SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998
Commission File Number 1-6926
C. R. BARD, INC.
(Exact name of registrant as specified in its charter)
New Jersey
(State of incorporation)
22-1454160
(I.R.S. Employer Identification No.)
730 Central Avenue, Murray Hill, New Jersey 07974
(Address of principal executive offices)
Registrant's telephone number,
including area code: (908) 277-8000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31, 1998
Common Stock - $.25 par value 56,128,147
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 1
Condensed Consolidated Statements of Income
and Retained Earnings For The Quarter and
Six Months Ended June 30, 1998 and 1997 2
Condensed Consolidated Statements of Cash Flows
For The Six Months Ended June 30, 1998 and 1997 3
Notes to Condensed Consolidated Financial
Statements 4
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II - OTHER INFORMATION 10
<PAGE>
<TABLE>
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
<CAPTION>
June 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments $ 71,600 $ 60,700
Accounts receivable, net 236,300 240,600
Inventories 265,100 241,700
Other current assets 23,200 20,500
Total current assets 596,200 563,500
Property, plant and equipment, net 210,300 206,400
Intangible assets, net of amortization 398,700 424,400
Other assets 78,600 85,000
$1,283,800 $1,279,300
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<S> <C> <C>
Current Liabilities:
Short-term borrowings and current
maturities of long-term debt $ 139,700 $ 103,000
Accounts payable 59,500 60,400
Accrued expenses 151,200 128,800
Federal and foreign income taxes 14,700 18,400
Total current liabilities 365,100 310,600
Long-term debt 280,200 340,700
Other long-term liabilities 50,200 54,900
Shareholders' Investment:
Preferred stock, $1 par value,
authorized 5,000,000 shares;
none issued --- ---
Common stock, $.25 par value,
authorized 300,000,000 shares;
issued and outstanding 56,321,879
shares in 1998 and 56,784,551
shares in 1997 14,100 14,100
Capital in excess of par value 103,900 101,100
Retained earnings 530,300 506,700
Accumulated other comprehensive
income (51,400) (38,500)
Unamortized expenses under stock
plans (8,600) (10,300)
Total shareholders' investment 588,300 573,100
$1,283,800 $1,279,300
<FN>
The accompanying notes to condensed consolidated financial
statements are an integral part of these balance sheets.
-1-
<PAGE>
</TABLE>
<TABLE>
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(thousands except per share amounts)
(Unaudited)
<CAPTION>
For Quarter Ended For Six Months Ended
June 30, June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $300,600 $304,000 $596,900 $604,700
Costs and expenses:
Cost of goods sold 144,600 143,700 285,500 286,900
Marketing, selling
and administrative 97,400 96,600 192,700 190,700
Research & development 20,800 21,500 40,000 42,600
Interest expense 7,100 8,500 15,300 16,700
Other(income)expense,
net (31,500) (4,000) (35,100) (7,800)
Total costs and
expenses 238,400 266,300 498,400 529,100
Income before taxes 62,200 37,700 98,500 75,600
Provision for income
taxes 22,000 11,500 33,400 23,300
Net income 40,200 26,200 65,100 52,300
Retained earnings,
beginning of period 521,300 522,400 506,700 506,700
Treasury stock
repurchases (21,000) (8,000) (21,000) (8,700)
Cash dividends (10,200) (9,700) (20,500) (19,400)
Retained earnings, end
of period $530,300 $530,900 $530,300 $530,900
Basic earnings per
share $ .71 $ .46 $ 1.15 $ .92
Diluted earnings per
share $ .71 $ .45 $ 1.14 $ .91
Cash dividends per
share $ .18 $ .17 $ .36 $ .34
Average common shares
outstanding-basic 56,593 57,021 56,683 57,021
Average common shares
outstanding-diluted 56,944 57,644 57,010 57,644
<FN>
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-2-
<PAGE>
<TABLE>
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
(Unaudited)
<CAPTION>
For The Six Months Ended
June 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 65,100 $ 52,300
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 29,700 30,200
Other non-cash items 22,700 200
Changes in assets and liabilities:
Current assets (12,300) (11,700)
Current liabilities 20,000 (6,900)
Other 6,000 900
131,200 65,000
Cash flows from investing activities:
Capital expenditures (21,700) (18,200)
Other long-term investments, net (13,100) (26,400)
(34,800) (44,600)
Cash flows from financing activities:
Purchase of common stock (21,100) (8,700)
Dividends paid (20,500) (19,400)
Short-term borrowings and other 39,600 5,600
Long-term borrowings (60,400) (1,500)
(62,400) (24,000)
Net increase in cash and cash
equivalents 34,000 (3,600)
Cash and cash equivalents
at January 1, 36,400 63,600
Cash and cash equivalents
at June 30, $ 70,400 $ 60,000
<FN>
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-3-
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The financial statements contained in this filing have been
prepared in accordance with the rules and regulations of the
Securities and Exchange Commission and have not been audited.
However, C. R. Bard, Inc. ("Bard" or the "company") believes that
it has included all adjustments to the interim financial
statements, consisting only of normal recurring adjustments, which
are necessary to present fairly the financial condition and results
of operations at and for these periods. The results of operations
for the interim periods are not necessarily indicative of results
of operations for a full year. These financial statements should
be read in conjunction with the Consolidated Financial Statements
and Notes to Consolidated Financial Statements as filed by the
company in the 1997 Annual Report on Form 10-K.
Accounting Policies
Earnings Per Share
The company has adopted Statement of Financial Accounting Standards
No. 128 "Earnings Per Share" ("FAS 128"). FAS 128 requires the
presentation of basic earnings per share and diluted earnings per
share. "Basic earnings per share" represents net income divided by
the weighted average shares outstanding and is consistent with the
company's historical presentation. "Diluted earnings per share"
represents net income divided by weighted average shares
outstanding adjusted for the incremental dilution of outstanding
employee stock options and awards.
Comprehensive Income
Effective for fiscal years beginning after December 15, 1997 the
company is required to adopt Statement of Financial Accounting
Standards No. 130 "Reporting Comprehensive Income". For the
company, comprehensive income comprises net income adjusted for the
change in foreign currency translation adjustments.
Historically, these currency translation adjustments were included
in "other" as a separate component of equity in the company's
consolidated balance sheet. The following table reconciles net
income to comprehensive income for the quarter and six months
ending June 30, 1998 and 1997 and reconciles accumulated other
comprehensive income for the corresponding periods.
- 4 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
For Quarter Ended For Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Net income $ 40,200 $ 26,200 $ 65,100 $ 52,300
Translation adjustments 500 (4,400) (12,900) (28,200)
Comprehensive income 40,700 21,800 52,200 24,100
Accumulated other compre-
hensive income beginning
of period (51,900) (15,900) (38,500) 7,900
Translation adjustments 500 (4,400) (12,900) (28,200)
Accumulated other compre-
hensive income end of
period $(51,400) $(20,300) $(51,400) $(20,300)
Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" ("FAS 133").
FAS 133 establishes accounting and reporting standards requiring
that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value.
FAS 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows
a derivative's gains and losses to offset related results on the
hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.
FAS 133 is effective for fiscal years beginning after June 15,
1999. The company may also implement the Statement as of the
beginning of any fiscal quarter after issuance (that is, fiscal
quarters beginning June 16, 1998 and thereafter). FAS 133 cannot
be applied retroactively. FAS 133 must be applied to (a)
derivative instruments and (b) certain derivative instruments
embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the
company's election, before January 1, 1998).
- 5 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The company has not yet quantified the impacts of adopting FAS 133
on its financial statements and has not determined the timing or
method of the adoption of FAS 133.
The company enters into foreign exchange options to help reduce the
exposure to fluctuations between certain currencies. These off-balance
sheet options are accounted for on a mark-to-market basis.
The gains and losses associated with these options are recorded on
the income statement as "other income and expense" and on the
balance sheet as "other current assets" or "accrued expenses".
Cash flows associated with the settlement of these options are
reflected as operating activities.
Reclassifications
Certain prior year amounts have been reclassified to conform with
the current year presentation.
Intellectual Property Settlement
On April 6, 1998, the company received a one-time payment of
$100,000,000 from Guidant Corporation in connection with the
settlement of several infringement claims and the grant of patent
licenses. $20,000,000 of this settlement was used for a third-party
royalty payment.
Subsequent Event
The company announced on July 9, 1998 that it has agreed to sell
its global coronary cath lab business (angioplasty and angiography)
to Arterial Vascular Engineering, Inc. for $600,000,000.
The transaction is structured as an acquisition of certain assets
and certain liabilities of the company and the acquisition of stock
of certain subsidiaries. In connection with the sale, the company
will receive $550,000,000 plus 95% of the net book value of certain
trade accounts receivable as of the Closing Date in cash, with the
balance of the purchase price being working capital retained by the
company. The sale of the coronary cath lab business will result in
further realignment of Bard's operations particularly those
operations located outside the U.S.
Separately, the company announced on July 9, 1998 that its Board of
Directors authorized purchases from time to time of up to
10,000,000 shares of the company's common stock.
- 6 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Consolidated net sales for the second quarter of 1998 of
$300,600,000 decreased 1 percent over the second quarter 1997 sales
of $304,000,000. Consolidated net sales for the first six months
of 1998 of $596,900,000 decreased 1 percent over the $604,700,000
for the same period last year. Sales in the U.S. for the second
quarter of 1998 were $194,600,000, a decrease of 2 percent from
1997, while international sales were 106,000,000, up 1 percent
against last year. The impact of a strengthening dollar in the
second quarter decreased sales outside the U.S. by 5 percent. For
the first six months of 1998, U.S. sales totaled $386,500,000, down
3 percent, while international sales increased 1 percent to
$210,400,000. Currency translation for the first half of 1998
decreased international sales by approximately 6 percent and
decreased worldwide sales by approximately 2 percent.
PRODUCT GROUP SUMMARY OF NET SALES
(in thousands)
Quarter Ended June 30, Six Months Ended June 30,
Percent Percent
1998 1997 Change 1998 1997 Change
Vascular $ 49,900 $ 49,500 1 $100,500 $ 96,700 4
Urology 85,100 77,100 10 164,600 156,100 5
Oncology 52,300 48,900 7 103,800 97,700 6
Surgery 36,900 33,900 9 72,000 65,800 9
Total
Emphasis
Products $224,200 209,400 7 $440,900 $416,300 6
Other 76,400 94,600 (19) 156,000 188,400 (17)
Net Sales $300,600 $304,000 (1) $596,900 $604,700 (1)
Based on the impending sale of its coronary cath lab businesses,
(see "Subsequent Event" on page 6), Bard has changed its product
group sales reporting. The most significant change is to include
sales from those cardiology businesses which Bard intends to sell
in the category designated "other".
Vascular sales were essentially flat for the quarter with year-to-date growth
occurring in electrophysiology, graft and radiology
products. Increases in infection control catheters, drainage bags
and urological specialties contributed to the 10 percent growth in
urology sales for the quarter.
Second quarter increases in specialty access products and mesh were
primarily responsible for the 7 and 9 percent growth in the
oncology and surgery categories, respectively.
- 7 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
The gross profit margin for the quarter ended June 30, 1998
decreased to 51.9 percent from 52.7 percent in the prior year
period. This decrease was primarily due to unfavorable variances
as a result of the company's manufacturing restructuring and price
erosion.
Other income and expense for the second quarter of 1998 was
affected by several nonrecurring, one-time items. These include
the gain from the Guidant settlement of $80,000,000 (net of a
third-party royalty payment); the writedown of several businesses
of $24,100,000 (including Bard's Diagnostic Sciences Division in
anticipation of its sale to Polymedco, Inc. which was completed on
July 7, 1998); $18,200,000 related to legal settlements and
$6,500,000 related to other items. The net after tax favorable
impact of these items was $18,700,000 or 33 cents per share on a
diluted basis. The second quarter of 1997 had a gain of 2 cents
per share on a diluted basis from the sale of an investment.
During the first six months of 1998 and 1997, the company acquired
600,000 and 275,000, respectively, of its common shares. The 1998
purchases are being held in treasury and the 1997 purchases were
retired.
Restructuring Charges
As a result of extensive reviews of operations, during the third
quarter of 1997, the Board of Directors and management authorized
and committed the company to a restructuring of its global
manufacturing operations. Five manufacturing facilities will be
closed, four additional facilities will be downsized and several
European distribution centers will be consolidated. The products
manufactured at these locations will be redeployed to other
facilities including a new plant. The restructuring plan resulted
in a charge of $44,100,000 exclusive of certain period costs which
are required to be expensed as incurred. To date, approximately
$20,300,000 has been incurred against the $44,100,000 charge.
- 8 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Year 2000 Expenditures
The company utilizes software and related technologies that will be
affected by the date change in the year 2000. For the first six
months, the company's marketing, selling and administrative expense
includes $2,400,000 for Year 2000 expenditures. Management
believes that the company will incur additional expenses of
$2,900,000 during 1998 and approximately $1,500,000 in 1999.
Cautionary Statement Regarding Forward-Looking Information
Certain statements contained herein or in other company documents
and certain statements that may be made by management of the
company orally, including statements regarding cost savings from
manufacturing restructuring, may contain forward-looking statements
as defined in the Private Securities Litigation Reform Act of 1995.
Because actual results are affected by risks and uncertainties, the
company cautions investors that actual results may differ
materially from those expressed or implied. Factors which could
cause the actual results to differ materially from expected and
historical results include, but are not limited to: health care
industry consolidation resulting in customer demands for price
concessions, competitor's attempts to gain market share through
aggressive marketing programs; fewer medical procedures performed
in a cost-conscious environment; the lengthy approval time by the
FDA or other government authorities to clear medical devices for
commercial release; unanticipated product failures; legislative or
administrative reforms to the U.S. Medicare and Medicaid systems or
other non-U.S. reimbursement systems in a manner that would
significantly reduce reimbursements for procedures using the
company's medical devices; the acquisition of key patents by
competitors that would have the effect of excluding the company
from new market segments; the uncertainty of whether increased
research and development expenditures will result in increased
sales; unpredictability of existing and future litigation including
litigation regarding product liability; uncertainty related to tax
appeals and litigation; price increases from the company's
suppliers of critical components; foreign currency fluctuations;
unanticipated business disruptions from Year 2000 issues; the risk
that the company may not achieve manufacturing or administrative
efficiencies as a result of the company's recent restructuring or
in the integration of recently acquired businesses.
- 9 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Davol Inc. has been identified as a Potentially Responsible Party
by the Massachusetts Department of Environmental Protection for two
net Superfund sites in Dartmouth and Freetown, Massachusetts. The
allegations stem from transhipments of waste from the ReSolve
hazardous waste reprocessing facility in Dartmouth, Massachusetts
to each of the sites associated with the H&M Drum Company. At this
time, each of the former ReSolve waste generators has agreed to
contribute $1,000 towards a fund to finance a site investigation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 12.1 - Computation of Ratio of Earnings to Fixed
Charges
(b) Exhibit 27 - Financial Data Schedule
(c) There were no reports on Form 8-K filed by the company
during the quarter ended June 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
C. R. BARD, INC.
(Registrant)
William C. Bopp /s/
William C. Bopp
Executive Vice President and
Chief Financial Officer
Charles P. Grom /s/
Charles P. Grom
Vice President and Controller and
Chief Accounting Officer
Date: August 12, 1998
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</TABLE>
<TABLE>
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges
<CAPTION>
Six Months
Ending
6/30/98 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Earnings before taxes $ 98,500 $104,900 $102,700 $123,500 $104,100 $101,400
Add(Deduct)
Fixed Charges 17,700 38,200 33,500 31,500 23,200 18,700
Undistributed earnings
of less than 50% owned
companies carried at
equity (400) (500) (700) (800) (400) (200)
Interest capitalized 0 0 0 0 (200) 0
Earnings available for fixed
charges $115,800 $142,600 $135,500 $154,200 $126,700 $119,900
Fixed charges:
Interest, including
amounts capitalized 15,300 32,900 26,400 24,200 16,500 12,500
Proportion of rent
expense deemed to
represent interest
factor 2,400 5,300 7,100 7,300 6,700 6,200
Fixed Charges $ 17,700 $ 38,200 $ 33,500 $ 31,500 $ 23,200 $ 18,700
Ratio of earnings to fixed
charges 6.54 3.73 4.04 4.89 5.46 6.41
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 12200
<SECURITIES> 59400
<RECEIVABLES> 236300
<ALLOWANCES> 13400
<INVENTORY> 265100
<CURRENT-ASSETS> 596200
<PP&E> 360200
<DEPRECIATION> 149900
<TOTAL-ASSETS> 1283800
<CURRENT-LIABILITIES> 365100
<BONDS> 280200
0
0
<COMMON> 14100
<OTHER-SE> 634200
<TOTAL-LIABILITY-AND-EQUITY> 1283800
<SALES> 596900
<TOTAL-REVENUES> 596900
<CGS> 285500
<TOTAL-COSTS> 518200
<OTHER-EXPENSES> (35100)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15300
<INCOME-PRETAX> 98500
<INCOME-TAX> 33400
<INCOME-CONTINUING> 65100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65100
<EPS-PRIMARY> 1.15
<EPS-DILUTED> 1.14
</TABLE>
