December 21, 2001 - EXHIBIT 13 - 10-K: Annual report pursuant to Section 13 and 15(d) | Becton, Dickinson and Company (BDX)

Exhibit 13

Becton, Dickinson and Company

Financials

U.S. Revenues
(Millions of Dollars)

Non-U.S. Revenues
(Millions of Dollars)

Operating Income*
(Millions of Dollars)
* Includes special charges in 2000, 1999 and 1998 and
in-process research and development charges in 2000,
1999, 1998 and 1997.

Debt to Capitalization
(Percent)

Research and
Development Expense*
(Millions of Dollars)
* In-process research and development charges of $5
million, $49 million, $30 million and $15 million were
recorded in 2000, 1999, 1998 and 1997, respectively.

Return on Equity*
(Percent)
* Includes cumulative effect of accounting change in
2001, as well as special charges in 2000, 1999 and 1998
and in-process research and development charges in
2000, 1999, 1998 and 1997.

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Becton, Dickinson and Company

Summary

Ten-Year Summary of Selected Financial Data
Years Ended September 30
Dollars in millions, except per-share amounts

(A) Includes cumulative effect of accounting change of $36.8 ($.14 per basic
and diluted share).

(B) Includes cumulative effect of accounting changes of $141.1 ($.47 per basic
share; $.45 per diluted share).

(C) Earnings before interest expense, taxes and cumulative effect of accounting
changes as a percent of average total assets.

(D) Excludes the cumulative effect of accounting changes.

(E) Total debt as a percent of the sum of total debt, shareholders' equity and
net non-current deferred income tax liabilities.

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Becton, Dickinson and Company

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Financial Review Becton, Dickinson and Company
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Company Overview

Becton, Dickinson and Company ("BD") is a medical technology company that serves
healthcare institutions, life science researchers, clinical laboratories,
industry and the general public. BD manufactures and sells a broad range of
medical supplies, devices, laboratory equipment and diagnostic products. We
focus strategically on achieving growth in three worldwide business segments-BD
Medical Systems ("Medical"), BD Clinical Laboratory Solutions ("Clinical Lab")
and BD Biosciences ("Biosciences"). Our products are marketed in the United
States and internationally through independent distribution channels, directly
to end users and by sales representatives. The following references to years
relate to our fiscal year, which ends on September 30.

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Accounting Change

We adopted the provisions of Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements," ("SAB 101"), in the fourth quarter of 2001
and, as a result, recorded the following accounting changes, described below,
effective October 1, 2000. SAB 101 provides the SEC's views on the timing of
revenue recognition for certain transactions for which explicit guidance had not
previously been available. We changed our method of accounting for revenue
related to branded insulin syringe products that are sold under incentive
programs to distributors in the U.S. consumer trade channel. We concluded that
the preferable method is to defer revenue recognition until such product is sold
by the distributor to the end customer. We also changed our accounting method
for Biosciences instruments to defer revenue from these products until
completion of installation at the customer's site. As a result of these
accounting changes, we recorded a total cumulative effect of change in
accounting principle of $37 million, net of tax. The impact of the adoption of
SAB 101 on revenues and net income before the cumulative effect was immaterial.
See Note 2 of the Notes to Consolidated Financial Statements for additional
discussion of these accounting changes.

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Revenues and Earnings

Worldwide revenues in 2001 were $3.8 billion, an increase of 4% over 2000.
Unfavorable foreign currency translation impacted revenue growth by 3%.
Underlying revenue growth, which excludes the effects of foreign currency
translation, resulted primarily from volume increases in all segments.

Medical revenues in 2001 increased 2% over 2000 to $2.0 billion. Excluding
unfavorable foreign currency translation of an estimated 4%, underlying revenue
growth was 6%. The primary growth drivers were the conversion to advanced
protection devices, which contributed approximately 4% to the underlying revenue
growth and prefillable syringes and other related devices, which contributed
approximately 2%. Medical revenue growth also benefited from a favorable
comparison with the prior year, which reflected the impact of the discontinuance
of U.S. medical surgical distributor incentive programs in fiscal 2000. In
addition, revenue growth was offset by a $28 million decline in sales of
consumer healthcare products compared with the prior year, primarily as a result
of our beginning to redirect promotional efforts toward branded syringe sales at
the retail level.

Medical operating income was $447 million in 2001 compared with $395
million in 2000. Medical operating income in 2000 was negatively impacted by
special charges, which are discussed below. Excluding these charges, Medical
operating income grew 3%. This growth was primarily driven by the factors
discussed above.

Clinical Lab revenues in 2001 rose 5% to $1.2 billion. Excluding
unfavorable foreign currency translation of an estimated 3%, underlying revenue
growth was 8%. The conversion to advanced protection products in the United
States was the primary growth driver, contributing approximately 3% to
underlying revenue growth. In addition, increased worldwide sales of the
molecular diagnostic platform, BD ProbeTec ET, contributed 1% to underlying
revenue growth. Clinical Lab revenue growth also benefited from a favorable
comparison with the prior year, which reflected the impact of the discontinuance
of U.S. distributor incentive programs in 2000.

Clinical Lab operating income was $213 million in 2001 compared with $170
million last year. Excluding the impact of special charges and a $5 million
purchased in-process research and development charge in 2000, Clinical Lab
operating income increased 17% over the prior year. This growth reflects the
higher gross profit margin from our advanced protection products.

Biosciences revenues in 2001 increased 8% over 2000 to $592 million.
Excluding unfavorable foreign currency translation of an estimated 3%,
underlying revenue growth was 11%. Such growth was led by sales of
immunocytometry products, particularly the BD FACS flow cytometry systems, which
contributed 5% to the underlying revenue growth. In addition, sales of BD
Pharmingen and BD Clontech reagents contributed 4% to the underlying revenue
growth. We believe that the events of September 11 adversely affected fourth
quarter 2001 revenues by as much as $5 million due to disruptions to air
shipments and research and business activities at several private and government
sector customers.

Biosciences operating income in 2001 was $97 million in 2001 compared with
$73 million in 2000. Biosciences operating income grew 25%, excluding 2000
special charges. This performance reflects increased sales of products in 2001
with higher gross profit margins than the mix of products sold in 2000, as well
as certain manufacturing and operational productivity gains. These gains were
partially offset by increased research and development spending in the area of
genomics research.

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Financial Review Becton, Dickinson and Company

On a geographic basis, revenues outside the United States in 2001 were
relatively the same as last year. Excluding the estimated impact of unfavorable
foreign currency translation, revenues outside the United States grew 7%.
Revenue growth in Europe accounted for approximately 4% of the underlying
revenue growth and was led by strong sales of prefillable syringes, BD FACS flow
cytometry systems and clinical immunology products. Revenues were adversely
impacted by economic conditions in Latin America and by a decline in sales
performance in Asia Pacific.

Revenues in the United States in 2001 of $2 billion increased 8%, primarily
from strong sales of advanced protection devices. Revenue growth benefited from
a favorable comparison due to the impact of the discontinuance of certain
distributor incentive programs in 2000. Revenue growth was offset by lower sales
of consumer healthcare products compared with the prior year, as discussed
above.

Special charges of $58 million were recorded in 2000. These charges
included $32 million relating to severance costs and $6 million of impaired
assets and other exit costs associated with a worldwide organizational
restructuring, which was approved in September 2000. The plan provides for the
termination of approximately 600 employees, of which 540 employees have been
severed as of September 30, 2001. The remaining terminations and related accrued
severance are expected to be substantially completed and paid no later than the
second quarter of 2002. The annual savings from the reduction in salaries and
wages expense were estimated to be $30 million. As anticipated, these savings,
beginning in 2001, offset incremental costs relating to programs, such as
advanced protection technologies, blood glucose monitoring, molecular oncology
and our enterprise-wide program to upgrade our business information systems,
known internally as Genesis. Special charges in 2000 also included $20 million
for estimated litigation defense costs associated with our divested latex gloves
business. See "Litigation" section below for additional discussion. We also
recorded other charges of $13 million in cost of products sold in 2000 relating
to a product recall. These charges consisted primarily of costs associated with
product returns, disposal of the affected product and other direct recall costs.
For additional discussion of these charges, see Note 5 of the Notes to
Consolidated Financial Statements.

Gross profit margin was 49.0% in 2001, compared with 48.9% last year.
Excluding the unfavorable impact of the previously discussed other charges in
2000, gross profit margin would have been 49.3% in 2000. Gross profit margin in
2001 reflects the impact of lower sales of consumer healthcare products and
unfavorable foreign exchange, offset largely by the higher gross margin from our
advanced protection products. We are considering actions, beginning in 2002, to
increase our operating efficiency. These actions may include a smaller scale
restructuring of manufacturing facilities in the Medical segment.

Selling and administrative expense of $983 million in 2001 was 26.2% of
revenues, compared to $974 million in 2000, or 26.9% of revenues. Incremental
spending for growth initiatives was offset, in part, by favorable foreign
currency translation and savings associated with the 2000 worldwide
rganizational restructuring plan.

Investment in research and development in 2001 was $212 million, or 5.6% of
revenues. Research and development expense in 2000 was $219 million, or 6% of
revenues, excluding an in-process research and development charge of $5 million.
This charge represented the fair value of certain acquired research and
development projects in the area of cancer diagnostics which were determined not
to have reached technological feasibility and which do not have alternative
future uses. Incremental spending was primarily in the Biosciences segment and
in key initiatives, including blood glucose monitoring. Investment in research
and development in 2001 reflects lower spending than in the prior year, which
included clinical trial costs for the BD Phoenix instrument platform and costs
relating to the transdermal business unit that was divested in the first quarter
of this year.

Operating margin in 2001 was 17.2% of revenues. Excluding special and other
charges and purchased in-process research and development charges in 2000,
operating margin would have been 16.3% in 2000. The increase in operating margin
reflects the revenue growth, along with the favorable effect of continued
control over costs.

Net interest expense of $55 million in 2001 was $19 million lower than in
2000, primarily due to lower debt levels and lower short-term interest rates.

Other expense, net in 2001 of $14 million included foreign exchange losses
of $9 million, including net hedging costs, and write-downs of equity
investments to market value of $6 million. Other income, net in 2000 of $3
million included the favorable effect of legal settlements and a gain on an
investment hedge that more than offset foreign exchange losses and net losses
relating to assets held for sale.

The effective tax rate in 2001 was 24% compared to 24.4% in 2000,
reflecting a favorable mix in income among tax jurisdictions.

Net income and diluted earnings per share before the cumulative effect of
accounting change in 2001 were $438 million, or $1.63, respectively, compared
with $393 million, or $1.49 in 2000. Earnings per share in 2000 would have
remained $1.49, excluding special and other charges, purchased in-process
research and development charges, investment gains and a favorable tax benefit
from the conclusion of a number of tax examinations in 2000.

As discussed above in "Accounting Change," we adopted SAB 101, effective
October 1, 2000, and recorded a cumulative effect of change in accounting
principle of $37 million, net of income tax benefit of $25 million. See Note 2
of the Notes to Consolidated Financial Statements for additional discussion.

Net income in 2001 was $402 million, or $1.49 per share, after reflecting
the after-tax cumulative effect of accounting change of $.14 per share.

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Financial Review Becton, Dickinson and Company
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Financial Instrument Market Risk

We selectively use financial instruments to manage the impact of foreign
exchange rate and interest rate fluctuations on earnings. The counterparties to
these contracts are highly-rated financial institutions, and we do not have
significant exposure to any one counterparty. We do not enter into financial
instruments for trading or speculative purposes.

Our foreign currency exposure is concentrated in Western Europe, Asia
Pacific, Japan and Latin America. We face transactional currency exposures that
arise when we enter into transactions in non-hyperinflationary countries,
generally on an intercompany basis, that are denominated in currencies other
than our functional currency. We hedge substantially all such foreign exchange
exposures primarily through the use of forward contracts and currency options.
We also face currency exposure that arises from translating the results of our
worldwide operations to the U.S. dollar at exchange rates that have fluctuated
from the beginning of the period. We purchase option and forward contracts to
partially protect against adverse foreign exchange rate movements. Gains or
losses on our derivative instruments are largely offset by the gains or losses
on the underlying hedged transactions. For foreign currency derivative
instruments, market risk is determined by calculating the impact on fair value
of an assumed one-time change in foreign exchange rates relative to the U.S.
dollar. Fair values were estimated based on market prices, when available, or
dealer quotes. The reduction in fair value of our purchased option contracts is
limited to the option's fair value. With respect to the derivative instruments
outstanding at September 30, 2001, a 10% appreciation of the U.S. dollar over a
one-year period would increase pre-tax earnings by $34 million, while a 10%
depreciation of the U.S. dollar would decrease pre-tax earnings by $15 million.
Comparatively, considering our derivative instruments outstanding at September
30, 2000, a 10% appreciation of the U.S. dollar over a one-year period would
have increased pre-tax earnings by $46 million, while a 10% depreciation of the
U.S. dollar would have decreased pre-tax earnings by $7 million. These
calculations do not reflect the impact of exchange gains or losses on the
underlying positions that would be offset, in part, by the results of the
derivative instruments.

Our primary interest rate exposure results from changes in short-term U.S.
dollar interest rates. Our debt portfolio at September 30, 2001, is primarily
U.S. dollar-denominated and is not subject to transaction or translation
exposure, with less than 3% being foreign denominated. In an effort to manage
interest rate exposures, we strive to achieve an acceptable balance between
fixed and floating rate debt and may enter into interest rate swaps to help
maintain that balance. For interest rate derivative instruments, market risk is
determined by calculating the impact to fair value of an assumed one-time change
in interest rates across all maturities. Fair values were estimated based on
market prices, when available, or dealer quotes. A change in interest rates on
short-term debt is assumed to impact earnings and cash flow but not fair value
because of the short maturities of these instruments. A change in interest rates
on long-term debt is assumed to impact fair value but not earnings or cash flow
because the interest rates are fixed. See Note 9 of the Notes to Consolidated
Financial Statements for additional discussion of our debt portfolio. Based on
our overall interest rate exposure at September 30, 2001 and 2000, a change of
10% in interest rates would not have a material effect on our earnings or cash
flows over a one-year period. An increase of 10% in interest rates would
decrease the fair value of our long-term debt at September 30, 2001 and 2000 by
approximately $45 million and $46 million, respectively. A 10% decrease in
interest rates would increase the fair value of our long-term debt at September
30, 2001 and 2000 by approximately $50 million and $52 million, respectively.

See Note 10 of the Notes to Consolidated Financial Statements for
additional discussion of our outstanding forward exchange contracts, currency
options and interest rate swaps at September 30, 2001.

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Liquidity and Capital Resources

Cash provided by operations continues to be our primary source of funds to
finance operating needs and capital expenditures. In 2001, net cash provided by
operating activities was $779 million, compared to $615 million in 2000. The
major source of funds in 2001 was net income adjusted for non-cash items.

Capital expenditures were $371 million in 2001, compared to $376 million in
the prior year. Medical and Clinical Lab capital spending, which in 2001 totaled
$266 million and $62 million, respectively, included continued spending for
advanced protection devices as well as various capacity expansions. Biosciences
capital spending, which totaled $24 million in 2001, included spending on new
manufacturing facilities. Funds expended outside the above segments included
amounts related to Genesis.

Net cash used for financing activities was $201 million in 2001 as compared
to $219 million during 2000. During 2001, total debt decreased $180 million,
primarily as a result of increased funds from operations which were used to pay
down short-term debt. Short-term debt was 37% of total debt at year end,
compared to 45% at the end of 2000. Our weighted average cost of total debt at
the end of 2001 was 4.8%, down from 7.0% at the end of last year due to the
reduction in interest rates of short-term borrowings and the impact of interest
rate swaps entered into in 2001. Debt to capitalization at year end improved to
34.1%, from 41.4% last year, reflecting the reduction in total debt discussed
above. We anticipate generating excess cash in 2002, which could be available to
further repay debt. Under a September 2001 Board of Directors' resolution, we
are authorized to repurchase up to 10 million common shares, none of which were
repurchased as of September 30, 2001. In November 2001, the Company made a $100
million cash contribution to the U.S. pension plan, which was funded by
commercial paper.

In 2001, we negotiated a new $900 million syndicated line of credit, $450
million of which matures in five years, and $450 million of which matures in 364
days. There were no borrowings outstanding under this facility at September 30,
2001. This facility can be used to support our commercial paper program, under
which $416 million was outstanding at September 30, 2001, and for other general
corporate purposes. In addition, we have informal lines of credit outside the
United States. Our long-term debt rating at September 30, 2001 was "A2" by
Moody's and "A+" by Standard & Poor's.

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Financial Review Becton, Dickinson and Company

Our commercial paper rating at September 30, 2001 was "P-1" by Moody's and "A-1"
by Standard & Poor's. We continue to have a high degree of confidence in our
ability to refinance maturing short-term and long-term debt, as well as to incur
substantial additional debt, if required.

Return on equity was 18.7% in 2001 or, 20.3%, excluding the 2001 cumulative
effect of change in accounting principle, compared with 21.1% in 2000.

We are considering the divestiture of some business units with combined
revenues of less than $200 million in 2002.

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Other Matters

We believe that our core products, our international diversification and our
ability to meet the needs of the worldwide healthcare industry with
cost-effective and innovative products will continue to cushion the long-term
impact on BD of potential economic and political dislocations in the countries
in which we do business, including the effects of possible healthcare system
reforms. In 2001, inflation did not have a material impact on our overall
operations.

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Litigation

We, along with a number of other manufacturers, have been named as a defendant
in approximately 482 product liability lawsuits related to natural rubber latex
that have been filed in various state and Federal courts. Cases pending in
Federal Court are being coordinated under the matter In re Latex Gloves Products
Liability Litigation (MDL Docket No. 1148) in Philadelphia, and analogous
procedures have been implemented in the state courts of California,
Pennsylvania, New Jersey and New York. Generally, these actions allege that
medical personnel have suffered allergic reactions ranging from skin irritation
to anaphylaxis as a result of exposure to medical gloves containing natural
rubber latex. In 1986, we acquired a business which manufactured, among other
things, latex surgical gloves. In 1995, we divested this glove business. We are
vigorously defending these lawsuits.

We, along with another manufacturer and several medical product
distributors, have been named as a defendant in 11 product liability lawsuits
relating to healthcare workers who allegedly sustained accidental needlesticks,
but have not become infected with any disease.

o In California, Chavez vs. Becton Dickinson (Case No. 722978, San Diego
County Superior Court), filed on August 4, 1998, was dismissed in a
judgment filed March 19, 1999. On August 29, 2000, the appellate court
affirmed the dismissal of the product liability claims, leaving only a
pending statutory claim for which the court has stated the plaintiff cannot
recover damages. On September 10, 2001, the parties reached a final
settlement of this remaining cause of action.

o In Florida, Delgado vs. Becton Dickinson et al. (Case No. 98-5608,
Hillsborough County Circuit Court) filed on July 24, 1998, was voluntarily
withdrawn by the plaintiffs on March 8, 1999.

o In Pennsylvania, 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.

Cases have been filed on behalf of an unspecified number of healthcare
workers in eight other states, seeking class action certification under the laws
of these states. Generally, these remaining actions allege that healthcare
workers have sustained needlesticks using hollow-bore needle devices
manufactured by BD and, as a result, require medical testing, counseling and/or
treatment. Several actions additionally allege that the healthcare workers have
sustained mental anguish. Plaintiffs seek money damages in all of these actions,
which are pending in Ohio state court, under the caption Grant vs. Becton
Dickinson et al. (Case No. 98 CVB075616, Franklin County Court), filed on July
22, 1998; in state court in Illinois, under the caption McCaster vs. Becton
Dickinson et al. (Case No. 98L09478, Cook County Circuit Court), filed on August
13, 1998; in state court in Oklahoma, under the caption Palmer vs. Becton
Dickinson et al. (Case No. CJ-98-685, Sequoyah County District Court), filed on
October 27, 1998; in state court in Alabama, under the caption Daniels vs.
Becton Dickinson et al. (Case No. CV 1998 2757, Montgomery County Circuit
Court), filed on October 30, 1998; in state court in South Carolina, under the
caption Bales vs. Becton Dickinson et al. (Case No. 98-CP-40-4343, Richland
County Court of Common Pleas), filed on November 25, 1998; in state court in New
Jersey, under the caption Pollak, Swartley vs. Becton Dickinson et al. (Case No.
L-9449-98, Camden County Superior Court), filed on December 7, 1998; in state
court in New York, under the caption Benner vs. Becton Dickinson et al. (Case
No. 99-111372, Supreme Court of the State of New York), filed on June 1, 1999,
and in Texas state court, under the caption Usrey vs. Becton Dickinson et al.
(Case No. 342-173329-98, Tarrant County District Court), filed on April 9, 1998.

In Texas state court, in the matter of Usrey vs. Becton Dickinson et al.,
the Court of Appeals for the Second District of Texas filed an Opinion on August
16, 2001 reversing the trial court's certification of a class, and remanding the
case to the trial court for further proceedings consistent with that opinion.
Plaintiffs petitioned the appellate court for rehearing, which the Court of
Appeals denied on October 25, 2001.

We continue to oppose class action certification in these cases and will
continue vigorously to defend these lawsuits, including pursuing all appropriate
rights of appeal.

BD has insurance policies in place, and believes that a substantial portion
of defense costs and potential liability, if any, in the latex and class action
matters will be covered by insurance. In order to protect our rights to
coverage, we have filed an action for declaratory judgment under the caption
Becton Dickinson and Company vs. Adriatic Insurance Company et al. (Docket No.
MID-L-3649-99MT, Middlesex County Superior Court) in New Jersey state court. We
have established reserves to cover reasonably-anticipated defense costs in all
product liability lawsuits, including the needlestick class action and latex
matters.

On January 29, 2001, Retractable Technologies, Inc. ("RTI") filed an action
under the caption Retractable Technologies, Inc. vs. Becton Dickinson and
Company, et al. (Case No. CA510V036, United States District Court, Eastern
District of Texas), against BD, another manufacturer and two group purchasing
organizations ("GPOs").

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Financial Review Becton, Dickinson and Company

RTI (a manufacturer of retractable syringes) alleges that we and other
defendants conspired to exclude them from the market and maintain our market
share by entering into long-term contracts with GPOs in violation of state and
Federal antitrust laws. Plaintiff seeks money damages. This action is in
preliminary stages. Discovery commenced in October, 2001, and we are vigorously
defending this action.

On May 11, 2001, CalOSHA issued a Citation and Notification of Penalty to
the Kaiser Permanente Sunset facility in Los Angeles, alleging that the BD
Eclipse blood collection device used in the laboratory at that facility did not
meet the California regulatory standard for a needle with engineered sharp
injury protection. The Citation did not state the factual basis of the
allegation or the relief sought. Kaiser has appealed this Citation and we have
intervened in the proceeding. Subsequent to the Citation, CalOSHA issued a
public statement that "We are not making an announcement per se that the Eclipse
device is unacceptable, but that the way it was used may be a problem. We are
not saying at this time that employers should not be using this device."

We also are involved both as a plaintiff and a defendant in other 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 above
or other legal actions brought against the Company, upon resolution of such
matters, BD may incur charges in excess of currently 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 the opinion of management, the results of the above
matters, individually and in the aggregate, are not expected to have a material
adverse effect on our consolidated financial condition.

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Environmental Matters

We believe that our operations comply in all material respects with applicable
laws and regulations. We are a party to a number of Federal proceedings in the
United States brought under the Comprehensive Environment Response, Compensation
and Liability Act, also known as "Superfund," and similar state laws. For all
sites, there are other potentially responsible parties that may be jointly or
severally liable to pay all cleanup costs. We accrue costs for estimated
environmental liabilities based upon our best estimate within the range of
probable losses, without considering possible third-party recoveries. Upon
resolution of these proceedings, BD may incur charges in excess of presently
established accruals. While such future costs could have a material adverse
impact on our net income and net cash flows in the period in which they are
recorded or paid, we believe that any reasonably possible losses in excess of
accruals would not have a material adverse effect on our consolidated financial
position.

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Adoption of New Accounting Standards

The Financial Accounting Standards Board issued, in June 2001, SFAS No. 141,
"Business Combinations," SFAS No. 142, "Goodwill and Other Intangible Assets"
and in August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets." SFAS No. 141 eliminates the pooling-of-interests method of
accounting for business combinations initiated after July 1, 2001, and clarifies
the criteria for recognizing intangible assets apart from goodwill. The
requirements of SFAS No. 141 are effective for any business combination
accounted for by the purchase method that is completed after June 30, 2001. SFAS
No. 142 stipulates that goodwill and indefinite-lived intangible assets will no
longer be amortized, but instead will be periodically reviewed for impairment.
The amortization provisions of SFAS No. 142 apply to goodwill and intangible
assets acquired after June 30, 2001. For goodwill and intangible assets acquired
prior to July 1, 2001, the provisions of SFAS No. 142 are effective upon
adoption. SFAS No. 144 requires that one accounting model be used for long-lived
assets to be disposed of by sale and it broadens the presentation of
discontinued operations to include more disposal transactions. The provisions
relating to long-lived assets to be disposed of by sale or otherwise are
effective for disposal activities initiated by a commitment to a plan after the
effective date of the Statement. We are required to adopt the provisions of
these Statements no later than October 1, 2002. We are in the process of
evaluating these Statements and have not yet determined the future impact on our
consolidated financial statements, although the adoption of SFAS No. 142 is
expected to result in additional earnings per share of approximately $.09
relating to the elimination of goodwill amortization.

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2000 Compared With 1999

Worldwide revenues in 2000 were $3.6 billion, an increase of 6% over 1999.
Unfavorable foreign currency translation impacted revenue growth by 2%.
Underlying revenue growth was 5%, excluding the effects of foreign currency
translation and acquisitions and resulted primarily from volume increases in all
segments.

Beginning October 1, 2000, we revised our reporting segments. The
microbiology product line was moved from Biosciences and combined with the
segment formerly known as Preanalytical Solutions to form Clinical Lab.

Medical revenues in 2000 increased 2% over 1999 to $2.0 billion, with
acquisitions contributing 1%. Unfavorable foreign currency translation impacted
revenue growth by an estimated 3%. The underlying revenue growth of 4% was
primarily due to the conversion of the U.S. market to advanced protection
devices. Such growth was unfavorably affected by the impact of the
discontinuance of certain distributor incentive programs in 2000 and the effect
of product lines exited in 1999.

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Financial Review Becton, Dickinson and Company

Clinical Lab revenues in 2000 rose 4% over 1999 to $1.1 billion.
Unfavorable foreign currency translation impacted revenues by an estimated 2%.
The underlying revenue growth of 6% was primarily due to the conversion of the
U.S. market to advanced protection devices. Such growth was unfavorably affected
by the impact of the discontinuance of certain distributor incentive programs
and continued cost containment pricing pressures in 2000. Although infectious
disease product revenues continued to be adversely affected by cost containment
in testing, revenues grew at a faster rate in 2000 than in 1999 due to strong
sales of clinical immunology products.

Biosciences revenues in 2000 increased 27% over 1999 to $550 million, with
acquisitions contributing 15%. Unfavorable foreign currency translation impacted
revenues by an estimated 2%. The underlying revenue growth of 14% was primarily
from strong sales of BD FACS flow cytometry systems and BD Pharmingen reagents.

During 1999, we recorded special charges of $76 million associated with the
exiting of product lines and other activities, primarily in the area of home
healthcare, the impairment of assets and an enhanced voluntary retirement
incentive program. We also recorded other charges of $27 million in cost of
products sold in 1999 to reflect the write-off of inventories and to provide
appropriate reserves for expected future returns relating to the exited product
lines. The annual savings of $6 million for the 1999 restructuring plan
primarily related to a reduction in salaries and wages expense resulting from
the voluntary retirement program. As anticipated, these benefits, beginning in
2000, offset incremental costs relating to Genesis. In 1998, we recorded special
charges of $91 million, primarily associated with the restructuring of certain
manufacturing operations and the write-down of impaired assets. For the 1998
restructuring plan, the estimated annual benefits of $4 million related to
reduced manufacturing costs and tax savings associated with the move of a
surgical blade plant are expected to be realized following the closure of the
facility. Beginning in 1999, we realized a reduction in amortization expense of
$5 million, resulting from the write-down of certain assets, which offset
incremental costs associated with Genesis. For additional discussion of these
charges, see Note 5 of the Notes to Consolidated Financial Statements.

Gross profit margin was 48.9% in 2000, compared with 49.9% in 1999.
Excluding the unfavorable impact of the previously discussed other charges in
both years, gross profit margin would have been 49.3% and 50.7% in 2000 and
1999, respectively. Gross profit margin in 2000 was adversely affected by a
decline in sales of higher margin products. This decline also reflects pricing
pressures in certain markets and higher costs associated with the production
scale-up of advanced protection devices.

Selling and administrative expense of $974 million in 2000 was 26.9% of
revenues, compared to the 1999 ratio of 27.3%. Savings achieved through spending
controls and productivity improvements more than offset increased investment
relating to advanced protection programs, the impact of acquisitions and
additional expense relating to Genesis.

Investment in research and development in 2000 was $224 million, or 6.2% of
revenues, including a $5 million charge for purchased in-process research and
development in the area of cancer diagnostics. Research and development expense
in 1999 also included in-process research and development charges of $49 million
in connection with business acquisitions. These charges represented the fair
value of certain acquired research and development projects which were
determined not to have alternative future uses. Excluding these charges in both
years, research and development would have been 6% of revenues in both 2000 and
1999.

Operating income in 2000 was $515 million, compared to $445 million in
1999. Excluding special and other charges and purchased in-process research and
development charges in both years, operating income would have been 16.3% and
17.4% of revenues in 2000 and 1999, respectively. This decline primarily
reflects the decrease in gross profit margin, partially offset by selling and
administrative expense leverage.

Net interest expense of $74 million in 2000 was $2 million higher in 1999.
The impact in 2000 of additional 1999 borrowings to fund acquisitions was
partially offset by interest refunds received in connection with the conclusion
of a number of tax examinations.

Gains on investments included $73 million in 2000 relating to the sale of
two equity investments, which are described more fully in Note 8 of the Notes to
Consolidated Financial Statements.

Other income, net in 2000 was $4 million higher compared to 1999. The
favorable effect of lower foreign exchange losses, legal settlements and a gain
on an investment hedge in 2000 were partially offset by net losses relating to
assets held for sale.

The effective tax rate in 2000 was 24.4%, compared to 26.0% in 1999. The
lower tax rate resulted principally from adjustments relating to the conclusion
of a number of tax examinations.

Net income in 2000 was $393 million, compared to $276 million in 1999.
Diluted earnings per share were $1.49 in 2000, compared to $1.04 in 1999.
Excluding special and other charges and purchased in-process research and
development charges in both years, as well as the investment gains and favorable
tax effect discussed above, earnings per share would have been unchanged from
1999.

Capital expenditures were $376 million in 2000, compared to $312 million in
1999, reflecting additional spending for capital expansion for advanced
protection devices. Medical, Clinical Lab and Biosciences capital spending
totaled $247 million, $66 million and $34 million, respectively, in 2000. Funds
expended outside the above segments included amounts related to Genesis.

Net cash provided by financing activities was $219 million in 2000 as
compared to net cash provided of $365 million during 1999. During 2000, total
debt decreased $168 million, primarily as a result of increased funds from
operations and a decline in accounts receivable. This decline was primarily the
result of foreign currency translation and stepped up enforcement of agreed upon
terms with customers. Short-term debt was 45% of total debt at year end,
compared to 40% at the end of 1999.

Return on equity increased to 21.1% in 2000, from 16.3% in 1999.

25

Financial Review Becton, Dickinson and Company
- -------------------------------------------------------------------------------
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 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 SEC and in our other reports to
shareholders. 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 our expectations in any forward-looking statements:

o 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.

o 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.

o Changes in domestic and foreign healthcare resulting in pricing pressures,
including the continued consolidation among healthcare providers, trends
toward managed care and healthcare cost containment and government laws and
regulations relating to sales and promotion, reimbursement and pricing
generally.

o Fluctuations in the cost and availability of raw materials and the ability
to maintain favorable supplier arrangements and relationships.

o 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.

o 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.

o 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 SEC filings.

o 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.

o Product efficacy or safety concerns resulting in product recalls,
regulatory action on the part of the U.S. Food and Drug Administration (or
foreign counterparts) or declining sales.

o Economic and political conditions in international markets, including civil
unrest, governmental changes and restrictions on the ability to transfer
capital across borders.

o 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.

o The impact of business combinations, including acquisitions and
divestitures, both internally for BD and externally in the healthcare
industry.

o Issuance of new or revised accounting standards by the American Institute
of Certified Public Accountants, the FASB or the SEC.

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 complete
statement of all potential risks and uncertainties.

26

Becton, Dickinson and Company

Report of Management

The following consolidated financial statements have been prepared by
management in conformity with accounting principles generally accepted in the
United States and include, where required, amounts based on the best estimates
and judgments of management. The integrity and objectivity of data in the
financial statements and elsewhere in this Annual Report are the responsibility
of management.

In fulfilling its responsibilities for the integrity of the data presented
and to safeguard the Company's assets, management employs a system of internal
accounting controls designed to provide reasonable assurance, at appropriate
cost, that the Company's assets are protected and that transactions are
appropriately authorized, recorded and summarized. This system of control is
supported by the selection of qualified personnel, by organizational assignments
that provide appropriate delegation of authority and division of
responsibilities, and by the dissemination of written policies and procedures.
This control structure is further reinforced by a program of internal audits,
including a policy that requires responsive action by management.

The consolidated financial statements have been audited by Ernst & Young
LLP, independent auditors, whose report follows. Their audits were conducted in
accordance with auditing standards generally accepted in the United States and
included a review and evaluation of the Company's internal accounting controls
to the extent they considered necessary for the purpose of expressing an opinion
on the consolidated financial statements. This, together with other audit
procedures and tests, was sufficient to provide reasonable assurance as to the
fairness of the information included in the consolidated financial statements
and to support their opinion thereon.

The Board of Directors monitors the internal control system, including
internal accounting controls, through its Audit Committee which consists of five
outside Directors. The Audit Committee meets periodically with the independent
auditors, internal auditors and financial management to review the work of each
and to satisfy itself that they are properly discharging their responsibilities.
The independent auditors and internal auditors have full and free access to the
Audit Committee and meet with its members, with and without financial management
present, to discuss the scope and results of their audits including internal
control, auditing and financial reporting matters.

Edward J. Ludwig John R. Considine Richard M. Hyne

Edward J. Ludwig John R. Considine Richard M. Hyne
President and Chief Executive Vice President Vice President and
Executive Officer and Chief Financial Controller
Officer

Report of Ernst & Young LLP, Independent Auditors

To the Shareholders and Board of Directors
Becton, Dickinson and Company

We have audited the accompanying consolidated balance sheets of Becton,
Dickinson and Company as of September 30, 2001 and 2000, and the related
consolidated statements of income, comprehensive income, and cash flows for each
of the three years in the period ended September 30, 2001. 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 in accordance with auditing standards generally
accepted in the United States. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Becton,
Dickinson and Company at September 30, 2001 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended September 30, 2001, in conformity with accounting principles
generally accepted in the United States.

As discussed in Note 2 to the financial statements, in fiscal year 2001 the
Company changed its method of accounting for revenue recognition in accordance
with guidance provided in Securities and Exchange Commission Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements."

Ernst & Young LLP

New York, New York
November 7, 2001

27

Becton, Dickinson and Company

Financial Statements

Consolidated Statements of Income
Years Ended September 30
Thousands of dollars, except per-share amounts

See notes to consolidated financial statements

28

Becton, Dickinson and Company

Consolidated Statements of Comprehensive Income
Years Ended September 30
Thousands of dollars

See notes to consolidated financial statements

29

Statements Becton, Dickinson and Company

Consolidated Balance Sheets
September 30
Thousands of dollars, except per-share amounts

See notes to consolidated financial statements

30

Becton, Dickinson and Company

Consolidated Statements of Cash Flows
Years Ended September 30
Thousands of dollars

See notes to consolidated financial statements

31

Notes Becton, Dickinson and Company

Notes to Consolidated
Financial Statements
Thousands of dollars, except per-share amounts

Index

1
- --------------------------------------------------------------------------------
Summary of Significant Accounting Policies

Principles of Consolidation
The consolidated financial statements include the accounts of Becton, Dickinson
and Company and its majority-owned subsidiaries after the elimination of
intercompany transactions.

Cash Equivalents
Cash equivalents are stated at cost plus accrued interest, which approximates
market. The Company considers all highly liquid investments with a maturity of
90 days or less when purchased to be cash equivalents.

Inventories
Inventories are stated at the lower of cost or market. The Company uses the
last-in, first-out ("LIFO") method of determining cost for substantially all
inventories in the United States. All other inventories are accounted for using
the first-in, first-out ("FIFO") method.

Property, Plant and Equipment
Property, plant and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation and amortization are principally provided on the
straight-line basis over estimated useful lives which range from 20 to 45 years
for buildings, four to 10 years for machinery and equipment and three to 20
years for leasehold improvements. Depreciation expense was $179,411, $168,846
and $158,202 in fiscal 2001, 2000 and 1999, respectively.

Intangibles
Goodwill and core and developed technology arise from acquisitions. Goodwill is
amortized over periods principally ranging from 10 to 40 years, using the
straight-line method. Core and developed technology is amortized over periods
ranging from 15 to 20 years, using the straight-line method. Other intangibles,
which include patents, are amortized over periods principally ranging from three
to 40 years, using the straight-line method. Intangibles are periodically
reviewed to assess recoverability from future operations using undiscounted cash
flows. To the extent carrying values exceed fair values, an impairment loss is
recognized in operating results. See Note 2 for discussion of the pending
adoption of new accounting standards.

Revenue Recognition
In the fourth quarter of 2001, the Company adopted the provisions of Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
("SAB 101") retroactive to October 1, 2000. Upon adoption of this SAB, the
Company changed its accounting method for recognizing revenue on the sale of
instruments in the Biosciences segment. Revenue will now be recognized for
these instruments upon completion of installation at the customer's site. The
Company also changed its accounting method for revenue recognition related
to branded insulin syringe products sold under incentive programs to
distributors in the U.S. consumer trade channel. Revenue will now be recognized
for these sales upon the sell-through of such product from the distribution
channel partner to the end customer. See Note 2 for additional discussion of
the accounting change. Substantially all other revenue is recognized when
products are shipped to customers.

Shipping and Handling Costs
Shipping and handling costs are included in Selling and administrative expense.
Shipping expense was $164,401, $148,571 and $135,209 in fiscal 2001, 2000 and
1999, respectively.

Warranty
Estimated future warranty obligations related to applicable products are
provided by charges to operations in the period in which the related revenue is
recognized.

Income Taxes
United States income taxes are not provided on substantially all undistributed
earnings of foreign subsidiaries since the subsidiaries reinvest such earnings
or remit them to the Company without tax consequence. Income taxes are provided
and tax credits are recognized based on tax laws enacted at the dates of the
financial statements.

Earnings Per Share
Basic earnings per share are computed based on the weighted average number of
common shares outstanding. Diluted earnings per share reflect the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock.

32

Becton, Dickinson and Company

Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions. These estimates or assumptions affect reported assets,
liabilities, revenues and expenses as reflected in the financial statements.
Actual results could differ from these estimates.

Derivative Financial Instruments
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, effective October 1, 2000, as discussed in Note 10.
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 cumulative effect of
adoption was not material to the Company's results of operations or financial
condition.

Derivative financial instruments are utilized by the Company in the
management of its foreign currency and interest rate exposures. The Company
hedges its foreign currency exposures by entering into offsetting forward
exchange contracts and currency options, when it deems appropriate. The Company
also occasionally enters into interest rate swaps, interest rate caps, interest
rate collars, and forward rate agreements in order to reduce the impact of
fluctuating interest rates on its short-term debt and investments. In connection
with issuances of long-term debt, the Company may also enter into forward rate
agreements in order to protect itself from fluctuating interest rates during the
period in which the sale of the debt is being arranged. The Company also
occasionally enters into forward contracts in order to reduce the impact of
fluctuating market values on its available-for-sale securities as defined by
SFAS No. 115. The Company does not use derivative financial instruments for
trading or speculative purposes.

Any deferred gains or losses associated with derivative instruments,
which on infrequent occasions may be terminated prior to maturity, are
recognized in income in the period in which the underlying hedged transaction is
recognized. In the event a designated hedged item is sold, extinguished or
matures prior to the termination of the related derivative instrument, such
instrument would be closed and the resultant gain or loss would be recognized in
income.

Stock-Based Compensation
Under the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company accounts for stock-based employee compensation using the intrinsic
value method prescribed by Accounting Principles Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's stock at the date of the grant
over the exercise price.

2
- --------------------------------------------------------------------------------
Accounting Changes

In December 1999, the Securities and Exchange Commission ("SEC") issued SAB 101,
"Revenue Recognition in Financial Statements." SAB 101 provided the SEC's views
in applying generally accepted accounting principles to selected revenue
recognition issues for which explicit guidance had not previously been
available. The Company adopted the provisions of this SAB in the fourth quarter
of 2001, retroactive to October 1, 2000, and as a result, recorded the following
accounting changes.

The Company changed its accounting method for revenue recognition
related to branded insulin syringe products that are sold under incentive
programs to distributors in the U.S. consumer trade channel. These partners have
implied rights of return on unsold merchandise held by them. The Company
previously recognized all incentive program revenue upon shipment to these
customers, net of appropriate allowances for sales returns. Effective October 1,
2000, the Company changed its method of accounting for revenue related to these
product sales to recognize such revenues upon the sell-through of the respective
product from the distribution channel partner to the end customer. The Company
believes this change in accounting principle is the preferable method. The
cumulative effect of this change in accounting method was a charge of $52,184
or $30,789, net of taxes.

The Company also changed its accounting method for recognizing revenue
on instruments in the Biosciences segment. Prior to the adoption of SAB 101, the
Company's accounting policy was to recognize revenue upon delivery of
instruments to customers but prior to installation at the customer's site. The
Company had routinely completed such installation services successfully in the
past, but a substantive effort is required for the installation of these
instruments and only the Company can perform the service. Therefore, effective
October 1, 2000, the Company recognizes revenues for these instruments upon
completion of installation at the customer's site. The cumulative effect of this
change in accounting method was a charge of $9,772, or $5,961, net of taxes.

The total cumulative effect of these accounting changes on prior years
resulted in a charge to income of $36,750 for the year ended September 30, 2001.
Of the $80,700 of revenues included in the cumulative effect adjustment, $44,300
and $28,500 were included in the restated revenues for the first and second
quarters of fiscal 2001, respectively, with the remainder substantially
recognized by the end of the third quarter. The adoption of SAB 101 increased
Biosciences revenues for the year by approximately $3,400 and decreased Medical
Systems revenues for the year by about $3,100. Consequently, the adoption of
SAB 101 had an immaterial effect on revenues for the year ended September 30,
2001.

As of September 30, 2001, the deferred profit balance recorded as
Accrued Expenses was $62,100.

33

Notes Becton, Dickinson and Company

The following pro forma data summarize the results of operations for
the years ended September 30, 2000 and 1999 as if the accounting change was made
retroactively.

The Company restated its results for the first three quarters of the
year ended September 30, 2001, as reflected in the Quarterly Data on page 48.

Adoption of New Accounting Standards
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 eliminates the pooling-of-interests method of accounting
for business combinations initiated after July 1, 2001, and clarifies the
criteria for recognizing intangible assets apart from goodwill. The requirements
of SFAS No. 141 are effective for any business combination accounted for by the
purchase method that is completed after June 30, 2001. SFAS No. 142 stipulates
that goodwill and indefinite-lived intangible assets will no longer be
amortized, but instead will be periodically reviewed for impairment. The
amortization provisions of SFAS No. 142 apply to goodwill and intangible assets
acquired after June 30, 2001. For goodwill and intangible assets acquired prior
to July 1, 2001, the provisions of Statement 142 are effective upon adoption.
The Company recorded goodwill amortization of $32,000 in 2001.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This Statement requires that one
accounting model be used for long-lived assets to be disposed of by sale and it
broadens the presentation of discontinued operations to include more disposal
transactions. The provisions relating to long-lived assets to be disposed of by
sale or otherwise are effective for disposal activities initiated by a
commitment to a plan after the effective date of the Statement.

The Company is required to adopt the provisions of these statements no
later than October 1, 2002. The Company is in the process of evaluating these
Statements and has not yet determined the future impact on its consolidated
financial statements.

3
- --------------------------------------------------------------------------------
Employee Stock Ownership Plan/Savings Incentive Plan

The Company has an Employee Stock Ownership Plan ("ESOP") as part of its
voluntary defined contribution plan (Savings Incentive Plan) covering most
domestic employees. The ESOP is intended to satisfy all or part of the Company's
obligation to match 50% of employees' contributions, up to a maximum of 3% of
each participant's salary. To accomplish this, in 1990, the ESOP borrowed
$60,000 in a private debt offering and used the proceeds to buy the Company's
ESOP convertible preferred stock. Each share of preferred stock has a guaranteed
liquidation value of $59 per share and is convertible into 6.4 shares of the
Company's common stock. The preferred stock pays an annual dividend of $3.835
per share, a portion of which is used by the ESOP, together with the Company's
contributions, to repay the ESOP debt. Since the ESOP debt is guaranteed by the
Company, it is reflected on the consolidated balance sheet as short-term and
long-term debt with a related amount shown in the shareholders' equity section
as Unearned ESOP compensation.

The amount of ESOP expense recognized is equal to the cost of the
preferred shares allocated to plan participants and the ESOP interest expense
for the year, reduced by the amount of dividends paid on the preferred stock.

For the plan year ended June 30, 1999, preferred shares accumulated in
the trust in excess of the Company's matching obligation due to the favorable
performance of the Company's common stock in previous years. As a result, the
Company matched up to an additional 1% of each eligible participant's salary.
This increase in the Company's contribution was distributed in September 1999.

Selected financial data pertaining to the ESOP/Savings Incentive Plan
follow:

The Company guarantees employees' contributions to the fixed income
fund of the Savings Incentive Plan. The amount guaranteed was $96,454 at
September 30, 2001.

4
- --------------------------------------------------------------------------------
Benefit Plans

The Company has defined benefit pension plans covering substantially all of its
employees in the United States and certain foreign locations. The Company also
provides certain postretirement health care and life insurance benefits to
qualifying domestic retirees. Postretirement benefit plans in foreign countries
are not material.

In September 2000, the Compensation and Benefits Committee of the
Company's Board of Directors rescinded its January 1999 approval for design
changes to the U.S. pension plan to reflect a pension equity formula. The U.S.
pension plan had been remeasured as of January 31, 1999 and the net periodic
pension cost in 1999 and the benefit obligations at September 30, 1999 reflected
the approval of this change. As a result of the September 2000 rescission, the
U.S. pension plan benefit obligations at September 30, 2000 reflect the previous
"final average pay" plan.

34

Becton, Dickinson and Company

The change in benefit obligation, change in plan assets, funded status
and amounts recognized in the consolidated balance sheets at September 30, 2001
and 2000 for these plans were as follows:

Foreign pension plan assets at fair value included in the preceding
table were $125,568 and $131,938 at September 30, 2001 and 2000, respectively.
The foreign pension plan projected benefit obligations were $147,283 and
$137,360 at September 30, 2001 and 2000, respectively.

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 $35,257, $29,653 and $18,349,
respectively as of September 30, 2001 and $38,960, $33,169 and $18,539,
respectively as of September 30, 2000.

Net pension and postretirement expense included the following
components:

35

Notes Becton, Dickinson and Company

Net pension expense attributable to foreign plans included in the
preceding table was $7,189, $8,580 and $8,721 in 2001, 2000 and 1999,
respectively.

As discussed in Note 5, the Company recorded special charges in 1999
relating to an enhanced voluntary retirement incentive program. These charges
included $7,828 and $5,412 of special termination benefits relating to pension
benefits and postretirement benefits, respectively.

The assumptions used in determining benefit obligations were as
follows:

Health care cost trends of 7% and 9%, respectively, pre-age 65 and 6%
post-age 65 were assumed in the valuation of postretirement healthcare benefits
at September 30, 2001 and 2000. The pre-age 65 rates were assumed to decrease to
an ultimate rate of 6% beginning in 2003. A one percentage point increase in
health-care cost trend rates in each year would increase the accumulated
postretirement benefit obligation as of September 30, 2001 by $10,545 and the
aggregate of the service cost and interest cost components of 2001 annual
expense by $791. A one percentage point decrease in the healthcare cost trend
rates in each year would decrease the accumulated postretirement benefit
obligation as of September 30, 2001 by $9,686 and the aggregate of the 2001
service cost and interest cost by $727.

The Company utilizes a service-based approach in applying the
provisions of SFAS No. 112, "Employers' Accounting For Postemployment Benefits,"
for most of its postemployment benefits. Such an approach recognizes that
actuarial gains and losses may result from experience that differs from baseline
assumptions. Postemployment benefit costs were $15,107, $22,364 and $22,842, in
2001, 2000 and 1999, respectively.

5
- -------------------------------------------------------------------------------
Special and Other Charges

The Company recorded special charges of $57,514, $75,553 and $90,945 in fiscal
years 2000, 1999 and 1998, respectively.

Fiscal Year 2000
The Company developed a worldwide organizational restructuring plan to align its
existing infrastructure with its projected growth programs. This plan included
the elimination of open positions and employee terminations from all businesses,
functional areas and regions for the sole purpose of cost reduction. As a result
of the approval of this plan in September 2000, the Company recorded $33,000 of
exit costs, of which $31,700 related to severance costs. This plan provides for
the termination of approximately 600 employees. As of September 30, 2001,
approximately 540 of the targeted 600 had been severed. The remaining
terminations and related accrued severance are expected to be substantially
completed and paid no later than the second quarter of 2002.

Asset impairments relating to this restructuring plan totaled $4,514
and represented the write-down to fair value less cost to sell of assets held
for sale or disposal in the Medical Systems segment. Also included in special
charges in 2000 was $20,000 for estimated litigation defense costs associated
with the Company's latex glove business, which was divested in 1995. Further
discussion of legal proceedings is included in Note 13.

A summary of the 2000 special charge accrual activity follows:

The Company also recorded $13,100 of charges in Cost of products sold
in the second quarter of fiscal 2000, associated with a product recall. These
charges consisted primarily of costs associated with product returns, disposal
of affected product, and other direct recall costs.

Fiscal Year 1999
In an effort to better focus its business and improve its future financial
performance, the Company decided in the third quarter of fiscal 1999 to exit
certain product lines and other activities, primarily in the Medical Systems
segment. The product lines were in the area of home healthcare and represented
new products that included self-monitoring devices for blood pressure, ear and
heart. These products did not gain the expected market acceptance and the
Company decided to discontinue these products due to poor performance.

36

Becton, Dickinson and Company

Included in 1999 special charges were exit costs relating to this plan of
$21,000. Such costs included approximately $11,500 for the settlement of
contractual obligations with suppliers, $6,800 for the write-off of prepaid
expenses associated with contractual obligations to purchase laboratory services
and inventory to be manufactured by third parties in the future, and $2,700 of
severance costs. This exit plan, which involved the termination of 61 employees,
was completed and substantially all accrued liabilities were paid within one
year, as anticipated. Also included in 1999 special charges were the write-off
of impaired assets relating to the plan of $25,100. Such write-offs included
$14,800 related to goodwill, $9,000 to licenses and $1,300 to molds, all of
which were written down to zero. Assets were taken out of service immediately
after the write-down occurred and were subsequently scrapped.

The Company also reversed $6,300 of 1998 special charges in 1999 as a
result of the decision not to exit certain activities as had originally been
planned.

Also included in special charges in 1999 were costs associated with a
voluntary retirement program offered to 176 employees meeting certain age and
service requirements at selected locations. A total of 133 participants accepted
the program, resulting in a $17,900 charge for special termination benefits, of
which $4,400 related to severance. This program was completed within one year,
as anticipated.

Special charges for 1999 also included $17,853 of other charges. Of
this amount, $8,153 related to the write-down of three equity investments whose
decline in fair value was deemed other than temporary. Also included was $7,200
relating to three intangible assets that were deemed impaired. The decision to
exit certain product development ventures and realign the Company's direction in
other areas in the third quarter of fiscal 1999 resulted in the need to review
for impairments. At that time, it was determined that an impairment loss existed
for these assets. The impairment loss, which related primarily to the Medical
Systems segment, represented the excess carrying values over the fair values for
these assets, based on discounted cash flow estimates. This charge also included
a $2,500 settlement payment relating to the exiting of a joint venture agreement
with a pump manufacturer.

A summary of the 1999 special charge accrual activity follows:

The Company also recorded $26,868 of charges in Cost of products sold
in 1999, to reflect the write-off of inventories and to provide appropriate
reserves for expected future returns relating to the exited product lines.

Fiscal Year 1998
In an effort to improve manufacturing efficiencies at certain locations, the
Company initiated in 1998 two restructuring plans: the closing of a surgical
blade plant in Hancock, New York and the consolidation of other production
functions in Brazil, Spain, Australia and France. Total charges of $35,300 were
recorded in 1998 relating to these restructuring plans, primarily in the Medical
Systems segment, and consisted of $15,400 relating to severance and other
employee termination costs, $15,400 relating to manufacturing equipment
write-offs and $4,500 relating to remaining lease obligations.

The original anticipated completion date for the Hancock facility
closing was May 2000. The Company had estimated that approximately 200 employees
would be terminated and recorded a $9,900 charge relating to severance and a
$2,400 charge relating to other employee termination costs. Severance was
originally estimated based on the severance arrangement communicated to
employees in June 1998. The shutdown of the Hancock facility involved the
transfer of three major production lines to new locations. Two of these
production moves occurred in September 1999, as planned. At that time, a total
of 50 employees were terminated and severance was paid and charged against the
reserve. The move of the remaining production line for surgical blades has been
delayed due to the following events:

1. The original plan did not anticipate the need for safety stock to
serve the blade market during the move since the Company planned to
use a new blade grinding technology that would allow for parallel
production of blades during the eventual wind down and phase out of
the old technology in Hancock. Problems arose with this new
technology during fiscal 1999, which resulted in the Company's
decision to maintain the existing technology. In addition, the blade
business experienced a surge in demand for surgical blades around
the world, particularly in Europe, between October 1998 and June
1999. This increased demand seriously hampered the Company's ability
to build the required inventory levels to enable a move by May 2000.
As a result, the Hancock closure date was revised to the latter part
of fiscal 2001.

2. During the latter part of fiscal 1999 and early fiscal 2000, the
U.S. healthcare marketplace experienced increased activity in the
area of healthcare worker safety and sharp device injuries. In
response to this significant shift in the marketplace and the
enactment of state laws and the expected enactment of federal law
requiring the use of safety-engineered products, the Company
re-prioritized its efforts to deliver safety surgical blades to the
marketplace. This decision resulted in an extension of the timeline
necessary to enable the blade production move and the closure of the
Hancock facility.

The Company now expects the Hancock restructuring plan to be completed
and the related accruals to be substantially paid by December 2002. The
severance estimates have increased as a result of the extension of the Hancock
final closing date. The impact of the estimated increase in severance costs was
offset by savings from certain other factors, including lower actual salary
increases, and lower outplacement fees than were originally anticipated. The
remaining 150 employees will be terminated upon closure of the plant.

37

Notes Becton, Dickinson and Company

The Company originally scheduled to complete the consolidation of the
other production facilities within twelve to eighteen months from the date the
plans were finalized. Approximately 150 employees were estimated to be affected
by these consolidations. Exit costs of approximately $23,000 associated with
these activities included $3,100 of severance costs, with the remainder
primarily related to write-offs of manufacturing equipment with a fair value of
zero. At the time, the Company expected to remove all such assets, with the
exception of Brazil and Spain manufacturing assets, from operations by September
1998. The Company reversed $6,300 of the charges relating to the Brazil and
Spain restructuring plans in fiscal 1999 as a result of the decision not to exit
certain production activities as had originally been planned. The Company also
recorded a catch-up adjustment to cost of sales for depreciation not taken since
the initial write-off of assets relating to these locations. The remaining
consolidation activities in Australia and France were completed as planned, with
a total of approximately 30 employees terminated.

The Company also recorded $37,800 of special charges to recognize
impairment losses on other non-manufacturing assets. Approximately $25,600 of
this charge related to the write-down of goodwill and other assets associated
with prior acquisitions in the area of manual microbiology. The impairment loss
was recorded as a result of the carrying value of these assets exceeding their
fair value, calculated on the basis of discounted estimated future cash flows.
The carrying amount of such goodwill and other intangibles was $24,000. The
balance of the impairment loss of $1,600 was recognized as a write-down of
related fixed assets. Also included in the $37,800 charge was a $4,700
write-down of a facility held for sale, which was subsequently sold in fiscal
2000 at its adjusted book value.

The remaining special charges of $17,845 primarily consisted of $12,300
of estimated litigation defense costs associated with the Company's latex glove
business, which was divested in 1995, as well as a number of miscellaneous asset
write-downs.

A summary of the 1998 special charge accrual activity follows:

Other accruals of $15,100 primarily represented the estimated litigation
defense costs, as discussed above.

6
- --------------------------------------------------------------------------------
Acquisitions

In January 2001, the Company completed its acquisition of Gentest Corporation, a
privately-held company serving the life sciences market in the areas of drug
metabolism and toxicology testing of pharmaceutical candidates. The purchase
price was approximately $29,000 in cash, subject to certain post-closing
adjustments. Unaudited pro forma consolidated results, after giving effect to
this acquisition, would not have been materially different from the reported
amounts for either 2001 or 2000.

During fiscal year 1999, the Company acquired 10 businesses for an
aggregate of $381,530 and 357,522 shares of the Company's stock. The Company
also granted options to purchase 73,074 shares of the Company's common stock to
eligible employees of one of the acquired companies. Included in 1999
acquisitions is the purchase of Clontech Laboratories, Inc. ("Clontech") for
approximately $201,000 in cash. Intangibles related to Clontech are being
amortized on a straight-line basis over their useful lives, which range from
10 to 15 years. Unaudited pro forma consolidated results, after giving effect to
the businesses acquired during fiscal 1999, would not have been materially
different from the reported amounts for 1999.

The 1999 results of operations included charges of $48,800 for
purchased in-process research and development in connection with three of these
acquisitions, including a $32,000 charge related to the Clontech acquisition.
These charges represent the fair value of certain acquired research and
development projects that were determined to have not reached technological
feasibility and did not have alternative future uses. For the acquisition of
Clontech, the charge for purchased in-process research and development
represented the value of several projects relating to gene chip technology, gene
expression and gene cloning and reporter tools. These charges represented the
fair value for all such projects based on discounted net cash flows. These cash
flows were based on management's estimates of future revenues and expected
profitability of each product/technology. The rate used to discount these
projected cash flows accounts for both the time value of money, as well as the
risks of realization of the cash flows.

The aggregate fair value of assets acquired and liabilities assumed for
1999 acquisitions is summarized below, after giving effect to the write-off of
purchased in-process research and development:

Working capital $ 31,669
Property, plant and equipment 10,044
Goodwill 195,938
Core and developed technology 130,406
Other intangibles 51,643
Other assets 2,308
Deferred income taxes and other (75,937)

All acquisitions were recorded under the purchase method of accounting
and, therefore, the purchase prices have been allocated to assets acquired and
liabilities assumed based on estimated fair values. The results of operations
of the acquired companies were included in the consolidated results of the
Company from their respective acquisition dates.

38

Becton, Dickinson and Company

7
- --------------------------------------------------------------------------------
Income Taxes

The provision for income taxes is composed of the following charges (benefits):

2001 2000 1999
- --------------------------------------------------------------------------------

Current:
Domestic:
Federal $ 49,053 $ 20,201 $ 27,303
State and local,
including Puerto Rico 7,728 13,843 12,127
Foreign 44,167 55,747 52,931
------------------------------------------
100,948 89,791 92,361
------------------------------------------
Deferred:
Domestic 29,342 35,029 15,138
Foreign 8,058 2,217 (10,563)
------------------------------------------
37,400 37,246 4,575
------------------------------------------
$138,348 $127,037 $ 96,936
==========================================

In accordance with SFAS No. 109, "Accounting for Income Taxes,"
deferred tax assets and liabilities are netted on the balance sheet by separate
tax jurisdictions. At September 30, 2001 and 2000, net current deferred tax
assets of $64,121 and $65,731, respectively, were included in Prepaid expenses,
deferred taxes and other. There were no net non-current deferred tax assets in
2001. Net non-current deferred tax assets of $917 in 2000 were included in Other
non-current assets. Net current deferred tax liabilities of $744 and $991,
respectively, were included in Current Liabilities- Income taxes. Net
non-current deferred tax liabilities of $57,318 and $51,117, respectively, were
included in Deferred Income Taxes and Other. Deferred taxes are not provided on
substantially all undistributed earnings of foreign subsidiaries. At September
30, 2001, the cumulative amount of such undistributed earnings approximated
$1,428,000 against which substantial tax credits are available. Determining the
tax liability that would arise if these earnings were remitted is not
practicable.

Deferred income taxes at September 30 consisted of:

2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------
Assets Liabilities Assets Liabilities Assets Liabilities
- ------------------------------------------------------------------------------------------------------------------------

Compensation and benefits $155,889 $ -- $158,167 $ -- $150,214 $ --
Property and equipment -- 118,223 -- 109,419 -- 92,608
Purchase acquisition adjustments -- 87,603 -- 98,472 -- 104,269
Other 172,981 110,338 199,726 118,186 187,626 70,867
---------------------------------------------------------------------------------
328,870 316,164 357,893 326,077 337,840 267,744
Valuation allowance (6,647) -- (17,276) -- (11,157) --
---------------------------------------------------------------------------------
$322,223 $316,164 $340,617 $326,077 $326,683 $267,744
=================================================================================

A reconciliation of the federal statutory tax rate to the Company's
effective tax rate follows:

2001 2000 1999
- --------------------------------------------------------------------------------

Federal statutory tax rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal tax benefit .6 .9 .4
Effect of foreign and Puerto Rican
income and foreign tax credits (8.2) (8.7) (10.8)
Research tax credit (2.0) (1.6) (2.5)
Purchased in-process research
and development -- .3 4.6
Adjustments to estimated liability
for prior years' taxes -- (2.0) --
Other, net (1.4) .5 (.7)
-------------------------------
24.0% 24.4% 26.0%
===============================

The approximate dollar and diluted per-share amounts of tax reductions
related to tax holidays in various countries in which the Company does business
were: 2001-$43,275 and $.16; 2000-$40,500 and $.15; and 1999-$30,400 and $.11.
The tax holidays expire at various dates through 2018.

The Company made income tax payments, net of refunds, of $53,498 in
2001, $51,010 in 2000, and $80,334 in 1999.

The components of Income Before Income Taxes and Cumulative Effect of
Change in Accounting Principle follow:

2001 2000 1999
- --------------------------------------------------------------------------------

Domestic, including Puerto Rico $340,073 $285,228 $177,520
Foreign 236,677 234,706 195,135
------------------------------------
$576,750 $519,934 $372,655
====================================

8
- --------------------------------------------------------------------------------
Supplemental Financial Information

Gains on Investments, Net
Gains on investments, net in 2000 related primarily to transactions involving
two equity investments. In fiscal 2000, the Company sold portions of an
investment for net gains of $44,508 before taxes and proceeds of $52,506. The
cost of this investment was determined based upon the specific identification
method. The Company had entered into a forward sale contract to hedge a portion
of the proceeds.

Also during fiscal 2000, the Company received 480,000 shares of common
stock in a publicly traded company (parent) in exchange for its shares in a
majority-owned subsidiary of the parent company. The total value of the stock
received by the Company was $50,820. Based upon the fair value of the parent
common stock at the date of the exchange and the cost basis of subsidiary stock,
the Company recorded a gain upon the exchange of the shares. The Company also
entered into forward sale contracts to hedge the proceeds from the anticipated
sale of the parent common stock.

39

Notes Becton, Dickinson and Company

The Company subsequently sold the parent common stock and settled the forward
sale contracts. As a result of these transactions, the Company recorded a net
gain of $28,810 before taxes.

Other (Expense) Income, Net
Other expense, net in 2001 included foreign exchange losses of $8,762, including
net hedging costs, and write-downs of investments to market value of $6,401.

Other income, net in 2000 included a $2,517 gain on an investment
hedge, along with $7,089 of gains relating to settlements of legal claims
brought against third parties for patent infringement. Also included in Other
income, net were foreign exchange losses of $5,849, including net hedging costs
and a net loss of $2,735 relating to assets held for sale.

Other expense, net in 1999 included foreign exchange losses of $9,154,
including hedging costs. Other expense, net also included $2,654 of gains on the
sale of assets and income of $2,610 associated with settlements.

Trade Receivables
Allowances for doubtful accounts and cash discounts netted against trade
receivables were $42,292 and $43,642 at September 30, 2001 and 2000,
respectively.

Inventories 2001 2000
- --------------------------------------------------------------------------------

Materials $ 160,208 $ 156,918
Work in process 115,257 110,843
Finished products 432,279 410,915
-------------------------
$ 707,744 $ 678,676
=========================

Inventories valued under the LIFO method were $422,805 in 2001 and
$437,254 in 2000. Inventories valued under the LIFO method would have been
higher by approximately $9,500 in 2000, if valued on a current cost basis. At
September 30, 2001, inventories valued under the LIFO method approximated
current cost.

Property, Plant and Equipment 2001 2000
- --------------------------------------------------------------------------------

Land $ 60,752 $ 61,550
Buildings 1,022,908 960,889
Machinery, equipment and fixtures 2,278,919 2,094,178
Leasehold improvements 57,715 46,483
-------------------------
3,420,294 3,163,100
Less allowances for depreciation and amortization 1,704,271 1,587,042
-------------------------
$1,716,023 $1,576,058
=========================

Goodwill 2001 2000
- --------------------------------------------------------------------------------

Goodwill $ 594,695 $ 599,850
Less accumulated amortization 163,243 133,507
-------------------------
$ 431,452 $ 466,343
=========================

Core and Developed Technology 2001 2000
- --------------------------------------------------------------------------------

Core and developed technology $ 370,044 $ 353,207
Less accumulated amortization 65,356 44,146
-------------------------
$ 304,688 $ 309,061
==========================

Other Intangibles 2001 2000
- --------------------------------------------------------------------------------

Patents and other $ 358,604 $ 351,250
Less accumulated amortization 193,961 178,530
-------------------------
$ 164,643 $ 172,720
=========================

Supplemental Cash Flow Information
Noncash investing activities for the years ended September 30:

2001 2000 1999
- --------------------------------------------------------------------------------

Exchange of an investment
in common stock $ -- $35,800 $ --
Stock issued for business acquisitions 243 212 13,341

9
- --------------------------------------------------------------------------------
Debt

The components of Short-Term Debt follow:

2001 2000
- --------------------------------------------------------------------------------

Loans payable:
Domestic $416,395 $478,236
Foreign 25,836 50,662
Current portion of long-term debt 11,781 108,837
-------------------------
$454,012 $637,735
=========================

Domestic loans payable consist of commercial paper. Foreign loans
payable consist of short-term borrowings from financial institutions. The
weighted average interest rates for loans payable were 3.8% and 6.5% at
September 30, 2001 and 2000, respectively. During the year, the Company replaced
three credit facilities totaling $900,000 with two new syndicated credit
facilities, consisting of a $450,000 line of credit expiring in August 2002 and
a $450,000 line of credit expiring in August 2006. These facilities are
available to support the Company's commercial paper borrowing program and for
other general corporate purposes. Restrictive covenants include a minimum
interest coverage ratio. There were no borrowings outstanding under either of
these facilities at September 30, 2001. In addition, the Company had unused
short-term foreign lines of credit pursuant to informal arrangements of
approximately $299,000 at September 30, 2001.

The components of Long-Term Debt follow:

2001 2000
- --------------------------------------------------------------------------------

Domestic notes due through 2015
(average year-end interest rate:
5.6%-2001; 5.7%-2000) $ 15,126 $ 16,674
Foreign notes due through 2011
(average year-end interest rate:
4.6%-2001; 4.7%-2000) 9,897 10,580
9.45% Guaranteed ESOP Notes
due through July 1, 2004 10,810 17,265
6.90% Notes due October 1, 2006 98,977 100,000
7.15% Notes due October 1, 2009 211,075 200,000
8.70% Debentures due January 15, 2025 102,061 100,000
7.00% Debentures due August 1, 2027 168,000 168,000
6.70% Debentures due August 1, 2028 167,050 167,050
------------------------
$782,996 $779,569
========================

Long-term debt balances as of September 30, 2001 have been impacted by
interest rate swaps entered into during fiscal 2001, as discussed in Note 10.

40

Becton, Dickinson and Company

The Company has available $100,000 under a $500,000 shelf registration
statement filed in October 1997 for the issuance of debt securities.

The aggregate annual maturities of long-term debt during the fiscal
years ending September 30, 2003 to 2006 are as follows: 2003-$8,355;
2004-$5,602; 2005-$5,780; 2006-$871.

The Company capitalizes interest costs as a component of the cost of
construction in progress. The following is a summary of interest costs:

2001 2000 1999
- -----------------------------------------------------------------------------

Charged to operations $61,585 $ 86,511 $76,738
Capitalized 28,625 24,946 14,655
-------------------------------------------
$90,210 $111,457 $91,393
===========================================

Interest paid, net of amounts capitalized, was $63,760 in 2001, $78,272
in 2000, and $77,681 in 1999.

10
- -------------------------------------------------------------------------------
Financial Instruments

Foreign Exchange Contracts and Currency Options
The Company uses foreign exchange forward contracts and currency options to
reduce the effect of fluctuating foreign exchange rates on certain foreign
currency denominated receivables and payables, third party product sales, and
investments in foreign subsidiaries. Gains and losses on the derivatives are
intended to offset gains and losses on the hedged transaction. The Company's
foreign currency risk exposure is primarily in Western Europe, Asia Pacific,
Japan and Latin America.

The Company hedges a significant portion of its transactional foreign
exchange exposures, primarily intercompany payables and receivables, through the
use of forward contracts and currency options with maturities of less than 12
months. Gains or losses on these contracts are largely offset by gains and
losses of the underlying hedged items. These foreign exchange contracts do not
qualify for hedge accounting under SFAS No. 133.

In addition, the Company enters into option and forward contracts to
hedge certain forecasted sales that are denominated in foreign currencies. These
contracts are designated as cash flow hedges, as defined by SFAS No. 133, and
are effective as hedges of these revenues. These contracts are intended to
reduce the risk that the Company's cash flows from certain third party
transactions will be adversely affected by changes in foreign currency exchange
rates. Changes in the effective portion of the fair value of these contracts are
included in other comprehensive income until the hedged sales transactions are
recognized in earnings. Once the hedged transaction occurs, the gain or loss on
the contract is reclassified from accumulated other comprehensive income to
revenues. The Company recorded net hedge gains of $10,628 to revenues in fiscal
2001. In April 2001, the Company re-designated its cash flow hedges pursuant to
Statement 133 implementation guidance released by the Derivatives Implementation
Group of the FASB. This interpretation allows changes in time value of options
to be included in effectiveness testing. Prior to the release of this guidance
and the re-designation of these hedges, the Company recorded the change in the
time value of options in other expense. The Company recorded other expense of
$7,127 in fiscal 2001 related to derivative losses excluded from the assessment
of hedge effectiveness.

All outstanding contracts that were designated as cash flow hedges as
of September 30, 2001 will mature by September 30, 2002. Included in other
comprehensive income in fiscal 2001 is an unrealized loss of $4,013, net of tax
and amounts realized, for contracts outstanding as of September 30, 2001.

During fiscal 2001, the Company entered into forward exchange contracts
to hedge its net investments in certain foreign subsidiaries. These forward
contracts are designated and effective as net investment hedges, as defined by
SFAS No. 133. The Company recorded a gain of $2,321 in fiscal 2001 to foreign
currency translation adjustments in other comprehensive income for the change
in the fair value of the contracts.

Interest Rate Swaps
The Company's policy is to manage interest cost using a mix of fixed and
floating rate debt. The Company has entered into interest rate swaps in which it
agrees to exchange, at specified intervals, the difference between fixed and
floating interest amounts calculated by reference to an agreed-upon notional
principal amount. These swaps are designated as fair value hedges, as defined by
SFAS No. 133. Changes in the fair value of the interest rate swaps offset
changes in the fair value of the fixed rate debt due to changes in market
interest rates. As such, there was no ineffective portion to the hedges
recognized in earnings during the period.

Fair Value of Financial Instruments
Cash equivalents, short-term investments and short-term debt are carried at
cost, which approximates fair value. Other investments are classified as
available-for-sale securities. Available-for-sale securities are carried at fair
value, with unrealized gains and losses reported in comprehensive income, net of
taxes. In accordance with the provisions of SFAS No. 133, forward exchange
contracts and currency options are recorded at fair value. Fair values were
estimated based on market prices, where available, or dealer quotes. The fair
value of certain long-term debt is based on redemption value. The estimated fair
values of the Company's financial instruments at September 30, 2001 and 2000
were as follows:

2001 2000
- ------------------------------------------------------------------------------------------------
Carrying Fair Carrying Fair
Value Value Value Value
- ------------------------------------------------------------------------------------------------

Assets:
Other investments
(non-current)(A) $ 20,299 $ 13,627 $ 9,125 $ 8,582
Currency options(B) 6,833 6,833 9,785 9,797
Forward exchange contracts(B) -- -- 1,438 730
Interest rate swaps(B) 12,113 12,113 -- --
Liabilities:
Forward exchange contracts(C) 1,635 1,635 -- --
Long-term debt 782,996 806,337 779,569 737,225
----------------------------------------

(A) Included in Other non-current assets.

(B) Included in Prepaid expenses, deferred taxes and other.

(C) Included in Accrued Expenses.

41

Notes Becton, Dickinson and Company

Concentration Of Credit Risk
Substantially all of the Company's trade receivables are due from public and
private entities involved in the health care industry. Due to the large size and
diversity of the Company's customer base, concentrations of credit risk with
respect to trade receivables are limited. The Company does not normally require
collateral. The Company is exposed to credit loss in the event of nonperformance
by financial institutions with which it conducts business. However, this loss is
limited to the amounts, if any, by which the obligations of the counterparty to
the financial instrument contract exceed the obligations of the Company. The
Company also minimizes exposure to credit risk by dealing only with major
international banks and financial institutions.

11
- -------------------------------------------------------------------------------
Shareholders' Equity

Changes in certain components of shareholders' equity were as follows:

Series B,
ESOP
Preferred Common Capital in
Stock Stock Excess of Retained
Issued Issued Par Value Earnings
- ----------------------------------------------------------------------------------------------------

Balance at October 1, 1998 $48,959 $332,662 $ -- $2,350,781
Net income 275,719
Cash dividends:
Common ($.34 per share) (84,936)
Preferred ($3.835 per share),
net of tax benefits (2,544)
Common stock issued for:
Employee stock plans, net 33,134
Business acquisitions 11,008
Common stock held in trusts
Reduction in unearned ESOP
compensation for the year
Adjustment for redemption provisions (2,242) 484
- ----------------------------------------------------------------------------------------------------
Balance at September 30, 1999 46,717 332,662 44,626 2,539,020
Net income 392,897
Cash dividends:
Common ($.37 per share) (93,544)
Preferred ($3.835 per share),
net of tax benefits (2,465)
Common stock issued for:
Employee stock plans, net 29,581
Business acquisitions 189
Common stock held in trusts
Reduction in unearned ESOP
compensation for the year
Adjustment for redemption provisions (3,147) 679
- ----------------------------------------------------------------------------------------------------
Balance at September 30, 2000 43,570 332,662 75,075 2,835,908
Net income 401,652
Cash dividends:
Common ($.38 per share) (97,897)
Preferred ($3.835 per share),
net of tax benefits (2,359)
Common stock issued for:
Employee stock plans, net 72,745
Business acquisitions 215
Common stock held in trusts
Reduction in unearned ESOP
compensation for the year
Adjustment for redemption provisions (3,042) 655
- ----------------------------------------------------------------------------------------------------
Balance at September 30, 2001 $40,528 $332,662 $148,690 $3,137,304
====================================================================================================

Unearned Treasury Stock
ESOP Deferred ---------------------------
Compensation Compensation Shares Amount
- -------------------------------------------------------------------------------------------------------

Balance at October 1, 1998 $(24,463) $4,903 (84,818,944) $(1,015,806)
Net income
Cash dividends:
Common ($.34 per share)
Preferred ($3.835 per share),
net of tax benefits
Common stock issued for:
Employee stock plans, net 2,382,641 15,428
Business acquisitions 357,522 2,333
Common stock held in trusts 1,046 (28,670) (1,046)
Reduction in unearned ESOP
compensation for the year 4,153
Adjustment for redemption provisions 243,122 1,758
- -------------------------------------------------------------------------------------------------------
Balance at September 30, 1999 (20,310) 5,949 (81,864,329) (997,333)
Net income
Cash dividends:
Common ($.37 per share)
Preferred ($3.835 per share),
net of tax benefits
Common stock issued for:
Employee stock plans, net 2,357,340 15,220
Business acquisitions 3,480 23
Common stock held in trusts 541 (3,592) (541)
Reduction in unearned ESOP
compensation for the year 4,155
Adjustment for redemption provisions 341,393 2,468
- -------------------------------------------------------------------------------------------------------
Balance at September 30, 2000 (16,155) 6,490 (79,165,708) (980,163)
Net income
Cash dividends:
Common ($.38 per share)
Preferred ($3.835 per share),
net of tax benefits
Common stock issued for:
Employee stock plans, net 5,423,069 40,564
Business acquisitions 3,630 28
Common stock held in trusts 606 (16,346) (606)
Reduction in unearned ESOP
compensation for the year 4,154
Adjustment for redemption provisions 329,877 2,387
- -------------------------------------------------------------------------------------------------------
Balance at September 30, 2001 $(12,001) $7,096 (73,425,478) $ (937,790)
=======================================================================================================

42

Becton, Dickinson and Company

Common stock held in trusts represents rabbi trusts in connection with
the Company's employee salary and bonus deferral plan and Directors' deferral
plan.

Preferred Stock Purchase Rights
In accordance with the Company's shareholder rights plan, each certificate
representing a share of outstanding common stock of the Company also represents
one Preferred Stock Purchase Right (a "Right"). Each whole Right entitles the
registered holder to purchase from the Company one eight-hundredths of a share
of Preferred Stock, Series A, par value $1.00 per share, at a price of $67.50.
The Rights will not become exercisable unless and until, among other things, a
third party acquires 15% or more of the Company's outstanding common stock. The
Rights are redeemable under certain circumstances at $.01 per Right and will
expire, unless earlier redeemed, on April 25, 2006. There are 500,000 shares of
preferred stock designated Series A, none of which has been issued.

12
- -------------------------------------------------------------------------------
Comprehensive Income

The components of Accumulated other comprehensive loss are as follows:

2001 2000
- --------------------------------------------------------------------------------

Foreign currency translation adjustments $(379,772) $(341,068)
Unrealized losses on investments (3,937) (321)
Unrealized losses on currency options (4,013) --
------------------------
$(387,722) $(341,389)
========================

Generally, the net assets of foreign operations are translated into
U.S. dollars using current exchange rates. The U.S. dollar results that arise
from such translation, as well as exchange gains and losses on intercompany
balances of a long-term investment nature, are included in the cumulative
currency translation adjustments in Accumulated other comprehensive loss.

The income tax benefit amounts recorded in fiscal 2001 for the
unrealized losses on investments and currency options were $2,500 and $2,800,
respectively. The income taxes related to Other Comprehensive Loss were not
significant in 2000 or 1999. Income taxes are generally not provided for
translation adjustments.

The unrealized losses on currency options included in other
comprehensive loss for 2001 are net of reclassification adjustments of $5,000,
net of tax, for realized hedge gains recorded to revenues. These amounts had
been included in Accumulated other comprehensive loss in prior periods. The tax
expense associated with these reclassification adjustments was $3,500.

The unrealized gains on investments included in Other Comprehensive
Loss for 2000 are net of reclassification adjustments of $28,000, net of tax,
for realized gains on sales of available-for-sale securities as defined by SFAS
No. 115. The tax expense associated with the reclassification adjustments was
$19,500. Reclassification adjustments related to investments were not
significant in fiscal 2001 or 1999.

13
- -------------------------------------------------------------------------------
Commitments and Contingencies

Commitments
Rental expense for all operating leases amounted to $49,600 in 2001, $49,200 in
2000 and $46,000 in 1999. Future minimum rental commitments on noncancelable
leases are as follows: 2002-$31,100; 2003-$24,300; 2004-$20,200; 2005-$15,400;
2006-$13,000 and an aggregate of $29,400 thereafter.

As of September 30, 2001, the Company has certain future capital
commitments aggregating approximately $93,100, which will be expended over the
next several years.

Contingencies
The Company, along with a number of other manufacturers, has been named as a
defendant in approximately 482 product liability lawsuits related to natural
rubber latex that have been filed in various state and Federal courts. Cases
pending in Federal court are being coordinated under the matter In re Latex
Gloves Products Liability Litigation (MDL Docket No. 1148) in Philadelphia, and
analogous procedures have been implemented in the state courts of California,
Pennsylvania, New Jersey and New York. Generally, these actions allege that
medical personnel have suffered allergic reactions ranging from skin irritation
to anaphylaxis as a result of exposure to medical gloves containing natural
rubber latex. In 1986, the Company acquired a business which manufactured, among
other things, latex surgical gloves. In 1995, the Company divested this glove
business. The Company is vigorously defending these lawsuits.

The Company, along with another manufacturer and several medical
product distributors, has been named as a defendant in 11 product liability
lawsuits relating to health care workers who allegedly sustained accidental
needlesticks, but have not become infected with any disease.

o In California, Chavez vs. Becton Dickinson (Case No. 722978, San Diego County
Superior Court), filed on August 4, 1998, was dismissed in a judgment filed
March 19, 1999. On August 29, 2000, the appellate court affirmed the
dismissal of the product liability claims, leaving only a pending statutory
claim for which the court has stated the plaintiff cannot recover damages. On
September 10, 2001, the parties reached a final settlement of this remaining
cause of action.

o In Florida, Delgado vs. Becton Dickinson et al. (Case No. 98-5608,
Hillsborough County Circuit Court), filed on July 24, 1998, was voluntarily
withdrawn by the plaintiffs on March 8, 1999.

o In Pennsylvania, 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.

43

Notes Becton, Dickinson and Company

Cases have been filed on behalf of an unspecified number of health care
workers in eight other states, seeking class action certification under the laws
of these states. Generally, these remaining actions allege that health care
workers have sustained needlesticks using hollow-bore needle devices
manufactured by the Company and, as a result, require medical testing,
counseling and/or treatment. Several actions additionally allege that the health
care workers have sustained mental anguish. Plaintiffs seek money damages in all
of these remaining actions, which are pending in Ohio state court, under the
caption Grant vs. Becton Dickinson et al. (Case No. 98 CVB075616, Franklin
County Court), filed on July 22, 1998; in state court in Illinois, under the
caption McCaster vs. Becton Dickinson et al. (Case No. 98L09478, Cook County
Circuit Court), filed on August 13, 1998; in state court in Oklahoma, under the
caption Palmer vs. Becton Dickinson et al. (Case No. CJ-98-685, Sequoyah County
District Court), filed on October 27, 1998; in state court in Alabama, under the
caption Daniels vs. Becton Dickinson et al. (Case No. CV 1998 2757, Montgomery
County Circuit Court), filed on October 30, 1998; in state court in South
Carolina, under the caption Bales vs. Becton Dickinson et al. (Case No.
98-CP-40-4343, Richland County Court of Common Pleas), filed on November 25,
1998; in state court in New Jersey, under the caption Pollak, Swartley vs.
Becton Dickinson et al. (Case No. L-9449-98, Camden County Superior Court),
filed on December 7, 1998; in state court in New York, under the caption Benner
vs. Becton Dickinson et al. (Case No. 99-111372, Supreme Court of the State of
New York), filed on June 1, 1999; and in Texas state court, under the caption
Usrey vs. Becton Dickinson et al. (Case No. 342-173329-98, Tarrant County
District Court), filed on April 9, 1998.

In Texas state court in the matter of Usrey vs. Becton Dickinson et al.,
the Court of Appeals for the Second District of Texas filed an Opinion on August
16, 2001, reversing the trial court's certification of a class, and remanding
the case to the trial court for further proceedings consistent with that
opinion. Plaintiffs petitioned the appellate court for rehearing, which the
Court of Appeals denied on October 25, 2001.

The Company continues to oppose class action certification in these cases
and will continue vigorously to defend these lawsuits, including pursuing all
appropriate rights of appeal.

The Company has insurance policies in place, and believes that a
substantial portion of defense costs and potential liability, if any, in the
latex and class action matters will be covered by insurance. In order to protect
its rights to coverage, the Company has filed an action for declaratory judgment
under the caption Becton Dickinson and Company vs. Adriatic Insurance Company et
al. (Docket No. MID-L-3649-99 MT, Middlesex County Superior Court) in New Jersey
state court. The Company also has established reserves to cover reasonably-
anticipated defense costs in all product liability lawsuits, including the latex
and needlestick class action matters.

On January 29, 2001, Retractable Technologies, Inc. ("RTI") filed an action
under the caption Retractable Technologies, Inc. vs. Becton Dickinson and
Company, et al. (Case No. CA510V036, United States District Court, Eastern
District of Texas), against the Company, another manufacturer and two group
purchasing organizations ("GPOs"). RTI (a manufacturer of retractable syringes)
alleges that the Company and the other defendants conspired to exclude them from
the market and maintain the Company's market share by entering into long-term
contracts with GPOs in violation of state and Federal antitrust laws. Plaintiff
seeks money damages. This action is in preliminary stages. Discovery commenced
in October, 2001 and the Company is vigorously defending this action.

On May 11, 2001, CalOSHA issued a Citation and Notification of Penalty to
the Kaiser Permanente Sunset facility in Los Angeles, alleging that the BD
Eclipse blood collection device used in the laboratory at that facility did not
meet the California regulatory standard for a needle with engineered sharp
injury protection. The Citation did not state the factual basis of the
allegation or the relief sought. Kaiser has appealed this citation and the
Company has intervened in the proceeding. Subsequent to the Citation, CalOSHA
issued a public statement that "We are not making an announcement per se that
the Eclipse device is unacceptable, but that the way it was used may be a
problem. We are not saying at this time that employers should not be using this
device."

The Company is a party to a number of Federal proceedings in the United
States brought under the Comprehensive Environment Response, Compensation and
Liability Act, also known as "Superfund," and similar state laws. For all sites,
there are other potentially responsible parties that may be jointly or severally
liable to pay all cleanup costs. The Company accrues costs for estimated
environmental liabilities based upon its best estimate within the range of
probable losses, without considering possible third-party recoveries.

The Company also is involved both as a plaintiff and a defendant in other
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 above
or other legal actions brought against the Company, upon resolution of such
matters, the Company may incur charges in excess of currently established
reserves. While such future charges, individually or 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 opinion of management, the
results of the above matters, individually or in the aggregate, are not expected
to have a material adverse effect on the Company's consolidated financial
condition.

44

Becton, Dickinson and Company

14
- -------------------------------------------------------------------------------
Stock Plans

Stock Option Plans
The Company has stock option plans under which options have been granted to
purchase shares of the Company's common stock at prices established by the
Compensation and Benefits Committee of the Board of Directors. The 1995 and 1998
Stock Option Plans made available 24,000,000 and 10,000,000 shares of the
Company's common stock for the granting of options to employees, respectively.
At September 30, 2001, shares available for future grant under the 1995 and 1998
Plans were 193,210 and 7,105,263, respectively. The Non-Employee Directors 2000
Stock Option Plan made available 1,000,000 common shares for the granting of
options, of which 947,989 remained available for future grant as of September
30, 2001. All stock plan data has been retroactively restated to reflect the
two-for-one stock splits in prior years, where applicable.

A summary of changes in outstanding options is as follows:

2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Options Average Options Average Options Average
for Exercise for Exercise for Exercise
Shares Price Shares Price Shares Price
--------------------------------------------------------------------------------------

Balance at October 1 30,516,315 $21.29 30,122,274 $20.33 29,904,859 $18.22
Granted 4,635,232 31.90 3,727,955 27.94 3,170,821 (A) 34.83
Exercised (5,354,447) 15.34 (2,287,523) 15.09 (2,281,727) 11.37
Forfeited, canceled or expired (1,525,771) 28.20 (1,046,391) 30.80 (671,679) 25.29
--------------------------------------------------------------------------------------
Balance at September 30 28,271,329 $23.80 30,516,315 $21.29 30,122,274 $20.33
======================================================================================
Exercisable at September 30 20,534,073 $21.30 26,641,132 $20.23 26,426,344 $18.37
======================================================================================
Weighted average fair value of
options granted $ 12.08 $ 11.53 $ 12.77
======================================================================================
Available for grant at September 30 8,246,462 11,555,118 13,462,158
======================================================================================

The maximum term of options is ten years. Options outstanding as of September
30, 2001 expire on various dates from May 2002 through September 2011.

(A) The Company granted 73,074 of options to purchase shares of the Company's
common stock to eligible employees of a business acquired in fiscal 1999.

September 30, 2001
- ----------------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------------------------------------------------
Weighted
Weighted Average Weighted
Range Of Number Average Remaining Number Average
Option Exercise Price Outstanding Exercise Price Contractual Life Exercisable Exercise Price
----------------------------------------------------------------------------------------------

$ 8.64-$12.55 6,436,291 $10.55 2.6 Years 6,436,291 $10.55
$17.36- 25.63 8,585,565 22.59 5.0 Years 8,529,993 22.58
$27.25- 41.56 13,249,473 31.03 7.9 Years 5,567,789 31.76
----------------------------------------------------------------------------------------------
28,271,329 $23.80 6.5 Years 20,534,073 $21.30
==============================================================================================

As permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company has adopted the disclosure-only provision of the
Statement and applies APB Opinion No. 25 and related interpretations in
accounting for its employee stock plans.

The 1990 Plan has a provision whereby unqualified options may be granted
at, below, or above market value of the Company's stock. If the option price is
less than the market value of the Company's stock on the date of grant, the
discount is recorded as compensation expense over the service period in
accordance with the provisions of APB Opinion No. 25. There was no such
compensation expense in 2001, 2000 or 1999.

Under certain circumstances, the stock option plans permit the optionee the
right to receive cash and/or stock at the Company's discretion equal to the
difference between the market value on the date of exercise and the option
price. This difference would be recorded as compensation expense over the
vesting period.

The following pro forma net income and earnings per share information has
been determined as if the Company had accounted for its stock-based compensation
awards issued subsequent to October 1, 1995 using the fair value method. Under
the fair value method, the estimated fair value of awards would be charged
against income on a straight-line basis over the vesting period which generally
ranges from zero to three years. The pro forma effect on net income for 2001,
2000 and 1999 is not representative of the pro forma effect on net income in
future years since compensation cost is allocated on a straight-line basis over
the vesting periods of the grants, which extends beyond the reported years.

45

Notes Becton, Dickinson and Company

2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------
As Reported Pro Forma As Reported Pro Forma As Reported Pro Forma
- ---------------------------------------------------------------------------------------------------------------------

Net Income $401,652 $368,135 $392,897 $361,639 $275,719 $247,224
Earnings Per Share:
Basic 1.55 1.42 1.54 1.42 1.09 .98
Diluted 1.49 1.37 1.49 1.38 1.04 .93
-----------------------------------------------------------------------------------------

The pro forma amounts and fair value of each option grant is estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants in 2001, 2000 and 1999:
risk free interest rates of 5.57%, 6.64% and 4.79%, respectively; expected
volatility of 32.8%, 35.4% and 31.0%, respectively; expected dividend yields of
1.09%; and expected lives of 6 years for each year presented.

Other Stock Plans
The Company has a compensatory Stock Award Plan which allows for grants of
common shares to certain key employees. Distribution of 25% or more of each
award, as elected by the grantee, is deferred until after retirement or
involuntary termination. Com-mencing on the first anniversary of a grant
following retirement, the remainder is distributable in five equal annual
installments. During 2001, 70,030 shares were distributed. No awards were
granted in 2001, 2000 or 1999. At September 30, 2001, 2,385,988 shares were
reserved for future issuance, of which awards for 284,600 shares have been
granted.

The Company has a compensatory Restricted Stock Plan for Non-Employee
Directors which reserves for issuance 300,000 shares of the Company's common
stock. No restricted shares were issued in 2001, 2000 or 1999.

The Company has a Directors' Deferral Plan which provides a means to defer
director compensation, from time to time, on a deferred stock or cash basis. As
of September 30, 2001, 142,405 shares were held in trust, of which 9,951 shares
represented Directors' compensation in 2001, in accordance with the provisions
of the Plan. Under the Plan, which is unfunded, directors have an unsecured
contractual commitment from the Company to pay directors the amounts due to them
under the Plan.

15
- --------------------------------------------------------------------------------
Earnings Per Share

For the years ended September 30, 2001, 2000 and 1999, the following table sets
forth the computations of basic and diluted earnings per share (shares in
thousands):

2001 2000 1999
- -----------------------------------------------------------------------------

Net income $401,652 $392,897 $275,719
Preferred stock dividends (2,721) (2,916) (3,114)
----------------------------------------
Income available to common
shareholders(A) 398,931 389,981 272,605
Preferred stock dividends-using
"if converted" method 2,721 2,916 3,114
Additional ESOP contribution-
using "if converted" method (645) (689) (821)
----------------------------------------
Income available to common
shareholders after assumed
conversions(B) $401,007 $392,208 $274,898
========================================
Average common shares
outstanding(C) 257,128 252,454 249,595
Dilutive stock equivalents from
stock plans 7,309 6,059 9,917
Shares issuable upon conversion
of preferred stock 4,396 4,726 5,068
----------------------------------------
Average common and common
equivalent shares outstanding-
assuming dilution(D) 268,833 263,239 264,580
========================================
Basic earnings per share(A/C) $ 1.55 $ 1.54 $ 1.09
========================================
Diluted earnings per share(B/D) $ 1.49 $ 1.49 $ 1.04
========================================

16
- --------------------------------------------------------------------------------
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 year ended September 30, 2001, decisions about resource allocation and
performance assessment will be made separately for the Medical Systems
("Medical") segment, the new Clinical Laboratory Solutions ("Clinical Lab")
segment, and the reorganized Biosciences segment. Prior year information has
been reclassified to conform to current year presentation.

The major products in the Medical segment are hypodermic products,
specially designed devices for diabetes care, prefillable drug delivery systems,
infusion therapy products, elastic support products and thermometers. The
Medical segment also includes disposable scrubs, specialty needles and surgical
blades. The major products in the Biosciences segment are flow cytometry systems
for cellular analysis, reagents and tissue culture labware. The major products
in the Clinical Lab segment are clinical and industrial microbiology products,
sample collection products, specimen management systems, hematology instruments
and other diagnostic systems, including immunodiagnostic test kits. This segment
also includes consulting services and customized, automated bar-code systems.

The Company evaluates performance based upon operating income. Segment
operating income represents revenues reduced by product costs and operating
expenses. The calculations of segment operating income and assets are in
accordance with the accounting policies described in Note 1. During fiscal 2001,
the Company refined its methodology for allocating indirect expenses for
purposes of reporting segment operating income to the chief

46

Becton, Dickinson and Company

operating decision maker. In the past, the Company allocated consolidated
amounts using reasonable allocation methods. These consolidated amounts are now
reported locally by the various regions, which allocate these expenses to the
appropriate operating segment. The Company believes this new approach is a more
preferable method for allocating shared expenses as the allocations are now
being performed at a more detailed level of reporting. As a result of this
change in methodology, segment operating income has been restated for all
periods presented. Restated segment operating income for the first three
quarters of fiscal 2001 and 2000 are as follows:

First Quarter Second Quarter Third Quarter
- ----------------------------------------------------------------------------------------------------------------------------
2001* 2000 2001* 2000 2001* 2000
- ----------------------------------------------------------------------------------------------------------------------------

Medical Systems $ 90,625 $ 99,044 $110,937 $ 98,414 $118,062 $122,215
Clinical Lab 45,877 40,463 57,441 56,452 53,779 41,191
Biosciences 13,410 13,749 26,914 25,077 26,614 17,602
-----------------------------------------------------------------------------------
Total Segment Operating Income 149,912 153,256 195,292 179,943 198,455 181,008
Unallocated Expenses (48,054) (51,507) (46,688) (14,836) (45,392) (19,500)
-----------------------------------------------------------------------------------
Income Before Taxes and Cumulative
Effect of Accounting Change $101,858 $101,749 $148,604 $165,107 $153,063 $161,508
===================================================================================

* Restated to reflect the adoption of SAB 101.

Distribution of products is both through distributors and directly to
hospitals, laboratories and other end users. Sales to a distributor which
supplies the Company's products to many end users accounted for approximately
11% of revenues in 2001, 10% in 2000, and 11% in 1999, and included products
from the Medical and Clinical Lab segments. No other customer accounted for 10%
or more of revenues in each of the three years presented.

Revenues 2001 2000 1999
- --------------------------------------------------------------------------------------

Medical Systems $2,007,540 $1,966,039 $1,923,865
Clinical Lab 1,154,752 1,102,352 1,061,235
Biosciences 592,010 549,943 433,312
-----------------------------------------------
Total(A) $3,754,302 $3,618,334 $3,418,412
===============================================

Segment Operating Income(B)
- --------------------------------------------------------------------------------------
Medical Systems $ 446,940 $ 394,858(C) $ 351,390(C)
Clinical Lab 212,837 169,880(D) 182,718(D)
Biosciences 97,293 73,173(E) 12,581(E)
-----------------------------------------------
Total Segment Operating Income 757,070 637,911 546,689
Unallocated Expenses(F) (180,320) (117,977) (174,034)
-----------------------------------------------
Income Before Income Taxes
and Cumulative Effect of
Change in Accounting Principle $ 576,750 $ 519,934 $ 372,655
===============================================

Segment Assets
- --------------------------------------------------------------------------------------
Medical Systems $2,432,709 $2,289,304 $2,258,779
Clinical Lab 1,093,735 1,059,144 1,109,385
Biosciences 830,550 811,081 777,630
-----------------------------------------------
Total Segment Assets 4,356,994 4,159,529 4,145,794
Corporate and All Other(G) 445,293 345,567 291,164
-----------------------------------------------
Total Assets $4,802,287 $4,505,096 $4,436,958
===============================================

Capital Expenditures 2001 2000 1999
- --------------------------------------------------------------------------------------

Medical Systems $ 265,531 $ 246,928 $ 187,868
Clinical Lab 62,009 66,270 75,537
Biosciences 24,083 33,881 19,989
Corporate and All Other 19,131 29,293 28,153
-----------------------------------------------
Total $ 370,754 $ 376,372 $ 311,547
===============================================

Depreciation and Amortization
- --------------------------------------------------------------------------------------
Medical Systems $ 145,702 $ 133,787 $ 122,804
Clinical Lab 89,117 81,577 82,363
Biosciences 58,204 63,070 45,414
Corporate and All Other 12,677 9,821 8,282
-----------------------------------------------
Total $ 305,700 $ 288,255 $ 258,863
===============================================

(A) Intersegment revenues are not material.
(B) Restated, as described above.
(C) Includes $39,844 in 2000 and $60,933 in 1999 for special charges discussed
in Note 5.
(D) Includes $7,697 in 2000 and $5,886 in 1999 for special charges discussed in
Note 5.
(E) Includes $4,576 in 2000 and $3,505 in 1999 for special charges discussed in
Note 5, as well as $48,800 in 1999 for purchased in-process research and
development charges discussed in Note 6.
(F) Includes interest, net; foreign exchange; corporate expenses; and gains on
sales of investments. Also includes special charges of $5,397 and $5,229 in
2000 and 1999, respectively, as discussed in Note 5.
(G) Includes cash, investments and corporate assets.

47

Notes Becton, Dickinson and Company

Geographic Information
The countries in which the Company has local revenue-generating operations have
been combined into the following geographic areas: the United States, including
Puerto Rico, and International, which is composed of Europe, Canada, Latin
America, Japan and Asia Pacific.

Revenues to unaffiliated customers are based upon the source of the
product shipment. Long-lived assets, which include net property, plant and
equipment, are based upon physical location. Intangible assets are not included
since, by their nature, they do not have a physical or geographic location.

2001 2000 1999
- --------------------------------------------------------------------------------

Revenues
United States $2,016,523 $1,863,555 $1,747,785
International 1,737,779 1,754,779 1,670,627
----------------------------------------------
Total $3,754,302 $3,618,334 $3,418,412
==============================================

Long-Lived Assets
United States $ 956,138 $ 866,125 $ 758,929
International 633,671 578,741 550,588
Corporate 126,214 131,192 121,632
----------------------------------------------
Total $1,716,023 $1,576,058 $1,431,149
==============================================

Quarterly Data (Unaudited)
Thousands of dollars, except per-share amounts

2001
- -----------------------------------------------------------------------------------------------------------------
1st(A) 2nd(A) 3rd(A) 4th Year
- -----------------------------------------------------------------------------------------------------------------

Revenues $870,320 $953,167 $943,290 $987,525 $3,754,302
Gross Profit 416,402 466,429 468,399 489,780 1,841,010
Income Before Cumulative
Effect of Accounting Change 73,698 114,165 118,129 132,410 438,402
Net Income 36,948(B) 114,165 118,129 132,410 401,652(B)
Basic Earnings Per Share:
Income Before Cumulative Effect .29 .44 .46 .51 1.69
Net Income .15(B) .44 .46 .51 1.55(B)
Diluted Earnings Per Share:
Income Before Cumulative Effect .28 .42 .44 .49 1.63
Net Income .14(B) .42 .44 .49 1.49(B)
--------------------------------------------------------------------------

2000
- -----------------------------------------------------------------------------------------------------------------
1st 2nd 3rd 4th Year
- -----------------------------------------------------------------------------------------------------------------

Revenues $859,164 $925,132 $914,140 $919,898 $3,618,334
Gross Profit 409,213 451,145 460,302 449,342 1,770,002
Net Income 75,294 119,171 114,418 84,014 392,897(C)
Earnings Per Share:
Basic .30 .47 .45 .33 1.54
Diluted .29 .45 .43 .32 1.49
--------------------------------------------------------------------------

(A) Restated to reflect the adoption of SAB 101.
(B) Include an after-tax charge of $36,750, or $.14 per share, for the
cumulative effect of accounting change.
(C) Includes $57,514 of special charges in the fourth quarter.

48

Form: 10-K

Documents

EXHIBIT 13