FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 001-4802
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Becton, Dickinson and Company
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(Exact name of registrant as specified in its charter)
New Jersey 22-0760120
- -------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Becton Drive, Franklin Lakes, New Jersey 07417-1880
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(Address of principal executive offices)
(Zip Code)
(201) 847-6800
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
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 of Common Stock Shares Outstanding as of January 31, 2001
--------------------- -----------------------------------------
Common stock, par value $1.00 256,495,577
BECTON, DICKINSON AND COMPANY
FORM 10-Q
For the quarterly period ended December 31, 2000
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION Page Number
- ------- --------------------- -----------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets.................. 3
Condensed Consolidated Statements of Income............ 4
Condensed Consolidated Statements of Cash Flows........ 5
Notes to Condensed Consolidated Financial Statements... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 11
Item 3. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 15
Part II. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings......................................... 16
Item 2. Changes in Securities and Use of Proceeds................. 17
Item 3. Defaults Upon Senior Securities........................... 17
Item 4. Submission of Matters to a Vote of Security Holders....... 17
Item 5. Other Information......................................... 17
Item 6. Exhibits and Reports on Form 8-K.......................... 17
Signatures .......................................................... 19
Exhibits .......................................................... 20
2
ITEM 1. FINANCIAL STATEMENTS BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
December 31, September 30,
Assets 2000 2000
- ------ ------------ -------------
(Unaudited)
Current Assets:
Cash and equivalents $ 79,012 $ 49,196
Short-term investments 2,339 5,561
Trade receivables, net 738,310 751,720
Inventories:
Materials 156,820 156,918
Work in process 108,991 110,843
Finished products 431,647 410,915
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697,458 678,676
Prepaid expenses, deferred taxes and other 199,190 175,524
----------- ----------
Total Current Assets 1,716,309 1,660,677
Property, plant and equipment 3,223,894 3,163,100
Less allowances for depreciation and amortization 1,620,718 1,587,042
----------- ----------
1,603,176 1,576,058
Goodwill, Net 460,444 466,343
Core and Developed Technology, Net 303,960 309,061
Other Intangibles, Net 173,622 172,720
Other 337,757 320,237
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Total Assets $ 4,595,268 $4,505,096
=========== ==========
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-term debt $ 659,177 $ 637,735
Payables and accrued expenses 703,307 715,803
----------- ----------
Total Current Liabilities 1,362,484 1,353,538
Long-Term Debt 781,007 779,569
Long-Term Employee Benefit Obligations 331,480 329,497
Deferred Income Taxes and Other 90,161 86,494
Commitments and Contingencies -- --
Shareholders' Equity:
Preferred stock 42,865 43,570
Common stock 332,662 332,662
Capital in excess of par value 96,179 75,075
Retained earnings 2,871,466 2,835,908
Unearned ESOP compensation (16,585) (16,155)
Deferred compensation 6,617 6,490
Common shares in treasury - at cost (969,217) (980,163)
Accumulated other comprehensive loss (333,851) (341,389)
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Total Shareholders' Equity 2,030,136 1,955,998
----------- ----------
Total Liabilities and Shareholders' Equity $ 4,595,268 $4,505,096
=========== ==========
See notes to condensed consolidated financial statements
3
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Thousands of Dollars, Except Per-share Data (Unaudited)
Three Months Ended
December 31,
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2000 1999
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Revenues $ 843,257 $ 859,164
Cost of products sold 448,947 449,951
Selling and administrative expense 235,292 233,838
Research and development expense 52,727 53,743
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Total Operating Costs and Expenses 736,966 737,532
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Operating Income 106,291 121,632
Interest expense, net (18,564) (21,557)
Other (expense) income, net (7,961) 1,674
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Income Before Income Taxes 79,766 101,749
Income tax provision 19,144 26,455
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Net Income $ 60,622 $ 75,294
========= =========
Earnings Per Share:
Basic $ .24 $ .30
========= =========
Diluted $ .23 $ .29
========= =========
Dividends Per Common Share $ .095 $ .0925
========= =========
See notes to condensed consolidated financial statements
4
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)
Three Months Ended
December 31,
----------------------
2000 1999
Operating Activities ---------- ----------
- --------------------
Net income $ 60,622 $ 75,294
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 75,318 72,440
Change in working capital (53,712) (25,960)
Other, net 12,962 (539)
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Net Cash Provided by Operating Activities 95,190 121,235
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Investing Activities
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Capital expenditures (77,213) (66,697)
Acquisitions of businesses, net of cash acquired (2,575) -
(Purchases) sales of investments, net (544) 3,529
Capitalized software (18,152) (10,992)
Other, net (10,868) (20,686)
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Net Cash Used for Investing Activities (109,352) (94,846)
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Financing Activities
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Change in short-term debt 23,258 (21,417)
Proceeds from long-term debt 2,127 -
Payments of long-term debt (1,579) (349)
Issuance of common stock from treasury 21,407 7,445
Dividends paid (652) (698)
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Net Cash Provided by (Used for) Financing Activities 44,561 (15,019)
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Effect of exchange rate changes on cash and equivalents (583) (366)
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Net increase in cash and equivalents 29,816 11,004
Opening Cash and Equivalents 49,196 59,932
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Closing Cash and Equivalents $ 79,012 $ 70,936
========== ==========
See notes to condensed consolidated financial statements
5
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar and Share Amounts in Thousands, Except Per-share Data
December 31, 2000
Note 1 - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion of
the management of the Company, include all adjustments which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However, the
financial statements do not include all information and footnotes required for a
presentation in accordance with generally accepted accounting principles. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included or
incorporated by reference in the Company's 2000 Annual Report on Form 10-K. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year.
Note 2 - Inventory Valuation
- ----------------------------
The Company uses the last-in, first-out ("LIFO") method of determining cost for
substantially all inventories in the United States. An actual valuation of
inventory under the LIFO method will be made only at the end of each fiscal year
based on the inventory levels and costs at that time. Accordingly, interim LIFO
calculations are based on management's estimates of expected year-end inventory
levels and costs. All other inventories are accounted for using the first-in,
first-out ("FIFO") method.
Note 3 - Comprehensive Income
- -----------------------------
Comprehensive income for the Company is comprised of the following:
Three Months Ended December 31,
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2000 1999
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Net income $ 60,622 $ 75,294
Other Comprehensive Income, Net of Tax
Foreign currency translation adjustments 6,347 (38,685)
Unrealized (loss) gain on investments (859) 13,068
Unrealized gain on currency options 2,050 --
-------------- -------------
Comprehensive Income $ 68,160 $ 49,677
============== =============
On October 1, 2000, the Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities."
6
Accordingly, a net unrealized gain on currency options as of December 31, 2000
of $2,050 was included in other comprehensive income. For additional discussion
regarding the adoption of this Statement, see Note 8 of the Notes to Condensed
Consolidated Financial Statements.
Note 4 - Earnings per Share
- ---------------------------
The following table sets forth the computations of basic and diluted earnings
per share:
Three Months Ended December 31,
------------------------------
2000 1999
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Net income $ 60,622 $ 75,294
Preferred stock dividends (701) (746)
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Income available to common shareholders (A) 59,921 74,548
Preferred stock dividends - using "if
converted" method 701 746
Additional ESOP contribution - using "if
converted" method (160) (169)
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Income available to common shareholders
after assumed conversions (B) $ 60,462 $ 75,125
=========== ===========
Average common shares outstanding (C) 254,465 251,328
Dilutive stock equivalents from stock plans 7,122 6,287
Shares issuable upon conversion of preferred
Stock 4,650 4,978
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Average common and common equivalent
shares outstanding - assuming dilution (D) 266,237 262,593
=========== ===========
Basic earnings per share (A/C) $ .24 $ .30
=========== ===========
Diluted earnings per share (B/D) $ .23 $ .29
=========== ===========
Note 5 - Contingencies
- ----------------------
The Company is involved, both as a plaintiff and a defendant, in various legal
proceedings and claims which arise in the ordinary course of business, including
product liability and environmental matters. While it is not possible to predict
or determine the outcome of the legal actions brought against the Company, upon
resolution of such matters, the Company may incur charges in excess of presently
established reserves. While such future charges, individually and in the
aggregate, could have a material adverse impact on the Company's net income and
net cash flows in the period in which they are recorded or paid, in the
Company's opinion, the results of these matters, individually and in the
aggregate, are not expected to have a material adverse effect on the Company's
consolidated financial condition. Further discussion of legal proceedings is
included in Part II of this Report on Form 10-Q.
7
Note 6 - Segment Data
- ---------------------
On October 1, 2000, the Company changed the structure of its internal
organization, which caused the composition of its reportable segments to change.
For the quarter ending December 31, 2000, decisions about resource allocation
and performance assessment were made separately for the Medical Systems segment,
the new Clinical Laboratory Solutions segment, and the reorganized Biosciences
segment. Prior year information has been reclassified to conform to current year
presentation.
The Company evaluates performance based upon operating income. Segment operating
income represents revenues reduced by product costs and operating expenses.
Financial information for the Company's segments is as follows:
Three Months Ended December 31,
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2000 1999
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Revenues
- --------
Medical Systems $ 438,434 $ 462,606
Clinical Laboratory Solutions 276,953 271,099
Biosciences 127,870 125,459
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Total Revenues (A) $ 843,257 $ 859,164
========== ============
Segment Operating Income
- ------------------------
Medical Systems $ 73,599 $ 94,701
Clinical Laboratory Solutions 48,449 42,230
Biosciences 13,173 10,389
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Total Segment Operating Income 135,221 147,320
Unallocated Items (B) (55,455) (45,571)
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Income Before Income Taxes $ 79,766 $ 101,749
=========== ============
(A) Intersegment revenues are not material.
(B) Includes interest, net; foreign exchange; and corporate expenses.
Note 7 - Special Charges
- ------------------------
The Company recorded special charges in September 2000 that included severance
costs associated with a worldwide organizational restructuring. As of December
31, 2000, more than two-thirds of the targeted 600 employees had been severed
under this program. The remaining terminations are expected to occur by the end
of fiscal 2001. The fiscal 2000 special charges also included the write-down of
impaired fixed assets held for sale and other exit costs related to this
restructuring program, as well as litigation defense costs associated with the
Company's divested latex glove business.
The Company also recorded special charges in fiscal years 1999 and 1998
associated with two restructuring programs, primarily designed to improve the
Company's cost structure, refocus certain businesses, restructure certain
manufacturing operations and write-down impaired assets. As of December 31,
2000, approximately 100 positions have been eliminated, and the Company
8
expects that an additional 150 people will be affected by this plan. These
remaining affected employees are related to the planned closure of a surgical
blade plant in the United States, scheduled for the first half of fiscal year
2002. The remaining restructuring accruals related to this closure consist
primarily of severance.
A summary of the special charge accrual activity during the first three months
of fiscal 2001 follows:
Severance Restructuring Other
--------- ------------- ----------
Accrual Balance at
September 30, 2000 $ 40,000 $3,050 $21,600
Payments (10,800) (300) (2,600)
--------- ------------- ----------
Accrual Balance at
December 31, 2000 $ 29,200 $2,750 $19,000
========= ============= ==========
Note 8 - Adoption of New Accounting Standards
- ---------------------------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended,
which is required to be adopted in fiscal years beginning after June 15, 2000.
This Statement requires that all derivatives be recorded in the balance sheet at
fair value and that changes in fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The Company adopted the
provisions of SFAS No. 133 effective October 1, 2000. The cumulative effect of
adoption was not material to the Company's results of operations or financial
condition.
At the end of fiscal 2000, the Company purchased option contracts to hedge a
portion of its anticipated sales from the United States to customers outside of
the United States made by local affiliates. These options contracts are
designated as cash flow hedges, as defined by SFAS No. 133, and effective as
hedges of these revenues.
Changes in the effective portion of the fair value of these option contracts are
included in other comprehensive income until the hedged sales transactions,
described above, are recognized in earnings. Once the hedged transaction occurs,
the unrealized gain or loss on the option is reclassified from accumulated other
comprehensive income to revenues. The ineffective portion of an option's change
in fair value is immediately recognized in earnings. During the first quarter of
fiscal 2001, the Company recorded a gain of $2,086 representing a portion of the
change in the fair value of options designated as hedges of sales transactions.
The Company also recorded other expense of $5,903 for the ineffective portion of
the change in fair value of the options.
All outstanding currency options, designated as cash flow hedges, as of December
31, 2000 will mature by the end of fiscal 2001. Included in other comprehensive
income is an unrealized gain of $2,050, net of tax, for options outstanding as
of December 31, 2000.
The Company continues to hedge certain intercompany receivables and payables by
entering into forward exchange contracts. Gains or losses on these forward
contracts are largely offset by the
9
gains or losses on the underlying hedged items. As under prior literature, these
forward exchange contracts do not qualify for hedge accounting under SFAS No.
133.
The Company is exposed to credit loss in the event of nonperformance by
financial institutions with which it conducts business. The Company minimizes
exposure to such risk, however, by dealing only with major international banks
and financial institutions.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." This SAB provides the SEC's views in applying generally accepted
accounting principles to selected revenue recognition issues. The Company is
required to adopt the provisions of this SAB no later than its fourth quarter of
fiscal 2001. The Company is continuing to evaluate and quantify the issues
identified as a result of the additional guidance issued by the SEC in October
2000. The Company expects to record a cumulative effect adjustment upon
adoption, primarily related to timing issues associated with shipping terms and
the installation of diagnostic instruments. The Company does not expect the
adoption of this SAB to be material to its results of operations or financial
condition for the fiscal year ending September 30, 2001.
10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Results of Operations
- ---------------------
First quarter revenues of $843 million were down two percent from the same
period a year ago. Revenue growth for the quarter was unfavorably affected by
foreign currency translation, related primarily to the Euro, which reduced
revenues by an estimated $46 million or five percent. International revenues,
which decreased five percent, grew approximately six percent after excluding the
unfavorable impact of foreign currency translation. Growth for the quarter was
also affected by an unfavorable comparison to the first quarter of fiscal 2000,
which benefited from year 2000-related inventory stocking. Remaining
inventory reductions at the trade level following the discontinuation of certain
distributor incentive programs in the prior year also adversely affected
revenues for the quarter.
Segment Revenues Three Months Ended December 31,
-------------------------------
(Dollars in millions) 2000 1999 % Change
==================================================================
Medical Systems
- ---------------
United States $ 202 $ 207 (2)
International 236 256 (8)
- ------------------------------------------------------------------
Total $ 438 $ 463 (5)
==================================================================
Clinical Laboratory Solutions
- -----------------------------
United States $ 160 $ 148 8
International 117 123 (4)
- ------------------------------------------------------------------
Total $ 277 $ 271 2
==================================================================
Biosciences
- -----------
United States $ 70 $ 71 (2)
International 58 54 8
- ------------------------------------------------------------------
Total $ 128 $ 125 2
==================================================================
Total Revenues
- --------------
United States $ 431 $ 426 1
International 412 433 (5)
- ------------------------------------------------------------------
Total $ 843 $ 859 (2)
==================================================================
Medical Systems ("Medical") revenues, which declined five percent, were about
the same as last year after excluding the estimated unfavorable impact of
foreign currency translation. Medical revenues reflected good growth in sales of
safety-engineered products. Growth in this segment was offset by the unfavorable
impact of remaining inventory reductions at the trade level following the
discontinuation of certain distributor incentive programs in the prior quarter,
as well as year 2000-related inventory stocking in the prior year, as discussed
earlier. Clinical Laboratory Solutions ("Clinical Lab") revenues increased two
percent, or seven percent after excluding the estimated unfavorable impact of
foreign currency translation, also reflecting good
11
growth in sales of safety-engineered products. Biosciences revenues grew two
percent, or eight percent after excluding the estimated unfavorable impact of
foreign currency translation. Revenue growth for the Biosciences segment was led
by sales of Clontech, PharMingen and Transduction Labs products.
Changes in segment operating income were primarily driven by fluctuations in
revenue, as discussed above. Medical segment operating income was also adversely
affected by unfavorable product and geographic mix, as well as cost containment
pricing pressures. The increase in Clinical Lab and Biosciences segment income
also reflects a better mix in products sold compared with the prior year. (See
Note 6 in "Notes to Condensed Consolidated Financial Statements" for additional
segment income information.)
Gross profit margin was 46.8% compared with last year's first quarter ratio of
47.6%, reflecting an unfavorable mix of products sold and cost containment
pricing pressures during the quarter. Selling and administrative expense was
27.9% of revenues compared with the prior year's ratio of 27.2%. Actual spending
increased slightly, primarily due to spending for key initiatives. Investment in
research and development was 6.3% of revenues in the current quarter, which was
the same as last year.
Operating margin was 12.6%, compared with 14.2% last year, reflecting the
factors discussed earlier. Net interest expense was about $3 million lower than
the prior year, primarily due to lower debt levels compared with a year ago.
Other expense, net was $8 million for the current quarter compared with other
income, net of $2 million last year. This change was primarily due to the
absence of a favorable patent settlement recorded in the prior year and hedging
expenses recorded in the current quarter, pursuant to our adoption of Statement
of Financial Accounting Standards No. 133. See Note 8 of the Notes to Condensed
Consolidated Financial Statements for further discussion.
The first quarter income tax rate was 24%, compared with the prior year's rate
of 26%. We expect our tax rate for the full year to be about 24%.
Net income and diluted earnings per share for the current quarter were $61
million and 23 cents, respectively, compared with $75 million and 29 cents in
the prior year, reflecting the items discussed above.
Financial Condition
- -------------------
During the first three months of fiscal 2001, cash provided by operating
activities decreased to $95 million compared to $121 million during the first
three months of last year. Capital expenditures during the first three months
were $77 million, compared with last year's amount of $67 million. We expect
capital spending for fiscal 2001 to be slightly less than last year's amount of
$376 million.
As of December 31, 2000, total debt of $1.4 billion represented 40.8% of total
capital
12
(shareholders' equity, net non-current deferred income tax liabilities, and
debt), compared to 46.3% a year ago. Because of our strong credit rating, we
believe we have the capacity to arrange any additional borrowings which might be
required in the ordinary course of business.
Cautionary Statement Pursuant to Private Securities Litigation Reform Act of
- ----------------------------------------------------------------------------
1995 -- "Safe Harbor" for Forward-Looking Statements
- -----------------------------------------------------
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe
harbor for forward-looking statements made by or on behalf of Becton, Dickinson
and Company ("BD"). BD and its representatives may from time to time make
certain forward-looking statements in publicly-released materials, both written
and oral, including statements contained in this report and filings with the
Securities and Exchange Commission and in our other reports to shareowners.
Forward-looking statements may be identified by the use of words like "plan,"
"expect," "believe," "intend," "will," "anticipate," "estimate" and other words
of similar meaning in conjunction with, among other things, discussions of
future operations and financial performance, as well as our strategy for growth,
product development, regulatory approvals, market position and expenditures. All
statements which address operating performance or events or developments that we
expect or anticipate will occur in the future -- including statements relating
to volume growth, sales and earnings per share growth and statements expressing
views about future operating results - are forward-looking statements within the
meaning of the Act.
Forward-looking statements are based on current expectations of future events.
The forward-looking statements are and will be based on management's then
current views and assumptions regarding future events and operating performance,
and speak only as of their dates. Investors should realize that if underlying
assumptions prove inaccurate or unknown risks or uncertainties materialize,
actual results could vary materially from our expectations and projections.
Investors are therefore cautioned not to place undue reliance on any
forward-looking statements. Furthermore, we undertake no obligation to update or
revise any forward-looking statements whether as a result of new information,
future events and developments or otherwise.
The following are some important factors that could cause our actual results to
differ from the our expectations in any forward-looking statements:
. Regional, national and foreign economic factors, including inflation and
fluctuations in interest rates and foreign currency exchange rates and the
potential effect of such fluctuations on revenues, expenses and resulting
margins.
. Competitive product and pricing pressures and our ability to gain or
maintain market share in the global market as a result of actions by
competitors, including technological advances achieved and patents attained
by competitors as patents on our products expire. While we believe our
opportunities for sustained, profitable growth are considerable, actions of
competitors could impact our earnings, share of sales and volume growth.
. Changes in domestic and foreign healthcare resulting in pricing pressures,
including the continued consolidation among healthcare providers, trends
toward managed care and
13
healthcare cost containment and government laws and regulations relating to
sales and promotion, reimbursement and pricing generally.
. Fluctuations in the cost and availability of raw materials and the ability
to maintain favorable supplier arrangements and relationships.
. Government laws and regulations affecting domestic and foreign operations,
including those relating to trade, monetary and fiscal policies, taxation,
environmental matters, price controls, licensing and regulatory approval of
new products.
. Difficulties inherent in product development, including the potential
inability to successfully continue technological innovation, complete
clinical trials, obtain regulatory approvals in the United States and
abroad, or gain and maintain market approval of products, and the
possibility of encountering infringement claims by competitors with respect
to patent or other intellectual property rights, all of which can preclude
or delay commercialization of a product.
. Significant litigation adverse to BD, including product liability claims,
patent infringement claims, and antitrust claims, as well as other risks
and uncertainties detailed from time to time in our Securities and Exchange
Commission filings.
. Our ability to achieve earnings forecasts, which are generated based on
projected volumes and sales of many product types, some of which are more
profitable than others. There can be no assurance that we will achieve the
projected level or mix of product sales.
. Product efficacy or safety concerns resulting in product recalls,
regulatory action on the part of the Federal Drug Administration (or
foreign counterparts) or declining sales.
. Economic and political conditions in international markets, including civil
unrest, governmental changes and restrictions on the ability to transfer
capital across borders.
. Our ability to penetrate developing and emerging markets, which also
depends on economic and political conditions, and how well we are able to
acquire or form strategic business alliances with local companies and make
necessary infrastructure enhancements to production facilities,
distribution networks, sales equipment and technology.
. The impact of business combinations, including acquisitions and
divestitures, both internally for BD and externally in the healthcare
industry.
. Issuance of new or revised accounting standards by the American Institute
of Certified Public Accountants, the Financial Accounting Standards Board
or the Securities and Exchange Commission.
The foregoing list sets forth many, but not all, of the factors that could
impact our ability to achieve results described in any forward-looking
statements. Investors should understand that it is not possible to predict or
identify all such factors and should not consider this list to be a
14
complete statement of all potential risks and uncertainties.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
-----------------------------------------------------------
There have been no material changes in information reported since the
fiscal year ended September 30, 2000.
15
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
-----------------
We are involved, both as a plaintiff and a defendant, in various legal
proceedings which arise in the ordinary course of business, including
product liability and environmental matters.
A more complete description of legal proceedings has been set forth in
our 2000 annual report on Form 10-K (the "10-K"). Since the date of
the filing of the 10-K, the following changes have occurred.
Latex Cases
-----------
We have now received a total of 428 claims to date, relating to alleged
reactions caused by exposure to latex resulting from the use, over time,
of latex gloves. The facts and circumstances of new claims filed since
the 10-K are similar to those previously filed and we are of the same
opinion as stated in the 10-K.
Needle-Stick Cases
------------------
We have not received any additional class action lawsuits relating to
allegations that healthcare workers stuck themselves with needles sold
by BD. However, the case brought in Pennsylvania under the caption
McGeehan vs. Becton Dickinson (Case No. 3474, Court of Common Pleas,
Philadelphia County) filed on November 27, 1998, was dismissed without
leave to amend in an order dated December 18, 2000. The facts and
circumstances of the other class action claims are identical to those
previously disclosed and we are of the same opinion as stated in the
10-K.
Braun Litigation
----------------
On January 30, 2001, the parties to the patent infringement litigation
under the caption Becton Dickinson and Company et al. vs. B. Braun
Medical Inc., (Case No. 2:99-CV-00987J, United States District Court
for the District of Utah), entered into an agreement suspending the
litigation. Accordingly, the case was dismissed without prejudice at
the request of the parties on February 2, 2001. Under the terms of our
agreement, neither we nor Braun may refile the litigation until after
May 15, 2001 under any circumstances, and during the period from May
16, 2001 to September 30, 2001, only under certain circumstances.
Either of us may refile after September 30, 2001.
RTI Litigation
---------------
On January 29, 2001, a lawsuit was filed under the caption Retractable
Technologies, Inc. vs. Becton Dickinson and Company, et al. (Case No.
CA5010V036, United States District Court for the Eastern District of
Texas). The allegations of the lawsuit, with the exception of new causes
of action under federal antitrust laws, are substantially similar to the
allegations set forth in Retractable Technologies, Inc. vs. Becton
Dickinson and Company et al. (Case No. 5333*J6198, Brazoria County
District Court), which was withdrawn by the plaintiff on
February 5, 2001.
16
Critikon Litigation
-------------------
On January 23, 2001, the parties to the patent infringement litigation
under the caption Critikon Inc. vs. Becton Dickinson Vascular Access,
Inc. (Civ.93-108 (JJF) United States District Court for the District
of Delaware) entered into a definitive agreement to settle the matter.
Under the terms of the agreement, we made an initial payment of
$3,000,000 to the plaintiff, and have limited our further maximum
additional potential liability in this matter, including interest
charges, to $5,000,000.
Summary
-------
While it is not possible to predict or determine the outcome of the
above or other legal actions brought against BD, upon resolution of
such matters, we may incur charges in excess of presently established
reserves. While such future charges, individually and in the
aggregate, could have a material adverse impact on our net income and
net cash flows in the period in which they are recorded or paid, in
our opinion, the results of the above matters, individually and in the
aggregate, are not expected to have a material adverse effect on the
Company's consolidated financial condition.
Item 2. Changes in Securities and Use of Proceeds.
------------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities.
--------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
Not applicable.
Item 5. Other Information.
------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits
27 - Financial Data Schedule.
b) Reports on Form 8-K
During the three-month period ended December 31, 2000, we filed
six Current Reports on Form 8-K:
(i) Under Item 9 - Regulation FD Disclosure, we announced our
results for the quarter and year ended September 30, 2000 in a
report dated
17
November 8, 2000.
(ii) Under Item 9 - Regulation FD Disclosure, we furnished the slide
presentations from the analyst meeting held on November 9, 2000 in a
report on the same date.
(iii) Under Item 9 - Regulation FD Disclosure, we furnished supplemental
financial information for the quarter ended September 30, 2000 in a
report dated November 13, 2000.
(iv) Under Item 9 - Regulation FD Disclosure, we furnished supplemental
financial information for the quarter and year ended September 30, 2000
in a report dated November 20, 2000.
(v) Under Item 5 - Other Events, we announced the election of James F. Orr
to our Board of Directors in a report dated November 27, 2000.
(vi) Under Item 9 - Regulation FD Disclosure, we released a letter sent to
certain BD customers regarding the transition to safety-engineered sharps
devices in a report dated December 14, 2000.
18
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.
Becton, Dickinson and Company
-----------------------------
(Registrant)
Date February 12, 2001
-----------------
/s/ John R. Considine
-----------------------------
John R. Considine
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Richard M. Hyne
-----------------------------
Richard M. Hyne
Vice President and Controller
(Chief Accounting Officer)
19
EXHIBIT INDEX
-------------
Exhibit
Number Description Method of Filing
- --------------------------------------------------------------------------------
27 Financial Data Schedule Filed with
this report