 1997 and 1996, the carrying value of all financial
instruments, both short- and long-term, approximated their fair values.
Note 12 LEASES
- ---------------
Minimum rental commitments under all noncancelable operating leases, primarily
real estate, in effect at December 31, 1998 were:
Years Ending December 31,
- -------------------------
1999 $119
2000 89
2001 74
2002 50
2003 37
Later years 154
------
Total minimum payments 523
Less total minimum sublease rentals 126
------
Net minimum rental commitments $397
======
Operating lease rental expense (net of sublease rental income of $27 million
in 1998, $26 million in 1997 and $27 million in 1996) was $105 million in
1998, $124 million in 1997 and $129 million in 1996.
49
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 13 SEGMENT INFORMATION
- ----------------------------
The major product categories for each business segment are as follows:
Year Ended December 31,
--------------------------
1998 1997 1996
------- ------ ------
Medicines
Cardiovascular $3,210 $2,905 $2,816
Anti-cancer 2,925 2,420 1,971
Anti-infective 2,412 2,235 1,856
Central nervous system 1,099 955 760
Analgesics 722 739 718
Beauty Care
Hair care 1,179 794 586
Haircolor 894 841 812
Nutritionals
Infant formulas 1,203 1,219 1,201
Medical Devices
Orthopaedic implants 596 615 644
Ostomy 464 451 452
Inter-area sales, which are usually billed at or above manufacturing costs, by
geographic area, were:
Year Ended December 31,
----------------------------
1998 1997 1996
-------- ------- -------
United States $1,434 $1,370 $1,210
Europe, Mid-East and Africa 843 762 692
Other Western Hemisphere 29 32 59
Pacific 16 24 25
-------- ------- -------
Total inter-area eliminations $2,322 $2,188 $1,986
======== ======= =======
The Medicines Segment represents pharmaceuticals and consumer medicines
businesses. In addition, the segment information reflects certain internal
organizational changes made in 1998. Prior year data has been restated
accordingly.
50
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Included in earnings before taxes of each segment is a cost of capital charge.
The offset to the cost of capital charge is included in Other. In addition,
Other principally consists of interest income, interest expense and certain
administrative expenses, and in 1996, the cost of certain of the Company's
productivity programs. In 1998, Other includes the gain on sale of businesses
of $201 million and the provision for restructuring of $201 million. In 1997,
Other includes the gain on sale of a business of $225 million and the
provision for restructuring of $225 million. Other assets principally consist
of cash and cash equivalents, time deposits and marketable securities, and
certain other assets.
BUSINESS SEGMENTS Net Sales Earnings Before Taxes
- ----------------- ----------------------- ----------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------ ------ ------
Medicines $12,573 $11,211 $ 9,848 $3,491 $3,124 $2,758
Beauty Care 2,305 1,895 1,663 361 280 240
Nutritionals 1,759 1,793 1,694 376 370 357
Medical Devices 1,647 1,802 1,860 338 352 418
------- ------- ------- ------ ------ ------
Net sales and earnings
before taxes $18,284 $16,701 $15,065 $4,566 $4,126 $3,773
======= ======= ======= ====== ====== ======
GEOGRAPHIC AREAS Net Sales Earnings Before Taxes
- ---------------- ------------------------ ------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------ ------ ------
United States $12,527 $11,014 $ 9,661 $3,278 $2,700 $2,512
Europe, Mid-East and
Africa 4,873 4,653 4,520 1,139 1,109 988
Other Western Hemisphere 1,749 1,586 1,307 223 225 145
Pacific 1,457 1,636 1,563 2 52 69
Inter-area eliminations (2,322) (2,188) (1,986) (76) 40 59
------- ------ ------ ------ ----- -----
Net sales and earnings
before taxes $18,284 $16,701 $15,065 4,566 4,126 3,773
======= ======= =======
Special Charge (800) - -
Other 502 356 240
------ ------ ------
Earnings before taxes $4,268 $4,482 $4,013
====== ====== ======
51
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
BUSINESS SEGMENTS Year-End Assets
- ----------------- -------------------------
1998 1997 1996
------- ------- -------
Medicines $ 8,545 $ 8,278 $ 7,548
Beauty Care 1,058 743 652
Nutritionals 1,094 1,021 910
Medical Devices 1,174 1,225 1,376
------- ------- -------
Identifiable segment assets $11,871 $11,267 $10,486
======= ======= =======
GEOGRAPHIC AREAS Year-End Assets
- ---------------- -------------------------
1998 1997 1996
------- ------- -------
United States $ 6,897 $ 6,545 $ 5,925
Europe, Mid-East and Africa 3,540 3,430 3,376
Other Western Hemisphere 1,238 1,063 741
Pacific 944 989 1,023
Inter-area eliminations (748) (760) (579)
------- ------- -------
Identifiable geographic assets 11,871 11,267 10,486
Other assets 4,401 3,710 4,199
------- ------- -------
Total assets $16,272 $14,977 $14,685
======= ======= =======
Capital
BUSINESS SEGMENTS Expenditures Depreciation
- ----------------- ------------------ ----------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
Medicines $575 $573 $434 $290 $265 $252
Beauty Care 71 53 67 29 20 26
Nutritionals 59 55 43 38 43 45
Medical Devices 33 24 36 36 46 43
---- ---- ---- ---- ---- ----
Business segment total 738 705 580 393 374 366
Other 50 62 21 20 23 21
---- ---- ---- ---- ---- ----
Total $788 $767 $601 $413 $397 $387
==== ==== ==== ==== ==== ====
52
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 14 RETIREMENT PLANS
- -------------------------
The Company and certain of its subsidiaries have defined benefit pension plans
and defines contribution plans for regular full-time employees. The principal
pension plan is the Bristol-Myers Squibb Retirement Income Plan. The
Company's funding policy is to contribute amounts to provide for current
service and to fund past service liability. Plan benefits are primarily based
on years of credited service and on the participants' compensation. Plan
assets principally consist of equity and fixed income securities.
Cost for the Company's defined benefit plans included the following components:
Year Ended December 31,
------------------------
1998 1997 1996
------ ------ ------
Service cost -- benefits earned during the year $ 132 $ 135 $ 127
Interest cost on projected benefit obligation 207 203 191
Expected earnings on plan assets (258) (231) (213)
Net amortization and deferral (1) 10 25
------ ------ ------
Net pension expense $ 80 $ 117 $ 130
====== ====== ======
The weighted average actuarial assumptions for the Company's pension plans
were as follows:
December 31,
------------------------
1998 1997 1996
------ ------ ------
Discount rate 7.0% 7.5% 7.8%
Compensation increase 4.3% 4.5% 4.8%
Long-term rate of return 10.0% 10.0% 10.0%
53
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Changes in benefit obligation and plan assets were:
Year Ended December 31,
-----------------------------
1998 1997 1996
-------- ------- --------
Benefit obligation at beginning of year $2,928 $2,734 $2,689
Service cost - benefits earned during the year 132 135 127
Interest cost on projected benefit obligation 207 203 191
Actuarial (gains) and losses 160 45 (118)
Benefits paid (211) (189) (155)
-------- ------- --------
Benefit obligation at end of year $3,216 $2,928 $2,734
======== ======= ========
Fair value of plan assets at beginning of year 2,949 2,596 2,307
Actual earnings on plan assets 359 504 359
Employer contribution 40 38 85
Benefits paid (211) (189) (155)
-------- ------- --------
Fair value of plan assets at end of year $3,137 $2,949 $2,596
======== ======= ========
December 31,
-----------------------------
1998 1997 1996
-------- ------- --------
Plan assets in excess of (less than)
projected benefit obligation $ (79) $ 21 $ (138)
Unamortized net assets at adoption (33) (47) (62)
Unrecognized prior service cost 48 56 67
Unrecognized net losses 87 13 235
-------- ------- --------
Net amount recognized $ 23 $ 43 $ 102
======== ======= ========
Amounts recognized in the consolidated balance
sheet consist of:
Prepaid benefit cost 187 194 241
Accrued benefit liability (190) (173) (165)
Other asset 26 22 26
-------- ------- --------
Net amount recognized $ 23 $ 43 $ 102
======== ======= ========
54
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
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 $288 million, $230 million and
$40 million, respectively, as of December 31, 1998, $271 million, $208 million
and $37 million, respectively, as of December 31, 1997, and $272 million,
$202 million and $38 million, respectively, as of December 31, 1996. This
is primarily attributable to an unfunded benefit equalization plan.
In 1998, the increase in total projected benefit obligation was due to a lower
discount rate.
The principal defined contribution plan is the Bristol-Myers Squibb Savings
and Investment Program. The Company's contribution is based on employee
contributions and the level of company match. Company contributions to the
plan were $45 million in 1998, $40 million in 1997 and $39 million in 1996.
Note 15 POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS
- ---------------------------------------------------------
The Company provides comprehensive medical and group life benefits to
substantially all U.S. retirees who elect to participate in the Company's
comprehensive medical and group life plans. The medical plan is contributory.
Contributions are adjusted periodically and vary by date of retirement and the
original retiring company. The life insurance plan is non-contributory. Plan
assets principally consist of equity securities and fixed income securities.
Cost for the Company's postretirement benefit plans included the following
components:
Year Ended
December 31,
---------------------------
1998 1997 1996
------- ------- -------
Service cost -- benefits earned during the year $ 8 $ 9 $ 9
Interest cost on accumulated postretirement
benefit obligation 35 36 34
Expected earnings on plan assets (11) (9) (8)
Net amortization and deferral (3) (2) 1
------- ------- -------
Net postretirement benefit expense $ 29 $ 34 $ 36
======= ======= =======
55
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The weighted average actuarial assumptions for the Company's postretirement
benefit plans were as follows:
December 31,
------------------------
1998 1997 1996
------ ------ ------
Discount rate 7.0% 7.5% 7.8%
Long-term rate of return 10.0% 10.0% 10.0%
Changes in benefit obligation and plan assets were:
Year Ended December 31,
-----------------------------
1998 1997 1996
------- ------- -------
Benefit obligation at beginning of year $ 495 $ 482 $ 554
Service cost - benefits earned during the year 8 9 9
Interest cost on accumulated post-retirement
benefit obligation 35 36 34
Plan participants' contributions 2 2 2
Plan amendments (1) - -
Acquisition - - 2
Actuarial (gains) and losses 6 (2) (87)
Benefits paid (38) (32) (32)
------- ------- -------
Benefit obligation at end of year $ 507 $ 495 $ 482
======= ======= =======
Fair value of plan assets at beginning of year $ 113 $ 89 $ 74
Actual earnings on plan assets 15 20 13
Employer contribution 36 34 32
Plan participants' contributions 2 2 2
Benefits paid (38) (32) (32)
------- ------- -------
Fair value of plan assets at end of year $ 128 $ 113 $ 89
======= ======= =======
56
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
December 31,
--------------------------
1998 1997 1996
------- ------- --------
Accumulated portretirement benefit obligation
In excess of plan assets $ (379) $ (382) $ (393)
Unrecognized prior service cost 3 4 5
Unrecognized net earnings (60) (65) (56)
------- ------- --------
Accrued postretirement benefit expense $ (436) $ (443) $ (444)
======= ======= ========
For measurement purposes, an annual rate of increase in the per capita cost
of covered health care benefits of 7.2% for participants under age 65 and
6.7% for participants age 65 and over was assumed for 1999; the rate was
assumed to decrease gradually to 4.75% in 2007 and to remain at that level
thereafter.
A one-percentage-point change in assumed health care cost trend rates would
have the following effects:
1-Percentage- 1-Percentage-
Point Increase Point Decrease
-------------- --------------
Effect on the aggregate of the service
and interest cost Components of net
postretirement benefit expense $ 1 $ (1)
Effect on the accumulated postretirement
benefit obligation $ 22 $ (20)
In 1998, the increase in total benefit obligation was due to a lower
discount rate.
Note 16 CONTINGENCIES
- ----------------------
Various lawsuits, claims and proceedings of a nature considered normal to its
businesses are pending against the Company and certain of its subsidiaries.
The most significant of these are described below. Reference is made to
Item 3 Legal Proceedings in Part 1 of this Form 10-K Annual Report.
Breast Implant Litigation
- -------------------------
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 polyurethane-covered breast implants and smooth-walled
breast implants formerly manufactured by MEC or a related company. Of the
more than 90,000 claims or potential claims against the Company in direct
57
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
lawsuits or through registration in the nationwide class action settlement
approved by the Federal District Court in Birmingham, Alabama (the Revised
Settlement), most have been dealt with through the Revised Settlement, other
settlements, or trial. It is expected that as of January 1, 1999, the
Company's contingent liability in respect of breast implant claims will be
limited to residual unpaid Revised Settlement obligations and to roughly 6,000
remaining opt-outs who have pursued or may pursue their claims in court.
As of December 31, 1998, approximately 15,000 United States and 1,300 foreign
breast implant recipients were plaintiffs in lawsuits pending in federal and
state courts in the United States and in certain courts in Canada and
Australia. These figures include the claims of plaintiffs that are in the
process of being settled and/or dismissed. In these lawsuits, about 10,200
U.S. and 400 foreign plaintiffs opted out of the Revised Settlement. The
lawsuits of the 4,800 U.S. plaintiffs who did not opt out are expected to be
dismissed since these plaintiffs are among the estimated 74,000 women with MEC
implants who chose to participate in the nationwide settlement. Of the
remaining opt-out plaintiffs, some have claims based upon products that were
not manufactured and sold by MEC; many others have claims that are in the
process of being settled. Under the terms of the Revised Settlement,
additional opt-outs are expected to be minimal since the deadline for U.S.
class members to opt out has passed. In addition, the Company's remaining
obligations under the Revised Settlement Program are limited because most
payments to "Current Claimants" already have been made, no additional
"Current Claims" may be filed without court approval, and because payments
of claims to so-called "Other Registrants" and "Late Registrants" are limited
by the terms of the Revised Settlement. Separate class action settlements
have been approved in the provincial courts of Ontario and Quebec, and an
agreement has been reached under which other foreign breast implant recipients
may settle their claims. The Company believes it will be able to address
remaining opt-out claims as well as expected remaining obligations under
the Revised Settlement Program within its reserves described below.
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 cases.
The charge consisted of $1.5 billion for potential liabilities and expenses,
offset by $1.0 billion of expected insurance proceeds. In the fourth quarters
of 1994 and 1995, the Company recorded additional special charges of $750
million before taxes ($488 million after taxes) and $950 million before taxes
($590 million after taxes), respectively, related to breast implant product
liability claims. In the fourth quarter of 1998, the Company recorded an
additional special charge to earnings in the amount of $800 million before
taxes and increased its insurance receivable in the amount of $100 million,
resulting in a net charge to earnings of $433 million after taxes in respect
of breast implant product liability claims. At December 31, 1998, 1997 and
1996 the amount of insurance recoverable was $523 million, $619 million and
$853 million, respectively, and included in current and other liabilities
for product liability claims was $1,121 million, $1,036 million and $1,831
million, respectively.
Prescription Drug Litigation
- ----------------------------
As of December 31, 1998, the Company is a defendant in over 100 actions
brought against the Company and more than 30 other pharmaceutical
manufacturers, drug wholesalers and pharmacy benefit managers in various
federal district courts by certain chain drugstores, supermarket chains
and independent drug stores, which opted out of a nationwide class (previously
settled by the Company) and are suing individually. These cases have been
coordinated for pretrial purposes and all seek treble damages and injunctive
relief on account of alleged antitrust violations in the pricing and marketing
of brand name prescription drugs. Cases brought by retail pharmacies in state
court under state law alleging similar grounds are pending in California,
Alabama and Mississippi. Purported class actions, some
58
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
purportedly multistate in reach, brought by consumers in state court under
state law alleging similar grounds have been settled, subject to court
approval, in California and remain pending in Alabama and Tennessee. In the
fourth quarter of 1998, the Company recorded a special charge to earnings in
the amount of $100 million before taxes ($62 million after taxes) in respect
of this prescription drug litigation. While it is not possible to predict
with certainty the outcome of these cases, it is the opinion of management
that they will not have a material adverse effect on the Company's operating
results, liquidity or consolidated financial position.
59
<PAGE>
Note 17 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- -----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ------
1998:
Net Sales $4,446 $4,430 $4,523 $4,885 $18,284
Gross Profit 3,294 3,224 3,332 3,578 13,428
Net Earnings 927 835 966 413 3,141
Earnings Per Common Share
Basic .47 .42 .49 .21 1.58
Diluted .46 .41 .47 .20 1.55
1997:
Net Sales $4,045 $4,064 $4,151 $4,441 $16,701
Gross Profit 2,967 2,967 3,041 3,262 12,237
Net Earnings 810 738 855 802 3,205
Earnings Per Common Share
Basic .41 .37 .43 .40 1.61
Diluted .40 .36 .42 .39 1.57
* In 1998, the first quarter results included a gain on the sale of a
business of $125 million ($78 million after taxes) and a provision for
restructuring of $125 million ($78 million after taxes). The second quarter
results included a gain on the sale of businesses of $76 million ($47 million
after taxes) and a provision for restructuring of $76 million ($47 million
after taxes). The fourth quarter results included a charge of $800 million
($495 million after taxes; or $.25 per common share - basic and $.24 per
common share - diluted) for litigation of breast implant and prescription
drug pricing cases, offset by expected insurance recoveries.
* In 1997, the fourth quarter results included a gain on the sale of a
business of $225 million ($140 million after taxes) and a provision for
restructuring of $225 million ($140 million after taxes).
60
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
To the Board of Directors
and Stockholders of
Bristol-Myers Squibb Company
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 63 present fairly, in all
material respects, the financial position of Bristol-Myers Squibb Company
and its subsidiaries at December 31, 1998, 1997 and 1996, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles. 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 of these statements in accordance with generally accepted
auditing standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
11 Madison Avenue
New York, New York 10010
January 20, 1999
61
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
--------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Reference is made to the Proxy Statement for the Annual Meeting of
Stockholders on May 4, 1999 with respect to the Directors of the Registrant
which is incorporated herein by reference and made a part hereof in response
to the information required by Item 10.
(b) The information required by Item 10 with respect to the Executive Officers
of the Registrant has been included in Part IA of this Form 10-K Annual Report
in reliance on General Instruction G of Form 10-K and Instruction 3 to Item
401(b) of Regulation S-K.
Item 11. EXECUTIVE COMPENSATION.
Reference is made to the Proxy Statement for the Annual Meeting of
Stockholders on May 4, 1999 with respect to Executive Compensation which is
incorporated herein by reference and made a part hereof in response to the
information required by Item 11.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Reference is made to the Proxy Statement for the Annual Meeting of
Stockholders on May 4, 1999 with respect to the security ownership of
certain beneficial owners and management which is incorporated herein by
reference and made a part hereof in response to information required by
Item 12.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the Proxy Statement for the Annual Meeting of
Stockholders on May 4, 1999 with respect to certain relationships and
related transactions which is incorporated herein by reference and made
a part hereof in response to the information required by Item 13.
62
<PAGE>
PART IV
--------
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Page
Number
----------
(a)
1. Financial Statements 33-37
Notes to Consolidated Financial Statements 38-60
Report of Independent Accountants 61
2. Financial Statement Schedules
Schedule Page
Number Number
--------- ----------
Valuation and qualifying accounts II S-1
All other schedules not included with this additional financial data are
omitted because they are not applicable or the required information is
included in the financial statements or notes thereto.
3. Exhibit List
The Exhibits listed below are identified by numbers corresponding to the
Exhibit Table of Item 601 of Regulation S-K. The Exhibits designated by
two asterisks (**) are management contracts or compensatory plans or
arrangements required to be filed pursuant to this Item 14. Unless otherwise
indicated, all Exhibits are part of Commission File Number 1-1136.
3a. Restated Certificate of Incorporation of Bristol-Myers Squibb Company
(filed as Exhibit 4a to Registrant's Registration Statement on Form S-3,
Registration Statement No. 33-33682, dated March 7, 1990, as amended
through May 6, 1997).
3b. Bylaws of Bristol-Myers Squibb Company, as amended through November 3, 1998
(incorporated herein by reference to Exhibit 3(b) to Form 10-Q for the
quarterly period ended September 30, 1998).
4a. Letter of Agreement dated March 28, 1984 (incorporated herein by reference
to Exhibit 4 to Form 10-K for the fiscal year ended December 31, 1983).
4b. Indenture, dated as of June 1, 1993, between Bristol-Myers Squibb Company
and The Chase Manhattan Bank (National Association), as trustee
(incorporated herein by reference to Exhibit 4.1 to the Form 8-K dated
May 27, 1993, and filed on June 3, 1993).
4c. Form of 7.15% Debenture Due 2023 of Bristol-Myers Squibb Company
(incorporated herein by reference to Exhibit 4.2 to the Form 8-K dated
May 27, 1993, and filed on June 3, 1993).
63
<PAGE>
4d. Form of 6.80% Debenture Due 2026 of Bristol-Myers Squibb Company
(incorporated herein by reference to Exhibit 4e to the Form 10-K for the
fiscal year ended December 31, 1996).
4e. Form of 6.875% Debenture Due 2097 of Bristol-Myers Squibb Company
(incorporated herein by reference to Exhibit 4f to the Form 10-Q for the
quarterly period ended September 30, 1997).
4f. Five Year Competitive Advance and Revolving Credit Facility Agreement
dated as of March 17, 1998 among Bristol-Myers Squibb Company, the
Borrowing Subsidiaries (as defined in the Agreement), the Lenders listed
in Schedule 2.1 to the Agreement, The Chase Manhattan Bank as
Administrative Agent and Citibank, N.A., as Administrative Agent
(incorporated herein by reference to Exhibit 4f to the Form 10-K for the
fiscal year ended December 31, 1997).
4g. 364-Day Competitive Advance and Revolving Credit Facility agreement dated
as of March 17, 1998 among Bristol-Myers Squibb Company, the Borrowing
Subsidiaries (as defined in the Agreement), the Lenders listed in Schedule
2.1 to the Agreement, The Chase Manhattan Bank as Administrative Agent and
Citibank, N.A., as Administrative Agent (incorporated herein by reference
to Exhibit 4g to the Form 10-K for the fiscal year ended December 31,
1997).
**10a. Bristol-Myers Squibb Company 1997 Stock Incentive Plan, effective as of
May 6, 1997 and as amended effective November 3, 1998, filed herewith.
**10b. Bristol-Myers Squibb Company Executive Performance Incentive Plan
(incorporated herein by reference to Exhibit 10b to the Form 10-K for
the fiscal year ended December 31, 1996).
**10c. Bristol-Myers Squibb Company 1983 Stock Option Plan, as amended and
restated as of January 1, 1997, as amended November 3, 1998, filed
herewith.
**10d. Squibb Corporation 1982 Option, Restricted Stock and Performance Unit
Plan, as amended (incorporated herein by reference to Exhibit 10b to
the Form 10-K for the fiscal year ended December 31, 1993).
**10e. Squibb Corporation 1986 Option, Restricted Stock and Performance Unit
Plan, as amended (as adopted, incorporated herein by reference to
Exhibit 10k to the Squibb Corporation Form 10-K for the fiscal year
ended December 31, 1988, File No. 1-5514; as amended effective July 1,
1993, and incorporated herein by reference to Exhibit 10c to the Form
10-K for the fiscal year ended December 31, 1993).
**10f. Bristol-Myers Squibb Company Performance Incentive Plan, as amended
(as adopted, incorporated herein by reference to Exhibit 2 to the Form
10-K for the fiscal year ended December 31, 1978; as amended as of
January 8, 1990, incorporated herein by reference to Exhibit 19b to the
Form 10-K for the fiscal year ended December 31, 1990; as amended on
April 2, 1991, incorporated herein by reference to Exhibit 19b to the
Form 10-K for the fiscal year ended December 31, 1991; as amended
effective January 1, 1994, incorporated herein by reference to Exhibit
10d to the Form 10-K for the fiscal year ended December 31, 1993; and
as amended effective January 1, 1994, incorporated herein by reference
to Exhibit 10d to the Form 10-K for the fiscal year ended December 31,
1994).
64
<PAGE>
**10g. Benefit Equalization Plan of Bristol-Myers Squibb Company and its
Subsidiary or Affiliated Corporations Participating in the Bristol-Myers
Squibb Company Retirement Income Plan or the Bristol-Myers Squibb Puerto
Rico, Inc. Retirement Income Plan, as amended (as amended and restated
as of January 1, 1993, as amended effective October 1, 1993,
incorporated herein by reference to Exhibit 10e to the Form 10-K for
the fiscal year ended December 31, 1993; and as amended effective
February 1, 1995, incorporated herein by reference to Exhibit 10e to
the Form 10-K for the fiscal year ended December 31, 1996).
**10h. Benefit Equalization Plan of Bristol-Myers Squibb Company and its
Subsidiary or Affiliated Corporations Participating in the Bristol-Myers
Squibb Company Savings and Investment Program, as amended (as amended
and restated as of May 1, 1990, incorporated herein by reference to
Exhibit 19d to the Form 10-K for the fiscal year ended December 31,
1990; as amended as of January 1, 1991, incorporated herein by
reference to Exhibit 19g to the Form 10-K for the fiscal year ended
December 31, 1990; as amended as of January 1, 1991, incorporated herein
by reference to Exhibit 19e to the Form 10-K for the fiscal year ended
December 31, 1991, as amended as of October 1, 1994, incorporated herein
by reference to Exhibit 10f to the Form 10-K for the fiscal year ended
December 31, 1994).
**10i. Squibb Corporation Supplementary Pension Plan, as amended (as
previously amended and restated, incorporated herein by reference to
Exhibit 19g to the Form 10-K for the fiscal year ended December 31,
1991; as amended as of September 14, 1993, and incorporated herein by
reference to Exhibit 10g to the Form 10-K for the fiscal year ended
December 31, 1993).
**10j. Bristol-Myers Squibb Company Restricted Stock Award Plan, as amended
(as adopted on November 7, 1989, incorporated herein by reference to
Exhibit 10t to the Form 10-K for the fiscal year ended December 31,
1989; as amended on December 4, 1990, incorporated herein by reference
to Exhibit 19a to the Form 10-K for the fiscal year ended December 31,
1990; as amended effective July 1, 1993, incorporated herein by
reference to Exhibit 10h to the Form 10-K for the fiscal year ended
December 31, 1993; as amended effective December 6, 1994, incorporated
herein by reference to Exhibit 10h to the Form 10-K for the fiscal year
ended December 31, 1994).
**10k. Bristol-Myers Squibb Company Retirement Income Plan for Non-Employee
Directors, as amended to March 5, 1996 (incorporated herein by
reference to Exhibit 10k to the Form 10-K for the fiscal year ended
December 31, 1996).
**10l. Bristol-Myers Squibb Company 1987 Deferred Compensation Plan for Non-
Employee Directors, as amended to January 13, 1998, (incorporated
herein by reference to Exhibit 10l to the Form 10-K for the fiscal year
ended December 31, 1997).
**10m. Bristol-Myers Squibb Company Non-Employee Directors' Stock Option Plan,
as amended (as approved by the Stockholders on May 1, 1990, incorporated
herein by reference to Exhibit 28 to Registration Statement No. 33-38587
on Form S-8; as amended May 7, 1991, incorporated herein by reference to
Exhibit 19c to the Form 10-K for the fiscal year ended December 31,
1991), as amended January 12, 1999, filed herewith.
65
<PAGE>
**10n. Squibb Corporation Deferral Plan for Fees of Outside Directors, as
amended (as adopted, incorporated herein by reference to Exhibit 10e to
the Squibb Corporation Form 10-K for the fiscal year ended December 31,
1987, File No. 1-5514; as amended effective December 31, 1991,
incorporated herein by reference to Exhibit 10m to the Form 10-K for the
fiscal year ended December 31, 1992).
**10o. Amendment to all of the Company's plans, agreements, legal documents and
other writings, pursuant to action of the Board of Directors on
October 3, 1989, to reflect the change of the Company's name to Bristol-
Myers Squibb Company (incorporated herein by reference to Exhibit 10v to
the Form 10-K for the fiscal year ended December 31, 1989).
**10p. Employment agreement of March 12, 1999 for Charles A. Heimbold, Jr.,
filed herewith.
21. Subsidiaries of the Registrant (filed herewith).
23. Consent of PricewaterhouseCoopers LLP(filed herewith).
27. Bristol-Myers Squibb Company Financial Data Schedule (filed herewith).
99. Additional Exhibit (filed herewith).
(b) Reports on Form 8-K
None.
66
<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.
BRISTOL-MYERS SQUIBB COMPANY
(Registrant)
By /s/ Charles A. Heimbold, Jr.
----------------------------------
Charles A. Heimbold, Jr.
Chairman of the Board and
Chief Executive Officer
March 31, 1999
----------------------------------
Date
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
---------- -------- -------
Chairman of the Board,
Chief Executive Officer
And Director (Principal
/s/ Charles A. Heimbold, Jr. Executive Officer) March 31, 1999
- ------------------------------
(Charles A. Heimbold, Jr.)
Chief Financial Officer
and Senior Vice President
Corporate Staff(Principal
/s/ Michael F. Mee Financial Officer) March 31, 1999
- ------------------------------
(Michael F. Mee)
Controller and Vice President,
Financial Operations,
Corporate Staff (Principal
/s/ Frederick S. Schiff Accounting Officer) March 31, 1999
- ------------------------------
(Frederick S. Schiff)
67
<PAGE>
Signature Title Date
- -------- ------ ------
/s/ Robert E. Allen Director March 31, 1999
- -----------------------------
(Robert E. Allen)
/s/ Lewis B. Campbell Director March 31, 1999
- -----------------------------
(Lewis B. Campbell)
/s/ Vance D. Coffman Director March 31, 1999
- -----------------------------
(Vance D. Coffman)
/s/ Ellen V. Futter Director March 31, 1999
- -----------------------------
(Ellen V. Futter)
/s/ Louis V. Gerstner, Jr. Director March 31, 1999
- -----------------------------
(Louis V. Gerstner, Jr.)
/s/ Laurie H. Glimcher, M.D. Director March 31, 1999
- -----------------------------
(Laurie H. Glimcher, M.D.)
/s/ Leif Johansson Director March 31, 1999
- -----------------------------
(Leif Johansson)
/s/ James D. Robinson III Director March 31, 1999
- -----------------------------
(James D. Robinson III)
/s/ Louis W. Sullivan, M.D. Director March 31, 1999
- -----------------------------
(Louis W. Sullivan, M.D.)
Executive Vice President,
/s/ Kenneth E. Weg and Director March 31, 1999
- ----------------------------
(Kenneth E. Weg)
68
<PAGE>
EXHIBIT INDEX
---------------
The Exhibits listed below are identified by numbers corresponding to the
Exhibit Table of Item 601 of Regulation S-K. The Exhibits designed by two
asterisks (**) are management contracts or compensatory plans or arrangements
required to be filed pursuant to this Item 14. An asterisk (*) in the Page
column indicates that the Exhibit has been previously filed with the Commission
and is incorporated herein by reference. Unless otherwise indicated, all
Exhibits are part of Commission File Number 1-1136.
Exhibit Number and Description Page
------------------------------ -------
3a. Restated Certificate of Incorporation of Bristol-Myers Squibb *
Company (incorporated herein by reference to Exhibit 4a to
Registration Statement No. 33-33682 on Form S-3).
3b. Bylaws of Bristol-Myers Squibb Company, as amended through *
November 3, 1998 (incorporated herein by reference to Exhibit 3(b)
to form 10-Q for the quarterly period ended September 30, 1998).
4a. Letter of Agreement dated March 28, 1984 (incorporated *
herein by reference to Exhibit 4 to Form 10-K for the fiscal
year ended December 31,1983).
4b. Indenture, dated as of June 1, 1993, between Bristol-Myers Squibb *
Company and The Chase Manhattan Bank (National Association),
as trustee (incorporated herein by reference to Exhibit 4.1
to the Form 8-K dated May 27, 1993, and filed on June 3, 1993).
4c. Form of 7.15% Debenture Due 2023 of Bristol-Myers Squibb *
Company (incorporated herein by reference to Exhibit 4.2 to the
Form 8-K dated May 27, 1993, and filed on June 3, 1993).
4d. Form of 6.80% Debenture Due 2026 of Bristol-Myers Squibb *
Company (incorporated herein by reference to Exhibit 4e to the
Form 10-K for the fiscal year ended December 31, 1996).
4e. Form of 6.875% Debenture Due 2097 of Bristol-Myers Squibb *
Company (incorporated herein by reference to Exhibit 4f to the
Form 10-Q for the quarterly period ended September 30, 1997).
69
<PAGE>
Exhibit Number and Description Page
------------------------------ ------
4f. Five Year Competitive Advance and Revolving Credit Facility *
Agreement dated as of March 17, 1998 among Bristol-Myers Squibb
Company, the Borrowing Subsidiaries (as defined in the
Agreement), the Lenders listed in Schedule 2.1 to the Agreement,
The Chase Manhattan Bank as Administrative Agent and
Citibank, N.A., as Administrative Agent.
4g. 364-Day Competitive Advance and Revolving Credit Facility *
Agreement dated as of March 17, 1998 among Bristol-Myers Squibb
Company, the Borrowing Subsidiaries (as defined in the Agreement),
the Lenders listed in Schedule 2.1 to the Agreement, The Chase
Manhattan Bank as Administrative Agent and Citibank, N.A.,
as Administrative Agent.
** 10a. Bristol-Myers Squibb Company 1997 Stock Incentive Plan, E-1-1
effective as of May 6, 1997 and as amended effective
November 3, 1998.
** 10b. Bristol-Myers Squibb Company Executive Performance Incentive *
Plan (incorporated herein by reference to Exhibit 10b to the
Form 10-K for the fiscal year ended December 31, 1996).
** 10c. Bristol-Myers Squibb Company 1983 Stock Option Plan, as E-2-1
amended and restated as of January 1, 1997, as amended
November 3, 1998.
** 10d. Squibb Corporation 1982 Option, Restricted Stock and *
Performance Unit Plan, as amended (incorporated by reference
to Exhibit 10b to the Form 10-K for the fiscal year ended
December 31, 1993).
** 10e. Squibb Corporation 1986 Option, Restricted Stock and Performance *
Unit Plan, as amended (as adopted, incorporated herein by reference
to Exhibit 10k to the Squibb Corporation Form 10-K for the fiscal
year ended December 31, 1988, File No. 1-5514, as amended
July 1, 1993, incorporated herein by reference to Exhibit 10c to the
Form 10-K for the fiscal year ended December 31, 1993).
70
<PAGE>
Exhibit Number and Description Page
------------------------------ ------
** 10f. Bristol-Myers Squibb Company Performance Incentive Plan, as *
amended (as adopted, incorporated herein by reference to Exhibit 2
to the Form 10-K for the fiscal year ended December 31, 1978; as
amended as of January 8, 1990, incorporated herein by reference
to Exhibit 19b to the Form 10-K for the fiscal year ended
December 31, 1990; as amended on April 2, 1991, incorporated
herein by reference to Exhibit 19b to the Form 10-K for the fiscal
year ended December 31, 1991; as amended effective on January 1,
1994, and incorporated herein by reference to Exhibit 10d to the
Form 10-K for the fiscal year ended December 31, 1994).
** 10g. Benefit Equalization Plan of Bristol-Myers Squibb Company and its *
Subsidiary or Affiliated corporations Participating in the Bristol-
Myers Squibb Company Retirement Income Plan or the Bristol-Myers
Squibb Puerto Rico, Inc. Retirement Income Plan, as amended (as
amended and restated as of January 1, 1993, as amended effective
October 1, 1993, incorporated herein by reference to Exhibit 10e to
the Form 10-K for the fiscal year ended December 31, 1993 and
amended effective February 1, 1995, incorporated by reference to
Exhibit 10e to the Form 10-K for the fiscal year ended December 31,
1995).
** 10h. Benefit Equalization Plan of Bristol-Myers Squibb Company and *
its Subsidiary or Affiliated Corporation Participating in the
Bristol-Myers Squibb Company Savings and Investment
Program, as amended (as amended and restated as of
May 1, 1990, incorporated herein by reference to Exhibit 19d
to the Form 10-K for the fiscal year ended December 31, 1990;
as amended as of January 1, 1991, incorporated herein by
reference to Exhibit 19g to the Form 10-K for the fiscal year
ended December 31, 1990; as amended as of January 1, 1991,
incorporated herein by reference to Exhibit 19e to the Form 10-K
for the fiscal year ended December 31, 1991; as amended as of
October 1, 1994, incorporated herein by reference to Exhibit 10f
of the Form 10-K for the fiscal year ended December 31, 1994).
** 10i. Squibb Corporation Supplementary Pension Plan, as amended (as *
previously amended and restated, incorporated herein by reference
to Exhibit 19g to the Form 10-K for the fiscal year ended
December 31, 1991; as amended on September 14, 1993,
incorporated by reference to Exhibit 10g to the Form 10-K
for the fiscal year ended December 31, 1993).
71
<PAGE>
Exhibit Number and Description Page
------------------------------ ------
** 10j. Bristol-Myers Squibb Company Restricted Stock Award Plan, as *
amended (as adopted on November 7, 1989, incorporated herein
by reference to Exhibit 10t to the Form 10-K for the fiscal year
ended December 31, 1989; as amended on December 4, 1990,
incorporated herein by reference to Exhibit 19a to the
Form 10-K for the fiscal year ended December 31, 1990; as
amended July 1, 1993, incorporated by reference to Exhibit 10h
to the Form 10-K for the fiscal year ended December 31, 1993;
as amended effective December 6, 1994, incorporated by
reference to Exhibit 10h to the Form 10-K for the fiscal year
Ended January 31, 1994).
** 10k. Bristol-Myers Squibb Company Retirement Income Plan for *
Non-Employee Directors, as amended to March 5,1996
(incorporated herein by reference to Exhibit 10k to the Form 10-K
for the fiscal year ended December 31, 1996).
** 10l. Bristol-Myers Squibb Company 1987 Deferred Compensation *
Plan for Non-Employee Directors, as amended to January 13, 1998.
** 10m. Bristol-Myers Squibb Company Non-Employee Directors' Stock E-3-1
Option Plan, as amended (as approved by the Stockholders on
May 1, 1990, incorporated herein by reference to Exhibit 28
to Registration Statement No. 33-38587 on Form S-8; as amended
May 7, 1991, incorporated herein by reference to Exhibit 19c to
the Form 10-K for the fiscal year ended December 31, 1991),
as amended January 12, 1999.
** 10n. Squibb Corporation Deferral Plan for Fees of Outside Directors, *
as amended (as adopted, incorporated herein by reference to
Exhibit 10e to the Squibb Corporation Form 10-K for the
fiscal year ended December 31, 1987, File No. 1-5514; as
amended effective December 31, 1991, incorporated herein
by reference to Exhibit 10m to the Form 10-K for the fiscal
year ended December 31, 1992).
** 10o. Amendment to all of the Company's plans, agreements, legal *
documents and other writings, pursuant to action of the Board
of Directors on October 3, 1989, to reflect the change of the
Company's name to Bristol-Myers Squibb Company (incorporated
herein by reference to Exhibit 10v to the Form 10-K for the
fiscal year ended December 31, 1989).
72
<PAGE>
Exhibit Number and Description Page
------------------------------ ------
** 10p. Employment agreement of March 12, 1999 for Charles A. E-4-1
Heimbold, Jr.
21. Subsidiaries of the Registrant. E-5-1
23. Consent of PricewaterhouseCoopers LLP. E-6-1
27. Bristol-Myers Squibb Company Financial Data Schedule. E-7-1
99. Additional Exhibit E-8-1
73
<PAGE>
SCHEDULE II
-----------
BRISTOL-MYERS SQUIBB COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(dollars in millions)
Additions
Balance at charged to Deductions- Balance at
beginning costs and bad debts end
Description of period expenses written off of period
- --------------- ---------- ---------- ------------ ----------
Allowances for
discounts and
doubtful accounts:
For the year ended
December 31, 1998 $109 $57 $19 $147
========== ========== ============ ===========
For the year ended
December 31, 1997 $107 $19 $17 $109
========== ========== ============ ===========
For the year ended
December 31, 1996 $100 $39 $32 $107
========== ========== ============ ===========
S-1
BRISTOL-MYERS SQUIBB COMPANY
1997 STOCK INCENTIVE PLAN
(as amended as of November 3, 1998)
1. Purpose: The purpose of the 1997 Stock Incentive Plan is to secure for the
Company and its stockholders the benefits of the incentive inherent in common
stock ownership by the officers and key employees of the Company and its
Subsidiaries and Affiliates who will be largely responsible for the Company's
future growth and continued financial success and by providing long-term
incentives in addition to current compensation to certain key executives of
the Company and its Subsidiaries and Affiliates who contribute significantly
to the long-term performance and growth of the Company and such Subsidiaries
and Affiliates. It is intended that the former purpose will be effected through
the granting of stock options, stock appreciation rights, dividend equivalents
and/or restricted stock under the Plan and that the latter purpose will be
effected through an award conditionally granting performance units or
performance shares under the Plan, either independently or in conjunction with
and related to a nonqualified stock option grant under the Plan.
2. Definitions: For purposes of this Plan:
(a) "Affiliate" shall mean any entity in which the Company has an ownership
interest of at least 20%.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Company's common stock (par value $.10
per share).
(d) "Company" shall mean the Issuer (the Bristol-Myers Squibb Company),
its Subsidiaries and Affiliates.
(e) "Disability" or "Disabled" shall mean qualifying for and receiving
payments under a disability pay plan of the Company or any Subsidiary
or Affiliate.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(g) "Fair Market Value" shall mean the average of the high and low sale
prices of a share of Common Stock on the New York Stock Exchange, Inc.
composite tape on the date of measurement or on any date as determined
by the Committee and if there were no trades on such date, on the day
on which a trade occurred next preceding such date.
(h) "Issuer" shall mean the Bristol-Myers Squibb Company.
(i) "Prior Plan" shall mean the Bristol-Myers Squibb Company 1983 Stock
Option Plan as amended and restated effective as of September 10, 1996.
(j) "Retirement" shall mean termination of the employment of an employee
with the Company or a Subsidiary or Affiliate on or after (i) the
employee's 65th birthday or (ii) the employee's 55th birthday if the
employee has completed 10 years of service with the Company, its
Subsidiaries and/or its Affiliates. For purposes of this Section 2(j)
and all other purposes of this Plan, Retirement shall also mean
termination of employment of an employee with the Company or a
Subsidiary or Affiliate for any reason (other than the employee's
death, disability, resignation, willful misconduct or activity deemed
detrimental to the interests of the Company) where, on termination,
the employee's age plus years of service (rounded up to the next
higher whole number) equals at least 70 and the employee has completed
10 years of service with the Company, its Subsidiaries and/or its
Affiliates.
E-1-1
<PAGE>
Furthermore, an employee who makes an election to retire under Article 19
of the Bristol-Myers Squibb Company Retirement Income Plan (the "Retirement
Income Plan") shall have any additional years of age and service which are
credited under Article 19 of the Retirement Income Plan taken into account
when determining such employee's age and service under this Section 2(j). Such
election shall be deemed a Retirement for purposes of this Section 2(j) and
all other purposes of this Plan.
(k) "Subsidiary" shall mean any corporation which at the time qualifies as a
subsidiary of the Company under the definition of "subsidiary
corporation" in Section 424 of the Code.
3. Amount of Stock: The amount of stock which may be made subject to grants of
options or awards of performance units under the Plan in calendar year 1997
shall not exceed an amount equal to the amount of shares available for, and
not made subject to, grants of options or awards under the Prior Plan as of
February 28, 1997. With respect to each succeeding year, the amount of stock
which may be made subject to grants of options or awards of performance units
under the Plan shall not exceed an amount equal to (i) 0.9% of the outstanding
shares of the Company's Common Stock on January 1 of such year plus, subject
to this Section 3, (ii) in any year the number of shares equal to the amount
of shares that were available for grants and awards in the prior year but were
not made subject to a grant or award in such prior year and (iii) the number
of shares that were subject to options or awards granted hereunder or under
the Prior Plan, which options or awards terminated or expired in the prior
year without being exercised. No individual may be granted options or awards
under Sections 6, 7 or 8 in the aggregate, in respect of more than 1,500,000
shares of the Company's Common Stock in a calendar year; upon a change in
stock the maximum number of shares shall be adjusted in number and kind
pursuant to Section 10. Aggregate shares issued under performance share
awards made pursuant to Section 7 and restricted stock awards made pursuant
to Section 8 may not exceed 10,000,000 shares over the life of the Plan.
Common Stock issued hereunder may be authorized and reissued shares or issued
shares acquired by the Company or its Subsidiaries on the market or otherwise.
4. Administration: The Plan shall be administered under the supervision of the
Board of Directors of the Company which shall exercise its powers, to the
extent herein provided, through the agency of a Compensation and Management
Development Committee (the "Committee") which shall be appointed by the Board
of Directors of the Company. The Committee shall consist of not less than
three (3) members of the Board who meet the definition of "outside director"
under the provisions of Section 162(m) of the Code and the definition of
"non-employee directors" under the provisions of the Exchange Act or rules
or regulations promulgated thereunder. No member of the Committee shall have
been within one year prior to appointment to, or while serving on, the
Committee granted or awarded equity securities of the Company pursuant to this
or any other plan of the Company except to the extent that participation in
any such plan or receipt of any such grant or award would not adversely affect
the Committee member's status as a "nonemployee director" or as an "outside
director".
The Committee, from time to time, may adopt rules and regulations
("Regulations") for carrying out the provisions and purposes of the Plan and
make such other determinations, not inconsistent with the terms of the Plan,
as the Committee shall deem appropriate. The interpretation and construction
of any provision of the Plan by the Committee shall, unless otherwise
determined by the Board of Directors, be final and conclusive.
The Committee shall maintain a written record of its proceedings. A majority
of the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, or acts
unanimously approved in writing, shall be the acts of the Committee.
5. Eligibility: Options and awards may be granted only to present or future
officers and key employees of the Company and its Subsidiaries and Affiliates,
including Subsidiaries and Affiliates which become such after the adoption of
the Plan. Any officer or key employee of the Company or of any such Subsidiary
or Affiliate shall be eligible to receive one or more options or awards under
the Plan. Any director who is not an officer or employee of the Company or one
of its Subsidiaries or Affiliates and any member of the Committee, during the
E-1-2
<PAGE>
time of the member's service as such or thereafter, shall be ineligible to
receive an option or award under the Plan. The adoption of this Plan shall not
be deemed to give any officer or employee any right to an award or to be
granted an option to purchase Common Stock of the Company, except to the
extent and upon such terms and conditions as may be determined by the
Committee.
6. Stock Options: Stock options under the Plan shall consist of incentive
stock options under Section 422 of the Code or nonqualified stock options
(options not intended to qualify as incentive stock options), as the Committee
shall determine. In addition, the Committee may grant stock appreciation
rights in conjunction with an option, as set forth in Section 6(b)(11), or
may grant awards in conjunction with an option, as set forth in Section
6(b)(10) (an "Associated Option").
Each option shall be subject to the following terms and conditions:
(a) Grant of Options. The Committee shall (1) select the officers and key
employees of the Company and its Subsidiaries and Affiliates to whom
options may from time to time be granted, (2) determine whether
incentive stock options or nonqualified stock options are to be granted,
(3) determine the number of shares to be covered by each option so
granted, (4) determine the terms and conditions (not inconsistent with
the Plan) of any option granted hereunder (including but not limited
to restrictions upon the options, conditions of their exercise, or on
the shares of Common Stock issuable upon exercise thereof), (5)
determine whether nonqualified stock options or incentive stock options
granted under the Plan shall include stock appreciation rights and,
if so, shall determine the terms and conditions thereof in accordance
with Section 6(b)(11) hereof, (6) determine whether any nonqualified
stock options granted under the Plan shall be Associated Options, and
(7) prescribe the form of the instruments necessary or advisable in the
administration of options.
(b) Terms and Conditions of Option. Any option granted under the Plan shall
be evidenced by a Stock Option Agreement executed by the Company and the
optionee, in such form as the Committee shall approve, which agreement
shall be subject to the following terms and conditions and shall contain
such additional terms and conditions not inconsistent with the Plan, and
in the case of an incentive stock option not inconsistent with the
provisions of the Code applicable to incentive stock options, as the
Committee shall prescribe:
(1) Number of Shares Subject to an Option. The Stock Option Agreement
shall specify the number of shares of Common Stock subject to the
Agreement. If the option is an Associated Option, the number of
shares of Common Stock subject to such Associated Option shall
initially be equal to the number of performance units or performance
shares subject to the award, but one share of Common Stock shall be
canceled for each performance unit or performance share paid out
under the award.
(2) Option Price. The purchase price per share of Common Stock
purchasable under an option will be determined by the Committee but
will be not less than the Fair Market Value of a share of Common
Stock on the date of the grant of such option.
(3) Option Period. The period of each option shall be fixed by the
Committee, but no option shall be exercisable after the expiration
of ten years from the date the option is granted.
(4) Consideration. Each optionee, as consideration for the grant of an
option, shall remain in the continuous employ of the Company or of
one of its Subsidiaries or Affiliates for at least one year from
the date of the granting of such option, and no option shall be
exercisable until after the completion of such one year period of
employment by the optionee.
E-1-3
<PAGE>
(5) Exercise of Option. An option may be exercised in whole or in part
from time to time during the option period (or, if determined by
the Committee, in specified installments during the option period)
by giving written notice of exercise to the Company specifying the
number of shares to be purchased, such notice to be accompanied by
payment in full of the purchase price and Withholding Taxes (as
defined in Section 11 hereof), unless an election to defer receipt
of shares is made under Section 12, due either by certified or bank
check, or in shares of Common Stock of the Company owned by the
optionee having a Fair Market Value at the date of exercise equal to
such purchase price, or in a combination of the foregoing; provided,
however, that payment in shares of Common Stock of the Company will
not be permitted unless at least 100 shares of Common Stock are
required and delivered for such purpose. No shares shall be issued
until full payment therefor has been made. An optionee shall have
the rights of a stockholder only with respect to shares of stock
for which certificates have been issued to the optionee.
(6) Nontransferability of Options. No option or stock appreciation right
granted under the Plan shall be transferable by the optionee
otherwise than by will or by the laws of descent and distribution,
and such option or stock appreciation right shall be exercisable,
during the optionee's lifetime, only by the optionee.
Notwithstanding the foregoing, the Committee may set forth in a
Stock Option Agreement at the time of grant or thereafter, that the
options (other than Incentive Stock Options) may be transferred to
members of the optionee's immediate family, to trusts solely for the
benefit of such immediate family members and to partnerships in
which such family members and/or trusts are the only partners. For
this purpose, immediate family means the optionee's spouse, parents,
children, stepchildren, grandchildren and legal dependants. Any
transfer of options made under this provision will not be effective
until notice of such transfer is delivered to the Company.
(7) Retirement and Termination of Employment Other than by Death or
Disability. If an optionee shall cease to be employed by the Company
or any of its Subsidiaries or Affiliates for any reason (other than
termination of employment by reason of death or Disability) after
the optionee shall have been continuously so employed for one year
after the granting of the option, the option shall be exercisable
only to the extent that the optionee was otherwise entitled to
exercise it at the time of such cessation of employment with the
Company, Subsidiary or Affiliate, but in no event after the
expiration of the option period set forth therein except that in the
case of cessation of employment other than by reason of Retirement
or death, the option shall in no event be exercisable after the date
three months next succeeding such cessation of employment. The Plan
does not confer upon any optionee any right with respect to
continuation of employment by the Company or any of its Subsidiaries
or Affiliates.
(8) Disability of Optionee. An optionee who ceases to be employed by
reason of Disability shall be treated as though the optionee
remained in the employ of the Company or a Subsidiary or Affiliate
until the earlier of (i) cessation of payments under a disability
pay plan of the Company, Subsidiary or Affiliate, (ii) the
optionee's death, or (iii) the optionee's 65th birthday.
(9) Death of Optionee. Except as otherwise provided in subsection (13),
in the event of the optionee's death (i) while in the employ of the
Company or any of its Subsidiaries or Affiliates, (ii) while
Disabled as described in subsection (8) or (iii) after cessation
of employment due to Retirement, the option shall be fully
exercisable by the executors, administrators, legatees or
distributees of the optionee's estate, as the case may be, at any
time following such death. In the event of the optionee's death
after cessation of employment for any reason other than Disability
or Retirement, the option shall be exercisable by the executors,
administrators, legatees or distributees of the optionee's estate,
as the case may be, at any time during the twelve month period
following such death. Notwithstanding the foregoing, in no event
shall an option be exercisable unless the optionee shall have been
continuously employed by the Company or any of its Subsidiaries or
Affiliates for a period of at least one year after the option grant,
and no option shall be exercisable after the expiration of the
option period set forth in the Stock Option Agreement. In the event
E-1-4
<PAGE>
any option is exercised by the executors, administrators, legatees
or distributees of the estate of a deceased optionee, the Company
shall be under no obligation to issue stock thereunder unless and
until the Company is satisfied that the person or persons exercising
the option are the duly appointed legal representatives of the
deceased optionee's estate or the proper legatees or distributees
thereof.
(10) Long-Term Performance Awards. The Committee may from time to time
grant nonqualified stock options under the Plan in conjunction with
and related to an award of performance units or performance shares
made under a Long-Term Performance Award as set forth in Section
7(b)(11). In such event, notwithstanding any other provision hereof,
(i) the number of shares to which the Associated Option applies
shall initially be equal to the number of performance units or
performance shares granted by the award, but such number of shares
shall be reduced on a one-share-for-one unit or share basis to the
extent that the Committee determines pursuant to the terms of the
award, to pay to the optionee or the optionee's beneficiary the
performance units or performance shares granted pursuant to such
award; and (ii) such Associated Option shall be cancelable in the
discretion of the Committee, without the consent of the optionee,
under the conditions and to the extent specified in the award.
(11) Stock Appreciation Rights. In the case of any option granted under
the Plan, either at the time of grant or by amendment of such option
at any time after such grant there may be included a stock
appreciation right which shall be subject to such terms and
conditions, not inconsistent with the Plan, as the Committee shall
impose, including the following:
(A) A stock appreciation right shall be exercisable to the extent,
and only to the extent, that the option in which it is included
is at the time exercisable, and may be exercised within such
period only at such time or times as may be determined by the
Committee;
(B) A stock appreciation right shall entitle the optionee (or any
person entitled to act under the provisions of subsection (9)
hereof) to surrender unexercised the option in which the stock
appreciation right is included (or any portion of such option)
to the Company and to receive from the Company in exchange
therefor that number of shares having an aggregate value equal
to (or, in the discretion of the Committee, less than) the excess
of the value of one share (provided such value does not exceed
such multiple of the option price per share as may be specified
by the Committee) over the option price per share specified in
such option times the number of shares called for by the option,
or portion thereof, which is so surrendered. The Committee shall
be entitled to cause the Company to settle its obligation,
arising out of the exercise of a stock appreciation right, by
the payment of cash equal to the aggregate value of the shares
the Company would otherwise be obligated to deliver or partly
by the payment of cash and partly by the delivery of shares. Any
such election shall be made within 30 business days after the
receipt by the Committee of written notice of the exercise of
the stock appreciation right. The value of a share for this
purpose shall be the Fair Market Value thereof on the last
business day preceding the date of the election to exercise the
stock appreciation right;
(C) No fractional shares shall be delivered under this subsection
(11) but in lieu thereof a cash adjustment shall be made;
(D) If a stock appreciation right included in an option is exercised,
such option shall be deemed to have been exercised to the extent
of the number of shares called for by the option or portion
thereof which is surrendered on exercise of the stock
appreciation right and no new option may be granted covering
such shares under this Plan; and
E-1-5
<PAGE>
(E) If an option which includes a stock appreciation right is
exercised, such stock appreciation right shall be deemed to have
been canceled to the extent of the number of shares called for
by the option or portion thereof is exercised and no new stock
appreciation rights may be granted covering such shares under
this Plan.
(12) Incentive Stock Options. In the case of any incentive stock option
granted under the Plan, the aggregate Fair Market Value of the
shares of Common Stock of the Company (determined at the time of
grant of each option) with respect to which incentive stock options
granted under the Plan and any other plan of the Company or its
parent or a Subsidiary which are exercisable for the first time by
an employee during any calendar year shall not exceed $100,000 or
such other amount as may be required by the Code. In any year, the
maximum number of shares with respect to which incentive stock
options may be granted shall not exceed 4,000,000 shares.
(13) Rights of Transferee. Notwithstanding anything to the contrary herein,
if an option has been transferred in accordance with Section 6(b)(6),
the option shall be exercisable solely by the transferee. The option
shall remain subject to the provisions of the Plan, including that it
will be exercisable only to the extent that the optionee or optionee's
estate would have been entitled to exercise it if the optionee had not
transferred the option. In the event of the death of the optionee
prior to the expiration of the right to exercise the transferred
option, the period during which the option shall be exercisable will
terminate on the date one year following the date of the optionee's
death. In the event of the death of the transferee prior to the
expiration of the right to exercise the option, the period during
which the option shall be exercisable by the executors, administrators,
legatees and distributees of the transferee's estate, as the case may
be, will terminate on the date one year following the date of the
transferee's death. In no event will be the option be exercisable
after the expiration of the option period set forth in the Stock Option
Agreement. The option shall be subject to such other rules as the
Committee shall determine.
7. Long-term Performance Awards: Awards under the Plan shall consist of the
conditional grant to the participants of a specified number of performance
units or performance shares. The conditional grant of a performance unit to
a participant will entitle the participant to receive a specified dollar value,
variable under conditions specified in the award, if the performance objectives
specified in the award are achieved and the other terms and conditions thereof
are satisfied. The conditional grant of a performance share to a participant
will entitle the participant to receive a specified number of shares of Common
Stock of the Company, or the equivalent cash value, if the objective(s)
specified in the award are achieved and the other terms and conditions thereof
are satisfied.
Each award will be subject to the following terms and conditions:
(a) Grant of Awards. The Committee shall (1) select the officers and key
executives of the Company and its Subsidiaries and Affiliates to whom
awards may from time to time be granted, (2) determine the number of
performance units or performance shares covered by each award, (3)
determine the terms and conditions of each performance unit or
performance share awarded and the award period and performance
objectives with respect to each award, (4) determine the periods
during which a participant may request the Committee to approve
deferred payment of a percentage (not less than 25%) of an award
(the "Deferred Portion") and the interest or rate of return thereon or
the basis on which such interest or rate of return thereon is to be
determined, (5) determine whether payment with respect to the portion
of an award which has not been deferred (the "Current Portion") and
the payment with respect to the Deferred Portion of an award shall be
made entirely in cash, entirely in Common Stock or partially in cash and
partially in Common Stock, (6) determine whether the award is to be
made independently of or in conjunction with a nonqualified stock option
granted under the Plan, and (7) prescribe the form of the instruments
necessary or advisable in the administration of the awards.
E-1-6
<PAGE>
(b) Terms and Conditions of Award. Any award conditionally granting
performance units or performance shares to a participant shall be
evidenced by a Performance Unit Agreement or Performance Share
Agreement, as applicable, executed by the Company and the participant,
in such form as the Committee shall approve, which Agreement shall
contain in substance the following terms and conditions applicable to
the award and such additional terms and conditions as the Committee
shall prescribe:
(1) Number and Value of Performance Units. The Performance Unit
Agreement shall specify the number of performance units
conditionally granted to the participant. If the award has been
made in conjunction with the grant of an Associated Option, the
number of performance units granted shall initially be equal to
the number of shares which the participant is granted the right
to purchase pursuant to the Associated Option, but one
performance unit shall be canceled for each share of the Company's
Common Stock purchased upon exercise of the Associated Option or
for each stock appreciation right included in such option that has
been exercised. The Performance Unit Agreement shall specify the
threshold, target and maximum dollar values of each performance
unit and corresponding performance objectives as provided under
Section 6(b)(5). No payout under a performance unit award to an
individual Participant may exceed 0.15% of the pre-tax earnings
of the Company for the fiscal year which coincides with the final
year of the performance unit period.
(2) Number and Value of Performance Shares. The Performance Share
Agreement shall specify the number of performance shares
conditionally granted to the participant. If the award has been
made in conjunction with the grant of an Associated Option, the
number of performance shares granted shall initially be equal to
the number of shares which the participant is granted the right to
purchase pursuant to the Associated Option, but one performance
share shall be canceled for each share of the Company's Common
Stock purchased upon exercise of the Associated Option or for each
stock appreciation right included in such option that has been
exercised. The Performance Share Agreement shall specify that each
Performance Share will have a value equal to one (1) share of
Common Stock of the Company.
(3) Award Periods. For each award, the Committee shall designate an
award period with a duration to be determined by the Committee in
its discretion but in no event less than three calendar years within
which specified performance objectives are to be attained. There
may be several award periods in existence at any one time and the
duration of performance objectives may differ from each other.
(4) Consideration. Each participant, as consideration for the award of
performance units or performance shares, shall remain in the
continuous employ of the Company or of one of its Subsidiaries or
Affiliates for at least one year after the date of the making of
such award, and no award shall be payable until after the
completion of such one year of employment by the participant.
(5) Performance Objectives. The Committee shall establish performance
objectives with respect to the Company for each award period on the
basis of such criteria and to accomplish such objectives as the
Committee may from time to time determine. Performance criteria
for awards under the Plan may include one or more of the following
measures of the operating performance:
a. Earnings d. Financial return ratios
b. Revenue e. Total Shareholder Return
c. Operating or net cash flows f. Market share
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<PAGE>
The Committee shall establish the specific targets for the selected
criteria. These targets may be set at a specific level or may be
expressed as relative to the comparable measure at comparison companies
or a defined index. These targets may be based upon the total Company
or upon a defined business unit which the executive has responsibility
for or influence over.
(6) Determination and Payment of Performance Units or Performance Shares
Earned. As soon as practicable after the end of an award period, the
Committee shall determine the extent to which awards have been
earned on the basis of the Company's actual performance in relation
to the established performance objectives as set forth in the
Performance Unit Agreement or Performance Share Agreement and
certify these results in writing. The Performance Unit Agreement
or Performance Share Agreement shall specify that as soon as
practicable after the end of each award period, the Committee shall
determine whether the conditions of Sections 7(b)(4) and 7(b)(5)
hereof have been met and, if so, shall ascertain the amount payable
or shares which should be distributed to the participant in respect
of the performance units or performance shares. As promptly as
practicable after it has determined that an amount is payable or
should be distributed in respect of an award, the Committee shall
cause the Current Portion of such award to be paid or distributed
to the participant or the participant's beneficiaries, as the case
may be, in the Committee's discretion, either entirely in cash,
entirely in Common Stock or partially in cash and partially in
Common Stock. The Deferred Portion of an award shall be
contingently credited and payable to the participant over a
deferred period and shall be credited with interest, rate of
return, or other valuation as determined by the Committee. The
Committee, in its discretion, shall determine the conditions upon,
and method of, payment of such Deferred Portions and whether such
payment will be made entirely in cash, entirely in Common Stock or
partially in cash and partially in Common Stock.
In making the payment of an award in Common Stock hereunder, the cash
equivalent of such Common Stock shall be determined by the Fair Market
Value of the Common Stock on the day the Committee designates the
performance units shall be payable.
(7) Nontransferability of Awards and Designation of Beneficiaries. No
award under this Section of the Plan shall be transferable by the
participant other than by will or by the laws of descent and
distribution, except that a participant may designate a beneficiary
pursuant to the provisions hereof.
If any participant or the participant's beneficiary shall attempt to
assign the participant's rights under the Plan in violation of the
provisions thereof, the Company's obligation to make any further
payments to such participant or the participant's beneficiaries shall
forthwith terminate.
A participant may name one or more beneficiaries to receive any payment
of an award to which the participant may be entitled under the Plan in
the event of the participant's death, on a form to be provided by the
Committee. A participant may change the participant's beneficiary
designation from time to time in the same manner.
If no designated beneficiary is living on the date on which any payment
becomes payable to a participant's beneficiary, or if no beneficiary
has been specified by the participant, such payment will be payable to
the person or persons in the first of the following classes of
successive preference:
(i) Widow or widower, if then living,
(ii) Surviving children, equally,
(iii) Surviving parents, equally,
(iv) Surviving brothers and sisters, equally,
(v) Executors or administrators
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<PAGE>
and the term "beneficiary" as used in the Plan shall include such person
or persons.
(8) Retirement and Termination of Employment Other Than by Death or
Disability. In the event of the Retirement prior to the end of an
award period of a participant who has satisfied the one year
employment requirement of Section 7(b)(4) with respect to an award
prior to Retirement, the participant, or his estate, shall be
entitled to a payment of such award at the end of the award period,
pursuant to the terms of the Plan and the participant's Performance
Unit Agreement or Performance Share Agreement, provided, however,
that the participant shall be deemed to have earned that proportion
(to the nearest whole unit or share) of the value of the performance
units or performance shares granted to the participant under such
award as the number of months of the award period which have
elapsed since the first day of the calendar year in which the award
was made to the end of the month in which the participant's
Retirement occurs, bears to the total number of months in the
award period, subject to the attainment of performance objectives
associated with the award as certified by the Committee. The
participant's right to receive any remaining performance units or
performance shares shall be canceled and forfeited.
Subject to Section 7(b)(6) hereof, the Performance Unit Agreement or
Performance Share Agreement shall specify that the right to receive the
performance units or performance shares granted to such participant
shall be conditional and shall be canceled, forfeited and surrendered
if the participant's continuous employment with the Company and its
Subsidiaries and Affiliates shall terminate for any reason, other than
the participant's death, Disability or Retirement prior to the end of
the award period.
(9) Disability of Participant. For the purposes of any award a
participant who becomes Disabled shall be deemed to have suspended
active employment by reason of Disability commencing on the date
the participant becomes entitled to receive payments under a
disability pay plan of the Company or any Subsidiary or Affiliate
and continuing until the date the participant is no longer entitled
to receive such payments. In the event a participant becomes
Disabled during an award period but only if the participant has
satisfied the one year employment requirement of Section 7(b)(4)
with respect to an award prior to becoming Disabled, upon the
determination by the Committee of the extent to which an award has
been earned pursuant to Section 7(b)(6) the participant shall be
deemed to have earned that proportion (to the nearest whole unit)
of the value of the performance units granted to the participants
under such award as the number of months of the award period in
which the participant was not Disabled bears to the total number
of months in the award period subject to the attainment of the
performance objectives associated with the award as certified by
the Committee. The participant's right to receive any remaining
performance units shall be canceled and forfeited.
(10) Death of Participant. In the event of the death prior to the end
of an award period of a participant who has satisfied the one year
employment requirement with respect to an award prior to the date
of death, the participant's beneficiaries or estate, as the case
may be, shall be entitled to a payment of such award upon the end
of the award period, pursuant to the terms of the Plan and the
participant's Performance Unit Agreement or Performance Share
Agreement, provided, however, that the participant shall be deemed
to have earned that proportion (to the nearest whole unit or share)
of the value of the performance units or performance shares granted
to the participant under such award as the number of months of the
award period which have elapsed since the first day of the calendar
year in which the award was made to the end of the month in which
the participant's death occurs, bears to the total number of months
in the award period. The participant's right to receive any
remaining performance units or performance shares shall be canceled
and forfeited.
The Committee may, in its discretion, waive, in whole or in part, such
cancellation and forfeiture of any performance units or performance
shares.
E-1-9
<PAGE>
(11) Grant of Associated Option. If the Committee determines that the
conditional grant of performance units or performance shares under
the Plan is to be made to a participant in conjunction with the
grant of a nonqualified stock option under the Plan, the Committee
shall grant the participant an Associated Option under the Plan
subject to the terms and conditions of this subsection (11). In
such event, such award under the Plan shall be contingent upon
the participant's being granted such an Associated Option pursuant
to which: (i) the number of shares the optionee may purchase shall
initially be equal to the number of performance units or
performance shares conditionally granted by the award, (ii) such
number of shares shall be reduced on a one-share-for-one-unit or
share basis to the extent that the Committee determines, pursuant
to Section 7(b)(6) hereof, to pay to the participant or the
participant's beneficiaries the performance units or performance
shares conditionally granted pursuant to the award, and (iii) the
Associated Option shall be cancelable in the discretion of the
Committee, without the consent of the participant, under the
conditions and to the extent specified herein and in Section
7(b)(6) hereof.
If no amount is payable in respect of the conditionally granted
performance units or performance shares, the award and such performance
units or performance shares shall be deemed to have been canceled,
forfeited and surrendered, and the Associated Option, if any, shall
continue in effect in accordance with its terms. If any amount is
payable in respect of the performance units or performance shares and
such units or shares were granted in conjunction with an Associated
Option, the Committee shall, within 30 days after the determination of
the Committee referred to in the first sentence of Section 7(b)(6),
determine, in its sole discretion, either:
(a) to cancel in full the Associated Option, in which event the
value of the performance units or performance shares payable
pursuant to Sections 7(b)(5) and (6) shall be paid or the
performance shares shall be distributed;
(b) to cancel in full the performance units or performance shares,
in which event no amount shall be paid to the participant in
respect thereof and no shares shall be distributed but the
Associated Option shall continue in effect in accordance with
its terms; or
(c) to cancel some, but not all, of the performance units or
performance shares, in which event the value of the performance
units payable pursuant to Sections 7(b)(5) and (6) which have
not been canceled shall be paid and/or the performance shares
shall be distributed and the Associated Option shall be
canceled with respect to that number of shares equal to the
number of conditionally granted performance units or
performance shares that remain payable.
Any action taken by the Committee pursuant to the preceding
sentence shall be uniform with respect to all awards having the
same award period. If the Committee takes no such action, it shall
be deemed to have determined to cancel in full the award in
accordance with clause (b) above.
8. Restricted Stock: Restricted stock awards under the Plan shall consist of
grants of shares of Common Stock of the Issuer subject to the terms and
conditions hereinafter provided.
(a) Grant of Awards: The Committee shall (i) select the officers and key
employees to whom Restricted Stock may from time to time be granted,
(ii) determine the number of shares to be covered by each award granted,
(iii) determine the terms and conditions (not inconsistent with the
Plan) of any award granted hereunder, and (iv) prescribe the form of
the agreement, legend or other instrument necessary or advisable in the
administration of awards under the Plan.
E-1-10
<PAGE>
(b) Terms and Conditions of Awards: Any restricted stock award granted
under the Plan shall be evidenced by a Restricted Stock Agreement
executed by the Issuer and the recipient, in such form as the Committee
shall approve, which agreement shall be subject to the following terms
and conditions and shall contain such additional terms and conditions
not inconsistent with the Plan as the Committee shall prescribe:
(1) Number of Shares Subject to an Award: The Restricted Stock Agreement
shall specify the number of shares of Common Stock subject to the
Award.
(2) Restriction Period: The period of restriction applicable to each
Award shall be established by the Committee but may not be less
than one year. The Restriction Period applicable to each Award
shall commence on the Award Date.
(3) Consideration: Each recipient, as consideration for the grant of
an award, shall remain in the continuous employ of the Company for
at least one year from the date of the granting of such award, and
any shares covered by such an award shall lapse if the recipient
does not remain in the continuous employ of the Company for at
least one year from the date of the granting of the award.
(4) Restriction Criteria: The Committee shall establish the criteria
upon which the restriction period shall be based. Restrictions may
be based upon either the continued employment of the recipient or
upon the attainment by the Company of one or more of the following
measures of the operating performance:
a. Earnings d. Financial return ratios
b. Revenue e. Total Shareholder Return
c. Operating or net cash flows f. Market share
The Committee shall establish the specific targets for the selected
criteria. These targets may be set at a specific level or may be
expressed as relative to the comparable measure at comparison companies
or a defined index. Performance objectives may be established in
combination with restrictions based upon the continued employment of
the recipient. These targets may be based upon the total Company or
upon a defined business unit which the executive has responsibility
for or influence over.
In cases where objective performance criteria are established, the
Committee shall determine the extent to which the criteria have been
achieved and the corresponding level to which restrictions will be
removed from the Award or the extent to which a participant's right to
receive an Award should be lapsed in cases where the performance
criteria have not been met and shall certify these determinations in
writing. The Committee may provide for the determination of the
attainment of such restrictions in installments where deemed
appropriate.
(c) Terms and Conditions of Restrictions and Forfeitures: The shares of
Common Stock awarded pursuant to the Plan shall be subject to the
following restrictions and conditions:
(1) During the Restriction Period, the participant will not be permitted
to sell, transfer, pledge or assign Restricted Stock awarded under
this Plan.
(2) Except as provided in Section 8(c)(i), or as the Committee may
otherwise determine, the participant shall have all of the rights
of a stockholder of the Issuer, including the right to vote the
shares and receive dividends and other distributions provided that
distributions in the form of stock shall be subject to the same
restrictions as the underlying Restricted Stock.
E-1-11
<PAGE>
(3) In the event of a participant's retirement, death or disability
prior to the end of the Restriction Period for a participant who
has satisfied the one year employment requirement of Section
7(c)(iii) with respect to an award prior to Retirement, death or
Disability, the participant, or his/her estate, shall be entitled
to receive that proportion (to the nearest whole share) of the
number of shares subject to the Award granted as the number of
months of the Restriction Period which have elapsed since the Award
date to the date at which the participant's retirement, death or
disability occurs, bears to the total number of months in the
Restriction Period. The participant's right to receive any
remaining shares shall be canceled and forfeited and the shares
will be deemed to be reacquired by the Issuer.
(4) In the event of a participant's retirement, death, disability or in
cases of special circumstances as determined by the Committee, the
Committee may, in its sole discretion when it finds that such an
action would be in the best interests of the Company, accelerate or
waive in whole or in part any or all remaining time based
restrictions with respect to all or part of such participant's
Restricted Stock.
(5) Upon termination of employment for any reason during the
restriction period, subject to the provisions of paragraph (iii)
above or in the event that the participant fails promptly to pay
or make satisfactory arrangements as to the withholding taxes as
provided in the following paragraph, all shares still subject to
restriction shall be forfeited by the participant and will be
deemed to be reacquired by the Company.
(6) A participant may, at any time prior to the expiration of the
Restriction Period, waive all right to receive all or some of the
shares of a Restricted Stock Award by delivering to the Company a
written notice of such waiver.
(7) Notwithstanding the other provisions of this Section 7, the
Committee may adopt rules which would permit a gift by a participant
of restricted shares to members of his/her immediate family (spouse,
parents, children, stepchildren, grandchildren or legal dependants)
or to a Trust whose beneficiary or beneficiaries shall be either
such a person or persons or the participant.
(8) Any attempt to dispose of Restricted Stock in a manner contrary to
the restrictions shall be ineffective.
9. Determination of Breach of Conditions: The determination of the Committee
as to whether an event has occurred resulting in a forfeiture or a termination
or reduction of the Company's obligations in accordance with the provisions of
the Plan shall be conclusive.
10. Adjustment in the Event of Change in Stock: In the event of changes in
the outstanding Common Stock of the Company by reason of stock dividends,
recapitalization, mergers, consolidations, split-ups, combinations or exchanges
of shares and the like, the aggregate number and class of shares available
under the Plan, and the number, class and the price of shares subject to
outstanding options and/or awards and the number of performance units and/or
the dollar value of each unit shall be appropriately adjusted by the
Committee, whose determination shall be conclusive.
11. Taxes: Each participant shall, no later than the Tax Date (as defined
below), pay to the Company, or make arrangements satisfactory to the Committee
regarding payment of, any Withholding Tax (as defined below) with respect to
an Option or Award, and the Company shall, to the extent permitted by law,
have the right to deduct such amount from any payment of any kind otherwise
due to the participant. The Company shall also have the right to retain or
sell without notice, or to demand surrender of, shares of Common Stock in
value sufficient to cover the amount of any Withholding Tax (that is that
portion of any Applicable Tax, as defined below, required by any governmental
entity to be withheld or otherwise deducted and paid with respect to such
Award), and to make payment (or to reimburse itself for payment made) to the
appropriate taxing authority of an amount in cash equal to the amount of such
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<PAGE>
Withholding Tax, remitting any balance to the participant. For purposes of
the paragraph, the value of shares of Common Stock so retained or surrendered
shall be the average of the high and low sales prices per share on the New
York Stock Exchange composite tape on the date that the amount of the
Withholding Tax is to be determined (the "Tax Date") and the value of
shares of Common Stock so sold shall be the actual net sale price per
share (after deduction of commissions) received by the Company.
Notwithstanding the foregoing, if the stock options have been transferred,
the optionee shall provide the Company with funds sufficient to pay such
Withholding Tax or Applicable Tax. Furthermore, if such optionee does not
satisfy his tax payment obligation and the stock options have been
transferred, the transferee may provide the funds sufficient to enable
the Company to pay such taxes. However, if the stock options have been
transferred, the Company shall have no right to retain or sell without
notice, or to demand surrender from the transferee of, shares of Common
Stock in order to pay such Withholding Tax or Applicable Tax.
Notwithstanding the foregoing, the participant shall be entitled to satisfy
the obligation to pay any Withholding Tax or to satisfy the obligation to pay
any tax to any governmental entity in respect of such Award, including any
Federal, state or local income tax up to an amount determined on the basis
of the highest marginal tax rate applicable to such participant, Federal
Insurance Contribution Act taxes or other governmental impost or levy (an
"Applicable Tax"), in whole or in part, by providing the Company with funds
sufficient to enable the Company to pay such Withholding Tax or Applicable
Tax or by requiring the Company to retain or to accept upon delivery thereof
by the participant shares of Common Stock having a Fair Market Value sufficient
to cover the amount of such Withholding Tax or Applicable Tax or in a greater
amount as deemed appropriate by the Company. Each election by a participant to
have shares retained or to deliver shares for this purpose shall be subject to
the following restrictions: (i) the election must be in writing and be made on
or prior to the Tax Date; (ii) the election must be irrevocable; (iii) the
election shall be subject to the disapproval of the Committee.
12. Deferral Election: Notwithstanding the provisions of Section 11, any
optionee or participant may elect, with the concurrence of the Committee
and consistent with any rules and regulations established by the Committee,
to defer the delivery of the proceeds of the exercise of any stock option
not transferred under the provisions of Section 6(b)(6) or stock appreciation
rights.
(a) Election Timing: The election to defer the delivery of the proceeds
from any eligible award must be made at least six months prior to the
date such award is exercised or at such other time as the Committee may
specify. Deferrals will only be allowed for exercises which occur
while the optionee or participant is an active employee of the Company.
Any election to defer the delivery of proceeds from an eligible award
shall be irrevocable as long as the optionee or participant remains
an employee of the Company.
(b) Stock Option Deferral: The deferral of the proceeds of stock options
may be elected by an optionee subject to the Regulations established
by the Committee. The proceeds from such an exercise shall be credited
to the optionee's deferred stock option account as the number of
deferred share units equivalent in value to those proceeds. Deferred
share units shall be valued at the Fair Market Value on the date of
exercise. Subsequent to exercise, the deferred share units shall be
valued at the Fair Market Value of Common Stock of the Company. Deferred
share units shall accrue dividends at the rate paid upon the Company's
Common Stock credited in the form of additional deferred share units.
Deferred share units shall be distributed in shares of Company Stock
upon the termination of employment of the participant or at such other
date as may be approved by the Committee over a period of no more than
10 years.
(c) Stock Appreciation Right Deferral: Upon such exercise, the Company will
credit the optionee's deferred stock option account with the number of
deferred share units equivalent in value to the difference between the
Fair Market Value of a share of Common Stock on the exercise date and
the exercise price of the Stock Appreciation Right multiplied by the
number of shares exercised. Deferred share units shall be valued at
the Fair Market Value on the date of exercise. Subsequent to exercise,
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<PAGE>
the deferred share units shall be valued at the Fair Market Value of
Common Stock of the Company. Deferred share units shall accrue
dividends at the rate paid upon the Company's Common Stock credited
in the form of additional deferred share units. Deferred share units
shall be distributed in shares of Common Stock upon the termination of
employment of the participant or at such other date as may be approved
by the Committee over a period of no more than 10 years.
(d) Accelerated Distributions: The Committee may, at its sole discretion,
allow for the early payment of an optionee's or participant's deferred
share units account in the event of an "unforeseeable emergency" or
in the event of the death or disability of the optionee or participant.
An "unforeseeable emergency" is defined as an unanticipated emergency
caused by an event beyond the control of the optionee or participant
that would result in severe financial hardship if the distribution were
not permitted. Such distributions shall be limited to the amount
necessary to sufficiently address the financial hardship. Any
distributions under this provision shall be consistent with the
Regulations established under the Code. Additionally, the Committee
may use its discretion to cause deferred share unit accounts to be
distributed when continuing the Program is no longer in the best
interest of the Company.
(e) Assignability: No rights to deferred share unit accounts may be
assigned or subject to any encumbrance, pledge or charge of any nature
except that an optionee or participant may designate a beneficiary
pursuant to any rules established by the Committee.
13. Amendment of the Plan: The Board of Directors may amend or suspend the Plan
at any time and from time to time. No such amendment of the Plan may, however,
increase the maximum number of shares to be offered under options or awards,
or change the manner of determining the option price, or change the designation
of employees or class of employees eligible to receive options or awards, or
permit the transfer or issue of stock before payment therefor in full, or,
without the written consent of the optionee or participant, alter or impair
any option or award previously granted under the Plan or Prior Plan.
Notwithstanding the foregoing, if an option has been transferred in accordance
with Section 6(b)(6), written consent of the transferee (and not the optionee)
shall be necessary to alter or impair any option or award previously granted
under the Plan.
14. Miscellaneous:
(a) By accepting any benefits under the Plan, each optionee or participant
and each person claiming under or through such optionee or participant
shall be conclusively deemed to have indicated acceptance and
ratification of, and consent to, any action taken or made to be taken
or made under the Plan by the Company, the Board, the Committee or any
other Committee appointed by the Board.
(b) No participant or any person claiming under or through him shall have
any right or interest, whether vested or otherwise, in the Plan or
in any option, or stock appreciation right or award thereunder,
contingent or otherwise, unless and until all of the terms,
conditions and provisions of the Plan and the Agreement that affect
such participant or such other person shall have been complied with.
(c) Nothing contained in the Plan or in any Agreement shall require the
Company to segregate or earmark any cash or other property.
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<PAGE>
(d) Neither the adoption of the Plan nor its operation shall in any
way affect the rights and powers of the Company or any of its
Subsidiaries or Affiliates to dismiss and/or discharge any employee
at any time.
(e) Notwithstanding anything to the contrary in the Plan, neither the
Board nor the Committee shall have any authority to take any action
under the Plan where such action would affect the Company's ability to
account for any business combination as a "pooling of interests."
15. Term of the Plan: The Plan, if approved by stockholders, will be
effective May 6, 1997. The Plan shall expire on May 31, 2002 unless suspended
or discontinued by action of the Board of Directors. The expiration of the
Plan, however, shall not affect the rights of Optionees under options
theretofore granted to them or the rights of participants under awards
theretofore granted to them, and all unexpired options and awards shall
continue in force and operation after termination of the Plan except as
they may lapse or be terminated by their own terms and conditions.
E-1-15
BRISTOL-MYERS SQUIBB COMPANY
1983 STOCK OPTION PLAN
(as amended effective as of November 3, 1998)
1. Purpose: The purpose of the 1983 Stock Option Plan (as amended effective
as of November 3, 1998) (the "Plan") is to secure for the Company and its
stockholders the benefits of the incentive inherent in common stock ownership
by the officers and key employees of the Company and its Subsidiaries and
Affiliates who will be largely responsible for the Company's future growth
and continued financial success and by providing long-term incentives in
addition to current compensation to certain key executives of the Company and
its Subsidiaries and Affiliates who contribute significantly to the long-term
performance and growth of the Company and such Subsidiaries and Affiliates.
It is intended that the former purpose will be effected through the grant of
stock options and stock appreciation rights under the Plan and that the latter
purpose will be effected through an award conditionally granting performance
units under the Plan, either independently or in conjunction with and related
to a nonqualified stock option grant under the Plan. The Bristol-Myers
Squibb Company Long-Term Performance Award Plan (as amended to January 17,
1983 and in effect as of December 31, 1992) ("LTPAP") has been merged into
and consolidated with the Plan as of January 1, 1993. As used herein, the
term "Prior Plan" shall mean the Bristol-Myers Squibb Company 1983 Stock
Option Plan (as amended through May 1, 1991 and in effect as of December 31,
1992) prior to its amendment and restatement as of January 1, 1993.
2. Definitions: For purposes of this Plan:
(a) "Affiliate" shall mean any entity in which the Company has an
ownership interest of at least 20%.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Company's common stock (par value $.10
per share).
(d) "Company" shall mean Bristol-Myers Squibb Company.
(e) "Disability" or "Disabled" shall mean qualifying for and receiving
payments under a disability pay plan of the Company or any Subsidiary
or Affiliate.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(g) "Fair Market Value" shall mean the average of the high and low sale
prices of a share of Common Stock on the New York Stock Exchange, Inc.
composite tape on the date of measurement or on any date as determined
by the Committee and if there were no trades on such date, on the day
on which a trade occurred next preceding such date.
(h) "Retirement" shall mean termination of the employment of an employee
with the Company or a Subsidiary or Affiliate on or after (i) the
employee's 65th birthday or (ii) the employee's 55th birthday if the
employee has completed 10 years of service with the Company, its
Subsidiaries and/or its Affiliates. For purposes of this Section 2(h)
and all other purposes of this Plan, Retirement shall also mean
termination of employment of an employee with the Company or a
Subsidiary or Affiliate for any reason (other than the employee's
death, disability, resignation, willful misconduct or activity deemed
detrimental to the interests of the Company) where, on termination,
the employee's age plus years of service (rounded up to the next
higher whole number) equals at least 70 and the employee has completed
10 years of service with the Company, its Subsidiaries and/or its
Affiliates.
Furthermore, an employee who makes an election to retire under Article 19
of the Bristol-Myers Squibb Company Retirement Income Plan (the "Retirement
Income Plan") shall have any additional years of age and service which are
credited under Article 19 of the Retirement Income Plan taken into account
when determining such employee's age and service under this Section 2(h).
Such election shall be deemed a Retirement for purposes of this Section 2(h)
and all other purposes of this Plan.
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<PAGE>
(i) "Subsidiary" shall mean any corporation which at the time qualifies
as a subsidiary of the Company under the definition of "subsidiary
corporation" in Section 424 of the Code.
3. Amount of Stock: The amount of stock which may be made subject to grants
of options or awards of performance units under the Plan in calendar year 1993
shall not exceed an amount equal to (i) 0.9% of the outstanding shares of the
Company's Common Stock on January 1, 1993, plus (ii) the amount of shares
available for, and not made subject to, grants of options under the Prior Plan
as of January 1, 1993, less (iii) the number of shares subject to options
granted in 1993 under the Prior Plan and (iv) the number of shares
corresponding to awards of performance units outstanding under the LTPAP on
the date the Plan is approved by the stockholders of the Company. With
respect to each succeeding year, the amount of stock which may be made subject
to grants of options or awards of performance units under the Plan shall not
exceed an amount equal to (i) 0.9% of the outstanding shares of the Company's
Common Stock on January 1 of such year plus, subject to this Section 3, (ii)
in any year the number of shares equal to the amount of shares that were
available for grants and awards in the prior year but were not made subject
to a grant or award in such prior year and (iii) the number of shares that
were subject to options or awards granted hereunder or under the Prior Plan,
which options or awards terminated or expired in the prior year without being
exercised. Common Stock issued hereunder may be authorized and reissued shares
or issued shares acquired by the Company or its Subsidiaries on the market or
otherwise.
4. Administration: The Plan shall be administered under the supervision of
the Board of Directors of the Company which shall exercise its powers, to the
extent herein provided, through the agency of a Compensation and Management
Development Committee (the "Committee") which shall be appointed by the Board
of Directors of the Company and shall consist of not less than three directors
who shall serve at the pleasure of the Board. No member of the Committee
shall have been within one year prior to appointment to, or while serving
on, the Committee granted or awarded equity securities of the Company pursuant
to this or any other plan of the Company or its Subsidiaries or Affiliates
except to the extent that participation in any such plan or receipt of any
such grant or award would not adversely affect the Committee member's status
as a non-employee director for purposes of Rule 16b-3 under the Exchange Act.
The Committee, from time to time, may adopt rules and regulations for
carrying out the provisions and purposes of the Plan and make such other
determinations, not inconsistent with the terms of the Plan, as the Committee
shall deem appropriate. The interpretation and construction of any provision
of the Plan by the Committee shall, unless otherwise determined by the Board
of Directors, be final and conclusive.
The Committee shall maintain a written record of its proceedings. A
majority of the Committee shall constitute a quorum, and the acts of a
majority of the members present at any meeting at which a quorum is present,
or acts unanimously approved in writing, shall be the acts of the Committee.
5. Eligibility: Options and awards may be granted only to present or future
officers and key employees of the Company and its Subsidiaries and Affiliates,
including Subsidiaries and Affiliates which become such after the adoption of
the Plan. Any officer or key employee of the Company or of any such
Subsidiary or Affiliate shall be eligible to receive one or more options
or awards under the Plan. Any director who is not an officer or employee
of the Company or one of its Subsidiaries or Affiliates and any member of
the Committee, during the time of the member's service as such or thereafter,
shall be ineligible to receive an option or award under the Plan. The
adoption of this Plan shall not be deemed to give any officer or employee
any right to an award or to be granted an option to purchase Common Stock
of the Company, except to the extent and upon such terms and conditions as
may be determined by the Committee.
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6. Stock Options: Stock options under the Plan shall consist of incentive
stock options under Section 422 of the Code or nonqualified stock options
(options not intended to qualify as incentive stock options), as the Committee
shall determine. In addition, the Committee may grant stock appreciation
rights in conjunction with an option, as set forth in Section 6(b)(11), or
may grant awards in conjunction with an option, as set forth in Section
6(b)(10) (an "Associated Option").
Each option shall be subject to the following terms and conditions:
(a) Grant of Options. The Committee shall (1) select the officers and
key employees of the Company and its Subsidiaries and Affiliates to whom
options may from time to time be granted, (2) determine whether
incentive stock options or nonqualified stock options, are to be
granted, (3) determine the number of shares to be covered by each
option so granted, (4) determine the terms and conditions (not
inconsistent with the Plan) of any option granted hereunder (including
but not limited to restrictions upon the options, conditions of their
exercise, or on the shares of Common Stock issuable upon exercise
thereof), (5) determine whether nonqualified stock options or incentive
stock options granted under the Plan shall include stock appreciation
rights and, if so, shall determine the terms and conditions thereof in
accordance with Section 6(b)(11) hereof, (6) determine whether any
nonqualified stock options granted under the Plan shall be Associated
Options, and (7) prescribe the form of the instruments necessary or
advisable in the administration of options.
(b) Terms and Conditions of Option. Any option granted under the Plan
shall be evidenced by a Stock Option Agreement executed by the Company
and the optionee, in such form as the Committee shall approve, which
agreement shall be subject to the following terms and conditions and
shall contain such additional terms and conditions not inconsistent
with the Plan, and in the case of an incentive stock option not
inconsistent with the provisions of the Code applicable to incentive
stock options, as the Committee shall prescribe:
(1) Number of Shares Subject to an Option. The Stock Option Agreement
shall specify the number of shares of Common Stock subject to the
Agreement. If the option is an Associated Option, the number of
shares of Common Stock subject to such Associated Option shall
initially be equal to the number of performance units subject to the
award, but one share of Common Stock shall be canceled for each
performance unit paid out under the award.
(2) Option Price. The purchase price per share of Common Stock
purchasable under an option will be determined by the Committee
but will be not less than the Fair Market Value of a share of
Common Stock on the date of the grant of such option.
(3) Option Period. The period of each option shall be fixed by
the Committee, but no option shall be exercisable after the
expiration of ten years from the date the option is granted.
(4) Consideration. Each optionee, as consideration for the grant of
an option, shall remain in the continuous employ of the Company or
of one of its Subsidiaries or Affiliates for at least one year
from the date of the granting of such option, and no option shall
be exercisable until after the completion of such one year period
of employment by the optionee.
(5) Exercise of Option. An option may be exercised in whole or in part
from time to time during the option period (or, if determined by
the Committee, in specified installments during the option period)
by giving written notice of exercise to the Company specifying the
number of shares to be purchased, such notice to be accompanied by
payment in full of the purchase price and Withholding Taxes (as
defined in Section 10 hereof) due either by certified or bank
check, or in shares of Common Stock of the Company owned by the
optionee having a Fair Market Value at the date of exercise equal
to such purchase price and Withholding Taxes due, or in a
combination of the foregoing; provided, however, that payment in
shares of Common Stock of the Company will not be permitted unless
at least 100 shares of Common Stock are required and delivered for
such purpose. No shares shall be issued until full payment
therefor has been made. An optionee shall have the rights of a
stockholder only with respect to shares of stock for which
certificates have been issued to the optionee.
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<PAGE>
(6) Nontransferability of Options. No option or stock appreciation
right granted under the Plan shall be transferable by the optionee
otherwise than by will or by the laws of descent and distribution,
and such option or stock appreciation right shall be exercisable,
during the optionee's lifetime, only by the optionee.
Notwithstanding the foregoing, the Committee may set forth in a
Stock Option Agreement at the time of grant or thereafter, that the
options may be transferred to members of the optionee's immediate
family, to trusts solely for the benefit of such immediate family
members and to partnerships in which such family members and/or
trusts are the only partners. For this purpose, immediate family
members means the optionee's spouse, parents, children,
stepchildren, grandchildren and legal dependents. Any transfer
of options made under this provision will not be effective until
notice of such transfer is delivered to the Company.
(7) Retirement and Termination of Employment Other than by Death or
Disability. If an optionee shall cease to be employed by the
Company or any of its Subsidiaries or Affiliates for any reason
(other than termination of employment by reason of death or
Disability) after the optionee shall have been continuously so
employed for one year after the granting of the option, the option
shall be exercisable only to the extent that the optionee was
otherwise entitled to exercise it at the time of such cessation
of employment with the Company, Subsidiary or Affiliate, but in
no event after the expiration of the option period set forth
therein except that in the case of cessation of employment other
than by reason of Retirement or death, the option shall in no
event be exercisable after the date three months next succeeding
such cessation of employment. The Plan does not confer upon
any optionee any right with respect to continuation of employment
by the Company or any of its Subsidiaries or Affiliates.
(8) Disability of Optionee. An optionee who ceases to be employed
by reason of Disability shall be treated as though the optionee
remained in the employ of the Company or a Subsidiary or Affiliate
until the earlier of (i) cessation of payments under a disability
pay plan of the Company, Subsidiary or Affiliate, (ii) the
optionee's death, or (iii) the optionee's 65th birthday.
(9) Death of Optionee. Except as otherwise provided in subsection (13),
in the event of the optionee's death (i) while in the employ of the
Company or any of its Subsidiaries or Affiliates, (ii) while
Disabled as described in subsection (8) or (iii) after cessation
of employment due to Retirement, the option shall be fully
exercisable by the executors, administrators, legatees or
distributees of the optionee's estate, as the case may be, at any
time following such death. In the event of the optionee's death
after cessation of employment for any reason other than Disability
or Retirement, the option shall be exercisable by the executors,
administrators, legatees or distributees of the optionee's estate,
as the case may be, at any time during the twelve month period
following such death. Notwithstanding the foregoing, in no event
shall an option be exercisable unless the optionee shall have
been continuously employed by the Company or any of its Subsidiaries
or Affiliates for a period of at least one year after the option
grant, and no option shall be exercisable after the expiration of
the option period set forth in the Stock Option Agreement. In the
event any option is exercised by the executors, administrators,
legatees or distributees of the estate of a deceased optionee,
the Company shall be under no obligation to issue stock thereunder
unless and until the Company is satisfied that the person or
persons exercising the option are the duly appointed legal
representatives of the deceased optionee's estate or the proper
legatees or distributees thereof.
(10) Long Term Performance Awards. The Committee may from time to time
grant nonqualified stock options under the Plan in conjunction with
and related to an award of performance units made under a Long Term
Performance Award as set forth in Section 7(b)(11). In such event,
notwithstanding any other provision hereof, (i) the number of
shares to which the Associated Option applies shall initially be
equal to the number of performance units granted by the award, but
such number of shares shall be reduced on a one share-for-one unit
basis to the extent that the Committee determines pursuant to the
terms of the award, to pay to the optionee or the optionee's
beneficiary the performance units granted pursuant to such award;
and (ii) such Associated Option shall be cancelable in the
discretion of the Committee, without the consent of the optionee,
under the conditions and to the extent specified in the award.
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<PAGE>
(11) Stock Appreciation Rights. In the case of any option granted
under the Plan, either at the time of grant or by amendment of such
option at any time after such grant there may be included a stock
appreciation right which shall be subject to such terms and
conditions, not inconsistent with the Plan, as the Committee
shall impose, including the following:
(A) A stock appreciation right shall be exercisable to the extent,
and only to the extent, that the option in which it is included
is at the time exercisable, and may be exercised within such
period only at such time or times as may be determined by
the Committee;
(B) A stock appreciation right shall entitle the optionee (or any
person entitled to act under the provisions of subsection (9)
hereof) to surrender unexercised the option in which the stock
appreciation right is included (or any portion of such option)
to the Company and to receive from the Company in exchange
therefor that number of shares having an aggregate value equal
to (or, in the discretion of the Committee, less than) the
excess of the value of one share (provided such value does not
exceed such multiple of the option price per share as may be
specified by the Committee) over the option price per share
specified in such option times the number of shares called for
by the option, or portion thereof, which is so surrendered. The
Committee shall be entitled to cause the Company to settle its
obligation, arising out of the exercise of a stock appreciation
right, by the payment of cash equal to the aggregate value of
the shares the Company would otherwise be obligated to deliver
or partly by the payment of cash and partly by the delivery
of shares. Any such election shall be made within 30 business
days after the receipt by the Committee of written notice of
the exercise of the stock appreciation right. The value of a
share for this purpose shall be the Fair Market Value thereof
on the last business day preceding the date of the election to
exercise the stock appreciation right;
(C) No fractional shares shall be delivered under this subsection
(11) but in lieu thereof a cash adjustment shall be made;
(D) If a stock appreciation right included in an option is
exercised, such option shall be deemed to have been exercised
to the extent of the number of shares called for by the option
or portion thereof which is surrendered on exercise of the
stock appreciation right and no new option may be granted
covering such shares under this Plan; and
(E) If an option which includes a stock appreciation right is
exercised, such stock appreciation right shall be deemed to
have been canceled to the extent of the number of shares called
for by the option or portion thereof is exercised and no new
stock appreciation rights may be granted covering such shares
under this Plan.
(12) Incentive Stock Options. In the case of any incentive stock
option granted under the Plan, the aggregate Fair Market Value of
the shares of Common Stock of the Company (determined at the time
of grant of each option) with respect to which incentive stock
options granted under the Plan and any other plan of the Company
or its parent or a Subsidiary which are exercisable for the first
time by an employee during any calendar year shall not exceed
$100,000 or such other amount as may be required by the Code.
In any year, the maximum number of shares with respect to which
incentive stock options may be granted shall not exceed 4,000,000
shares.
(13) Rights of Transferee. Notwithstanding anything to the contrary
herein, if an option has been transferred in accordance with
Section 6(b)(6), the option shall be exercisable solely by the
transferee. The option shall remain subject to the provisions of
the Plan, including that it will be exercisable only to the extent
that the optionee or optionee's estate would have been entitled
to exercise it if the optionee had not transferred the option.
In the event of the death of the optionee prior to the expiration
of the right to exercise the transferred option, the period during
which the option shall be exercisable will terminate on the date
one year following the date of the optionee's death. In the event
of the death of the transferee prior to the expiration of the right
to exercise the option, the period during which the option shall
be exercisable by the executors, administrators, legatees and
distributees of the transferee's estate, as the case may be, will
E-2-5
<PAGE>
terminate on the date one year following the date of the
transferee's death. In no event will the option be exercisable
after the expiration of the option period set forth in the Stock
Option Agreement. The option shall be subject to such other rules
as the Committee shall determine.
7. Long-term Performance Awards: Awards under the Plan shall consist of the
conditional grant to the participants of a specified number of performance
units. The conditional grant of a performance unit to a participant will
entitle the participant to receive a specified dollar value, variable under
conditions specified in the award, if the performance objectives specified
in the award are achieved and the other terms and conditions thereof are
satisfied.
Each award will be subject to the following terms and conditions:
(a) Grant of Awards. The Committee shall (1) select the officers and key
executives of the Company and its Subsidiaries and Affiliates to whom
awards may from time to time be granted, (2) determine the number of
performance units covered by each award, (3) determine the terms and
conditions of each performance unit awarded and the award period and
performance objectives with respect to each award, (4) determine the
periods during which a participant may request the Committee to approve
deferred payment of a percentage (50% or 100%) of an award (the
"Deferred Portion") and the interest or rate of return thereon or the
basis on which such interest or rate of return thereon is to be
determined, (5) determine whether payment with respect to the portion
of an award which has not been deferred (the "Current Portion") and the
payment with respect to the Deferred Portion of an award shall be made
entirely in cash, entirely in Common Stock or partially in cash and
partially in Common Stock, (6) determine whether the award is to be
made independently of or in conjunction with a nonqualified stock
option granted under the Plan, and (7) prescribe the form of the
instruments necessary or advisable in the administration of the awards.
(b) Terms and Conditions of Award. Any award conditionally granting
performance units to a participant shall be evidenced by a Performance
Unit Agreement executed by the Company and the participant, in such
form as the Committee shall approve, which Agreement shall contain
in substance the following terms and conditions and such additional
terms and conditions as the Committee shall prescribe:
(1) Number of Performance Units. The Performance Unit Agreement shall
specify the number of performance units conditionally granted to
the participant. If the award has been made in conjunction with
the grant of an Associated Option, the number of performance units
granted shall initially be equal to the number of shares which the
participant is granted the right to purchase pursuant to the
Associated Option, but one performance unit shall be canceled for
each share of the Company's Common Stock purchased upon exercise of
the Associated Option or for each stock appreciation right included
in such option that has been exercised.
(2) Value of Performance Units. The Performance Unit Agreement shall
specify the threshold, target and maximum dollar values of each
performance unit and corresponding performance objectives as
provided under Section 7(b)(5).
(3) Award Periods. For each award, the Committee shall designate an
award period with a duration to be determined by the Committee
in its discretion but in no event less than three calendar years
within which specified performance objectives are to be attained.
There may be several award periods in existence at any one time
and the duration of performance objectives may differ from each
other.
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<PAGE>
(4) Consideration. Each participant, as consideration for the award
of performance units, shall remain in the continuous employ of the
Company or of one of its Subsidiaries or Affiliates for at least
one year after the date of the making of such award, and no award
shall be payable until after the completion of such one year of
employment by the participant.
(5) Performance Objectives. The Committee shall establish performance
objectives with respect to the Company for each award period on the
basis of such criteria and to accomplish such objectives as the
Committee may from time to time determine. Performance objectives
may include objective and subjective criteria. During any award
period, the Committee may adjust the performance objectives for
such award period as it deems equitable in recognition of unusual
or nonrecurring events affecting the Company, changes in applicable
tax laws or accounting principles, or such other factors as the
Committee may determine.
(6) Determination and Payment of Performance Units Earned. As soon as
practicable after the end of an award period, the Committee shall
determine the extent to which awards have been earned on the basis
of the Company's actual performance in relation to the established
performance objectives as set forth in the Performance Unit
Agreement. The Performance Unit Agreement shall specify that as
soon as practicable after the end of each award period, the
Committee shall determine whether the conditions of Sections 7(b)(4)
and 7(b)(5) hereof have been met and, if so, shall ascertain the
amount payable to the participant in respect of the performance
units. As promptly as practicable after it has determined that an
amount is payable in respect of an award, the Committee shall cause
the Current Portion of such award to be paid to the participant or
the participant's beneficiaries, as the case may be, in the
Committee's discretion, either entirely in cash, entirely in Common
Stock or partially in cash and partially in Common Stock. The
Deferred Portion of an award shall be contingently credited and
payable to the participant over a deferred period and shall be
credited with interest or a rate of return, as determined by the
Committee. The Committee, in its discretion, shall determine the
conditions upon, and method of, payment of such deferred portions
and whether such payment will be made entirely in cash, entirely in
Common Stock or partially in cash and partially in Common Stock.
In making the payment of an award in Common Stock hereunder, the cash
equivalent of such Common Stock shall be determined by the Fair Market
Value of the Common Stock on the day the Committee designates the
performance units shall be paid.
(7) Nontransferability of Awards and Designation of Beneficiaries. No
award under the Plan shall be transferable by the participant other
than by will or by the laws of descent and distribution, except
that a participant may designate a beneficiary pursuant to the
provisions hereof.
If any participant or the participant's beneficiary shall attempt to
assign the participant's rights under the Plan in violation of the
provisions thereof, the Company's obligation to make any further
payments to such participant or the participant's beneficiaries shall
forthwith terminate.
A participant may name one or more beneficiaries to receive any payment
of an award to which the participant may be entitled under the Plan
in the event of the participant's death, on a form to be provided by
the Committee. A participant may change the participant's beneficiary
designation from time to time in the same manner.
If no designated beneficiary is living on the date on which any payment
becomes payable to a participant's beneficiary, such payment will be
payable to the person or persons in the first of the following classes
of successive preference:
(i) Widow or widower, if then living,
(ii) Surviving children, equally,
(iii) Surviving parents, equally,
(iv) Surviving brothers and sisters, equally,
(v) Executors or administrators
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<PAGE>
and the term "beneficiary" as used in the Plan shall include such
person or persons.
(8) Retirement and Termination of Employment Other Than by Death or
Disability. In the event of the Retirement prior to the end of
an award period of a participant who has satisfied the one year
employment requirement of Section 7(b)(4) with respect to an
award prior to Retirement, the participant, or his estate, shall
be entitled to a payment of such award at the end of the award
period, pursuant to the terms of the Plan and the participant's
Performance Unit Agreement, provided, however, that the participant
shall be deemed to have earned that proportion (to the nearest
whole unit) of the value of the performance units granted to the
participant under such award as the number of months of the award
period which have elapsed since the first day of the calendar year
in which the award was made to the end of the month in which the
participant's Retirement occurs, bears to the total number of
months in the award period. The participant's rights in any
remaining performance units shall be canceled and forfeited.
Subject to Section 7(b)(6) hereof, the Performance Unit Agreement
shall specify that the rights of the participant in the performance
units granted to such participant shall be conditional and shall be
canceled, forfeited and surrendered if the participant's continuous
employment with the Company and its Subsidiaries and Affiliates shall
terminate for any reason, other than the participant's death,
Disability or Retirement prior to the end of the award period.
The Committee may, in its discretion, waive, in whole or in part,
the cancellation, forfeiture and surrender of any performance units.
(9) Disability of Participant. For the purposes of any award a
participant who becomes Disabled shall be deemed to have suspended
active employment by reason of Disability commencing on the date
the participant becomes entitled to receive payments under a
disability pay plan of the Company or any Subsidiary or Affiliate
and continuing until the date the participant is no longer entitled
to receive such payments. In the event a participant becomes
Disabled during an award period but only if the participant has
satisfied the one year employment requirement of Section 7(b)(4)
with respect to an award prior to becoming Disabled, upon the
determination by the Committee of the extent to which an award has
been earned pursuant to Section 7(b)(6) the participant shall be
deemed to have earned that proportion (to the nearest whole unit)
of the value of the performance units granted to the participants
under such award as the number of months of the award period in
which the participant was not Disabled bears to the total number of
months of the award period. The participant's rights in any
remaining performance units shall be canceled and forfeited.
The Committee may, in its discretion, waive, in whole or in part, such
cancellation and forfeiture of any performance units.
(10) Death of Participant. In the event of the death prior to the end
of an award period of a participant who has satisfied the one year
employment requirement with respect to an award prior to the date
of death, the participant's beneficiaries or estate, as the case
may be, shall be entitled to a payment of such award upon the end
of the award period, pursuant to the terms of the Plan and the
participant's Performance Unit Agreement, provided, however, that
the participant shall be deemed to have earned that proportion
(to the nearest whole unit) of the value of the performance units
granted to the participant under such award as the number of months
of the award period which have elapsed since the first day of the
calendar year in which the award was made to the end of the month
in which the participant's death occurs, bears to the total number
of months in the award period. The participant's rights in any
remaining performance units shall be canceled and forfeited.
The Committee may, in its discretion, waive, in whole or in part, such
cancellation and forfeiture of any performance units.
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<PAGE>
(11) Grant of Associated Option. If the Committee determines that the
conditional grant of performance units under the Plan is to be made
to a participant in conjunction with the grant of a nonqualified
stock option under the Plan, the Committee shall grant the
participant an Associated Option under the Plan subject to the
terms and conditions of this subsection (11). In such event,
such award under the Plan shall be contingent upon the
participant's being granted such an Associated Option pursuant
to which: (i) the number of shares the optionee may purchase
shall initially be equal to the number of performance units
conditionally granted by the award, (ii) such number of shares
shall be reduced on a one share-for-one unit basis to the extent
that the Committee determines, pursuant to Section 7(b)(6) hereof,
to pay to the participant or the participant's beneficiaries the
performance units conditionally granted pursuant to the award, and
(iii) the Associated Option shall be cancelable in the discretion
of the Committee, without the consent of the participant, under
the conditions and to the extent specified herein and in
Section 7(b)(6) hereof.
If no amount is payable in respect of the conditionally granted
performance units, the award and such performance units shall be deemed
to have been canceled, forfeited and surrendered, and the Associated
Option, if any, shall continue in effect in accordance with its terms.
If any amount is payable in respect of the performance units and such
units were granted in conjunction with an Associated Option, the
Committee shall, within 30 days after the determination of the
Committee referred to in the first sentence of Section 7(b)(6),
determine, in its sole discretion, either:
(A) to cancel in full the Associated Option, in which event the
value of the performance units payable pursuant to Sections
7(b)(5) and (6) shall be paid;
(B) to cancel in full the performance units, in which event no
amount shall be paid to the participant in respect thereof but
the Associated Option shall continue in effect in accordance
with its terms; or
(C) to cancel some, but not all, of the performance units, in which
event the value of the performance units payable pursuant to
Sections 7(b)(5) and (6) which have not been canceled shall be
paid and the Associated Option shall be canceled with respect
to that number of shares equal to the number of conditionally
granted performance units that remain payable.
Any action taken by the Committee pursuant to the preceding
sentence shall be uniform with respect to all awards having the
same award period. If the Committee takes no such action, it
shall be deemed to have determined to cancel in full the award
in accordance with clause (B) above.
8. Determination of Breach of Conditions: The determination of the Committee
as to whether an event has occurred resulting in a forfeiture or a termination
or reduction of the Company's obligations in accordance with the provisions of
the Plan shall be conclusive.
9. Adjustment in the Event of Change in Stock: In the event of changes in
the outstanding Common Stock of the Company by reason of stock dividends,
recapitalization, mergers, consolidations, split-ups, combinations or
exchanges of shares and the like, the aggregate number and class of shares
available under the Plan, and the number, class and the price of shares
subject to outstanding options and/or awards and the number of performance
units and/or the dollar value of each unit shall be appropriately adjusted
by the Committee, whose determination shall be conclusive.
10. Taxes: In connection with the transfer of shares of Common Stock to an
optionee, subject to Section 16 of the Exchange Act, as the result of the
exercise of a nonqualified stock option or a stock appreciation right, or
to a participant subject to Section 16 of the Exchange Act, upon payment of
an award, the Company shall have the right to retain or sell without notice,
or to demand surrender of, shares of Common Stock having a Fair Market Value
(taking into account any commissions or other expenses the Company may incur
upon the sale of such shares) on the date that the amount required by any
governmental entity to be withheld or otherwise deducted and paid with respect
to such transfer ("Withholding Tax") is to be determined (the "Tax Date")
sufficient to cover the amount of any Applicable Tax (the amount of W
ithholding Tax plus the incremental amount determined on the basis of the
highest marginal tax rate applicable to such optionee or participant, Federal
Insurance Contribution Act taxes or other governmental impost or levy), and
to make payment (or to reimburse itself for payment made) to the appropriate
taxing authority of an amount in cash equal to the amount of such Applicable
Tax, remitting any balance to the optionee or participant. Notwithstanding
the foregoing, if the stock options have been transferred, the optionee shall
provide the Company with funds sufficient to pay such Withholding or
Applicable Tax. Furthermore, if such optionee does not satisfy his
E-2-9
<PAGE>
withholding obligation, the transferee may provide the funds sufficient to
enable the Company to pay such Withholding Tax or Applicable Tax. However,
if the stock options have been transferred, the Company shall have no right
to retain or sell without notice, or to demand surrender from the transferee
of, shares of Common Stock in order to pay such Withholding Tax or Applicable
Tax.
An optionee or participant who is not an executive officer of the Company
subject to Section 16 of the Exchange Act shall be entitled to satisfy the
obligation to pay any Withholding Tax or Applicable Tax, by providing the
Company with funds sufficient to enable the Company to pay such Withholding
Tax or Applicable Tax or by requiring the Company to retain or to accept upon
delivery thereof by the optionee or participant shares of Common Stock
sufficient in value (determined in accordance with the last sentence of the
preceding paragraph), to cover the amount of such Withholding Tax or
Applicable Tax. Each election by an optionee or participant to have shares
retained or to deliver shares for this purpose shall be subject to the
following restrictions: (i) the election must be in writing and be made
on or prior to the Tax Date; (ii) the election must be irrevocable; (iii)
the election shall be subject to the disapproval of the Committee.
11. Amendment of the Plan: The Board of Directors may amend or suspend the
Plan at any time and from time to time. No such amendment of the Plan may,
however, increase the maximum number of shares to be offered under options or
awards, or change the manner of determining the option price, or change the
designation of employees or class of employees eligible to receive options
or awards, or permit the transfer or issue of stock before payment therefor
in full, or, without the written consent of the optionee or participant,
alter or impair any option or award previously granted under the Plan, Prior
Plan or LTPAP. Notwithstanding the foregoing, if an option has been
transferred in accordance with Section 6(b)(6), written consent of the
transferee (and not the optionee) shall be necessary to alter or impair any
option or award previously granted under the Plan.
12. Amendment of Options Outstanding Under the Prior Plan: The Prior Plan and
certain nonqualified options granted and outstanding thereunder are hereby
amended to provide that any nonqualified option which is outstanding on the
date this Plan is adopted by a vote of the holders of a majority of the shares
of the Company's Common Stock and $2.00 Convertible Preferred Stock present in
person or by proxy at a duly held shareholders meeting at which a quorum
representing a majority of all outstanding voting stock is present shall be
exercisable in accordance with Sections 6(b)(7) and 6(b)(9), except that for
the purpose of such options "Retirement" shall additionally mean termination
of the employment of an employee after completing 35 years of service with
the Company or its Subsidiaries.
Furthermore, an employee who makes an election to retire under Article 19
of the Retirement Income Plan shall have any additional years of age and
service which are credited under Article 19 of the Retirement Income Plan
taken into account when determining such employee's age and years of service
with the Company or its Subsidiaries under this Section 12. Such election
shall be deemed a Retirement for purposes of this Section 12 and all other
purposes of this Plan.
13. Miscellaneous: By accepting any benefits under the Plan, each optionee
or participant and each person claiming under or through such optionee or
participant shall be conclusively deemed to have indicated acceptance and
ratification of, and consent to, any action taken or made to be taken or made
under the Plan by the Company, the Board, the Committee or any other Committee
appointed by the Board. No participant or any person claiming under or
through him shall have any right or interest, whether vested or otherwise,
in the Plan or in any option, or stock appreciation right or award thereunder,
contingent or otherwise, unless and until all of the terms, conditions and
provisions of the Plan and the Agreement that affect such participant or such
other person shall have been complied with. Nothing contained in the Plan or
in any Agreement shall require the Company to segregate or earmark any cash or
other property. Neither the adoption of the Plan nor its operation shall in
any way affect the rights and powers of the Company or any of its Subsidiaries
or Affiliates to dismiss and/or discharge any employee at any time.
E-2-10
<PAGE>
14. Term of the Plan: The Plan shall become effective as of January 1, 1993
by action of the Board of Directors conditioned on and subject to approval of
the Plan, by a vote of the holders of a majority of the shares of Common Stock
and $2.00 Convertible Preferred Stock of the Company present in person or by
proxy at a duly held shareholders meeting at which a quorum representing a
majority of all outstanding voting stock is present. The Plan shall terminate
on December 31, 2002, or at such earlier date as may be determined by the
Board of Directors. Termination of the Plan, however, shall not affect the
rights of optionees under options theretofore granted to them or the rights
of participants under awards theretofore granted to them, and all unexpired
options and awards shall continue in force and operation after termination
of the Plan except as they may lapse or be terminated by their own terms
and conditions.
BRISTOL-MYERS SQUIBB COMPANY
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
AMENDED EFFECTIVE JANUARY 12, 1999
1. Purpose:
The purpose of the Bristol-Myers Squibb Company Non-Employee Directors' Stock
Option Plan ("the Plan") is to secure for Bristol-Myers Squibb Company
("the Company") and its stockholders the benefits of the incentive inherent
in increased common stock ownership by the members of the Board of Directors
("the Board") of the Company who are Eligible Directors as defined in the Plan.
2. Administration:
The Plan shall be administered by the Board. The Board shall have all the
powers vested in it by the terms of the Plan, such powers to include authority
(within the limitations described herein) to prescribe the form of the
agreement embodying awards of stock options made under the Plan ("Options").
The Board shall, subject to the provisions of the Plan, grant Options under
the Plan and shall have the power to construe the Plan, to determine all
questions arising thereunder and to adopt and amend such rules and regulations
for the administration of the Plan as it may deem desirable. Any decision of
the Board in the administration of the Plan, as described herein, shall be
final and conclusive. The Board may act only by a majority of its members in
office, except that the members thereof may authorize any one or more of their
number or the Secretary or any other officer of the Company to execute and
deliver documents on behalf of the Board. No member of the Board shall be
liable for anything done or omitted to be done by such member or by any other
member of the Board in connection with the Plan, except for such member's own
willful misconduct or as expressly provided by statute.
3. Amount of Stock:
The stock which may be issued and sold under the Plan will be the Common
Stock (par value $.10 per share) of the Company, of a total number not
exceeding 500,000 shares, subject to adjustment as provided in Paragraph
6 below. The stock to be issued may be either authorized and unissued
shares or issued shares acquired by the Company or its subsidiaries. In
the event that Options granted under the Plan shall terminate or expire
without being exercised in whole or in part, new Options may be granted
covering the shares not purchased under such lapsed Options.
4. Eligible Directors:
The members of the Board who are eligible to participate in the Plan are
persons who serve as directors of the Company after the effective date of
the Plan and:
E-3-1
<PAGE>
(a) who are not current or former employees of the Company and
(b) who are not and, in the past, have not been eligible to receive Options
on Company stock by participation as an employee in another plan
sponsored by the Company or under a contractual arrangement with the
Company.
5. Terms and Conditions of Options:
Each Option granted under the Plan shall be evidenced by an agreement in such
form as the Board shall prescribe from time to time in accordance with the
Plan and shall comply with the following terms and conditions:
(a) The Option exercise price shall be the fair market value of the Common
Stock shares subject to such Option on the date the Option is granted,
which shall be the average of the high and the low sales prices of a
Common Stock share on the date of grant as reported on the New York
Stock Exchange Composite Transactions Tape or, if the New York Stock
Exchange is closed on that date, on the last preceding date on which
the New York Stock Exchange was open for trading.
(b) Each year, as of the date of the Annual Meeting of Stockholders of the
Company, each Eligible Director who has been elected or reelected or
who is continuing as a member of the Board as of the adjournment of
the Annual Meeting shall automatically receive an Option for 2,500
shares of Common Stock on a post-split basis.
(c) The Option shall not be transferable by the optionee otherwise than by
will or the laws of descent and distribution, and shall be exercisable
during his lifetime only by him.
(d) No Option or any part of an Option shall be exercisable:
(I) before the Eligible Director has served one term-year as a member
of the Board since the date the Option was granted (as used herein,
the term "term-year" means that period from one Annual Meeting to
the subsequent Annual Meeting),
(ii) after the expiration of ten years from the date the Option was
granted,
(iii) unless, written notice of the exercise is delivered to the
Company specifying the number of shares to be purchased and
payment in full is made for the shares of Common Stock being
acquired thereunder at the time of exercise; such payment shall
be made
(A) in United States dollars by certified check, or bank draft
or
E-3-2
<PAGE>
(B) by tendering to the Company Common Stock shares owned by the
person exercising the Option and having a fair market value
equal to the cash exercise price applicable to such Option,
such fair market value to be the average of the high and
low sales prices of a Common Stock share on the date of
exercise as reported on the New York Stock Exchange
Composite Transactions Tape, or, if the New York Stock
Exchange is closed on that date, on the last preceding date
on which the New York Stock Exchange was open for trading,
or
by a combination of United States dollars and Common Stock
shares as aforesaid; and
(iv) unless the person exercising the Option has been, at all times
during the period beginning with the date of grant of the Option
and ending on the date of such exercise, an Eligible Director
of the Company, except that
(A) if such a person shall cease to be such an Eligible Director
for reasons other than retirement or death, while holding an
Option that has not expired and has not been fully
exercised, such person, at any time within one year after
the date he ceases to be such an Eligible Director (but in
no event after the Option has expired under the provisions
of subparagraph 5(d) (ii) above), may exercise the Option
with respect to any Common Stock shares as to which such
person has not exercised the Option on the date the person
ceased to be such an Eligible Director; or
(B) if such person shall cease to be such an Eligible Director
by reason of retirement or death while holding an Option
that has not expired and has not been fully exercised, such
person, or in the case of death, the executors,
administrators or distributees, as the case may be, may at
any time within five years after the date such person ceased
to be such an Eligible Director (but in no event after the
Option has expired under the provisions of subparagraph 5(d)
(ii) above), exercise the Option with respect to any shares
of Common Stock as to which such person has not exercised
the Option on the date the person ceased to be such an
Eligible Director, notwithstanding the provisions of
subparagraph 5(e) below.
if any person who has ceased to be such an Eligible
Director for reasons other than death, shall die holding
an Option that has not been fully exercised, such person's
executors, administrators, heirs or distributees, as the
case may be, may, at any time within the greater of (1) one
year after the date of death or (2) the remainder for the
period in which such person could have exercised the Option
had the person not died, (but in no event (under either (1)
or (2) after the Option has expired under the provisions of
subparagraph 5(d) (ii) above)), exercise the Option with
respect to any shares as to which the decedent could have
exercised the Option at the time of death.
E-3-3
<PAGE>
In the event any Option is exercised by the executors,
administrators, legatees or distributees of the estate of
a deceased optionee, the Company shall be under no
obligation to issue stock thereunder unless and until the
Company is satisfied that the person or persons exercising
the Option are the duly appointed legal representatives of
the deceased optionee's estate or the proper legatees or
distributees thereof.
(e) Subject to subparagraph 5(d) (I) above, one-quarter (25%) of the total
number of shares of Common Stock covered by the Option shall become
exercisable beginning on the earlier of (a) the first anniversary date
of the grant of the Option or (b) the completion of one term-year
following the grant of the Option; thereafter an additional one-quarter
(25%) of the shares shall become exercisable annually on the earlier of
(a) the anniversary date of the grant of the Option or (b) the
completion of an additional term-year of service as a member of the
Board.
6. Adjustment in the Event of Change in Stock:
In the event of changes in the outstanding Common Stock of the Company by
reason of stock dividends, recapitalizations, mergers, consolidations,
split-ups, combinations or exchanges of shares and the like, the aggregate
number and class of shares available under the Plan, and the number, class
and the price of shares of Common Stock subject to outstanding Options shall
be appropriately adjusted by the Board, whose determination shall be
conclusive.
7. Miscellaneous Provisions:
(a) Except as expressly provided for in the Plan, no Eligible Director or
other person shall have any claim or right to be granted an Option under
the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any Eligible Director any right to be retained in
the service of the Company.
(b) An optionee's rights and interest under the Plan may not be assigned
or transferred in whole or in part either directly or by operation of
law or otherwise (except in the event of an optionee's death, by will
or the laws of descent and distribution), including, but not by way of
limitations, execution, levy, garnishment, attachment, pledge,
bankruptcy or in any other manner, and no such right or interest of
any participant in the Plan shall be subject to any obligation or
liability of such participant.
(c) No Common Stock shares shall be issued hereunder unless counsel for
the Company shall be satisfied that such issuance will be in compliance
with applicable federal, state and other securities laws and
regulations.
(d) It shall be a condition to the obligation of the Company to issue
Common Stock shares upon exercise of an Option, that the optionee (or
any beneficiary or person entitled to act under subparagraph 5(d) (iv)
above) pay to the Company, upon its demand, such amount as may be
requested by the Company for the purpose of satisfying any liability
to withhold federal, state, local or foreign income or other taxes.
If the amount requested is not paid, the Company may refuse to issue
Common Stock shares.
E-3-4
<PAGE>
(e) The expenses of the Plan shall be borne by the Company.
(f) The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund or to make any other
segregation of assets to assure the issuance of shares upon exercise
of any Option under the Plan and issuance of shares upon exercise of
Options shall be subordinate to the claims of the Company's general
creditors.
(g) By accepting any Option or other benefit under the Plan, each optionee
and each person claiming under or through such person shall be
conclusively deemed to have indicated his acceptance and ratification
of, and consent to, any action taken under the Plan by the Company
or the Board.
8. Amendment or Discontinuance:
The Plan may be amended at any time and from time to time by the Board as the
Board shall deem advisable, including, but not limited to amendments necessary
to qualify for any exemption or to comply with applicable law or regulations
provided, however, that except as provided in Paragraph 6 above, the Board
may not, without further approval by the shareholders of the Company in
accordance with Paragraph 10 below, increase the maximum number of shares
of Common Stock as to which Options may be granted under the Plan, increase
the number of shares subject to an Option, reduce the minimum Option
exercise price described in subparagraph 5(a) above, extend the period during
which Options may be granted or exercised under the Plan or change the class
of persons eligible to receive Options under the Plan. No amendment of the
Plan shall materially and adversely affect any right of any optionee with
respect to any Option theretofore granted without such optionee's written
consent.
9. Termination:
This Plan shall terminate upon the earlier of the following dates or events
to occur:
(a) upon the adoption of a resolution of the Board terminating the Plan; or
(b) ten years from the date the Plan is initially approved and adopted by
the shareholders of the Company in accordance with Paragraph 10 below.
10. Effective Date of Plan:
The Plan shall become effective as of May 1, 1990 or such later date as the
Board may determine, provided that the Company stockholders shall have adopted
the Plan at the Company's 1990 Annual Meeting of Stockholders.
E-3-5
March 12, 1999
Mr. Charles A. Heimbold, Jr.
Chairman and Chief Executive Officer
Bristol-Myers Squibb Company
345 Park Avenue
New York, New York 10154-0037
Dear Charlie:
Over the period since you assumed the role of Chief Executive Officer, your
leadership has significantly contributed to the Company's success, as
reflected in the substantial increase in the value of the Company by
approximately $100 billion as of year-end 1998. In light of this, the
Compensation and Management Development Committee has approved the following
in exchange for your agreement to serve as Chairman and Chief Executive
Officer until December 31, 2001, or such earlier date as the Board of
Directors may appoint your successor. This new agreement, the provisions
of which are detailed below, replaces the original agreement dated
March 25, 1998.
* You are granted a Restricted Stock Award of 300,000 shares which will
vest upon your retirement on December 31, 2001, or such earlier date as
the Board of Directors may appoint your successor.
* Your annual bonus target will be determined by the Board but will not be
less than 170% of your base salary, and your base salary will not be less
than in 1998.
* After your retirement you will be provided with the benefits, support and
agreements similar to those historically provided to other retiring executives
who served as Chairman and Chief Executive Officer of the Company.
* You are granted a Restricted Stock Award of 100,000 shares which will vest
on January 1, 2002. In the event the Board of Directors appoints your
successor prior to December 31, 2001, and you elect to retire prior to
December 1, 2001, you may elect to have this Restricted Stock Award vest
at the time you elect to retire.
* Your Retirement Income Plan Benefit will be calculated on the basis of your
three-year final average pay (salary plus bonus) instead of the five-year
final average pay normally provided under the Plan.
E-4-1
<PAGE>
In calculating your pension benefit, the pension formula will be increased
to reflect an additional ten percentage points above that provided by the
normal formula for retirement benefits (It is estimated that the benefit
earned under the Plan will approximate 77% of your final average pay upon
retirement at the end of 2001. This additional benefit would increase your
total retirement benefit to approximately 87% of final average pay).
Bristol-Myers Squibb Company
By: /s/ James D. Robinson III
-----------------------------------
James D. Robinson III
Chairman, Compensation and
Management Development Committee
Agreed to:
By: /s/ Charles A. Heimbold, Jr.
- --------------------------------------------
Charles A. Heimbold, Jr.
Chairman and Chief Executive Officer
E-4-2
EXHIBIT 21
----------
BRISTOL-MYERS SQUIBB COMPANY
SUBSIDIARY LIST
2309 Realty Corporation
345 Park Corporation
77 Wilson St., Corp.
A.G. Medical Services, P.A.
Agit Ges. fuer Informationssysteme und Techniken m.b.H.
Alive & Well, Inc.
Allard Laboratories, Inc.
Allard Labs Acquisition LLC
Apothecon BV
Apothecon Farmaceutica Ltda.
Apothecon, Inc.
Apothecon, S.A.
Astel Laboratoires S.A.R.L.
Auslandsbeteiligungs Holding, GmbH
B-MS GeneRx
B. L. Pharmaceuticals (Proprietary) Limited
Blisa Acquisition LLC
Blisa, Inc.
BMS Holdings
BMS Investco SAS
BMS Music Company
BMS-Generiques SA
BMSIC Pharma Handels GmbH & Co. KG
BMSIC Pharma-Handels Verwaltungs GmbH
Boclaro Inc.
Bristol (Iran) S.A.
Bristol Arzneimittel G.m.b.H.
Bristol Caribbean, Inc.
Bristol Foundation
Bristol Iran Private Company Limited
Bristol Laboratories Corporation
Bristol Laboratories Inc.
Bristol Laboratories International, S.A.
Bristol Laboratories Medical Information Systems Inc.
Bristol Pharmaceutical Information Center, S.A.
Bristol-Myers (Bangladesh) Inc.
Bristol-Myers (Japan) Limited
Bristol-Myers (Private) Limited
Bristol-Myers (Zaire) Ltd.
Bristol-Myers Award Superannuation Pty. Ltd.
Bristol-Myers Barceloneta, Inc.
E-5-1
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
SUBSIDIARY LIST
Bristol-Myers Company Limited
Bristol-Myers de Mexico, S. de R. L. de C.V.
Bristol-Myers Foreign Sales Corporation
Bristol-Myers Ges.m.b.H.
Bristol-Myers Industrial (Dominicana), Inc.
Bristol-Myers International s.r.l.
Bristol-Myers Lion Ltd.
Bristol-Myers Middle East S.A.L.
Bristol-Myers Nederland Inc.
Bristol-Myers Oncology Therapeutic Network, Inc.
Bristol-Myers Overseas Corporation
Bristol-Myers Overseas Corporation (Guam Branch)
Bristol-Myers Overseas Corporation (Korea - Branch)
Bristol-Myers Pakistan (Pvt.) Limited
Bristol-Myers S.A.
Bristol-Myers Squibb (China) Investment Co., Ltd.
Bristol-Myers Squibb (Guangzhou) Ltd.
Bristol-Myers Squibb (Hong Kong) Limited
Bristol-Myers Squibb (Malaysia) Sendirian Berhad
Bristol-Myers Squibb (N.Z.) Limited
Bristol-Myers Squibb (Phil.) Inc.
Bristol-Myers Squibb (Proprietary) Limited
Bristol-Myers Squibb (Russia)
Bristol-Myers Squibb (Singapore) Pte. Limited
Bristol-Myers Squibb (Taiwan) Ltd.
Bristol-Myers Squibb (Thailand) Ltd.
Bristol-Myers Squibb (West Indies) Ltd.
Bristol-Myers Squibb A.E.B.E.
Bristol-Myers Squibb A.G.
Bristol-Myers Squibb Aktiebolag
Bristol-Myers Squibb Argentina, S.A.*
Bristol-Myers Squibb Asia/Pacific, Inc.
Bristol-Myers Squibb Asia/Pacific, Inc. (Singapore - Branch)
Bristol-Myers Squibb Auslandsbeteiligungs Holding, GmbH
Bristol-Myers Squibb Australia Pty. Ltd.
Bristol-Myers Squibb B.V.
Bristol-Myers Squibb Belgium, S.A.
Bristol-Myers Squibb Brasil, S.A.
Bristol-Myers Squibb Business Services Limited
Bristol-Myers Squibb Canada Inc.
Bristol-Myers Squibb Company
Bristol-Myers Squibb de Colombia S.A.
Bristol-Myers Squibb de Costa Rica, S.A.
E-5-2
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
SUBSIDIARY LIST
Bristol-Myers Squibb de Guatemala, S. A.
Bristol-Myers Squibb de Mexico, S de R.L. de C.V.
Bristol-Myers Squibb de Venezuela, S.A.
Bristol-Myers Squibb del Ecuador, C.A.
Bristol-Myers Squibb Delta Holdings, L.L.C.
Bristol-Myers Squibb Dominicana, S.A.
Bristol-Myers Squibb Europa PLC
Bristol-Myers Squibb Europe Headquarters SARL
Bristol-Myers Squibb Export SA
Bristol-Myers Squibb Farmaceutica Portuguesa Limitada
Bristol-Myers Squibb G.m.b.H.
Bristol-Myers Squibb Ges. m.b.H.
Bristol-Myers Squibb Global Properties Ltd.
Bristol-Myers Squibb Holding Germany GMBH
Bristol-Myers Squibb Holdings B.V.
Bristol-Myers Squibb Holdings Limited
Bristol-Myers Squibb Holdings Limited (Ireland - Branch)
Bristol-Myers Squibb Holdings Limited (Kenya - Branch)
Bristol-Myers Squibb Ilaclari Limited Sirketi
Bristol-Myers Squibb Ilaclari, Inc.
Bristol-Myers Squibb Ilaclari, Inc. (Turkey - Branch)
Bristol-Myers Squibb International Company
Bristol-Myers Squibb International Corporation
Bristol-Myers Squibb International Corporation (Belgium - Branch)
Bristol-Myers Squibb International Corporation (Egypt - Branch)
Bristol-Myers Squibb International Corporation (Spain - Branch)
Bristol-Myers Squibb International Insurance Company
Bristol-Myers Squibb International Limited
Bristol-Myers Squibb Investco, Inc.
Bristol-Myers Squibb K.K.
Bristol-Myers Squibb Korea Ltd.
Bristol-Myers Squibb Laboratories Company
Bristol-Myers Squibb Manufacturing
Bristol-Myers Squibb MEA S.A. (Saudi Arabia - Branch)
Bristol-Myers Squibb MEA S.A. (Switzerland)
Bristol-Myers Squibb MEA S.A.(Egypt - Branch)
Bristol-Myers Squibb Norway Ltd.
Bristol-Myers Squibb Pakistan (Pvt.) Ltd.
Bristol-Myers Squibb Peru S.A.
Bristol-Myers Squibb Pharmaceuticals Limited (England)
Bristol-Myers Squibb Pharmaceuticals Limited (Ireland)
Bristol-Myers Squibb Products S.A.
Bristol-Myers Squibb Puerto Rico, Inc.
E-5-3
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
SUBSIDIARY LIST
Bristol-Myers Squibb S.p.A.
Bristol-Myers Squibb Service Ltd.
Bristol-Myers Squibb Sp. z o.o.
Bristol-Myers Squibb Spol. s r.o.
Bristol-Myers Squibb Superannuation Plan Pty. Ltd.
Bristol-Myers Squibb Zentrum Fuer Forschung Und Fortbildung Im
Gesundheitswesen G.m.b.H.
Bristol-Myers Squibb, S.A.
Bristol-Myers Zimmer Award Superannuation Plan
Bristol-Salor Pharma G.m.b.H.
Cancer Research, Inc.
Carboplant Spezialimplante GmbH
CJG Partners, L.P.
Clairol Brazil Ltda.
Clairol Incorporated
Clairol International S.r.l.
Clairol Limited
Comercializadora RPM, S. De R.L. De C.V.
Compania Bristol-Myers Squibb de Centro America (El Salvador Branch)
Compania Bristol-Myers Squibb de Centro America (Honduras Branch)
Compania Bristol-Myers Squibb de Centro America (Nicaragua Branch)
Compania Bristol-Myers Squibb de Centro America (Panama Branch)
Convatec Limited
Convatec Spot s r.o.
Convatec Vertriebs G.m.b.H.
Convatec, S.A.
CRBM GIE
Delmed S.A.
Dermogroup S.R.L.
Dong-A-Biotech Co., Ltd.
Duart Industries, Ltd.
E. R. Squibb & Sons de Venezuela, C.A.
E. R. Squibb & Sons Inter-American (Chile - Branch)
E. R. Squibb & Sons Inter-American Corporation
E. R. Squibb & Sons Inter-American Corporation (Colombia - Branch)
E. R. Squibb & Sons Inter-American Corporation (PRico - Branch)
E. R. Squibb & Sons Limited
E. R. Squibb & Sons, Inc.
E. R. Squibb & Sons, Inc. (England - Branch)*
Elektrochemische Ges.Hirschfelde M.b.H.
ESS Partners, L.P.
EWI Corporation
F.A.I.R. Laboratories Limited
E-5-4
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
SUBSIDIARY LIST
G.I.E. Centre de Recherche de Biologie Moleculaire
G.I.E. Institut de Recherche Squibb
Grove Insurance Company Ltd.
Grove Limited
Grove Products (Far East) Limited
Grove Products (Far East) Limited (India - Branch)
Heyden Farmaceutica Portugesa Limitada
Iris Acquisition Corp.
JG Partners, L.P.
Kingsdown Medical Consultants Limited
Laboratoire Oberlin
Laboratoires Convatec S.A.
Laboratoires Guieu France S.a.r.l.
Laboratoires UPSA
Laboratori Guieu S.p.A.
Lawrence Laboratories
Linson Investments Limited
Linson Pharma Inc.
Listo B.V.
Logics International, Inc.
Matrix Essentials Itallia SRL
Matrix Essentials, Inc.
Mead Johnson & Company
Mead Johnson (Guangzhou) Ltd.
Mead Johnson (Manufacturing) Jamaica Limited
Mead Johnson A.E.B.E.
Mead Johnson B.V.
Mead Johnson de Mexico, S. de R.L. de C.V.
Mead Johnson Farmaceutica Limitada
Mead Johnson International Limited (Argentine - Branch)
Mead Johnson International Limited (Canada)
Mead Johnson International Limited (Colombia - Branch)
Mead Johnson Jamaica Ltd.
Mead Johnson Limited
Mead Johnson Pharmaceutical, Inc.
Mead Johnson S.p.A.
MEC Subsidiary Corporation
Medical Engineering Corporation
Monarch Crown Corporation
Oncogen Limited Partnership
Oncology Therapeutics Network Automated Technologies, Inc.
Oncology Therapeutics Network Corporation
Oncology Therapeutics Network Joint Venture, L.P.
E-5-5
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
SUBSIDIARY LIST
Orthoplant Endoprothetik GmbH
Osmat S.A.
OTN Online, Inc.
OTN Parent Corp.
Oy Bristol-Myers Squibb (Finland) AB
P. T. Squibb Indonesia
Pharmagen
Pharmavit Rt.
PRB Partners, L.P.
Princeton Pharmaceuticals, S.A.
echerche et Propriete Industrielle
Redmond Products de Mexico, S. De R.L. De C.V.
Redmond Products Distributing, Inc.
Redmond Products International, Inc.
Redmond Products, Inc.
Route 22 Real Estate Holding Corporation
RPI Management, Inc.
S+G Implants G.m.b.H.
S.O.F.C.A.
Salorpharma G.m.b.H.
Sanofi Pharma Bristol-Myers Squibb SNC
Schuppert Meubelen Holten B.V.
Selecciones Mercantiles, S.A. de C.V.
Sino-American Shanghai Squibb Pharmaceuticals Limited
Societe Francaise de Complements Alimentaires
Squibb (Far East) Limited
Squibb (Far East) Limited (Taiwan - Branch)
Squibb (Nigeria) Limited
Squibb (Thailand) Limited
Squibb ApS
Squibb Convatec Medical Products Co. Ltd.
Squibb Development Limited
Squibb Farmaceutica Portuguesa, Limitada
Squibb Industria Farmaceutica, S.A.
Squibb Manufacturing, Inc.
Squibb Middle East S.A. (Egypt - Branch)
Squibb Middle East S.A. (Jordan - Branch)
Squibb Middle East S.A. (Panama)
Squibb Overseas Investments, Inc.
Squibb Pacific Limited
Squibb Pharma G.m.b.H.
Squibb Properties, Inc.
Squibb Surgicare Limited
E-5-6
<PAGE>
BRISTOL-MYERS SQUIBB COMPANY
SUBSIDIARY LIST
Squibb-von Heyden G.m.b.H.
Stamford Holdings B.V.
Swords Holdings I, L.L.C.
Swords Holdings II, L.L.C.
Swords Laboratories
T S V Corporation
Tallosa, S.A.
The B-M Group (Proprietary) Limited
Unterstuetzungskasse Bristol-Myers Squibb G.m.b.H.
Upsamedica LDA
Upsamedica SA NV
Upsamedica SpA
Von Heyden Pharma G.m.b.H.
Wallingford Research, Inc.
Westwood-Intrafin, S.A.
Westwood-Squibb Holdings, Inc.
Westwood-Squibb Pharmaceuticals, Inc.
Zimmer B.V.
Zimmer Caribe, Inc.
Zimmer Chirurgie G.m.b.H.
Zimmer Europe Co-Ordination Centre N.V.
Zimmer Europe Limited
Zimmer Limited
Zimmer New Zealand Limited
Zimmer of Canada Limited
Zimmer Pte. Ltd.
Zimmer S. A. S.(France)
Zimmer S.A. (Spain)
Zimmer S.R.L.
Zimmer SAS
Zimmer, Inc.
E-5-7
Exhibit 23
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
--------------------------------------
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 33-30856,
33-38411, 33-38587, 33-44788, 333-47403, 33-52691, 33-58187 and 333-02873),
Post-Effective Amendment No. 2 on Form S-8 (No. 33-30756-02) to Form S-4
(No. 333-09519), Form S-3 (Nos. 33-33682 and 333-49227) and Pre-Effective
Amendment No. 1 on Form S-3 (No. 33-62496) of Bristol-Myers Squibb Company
of our report dated January 20, 1999 appearing on page 61 of this Form 10-K.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PRICEWATERHOUSECOOPERS LLP
New York, New York
March 31, 1999
E-6-1
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
Exhibit 27 for Bristol-Myers Squibb For Year Ended 12/31/98
</LEGEND>
<MULTIPLIER>1000000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-END> Dec-31-1998<F1>
<CASH> 2244
<SECURITIES> 285
<RECEIVABLES> 3337
<ALLOWANCES> 147
<INVENTORY> 1873
<CURRENT-ASSETS> 8782
<PP&E> 7508
<DEPRECIATION> 3079
<TOTAL-ASSETS> 16272
<CURRENT-LIABILITIES> 5791
<BONDS> 1364
0
0
<COMMON> 219
<OTHER-SE> 7357
<TOTAL-LIABILITY-AND-EQUITY> 16272
<SALES> 18284
<TOTAL-REVENUES> 18284
<CGS> 4856
<TOTAL-COSTS> 4856
<OTHER-EXPENSES> 3889
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154
<INCOME-PRETAX> 4268
<INCOME-TAX> 1127
<INCOME-CONTINUING> 3141
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3141
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.55
<FN>
<F1> Items reported as "zero" are not applicable or are immaterial to the
consolidated financial position of the Company.
E-7-1
</TABLE>
EXHIBIT 99.1
------------
Cautionary statement regarding forward looking statements made by the Company,
intended to have the benefit of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995.
The Company is hereby filing a cautionary statement identifying important
factors that could cause the Company's actual results to differ materially
from those projected in forward looking statements made by or on behalf of
the Company. There are several communications made by or on behalf of the
Company (including the Company's Annual Report to Stockholders and Form 10-K)
which contain statements relating to goals, plans and projections regarding
its financial position, results of operations, market position and product
development, among other things, which are based on current expectations that
involve inherit risks and uncertainties including factors that would delay,
divert or change one of them in the next several years.
These important factors include --
New government laws and regulations, such as (i) health care initiatives,
(ii) changes in the FDA and foreign regulatory approval processes which
may cause delays in approving new products, (iii) tax changes such as the
phasing out of tax benefits heretofore available in the United States and
certain foreign countries.
Difficulties in developing new products; new products developed by competitors
which have lower prices or superior performance features or which are
otherwise competitive with the Company's current products; and generic
competition as the Company's products go off patent, as well as possible
problems with licensors.
Legal difficulties including negative results relating to patents; adverse
decisions in litigation including the breast implant cases and other product
liability cases; the inability to obtain adequate insurance with respect to
this type of liability; recalls of pharmaceutical products or forced closings
of manufacturing plants.
Increasing pricing pressures worldwide from managed care buyers and
institutional and governmental purchasers; the impact of Year 2000 problems;
and changes of business and economic conditions including, but not limited to,
changes in interest rates and fluctuation of foreign currency exchange rates.
No assurance can be given that any goal or plan set forth in forward looking
statements can be achieved and readers are cautioned not to place undue
reliance on such statements, which speak only as of the date made. The
Company undertakes no obligation to release publicly any revisions to forward
looking statements as a result of future events or developments.
E-8-1
