SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1999
Commission File Number 1-6926
C. R. BARD, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1454160
(State of incorporation) (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 April 30, 1999
Common Stock - $.25 par value 51,396,606
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
INDEX
Page No.
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 1
Condensed Consolidated Statements of Income
For The Three Months Ended March 31, 1999
and 1998 2
Condensed Consolidated Statements of
Shareholders' Investment For The Three
Months Ended March 31, 1999 and 1998 3
Condensed Consolidated Statements of Cash
Flows For The Three Months Ended
March 31, 1999 and 1998 4
Notes to Condensed Consolidated Financial
Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
PART II - OTHER INFORMATION 11
<PAGE>
<TABLE>
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(thousands of dollars)
<CAPTION>
March 31, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and short-term investments $ 47,300 $ 42,400
Accounts receivable, net 220,600 217,800
Inventories 199,400 182,500
Other current assets 45,200 45,800
Total current assets 512,500 488,500
Property, plant and equipment, net 171,300 172,700
Intangible assets, net of amortization 354,400 358,900
Other assets 55,100 59,700
$1,093,300 $1,079,800
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<S> <C> <C>
Current Liabilities:
Short-term borrowings and current
maturities of long-term debt $ 100,000 $ 2,000
Accounts payable 53,200 67,400
Accrued expenses 168,900 187,400
Federal and foreign income taxes 29,100 46,000
Total current liabilities 351,200 302,800
Long-term debt 159,500 160,000
Other long-term liabilities 38,600 49,400
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 51,131,592
shares and 51,497,564 shares 14,500 14,300
Capital in excess of par value 149,700 132,300
Retained earnings 430,300 452,200
Accumulated other comprehensive
income (33,100) (23,100)
Unamortized expenses under stock
plans (17,400) (8,100)
544,000 567,600
$1,093,300 $1,079,800
<FN>
</TABLE>
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
- 1 -
<PAGE>
<TABLE>
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(thousands of dollars except per share amounts)
(Unaudited)
<CAPTION>
For The Three Months Ended
March 31,
1999 1998
<S> <C> <C>
Net sales $248,500 $296,300
Costs and expenses:
Cost of goods sold 109,400 140,900
Marketing, selling and administrative 80,700 95,300
Research and development expense 13,800 19,200
Interest expense 4,200 8,200
Other(income)expense, net 500 (3,600)
Total costs and expenses 208,600 260,000
Income before taxes 39,900 36,300
Provision for income taxes 13,300 11,400
Net income 26,600 24,900
Basic earnings per share $ .52 $ .44
Diluted earnings per share $ .51 $ .44
Cash dividends per share $ .19 $ .18
Average common shares
outstanding - basic 51,332 56,819
Average common shares
outstanding - diluted 52,040 57,119
<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 SHAREHOLDERS' INVESTMENT
(thousands of dollars except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended March 31, 1999
Unamortized
Expenses
Cumulative Under
Capital in Retained Translation Stock
Shares Amount Excess of Par Earnings Adjustment Plan Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 51,497,564 $14,300 $132,300 $452,200 $(23,100) $ (8,100) $567,600
Net income 26,600 26,600
Currency translation adjustments (10,000) (10,000)
Comprehensive income 16,600
Cash dividends ($.19 per share) (9,800) (9,800)
Treasury stock acquired (940,600) (49,300) (49,300)
Employee stock plans 574,628 200 17,400 10,600 (9,300) 18,900
Balance at March 31, 1999 51,131,592 $14,500 $149,700 $430,300 $(33,100) $(17,400) $544,000
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998
Unamortized
Cumulative Under
Capital in Retained Translation Stock
Shares Amount Excess of Par Earnings Adjustment Plan Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 56,784,551 $14,100 $101,100 $506,700 $(38,500) $(10,300) $573,100
Net income 24,900 24,900
Currency translation adjustments (13,400) (13,400)
Comprehensive income 11,500
Cash dividends ($.18 per share) (10,300) (10,300)
Treasury stock acquired 0
Employee stock plans 85,001 2,000 700 2,700
Balance at March 31, 1998 56,869,552 $14,100 $103,100 $521,300 $(51,900) $ (9,600) $577,000
<FN>
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
- 3 -
<PAGE>
<TABLE>
C. R. BARD, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands of dollars)
(Unaudited)
<CAPTION>
March 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 26,600 $ 24,900
Noncash items and other (65,900) 29,800
(39,300) 54,700
Cash flows from investing activities:
Capital expenditures (6,500) (9,900)
Other long-term investments, net (3,200) (11,900)
(9,700) (21,800)
Cash flows from financing activities:
Purchase of common stock (49,300) 0
Dividends paid (9,800) (10,300)
Other financing activities 113,000 (1,900)
53,900 (12,200)
Cash and cash equivalents:
Increase (decrease) during the period 4,900 20,700
Balance at January 1, 41,200 36,400
Balance at March 31, $ 46,100 $ 57,100
<FN>
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
- 4 -
<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 Bard's financial condition and
results of operations at the dates and for the periods presented.
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 1998 Annual
Report on Form 10-K.
Consolidation
The consolidated financial statements include the accounts of the
company and its majority-owned subsidiaries. All significant
intercompany accounts and transactions are eliminated in
consolidation.
Earnings Per Share
"Basic earnings per share" represents net income divided by the
weighted average shares outstanding. "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. Unless indicated otherwise per
share amounts are calculated on a diluted basis.
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 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. FAS 133 is effective for fiscal years beginning
after June 15, 1999 with early adoption permitted. The company
does not expect that the adoption of FAS 133 will have a material
impact on its financial statements.
Use of Estimates
The financial statements and related disclosures have been prepared
in conformity with generally accepted accounting principles and,
accordingly, include amounts based on estimates and judgments of
management with consideration given to materiality. Actual results
could differ from those estimates.
- 5 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
Short Term Borrowings and Long-Term Debt
In June 1996 the company filed a shelf registration with the
Securities and Exchange Commission for the future issuance of up to
$200,000,000 of long-term debt. As part of the registration, in
December 1996, the company issued $150,000,000 of long-term notes
due 2026. These notes may be redeemed at the option of the note
holders on December 1, 2006, at a redemption price equal to the
principal amount.
Income Taxes
During the third quarter of 1997, the company filed a protest at
the IRS appeals level related to tax years 1990-1992. Management
believes that the outcome of these matters will not have a material
impact on the company's consolidated financial position or results
of operations.
Segment Information
The company's management considers its business to be a single
segment entity - the manufacture and sale of medical devices. The
company's products generally share similar distribution channels
and customers. The company designs, manufactures, packages,
distributes and sells medical, surgical, diagnostic and patient
care devices which, for the most part, are purchased by hospitals,
physicians and nursing homes, used once and discarded. Management
evaluates its various global product portfolios on a revenue basis,
which is presented below. Management generally evaluates
profitability on an enterprise-wide basis due to shared
infrastructures.
<TABLE>
For the Three Months Ended March 31:
(thousands of dollars)
<CAPTION>
Percent
1999 1998 Change
<S> <C> <C> <C>
Sales:
Vascular $ 52,600 $ 50,500 4
Urology 84,900 79,200 7
Oncology 57,100 51,500 11
Surgery 40,200 35,000 15
Other ongoing products 13,700 14,900 (8)
Total ongoing products 248,500 231,100 8
Divested products 0 65,200 ---
Net sales $ 248,500 $ 296,300 (16)
Income before taxes $ 39,900 $ 36,300
Total assets $1,093,300 $1,283,000
Capital expenditures $ 6,500 $ 9,900
Depreciation and amortization $ 12,300 $ 16,000
<FN>
</TABLE>
- 6 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table presents sales of ongoing products by geography
based on the location of the external customer.
For the Three Months Ended March 31,
(thousands of dollars)
1999 1998
United States $ 179,200 $ 165,500
Europe 46,400 41,400
Japan 10,600 13,200
Rest of world 12,300 11,000
Total ongoing products $ 248,500 $ 231,100
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Consolidated net sales of ongoing products for the first quarter of
1999 of $248,500,000 increased 8 percent from the first quarter
1998 net sales of $231,100,000. Net sales of ongoing products in
the U.S. for the first quarter of 1999 were $179,200,000, an
increase of 8 percent from the first quarter of 1998, while
international net sales of ongoing products for the first quarter
of 1999 were $69,300,000, up 6 percent against last year's first
quarter. First quarter international net sales growth was
favorably affected by foreign currency translation and negatively
affected by reporting certain foreign sales in 1998 on a current
month basis. Adjusting for these items, net sales of ongoing
products outside the U.S. would have increased 8 percent in the
first quarter of 1999.
Vascular sales increased by 4 percent due to electrophysiology and
radiology product growth. Urological sales increased by 7 percent
due to infection control catheters and brachytherapy growth. Sales
increases in specialty access products and soft tissue repair
products were primarily responsible for the 11 and 15 percent
growth in the oncology and surgery categories, respectively.
The company's gross profit margin of 56.0 percent improved from the
prior year's gross profit margin of 52.4 as a result of the
company's divestitures of several cardiology businesses and
improvements resulting from steps to improve global manufacturing
efficiencies.
- 7 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Other income and expense for the first quarter of 1999 and 1998 are
composed primarily of interest income and foreign exchange.
The translation of receivables and payables denominated in a
currency other than the functional currency of subsidiaries had a
favorable impact on net income for the first quarter of 1998 which,
when combined with the favorable net income impact of certain
foreign sales being reported on a current month basis (compared
with 1997 and prior periods being reported on a one-month lag), the
negative impact of ongoing period costs associated with the
manufacturing restructuring plan announced in the third quarter of
1997 and the negative impact of costs incurred during the quarter
to address the Year 2000 issue resulted in a favorable impact of 4
cents per diluted share.
During the first three months of 1999, the company acquired 940,600
of its common shares. No shares were acquired during the first
three months of 1998.
Restructuring Charges
In connection with the company's restructuring plans, restructuring
accruals during the three-month period ended March 31, 1999, have
decreased by approximately $1,000,000 primarily for cash
expenditures related to employees severed during 1998. Facility
closing plans proceeded as planned with no additional facilities
closed during the first quarter.
Year 2000 Functionality
Bard has a company-wide initiative to address Year 2000
functionality. A team of management and technical representatives
oversees the Year 2000 effort. The company divides its Year 2000
initiative into two components, information technology (IT) and
non-information technology (Non-IT). The IT initiative includes
purchased and internally developed mainframe and desktop computer
systems and applications. The Non-IT initiative includes
suppliers, manufacturing and support systems and the company's
customers.
Internal and external resources are being used to identify needs,
make the required IT modifications and test Year 2000
functionality. The identification process of all critical IT
applications is complete. The company is currently on schedule to
- 8 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
complete the implementation of all modifications to these
applications by the third quarter of 1999. The company is
utilizing both internal and external resources to provide
independent system verification and validation of Year 2000
functionality. This process will continue through the end of 1999
and includes the development and implementation of contingency
plans to address unforeseen problems.
The company's Non-IT efforts include ensuring suppliers,
manufacturing and support systems and the company's larger
customers are Year 2000 functional. The company is communicating
with suppliers that provide critical products or services and
customers. The company is testing significant manufacturing and
support systems. If as a result of the company's communications or
as a result of the company's testing of Non-IT systems there appear
to be potential Year 2000 functionality problems, additional
contingency plans under development should address these risks.
There can be no guarantee that the systems of other companies on
which the company's systems rely will be converted in a timely
manner, or that a failure to convert by another company (including
the company's suppliers and customers), or a conversion that is
incompatible with the company's systems, would not have a material
adverse effect on the company. In addition, there are many risks
associated with the Year 2000 issue, including but not limited to
the possible failure of the company's computer and information
technology systems. Any such failure may have a material adverse
financial or operational effect on the company.
The company's marketing, selling and administrative expense
included $800,000 for IT-related Year 2000 expenditures during the
first quarter of 1999 and $1,200,000 during the first quarter of
1998. Management believes that the company will incur additional
expenses of approximately $2,200,000 in 1999. These incremental
costs do not include existing internal resources allocated to the
project effort.
These costs and the date on which the company plans to complete the
Year 2000 modification and testing processes are based on
management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability
of certain resources, third-party modification plans and other
factors. However, there can be no guarantee that these estimates
will be achieved and actual results could differ from those plans.
- 9 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
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 without limitation statements regarding
the use of net proceeds from the sale of the company's cardiology
businesses, statements regarding cost savings from restructuring,
Year 2000 functionality and statements regarding the company's
future performance, 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; competitors' attempts to gain market share through
aggressive marketing programs; fewer medical procedures performed
in a cost-conscious environment; the unpredictability of the
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 without limitation 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 restructuring and/or in
the integration of acquired businesses or divestitures.
- 10 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The registrant held its Annual Meeting of Shareholders on
April 21, 1999.
(b) Proxies for the meeting were solicited pursuant to
Regulation 14; there was no solicitation in opposition to
management's nominees for directors as listed in the Proxy
Statement and all such nominees were elected. The results
of voting for the three Class III Directors elected for a
term of three years to serve until the 2003 Annual Meeting
were as follows: T. Kevin Dunnigan, For - 45,021,123
Authority Withheld - 302,711; Regina E. Herzlinger, For -
44,939,786 Authority Withheld - 384,048 and William H.
Longfield, For - 45,011,529 Authority Withheld - 312,305.
The results of voting for the one Class II Director elected
for a term of two years to serve until the 2002 Annual
Meeting was as follows: Anthony Welters, For - 45,014,799
Authority Withheld - 309,035.
(c) Briefly described below is each other matter voted upon at
the Annual Meeting and the number of affirmative votes,
negative votes and abstentions and broker nonvotes with
respect to each matter.
(I) To approve an amendment to, and reapprove certain
provisions of, the Company's 1993 Long Term
Incentive Plan.
For 41,382,588
Against 3,255,202
Abstain and Broker Nonvotes 686,044
(II) To reapprove certain provisions of the 1994
Executive Bonus Plan of C. R. Bard, Inc.
For 43,567,618
Against 1,055,872
Abstain and Broker Nonvotes 700,344
(III) Ratification of the appointment of Arthur Andersen
LLP as independent public accountants for the year
1999.
For 45,141,932
Against 59,731
Abstain and Broker Nonvotes 122,171
- 11 -
<PAGE>
C. R. BARD, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION (continued)
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
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)
Charles P. Slacik /s/
Charles P. Slacik
Senior Vice President and
Chief Financial Officer
Charles P. Grom /s/
Charles P. Grom
Vice President and Controller
and Chief Accounting Officer
DATE: May 13, 1999
- 12 -
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Three Months
Ending
3/31/99 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Earnings before taxes $39,900 $464,400 $104,900 $102,700 $123,500 $104,100
Add(Deduct)
Fixed Charges 5,500 31,400 38,200 33,500 31,500 23,200
Undistributed earnings
of less than 50% owned
companies carried at
equity (500) (800) (500) (700) (800) (400)
Interest capitalized 0 0 0 0 0 (200)
Earnings available for fixed
charges $44,900 $495,000 $142,600 $135,500 $154,200 $126,700
Fixed charges:
Interest, including
amounts capitalized 4,200 26,400 32,900 26,400 24,200 16,500
Proportion of rent
expense deemed to
represent interest
factor 1,300 5,000 5,300 7,100 7,300 6,700
Fixed Charges $ 5,500 $ 31,400 $ 38,200 $ 33,500 $ 31,500 $ 23,200
Ratio of earnings to fixed
charges 8.16 15.76 3.73 4.04 4.89 5.46
<FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 19800
<SECURITIES> 27500
<RECEIVABLES> 220600
<ALLOWANCES> 9300
<INVENTORY> 199400
<CURRENT-ASSETS> 512500
<PP&E> 293200
<DEPRECIATION> 121900
<TOTAL-ASSETS> 1093300
<CURRENT-LIABILITIES> 351200
<BONDS> 159500
0
0
<COMMON> 14500
<OTHER-SE> 580000
<TOTAL-LIABILITY-AND-EQUITY> 1093300
<SALES> 248500
<TOTAL-REVENUES> 248500
<CGS> 109400
<TOTAL-COSTS> 203900
<OTHER-EXPENSES> 500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4200
<INCOME-PRETAX> 39900
<INCOME-TAX> 13300
<INCOME-CONTINUING> 26600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26600
<EPS-PRIMARY> .52
<EPS-DILUTED> .51
</TABLE>
