FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _________________ Commission file number 001-4802 -------- Becton, Dickinson and Company ------------------------------------------------------ (Exact name of registrant as specified in its charter) New Jersey 22-0760120 - ------------------------------- ----------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1 Becton Drive, Franklin Lakes, New Jersey 07417-1880 ----------------------------------------------------- (Address of principal executive offices) (Zip Code) (201) 847-6800 ---------------------------------------------------- (Registrant's telephone number, including area code) N/A ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class of Common Stock Shares Outstanding as of April 30, 2004 --------------------- --------------------------------------- Common stock, par value $1.00 253,277,922 BECTON, DICKINSON AND COMPANY FORM 10-Q For the quarterly period ended March 31, 2004 TABLE OF CONTENTS

Page Number ----------- Part I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets...................... 3 Condensed Consolidated Statements of Income................ 4 Condensed Consolidated Statements of Cash Flows............ 5 Notes to Condensed Consolidated Financial Statements....... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk.... 28 Item 4. Controls and Procedures....................................... 28 Part II. OTHER INFORMATION Item 1. Legal Proceedings............................................. 28 Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities............................................ 30 Item 3. Defaults Upon Senior Securities............................... 31 Item 4. Submission of Matters to a Vote of Security Holders........... 31 Item 5. Other Information............................................. 31 Item 6. Exhibits and Reports on Form 8-K.............................. 32 Signatures .............................................................. 33 Exhibits .............................................................. 34

2 ITEM 1. FINANCIAL STATEMENTS BECTON, DICKINSON AND COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS Thousands of Dollars

March 31, September 30, 2004 2003 ----------- ------------- (Unaudited) Assets Current Assets: Cash and equivalents $ 660,469 $ 519,886 Trade receivables, net 801,014 781,342 Inventories: Materials 124,393 129,958 Work in process 151,089 145,500 Finished products 494,164 519,556 ----------- ----------- 769,646 795,014 Prepaid expenses, deferred taxes and other 253,202 242,327 ----------- ----------- Total Current Assets 2,484,331 2,338,569 Property, plant and equipment 4,038,412 3,905,155 Less allowances for depreciation and amortization 2,184,121 2,060,384 ----------- ----------- 1,854,291 1,844,771 Goodwill, Net 544,913 536,788 Core and Developed Technology, Net 233,681 242,683 Other Intangibles, Net 107,128 111,713 Capitalized Software, Net 299,354 305,608 Other 191,274 192,121 ----------- ----------- Total Assets $ 5,714,972 $ 5,572,253 =========== =========== Liabilities and Shareholders' Equity Current Liabilities: Short-term debt $ 6,782 $ 121,920 Payables and accrued expenses 884,674 921,454 ----------- ----------- Total Current Liabilities 891,456 1,043,374 Long-Term Debt 1,183,113 1,184,031 Long-Term Employee Benefit Obligations 355,512 328,807 Deferred Income Taxes and Other 124,438 119,087 Commitments and Contingencies Shareholders' Equity: Preferred stock 32,460 34,448 Common stock 332,662 332,662 Capital in excess of par value 373,847 257,178 Retained earnings 4,164,089 3,950,592 Unearned ESOP compensation (3,704) (3,693) Deferred compensation 9,450 8,974 Common shares in treasury - at cost (1,556,927) (1,439,934) Accumulated other comprehensive loss (191,424) (243,273) ----------- ----------- Total Shareholders' Equity 3,160,453 2,896,954 ----------- ----------- Total Liabilities and Shareholders' Equity $ 5,714,972 $ 5,572,253 =========== ===========

See notes to condensed consolidated financial statements 3 BECTON, DICKINSON AND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME Thousands of Dollars, Except Per-share Data (Unaudited)

Three Months Ended Six Months Ended March 31, March 31, ----------------------- ----------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Revenues $1,270,523 $1,134,041 $2,470,054 $2,185,689 Cost of products sold 638,049 578,428 1,278,933 1,128,467 Selling and administrative 338,628 298,798 668,248 582,979 Research and development 62,554 60,034 123,207 119,879 ---------- ---------- ---------- ---------- Total Operating Costs and Expenses 1,039,231 937,260 2,070,388 1,831,325 ---------- ---------- ---------- ---------- Operating Income 231,292 196,781 399,666 354,364 Interest expense, net (7,961) (8,653) (16,890) (17,286) Other expense, net (3,118) (1,847) (3,164) (1,763) ---------- ---------- ---------- ---------- Income Before Income Taxes 220,213 186,281 379,612 335,315 Income tax provision 55,053 44,241 89,050 79,637 ---------- ---------- ---------- ---------- Net Income $ 165,160 $ 142,040 $ 290,562 $ 255,678 ========== ========== ========== ========== Earnings Per Share: Basic $ .65 $ .56 $ 1.15 $ 1.00 ========== ========== ========== ========== Diluted $ .62 $ .54 $ 1.10 $ .97 ========== ========== ========== ========== Dividends Per Common Share $ .15 $ .10 $ .30 $ .20 ========== ========== ========== ==========

See notes to condensed consolidated financial statements 4 BECTON, DICKINSON AND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Thousands of Dollars (Unaudited)

Six Months Ended March 31, ---------------------- 2004 2003 --------- ---------- Operating Activities Net income $ 290,562 $ 255,678 Adjustments to net income to derive net cash provided by operating activities: Depreciation and amortization 186,009 168,131 Pension contribution -- (100,000) BGM charges (Note 9) 38,551 -- Change in working capital (4,621) (53,477) Other, net 17,202 22,501 --------- --------- Net Cash Provided by Operating Activities 527,703 292,833 --------- --------- Investing Activities Capital expenditures (108,250) (108,243) Capitalized software (22,717) (36,852) Purchases of investments, net (3,638) (1,672) Other, net (17,136) (25,263) --------- --------- Net Cash Used for Investing Activities (151,741) (172,030) --------- --------- Financing Activities Change in short-term debt (103,792) 51,794 Payments of long-term debt (17,096) (873) Repurchase of common stock (174,889) (106,490) Issuance of common stock from treasury 134,006 25,982 Dividends paid (76,318) (53,033) --------- --------- Net Cash Used for Financing Activities (238,089) (82,620) --------- --------- Effect of exchange rate changes on cash and equivalents 2,710 4,173 --------- --------- Net increase in cash and equivalents 140,583 42,356 Opening Cash and Equivalents 519,886 243,115 --------- --------- Closing Cash and Equivalents $ 660,469 $ 285,471 ========= =========

See notes to condensed consolidated financial statements 5 BECTON, DICKINSON AND COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Dollar and Share Amounts in Thousands, Except Per-share Data March 31, 2004 Note 1 - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of the management of the Company, include all adjustments which are of a normal recurring nature, necessary for a fair presentation of financial position and the results of operations and cash flows for the periods presented. However, the financial statements do not include all information and footnotes required for a presentation in accordance with generally accepted accounting principles. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included or incorporated by reference in the Company's 2003 Annual Report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. Stock-based Compensation Under the provisions of Statement of Financial Accounting Standards ("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 No. 25, "Accounting for Stock Issued to Employees", and related interpretations. Under the intrinsic value method, compensation cost of 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. Accordingly, no stock-based compensation cost relating to stock options has been reflected in the Company's net income for the three and six months ended March 31, 2004 and 2003, as all options granted under the Company's stock option plans had an exercise price equal to the market value of the underlying common stock on the date of grant. Stock-based compensation cost recorded in the six month period ended March 31, 2004 related to performance-based and other stock awards granted under the Company's Stock Award Plan was not material. The following table illustrates the effect on net income and earnings per share if the Company were to have applied the fair value recognition provisions of SFAS No. 123, as amended, to account for stock-based compensation for the periods indicated. These pro-forma amounts may not be representative of the effects on net income in future years since options generally vest over several years and additional awards may be made each year. 6

Three Months Ended March 31, Six Months Ended March 31, ---------------------------- -------------------------- 2004 2003 2004 2003 -------- -------- -------- -------- Net income, as reported $165,160 $142,040 $290,562 $255,678 Less stock-based compensation expense, net of tax (7,882) (8,584) (16,321) (17,638) -------- -------- -------- -------- Pro forma net income $157,278 $133,456 $274,241 $238,040 ======== ======== ======== ======== Reported earnings per share: Basic $ .65 $ .56 $ 1.15 $ 1.00 Diluted $ .62 $ .54 $ 1.10 $ .97 ======== ======== ======== ======== Pro forma earnings per share: Basic $ .62 $ .52 $ 1.08 $ .93 Diluted $ .59 $ .51 $ 1.04 $ .91 ======== ======== ======== ========

The Company estimated the fair value of stock options using the Black-Scholes option-pricing model, modified for dividends and using certain assumptions for stock price volatility, risk free interest rates, dividend yields and expected terms until exercise. The value determined by the Black-Scholes option-pricing model is based on assumptions at the time of grant and subsequent modifications to such assumptions are not reflected in the value of prior grants. The Black-Scholes model is a trading option-pricing model that does not reflect either the non-traded nature of employee stock options or the limited transferability of options. This model also does not consider restrictions on trading for all employees, including restrictions imposed on senior management of the Company, who are only permitted to trade in the Company's securities during specified quarterly "window periods." Therefore, if the Company had used an option-pricing model other than Black-Scholes, pro-forma results different from those shown above may have been reported. Note 2 - Comprehensive Income Comprehensive income for the Company is comprised of the following:

Three Months Ended Six Months Ended March 31, March 31, ------------------- ------------------- 2004 2003 2004 2003 -------- -------- -------- -------- Net Income $165,160 $142,040 $290,562 $255,678 Other Comprehensive Income, Net of Tax Foreign currency translation adjustments (12,514) 33,485 55,884 81,575 Unrealized gains on investments, net of amounts recognized 2,043 2,371 763 2,848 Unrealized losses on cash flow hedges, net of amounts realized (2,384) (1,532) (4,798) (2,090) -------- -------- -------- -------- Comprehensive Income $152,305 $176,364 $342,411 $338,011 ======== ======== ======== ========

7 The amount of unrealized gains or losses on investments and cash flow hedges in comprehensive income has been adjusted to reflect any realized gains and recognized losses included in net income during the three and six months ended March 31, 2004 and 2003. Note 3 - Earnings per Share The following table sets forth the computations of basic and diluted earnings per share:

Three Months Ended Six Months Ended March 31, March 31, ------------------- ------------------- 2004 2003 2004 2003 -------- -------- -------- -------- Net Income $165,160 $142,040 $290,562 $255,678 Preferred stock dividends (535) (595) (1,085) (1,201) -------- -------- -------- -------- Income available to common shareholders (A) 164,625 141,445 289,477 254,477 Preferred stock dividends - using "if converted" method 535 595 1,085 1,201 Additional ESOP contribution - Using "if converted" method (4) (119) (17) (244) -------- -------- -------- -------- Income available to common shareholders after assumed conversions (B) $165,156 $141,921 $290,545 $255,434 ======== ======== ======== ======== Average common shares outstanding (C) 253,294 254,694 252,710 254,994 Dilutive stock equivalents from stock plans 8,240 4,737 7,532 4,396 Shares issuable upon conversion of preferred stock 3,521 3,938 3,521 3,938 -------- -------- -------- -------- Average common and common equivalent shares outstanding - assuming dilution (D) 265,055 263,369 263,763 263,328 ======== ======== ======== ======== Basic earnings per share (A/C) $ .65 $ .56 $ 1.15 $ 1.00 ======== ======== ======== ======== Diluted earnings per share (B/D) $ .62 $ .54 $ 1.10 $ .97 ======== ======== ======== ========

During the three and six months ended March 31, 2004, 3,299 common shares and 5,870 common shares were issued upon exercise of stock options, respectively. During the three and six months ended March 31, 2003, 1,630 common shares and 2,018 common shares were issued upon exercise of stock options, respectively. Note 4 - Contingencies The Company is involved, both as a plaintiff and a defendant, in various legal proceedings and claims which arise in the ordinary course of business. 8 The Company currently is engaged in discovery or is otherwise in the early stages with respect to certain of the litigation to which it is a party, and therefore, it is difficult to predict the outcome of such litigation. In addition, given the uncertain nature of litigation generally and of the current litigation environment, it is difficult to predict the outcome of any litigation regardless of its stage. A number of the cases pending against the Company present complex factual and legal issues and are subject to a number of variables, including, but not limited to, the facts and circumstances of each particular case, the jurisdiction in which each suit is brought, and differences in applicable law. As a result, the Company is not able to estimate the amount or range of loss that could result from an unfavorable outcome of each and every matter. In accordance with generally accepted accounting principles, the Company establishes reserves to the extent probable future losses are estimable. While the Company believes that the claims against it, upon resolution, should not have a material adverse effect on the Company, in view of the uncertainties discussed above, the Company could incur charges in excess of currently established reserves and, to the extent available, excess liability insurance. Accordingly, in the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on the Company's consolidated results of operations and consolidated net cash flows in the period or periods in which they are recorded or paid. The Company continues to believe that it has a number of valid defenses to each of the suits pending against it and is engaged in a vigorous defense of each of these matters. Further discussion of legal proceedings is included in Part II of this Report on Form 10-Q. Note 5 - Segment Data The Company's organizational structure is based upon its three principal business segments: BD Medical ("Medical"), BD Diagnostics ("Diagnostics"), and BD Biosciences ("Biosciences"). The Company evaluates performance based upon operating income. Segment operating income represents revenues reduced by product costs and operating expenses. Financial information for the Company's segments is as follows:

Three Months Ended Six Months Ended March 31, March 31, ----------------------- ----------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Revenues Medical $ 682,641 $ 601,819 $1,309,509 $1,173,456 Diagnostics 382,875 356,800 783,820 688,454 Biosciences 205,007 175,422 376,725 323,779 ---------- ---------- ---------- ---------- Total Revenues (A) $1,270,523 $1,134,041 $2,470,054 $2,185,689 ========== ========== ========== ==========

9

Three Months Ended Six Months Ended March 31, March 31, ------------------- ---------------------- 2004 2003 2004 2003 -------- -------- --------- --------- Segment Operating Income Medical $151,260 $129,811 $ 243,206(B) $ 252,610 Diagnostics 87,491 84,928 185,126 151,026 Biosciences 45,592 28,348 75,429 47,215 -------- -------- --------- --------- Total Segment Operating Income 284,343 243,087 503,761 450,851 Unallocated Items (C) (64,130) (56,806) (124,149) (115,536) -------- -------- --------- --------- Income Before Income Taxes $220,213 $186,281 $ 379,612 $ 335,315 ======== ======== ========= =========

Three Months Ended Six Months Ended March 31, March 31, ----------------------- ----------------------- 2004 2003 2004 2003 ---------- ---------- ---------- ---------- Revenues by Organizational Units BD Medical Medical Surgical Systems $ 383,480 $ 341,398 $ 758,323 $ 686,917 Diabetes Care 150,068 133,832 283,094 253,377 Pharmaceutical Systems 135,376 113,806 240,575 207,051 Ophthalmic Systems 13,717 12,783 27,517 26,111 ---------- ---------- ---------- ---------- $ 682,641 $ 601,819 $1,309,509 $1,173,456 ---------- ---------- ---------- ---------- BD Diagnostics Preanalytical Systems $ 195,943 $ 176,057 $ 380,923 $ 343,260 Diagnostic Systems 186,932 180,743 402,897 345,194 ---------- ---------- ---------- ---------- $ 382,875 $ 356,800 $ 783,820 $ 688,454 ---------- ---------- ---------- ---------- BD Biosciences Immunocytometry Systems $ 103,563 $ 83,480 $ 185,707 $ 147,532 Clontech 16,787 17,288 31,140 33,043 Pharmingen 36,104 31,268 66,442 57,943 Discovery Labware 48,553 43,386 93,436 85,261 ---------- ---------- ---------- ---------- $ 205,007 $ 175,422 $ 376,725 $ 323,779 ---------- ---------- ---------- ---------- Total $1,270,523 $1,134,041 $2,470,054 $2,185,689 ========== ========== ========== ==========

(A) Intersegment revenues are not material. (B) Current year amount includes $45,024 related to blood glucose monitoring charges as discussed further in Note 9 to the condensed consolidated financial statements. (C) Includes primarily interest, net; foreign exchange; corporate expenses; and certain legal costs. 10 Note 6 - Special Charges In fiscal year 2002, the Company recorded special charges of $21,508 associated with a manufacturing restructuring program in the Medical segment that was aimed at optimizing manufacturing efficiencies and improving the Company's competitiveness in the different markets in which it operates. This program involved the termination of 533 employees in China, France, Germany, Ireland, Mexico and the United States. As of March 31, 2004, 524 of the targeted employees had been severed. The Company expects the remaining terminations to be completed and the related accrued severance to be substantially paid by June 2004. A summary of the 2002 special charge accrual activity during the first six months of fiscal 2004 follows:

Severance Restructuring --------- ------------- Accrual Balance at September 30, 2003 $ 1,800 $100 Payments (1,000) -- ------- ---- Accrual Balance at March 31, 2004 $ 800 $100 ======= ====

Note 7 - Goodwill and Other Intangible Assets The components of intangible assets are as follows:

March 31, 2004 September 30, 2003 ----------------------- ----------------------- Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization -------- ------------ -------- ------------ Amortized intangible assets: Core and Developed Technology $353,466 $ 119,785 $352,372 $109,689 Patents, Trademarks, & Other 317,853 225,862 314,211 217,635 -------- --------- -------- -------- Total $671,319 $ 345,647 $666,583 $327,324 ======== ========= ======== ======== Unamortized intangible assets: Goodwill $544,913 $536,788 Trademarks 15,137 15,137 -------- -------- Total $560,050 $551,925 ======== ========

The change in the carrying amount of goodwill for the six months ended March 31, 2004 relates to foreign currency translation adjustments. The estimated intangible amortization expense for the fiscal years ending September 30, 2004 to 2009 are as follows: 2004 - $35,200; 2005 - $33,600; 2006 - - $30,900; 2007 - $30,700; 2008 - $29,800; 2009 - $28,600. 11 Note 8 - Adoption of New Accounting Standards In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 significantly changes whether entities included in its scope are consolidated by their sponsors, transferors or investors. The Interpretation introduces a new consolidation model, "the variable interests model," which determines control based on potential variability in gains and losses of the entity being evaluated for consolidation. Under FIN 46, variable interest entities are to be consolidated if certain conditions are met. Variable interests are contractual, ownership or other interests in an entity that expose their holders to the risks and rewards of the variable interest entity. Variable interests include equity investments, leases, derivatives, guarantees and other instruments whose values change with changes in the variable interest entity's assets. The provisions of the Interpretation were effective for the Company as of March 31, 2004 for variable interest entities acquired before February 1, 2003 and in effect upon acquisition for any variable interest entities acquired after January 31, 2003 (of which there have been none to date). The adoption of FIN 46 had no impact on the Company's consolidated financial position, results of operations or financial disclosures. In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act") was signed into law. The Act introduces a prescription drug benefit under Medicare, as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare. In January 2004, the FASB issued FASB Staff Position ("FSP") No. 106-1 "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003" which permits a sponsor of a postretirement health care plan that provides a prescription drug benefit to make a one-time election to defer accounting for the effects of the Act. The Company has elected to defer recognition of the Act until such time as final authoritative accounting guidance has been issued. The Company expects the adoption of FSP No. 106-1 to have a favorable, yet immaterial, impact on its consolidated financial position and results of operations in fiscal 2004. Note 9 - Blood Glucose Monitoring Charges The Company recorded a pre-tax charge of $45,024 to cost of products sold in the Company's results of operations for the three months ended December 31, 2003 related to its blood glucose monitoring ("BGM") products, which included a reserve of $6,473 in connection with the voluntary product recall of certain lots of BGM test strips and the write-off of $29,803 of certain test strip inventories. Based upon internal testing, it was determined that certain BGM test strip lots, produced by BD's manufacturing partner, were not performing within BD's specifications. As a result, the Company decided to recall the affected lots and dispose of the non-conforming product in inventory. In addition, the charge reflects BD's decision to focus its sales and marketing efforts on the BD Logic'TM' and Paradigm Link'TM' blood glucose meters in the United States, and to discontinue support of the BD Latitude'TM' system product offering in the United States, resulting in a write-off of $8,748 of related blood glucose meters and fixed assets. 12 Note 10 - 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 healthcare and life insurance benefits to qualifying domestic retirees. Postretirement benefit plans in foreign countries are not material. Net pension and postretirement expense included the following components for the three months ended March 31:

Pension Plans Other Postretirement Benefits ------------------- ----------------------------- 2004 2003 2004 2003 -------- -------- ------- ------- Components of net pension and postretirement costs: Service cost $ 14,033 $ 11,200 $ 875 $ 790 Interest cost 15,423 13,518 3,841 3,621 Expected return on plan assets (12,773) (11,798) -- -- Amortization of prior service cost 59 21 (1,559) (1,558) Amortization of loss 4,337 3,280 1,298 836 Other (76) (34) -- -- -------- -------- ------- ------- Net pension and postretirement costs $ 21,003 $ 16,187 $ 4,455 $ 3,689 ======== ======== ======= =======

Net pension expense attributable to foreign plans included in the preceding table was $3,713 and $3,326 for the three months ended March 31, 2004 and 2003, respectively. Net pension and postretirement expense included the following components for the six months ended March 31:

Pension Plans Other Postretirement Benefits ------------------- ----------------------------- 2004 2003 2004 2003 -------- -------- ------- ------- Components of net pension and postretirement costs: Service cost $ 28,066 $ 22,400 $ 1,750 $ 1,580 Interest cost 30,846 27,036 7,682 7,242 Expected return on plan assets (25,546) (23,596) -- -- Amortization of prior service cost 118 42 (3,118) (3,116) Amortization of loss 8,674 6,560 2,596 1,672 Other (152) (68) -- -- -------- -------- ------- ------- Net pension and postretirement costs $ 42,006 $ 32,374 $ 8,910 $ 7,378 ======== ======== ======= =======

Net pension expense attributable to foreign plans included in the preceding table was $7,426 and $6,652 for the six months ended March 31, 2004 and 2003, respectively. We currently anticipate contributing $18 million, on a discretionary basis, to increase the funding for the U.S. pension plan during the third quarter of 2004. 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Company Overview 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 ("Medical"), BD Diagnostics ("Diagnostics") 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. BD's management operates the business consistent with the following core strategies: o to increase revenue growth by focusing on products that deliver greater benefits to patients, healthcare workers and researchers; o to improve operating effectiveness and balance sheet productivity; and, o to strengthen organizational and associate capabilities in the ever-changing healthcare environment. In assessing our implementation of these strategies and BD's financial condition and operating performance, management generally reviews quarterly forecast data, monthly actual results, segment sales and other similar information. We also consider trends related to certain key financial data, including gross profit margin, selling and administrative expense and cash flows, as further described below. The effectiveness of our strategies is demonstrated by our second quarter 2004 performance. BD reported second quarter revenues of $1.271 billion, an increase of 12% from the same period a year ago. After excluding the favorable impact of foreign currency translation, revenues for the quarter increased approximately 6%. For the six month period, reported revenues of $2.470 billion represented a 13% increase from a year ago, or approximately 6% at constant foreign exchange rates. Sales in the United States of safety-engineered devices grew 10% to $183 million. The Medical and Biosciences segments had solid revenue growth in the quarter reflecting contributions from several key areas - prefillable drug delivery devices, diabetes-related products and the BD FACSAria'TM' cell sorter. Safety-engineered device sales in the United States continued to support our overall growth. International revenue growth of 17% and 20% for the three and six month period, respectively, was favorably affected by foreign currency translation, primarily the Euro. After excluding the favorable impact of foreign currency translation, international revenues grew approximately 4% and 6% for the three and six month period, respectively. As further discussed in our 2003 Annual Report on Form 10-K, we 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. 14 Our balance sheet remains strong with net cash provided by operations at $528 million for the six months ended March 31, 2004 and our debt-to-capitalization ratio (shareholders' equity, net non-current deferred income tax liabilities, and debt) was reduced to 26.8% at March 31, 2004 from 30.4% at September 30, 2003. Our ability to sustain our long-term growth will depend on a number of factors, including our ability to expand our core business (including geographical expansion), develop innovative new products across our business segments, and continue to improve operating efficiency and organizational effectiveness. Numerous factors can affect our ability to achieve these goals, including without limitation, U.S and global economic conditions, increased competition and healthcare cost containment initiatives. Our anticipated revenue growth over the next five years is expected to come from the following: o Core business growth and expansion, including the continued transition to safety-engineered devices; o Expanding the sale of our high quality products across all continents; and, o In each business segment, new products and services that have higher benefits to patients, healthcare workers and researchers. Results of Operations Revenues Refer to Note 5 in the Notes to Condensed Consolidated Financial Statements for segment financial data. Medical Segment - Second quarter revenues of $683 million represented an increase of 13% from the prior year's period, or 7% at constant foreign exchange rates. Included in Medical revenues were U.S. safety-engineered product sales which grew 9% to $107 million, when compared with $98 million in the prior year's quarter. These sales were partly offset by reduced sales of certain conventional devices in the United States due to the transition to safety-engineered devices. Also contributing to the revenue growth of the segment were increased sales of diabetes-related products and prefillable drug delivery devices. International Medical revenue growth was 17% from the prior year's period, or 4% excluding the favorable impact of foreign currency translation. For the six month period, Medical revenue of $1.310 billion represented growth from the prior period of 12%, or 5% excluding the favorable impact of foreign currency translation. Diagnostics Segment - Second quarter revenues of $383 million represented an increase of 7% over the prior year period, or 2% excluding the favorable impact of foreign currency translation. Diagnostics revenues included sales of U.S. safety-engineered devices of $75 million compared with $68 million in the prior year's quarter. These sales were partly offset by reduced sales of certain conventional devices in the United States due to the transition to safety-engineered devices. Revenues from sales of diagnostic systems grew 3% to $187 million, after having experienced a 31% increase in the first quarter of 2004, due in large part to earlier than usual and exceptionally strong sales of respiratory and flu diagnostic tests in the United States and Japan. Also contributing to the segment's revenue growth for the quarter were sales of 15 BD ProbeTec'TM' ET instrument platforms which increased to $20 million from $16 million in the prior year. For the six month period, Diagnostics revenues of $784 million represented growth from the prior year period of 14%, or 8% excluding the favorable impact of foreign currency translation. Biosciences Segment - Second quarter revenues of $205 million represented an increase of 17% over the prior year period, or 9% excluding the favorable impact of foreign currency translation. Immunocytometry systems sales reflected broad acceptance of the BD FACSAria'TM' cell sorter, which BD Biosciences began shipping at the end of the second fiscal quarter of 2003, along with strong sales of flow cytometry reagents in the Immunocytometry Systems and Pharmingen units. Revenue growth was also driven by Discovery Labware products. Clontech revenues continue to be negatively affected by a slowdown in certain segments of the research market, as well as by competitive pressures. For the six month period, Biosciences revenues of $377 million represented growth from the prior year period of 16%, or 9% excluding the favorable impact of foreign currency translation. Segment Operating Income Medical Segment Segment operating income for the second quarter was $151 million, an increase of 16% when compared to $130 million in the prior year's second quarter. This increase was driven by higher Medical revenues combined with lower spending associated with our BGM products that were launched in the second quarter of 2003. In addition, segment operating income improved due to the benefits resulting from the 2002 Medical restructuring plan (see Note 6 in the Notes to Condensed Consolidated Financial Statements). Segment operating income for the six months was $243 million (which included $45 million of blood glucose monitoring ("BGM") charges as discussed in Note 9 to the condensed consolidated financial statements), compared to $253 million in the prior year period. Diagnostics Segment Segment operating income for the second quarter was $87 million compared to $85 million in the prior year's second quarter and reflects, among other things, fluctuations in revenues as discussed above. Segment operating income for the six months was $185 million compared to $151 million in the prior year period, and reflected increased sales of products with higher gross profit margins, including safety-engineered products, the BD ProbeTec'TM' ET instrument platform, and respiratory and flu products. Biosciences Segment Segment operating income for the second quarter was $46 million compared to $28 million in the prior year. Segment operating income for the six months was $75 million compared to $47 million in the prior year period, and reflected increased sales of products with higher gross profit margin, including instruments, highlighted by continued placements of the BD FASCAria'TM' instrument platform, and reagents. Reductions in manufacturing costs and infrastructure, as well as tighter expense controls, added to the growth of segment operating income. Biosciences segment operating income also benefited from the absence of inventory write-downs recorded in the prior year's quarter relating to molecular biology reagents. 16 Gross Profit Margin Gross profit margin was 49.8% for the quarter and 48.2% for the six months, compared with 49.0% and 48.4%, respectively, for the prior year. The increase in gross profit margin for the quarter reflected increased sales of products with higher overall gross profit margins, compared to products sold in the prior year including safety-engineered products, diabetes-related products and sales of the BD ProbeTec'TM' ET instrument platform. In addition, gross profit margin benefited from the effects of the 2002 Medical restructuring plan, as discussed above. For the six month period, gross profit margin was adversely impacted by the BGM charges, as discussed above, which reduced gross profit margin by 180 basis points. Selling and Administrative Expense Selling and administrative expense increased to 26.7% of revenues for the quarter and 27.1% of revenues for the six month period, compared with the prior year's ratios of 26.3% and 26.7%, respectively. Aggregate expenses were higher, reflecting increased investment in various strategic initiatives, including blood glucose monitoring products. Income Taxes The reported income tax rate was 25% for the quarter and 24% for the six months. The prior year's tax rate was 24% for both the quarter and six months. We expect the tax rate for the 2004 fiscal year to be approximately 24%, which reflects a 1% reduction due to the aforementioned BGM charges. Net Income and Earnings Per Share Net income and diluted earnings per share for the current quarter were $165 million and 62 cents, respectively, compared with $142 million and 54 cents in the prior year. Net income and diluted earnings per share for the current six month period were $291 million and $1.10, respectively, compared with $256 million and 97 cents in the prior year. BGM charges in the first quarter of 2004 reduced net income by $28 million and diluted earnings per share by 11 cents. Liquidity and Capital Resources Net cash provided by operating activities, which continues to be our primary source of funds to finance operating needs and capital expenditures, was $528 million during the first six month period of fiscal 2004, and $293 million in the same period in fiscal 2003. Net cash provided by operations in the first six months of fiscal 2003 was reduced by $100 million in cash contributions to the U.S. pension plan. We expect to contribute an additional discretionary $18 million to increase the funding for the U.S. pension plan during the third quarter of 2004. The Company's funding policy for its defined benefit pension plans is to contribute amounts sufficient to meet the minimum funding requirement of the Employee Retirement Income Security Act of 1974, plus any additional amounts that management may determine to be appropriate considering the funded status of the plans, tax deductibility, our cash flows, and other factors. As further discussed in our 2003 Annual Report on Form 10-K, changes in pension costs may occur in the future due to changes in assumptions inherent in the actuarial valuations used, in part, to determine the Company's minimum funding obligations. Net cash used for investing activities for the first six months of the current year was $152 million, compared to $172 million in the same period a year ago. Capital expenditures were 17 $108 million in the first six month period of both fiscal 2004 and 2003. We expect capital spending for fiscal 2004 to be between $275 million and $300 million. Capitalized software in the first six month period of fiscal 2004 included approximately $14 million of costs associated with a business information systems upgrade within our Biosciences segment in the United States, which was not within the scope of our worldwide systems implementation (known internally as "Genesis") which was substantially completed in 2003. Similar to Genesis, such costs are capitalized in accordance with the AICPA's Statement of Position 98-1 "Accounting for Costs of Computer Software Developed or Obtained for Internal Use." Net cash used for financing activities in the first six month period of the current year was $238 million, compared to $83 million in the same period a year ago, and included the repurchase of over 2 million shares of our common stock for $175 million in the current year. As of March 31, 2004, authorization to repurchase an additional 9.7 million common shares remained under a January 2004 resolution of the Board of Directors. Stock repurchases were offset by the issuance of common stock from treasury due to the exercising of stock options by employees. As of March 31, 2004, total debt of $1.2 billion represented 26.8% of total capital, down from 30.4% at September 30, 2003. We have in place a commercial paper borrowing program that is available to meet our short-term financing needs, including working capital requirements. There were no borrowings outstanding under this program as of March 31, 2004. As discussed in our fiscal year 2003 Annual Report on Form 10-K, we currently maintain two syndicated credit facilities totaling $900 million that are available to provide backup support for our commercial paper program and for other general corporate purposes. Each of these facilities contains a single financial covenant that requires BD to maintain an interest expense coverage ratio (ratio of earnings before income taxes, depreciation and amortization to interest expense) of not less than 5-to-1 for the most recent four consecutive fiscal quarters. Given the availability of these facilities and our strong credit ratings, we continue to have a high degree of confidence in our ability to refinance debt maturities, as well as to incur substantial additional debt, if required. BD's ability to generate cash flow from operations, issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms could be adversely affected in the event there was a material decline in the demand for BD's products, deterioration in BD's key financial ratios or credit ratings, or other significantly unfavorable changes in conditions. While a deterioration in the Company's credit ratings would increase the costs associated with maintaining and borrowing under its existing credit arrangements, such a downgrade would not affect the Company's ability to draw on these credit facilities, nor would it result in an acceleration of the scheduled maturities of any outstanding debt. Critical Accounting Policies The preparation of financial statements in accordance with generally accepted accounting principles ("GAAP") requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 1 to our consolidated financial statements for the year ended September 30, 2003, which are incorporated by reference in our 2003 Annual Report on Form 10-K. Certain of our accounting policies are considered critical, as summarized in the Financial Review section of our 2003 Annual Report on Form 10-K, as these policies are the most important to the depiction of our financial statements and require significant, difficult or 18 complex judgments by management, often employing the use of estimates about the effects of matters that are inherently uncertain. Estimation methodologies are applied consistently from year to year. There have been no significant changes in the application of the critical accounting policies since September 30, 2003. These critical accounting policies have been reviewed with the Audit Committee of the Board of Directors. Use of Non-GAAP Financial Measures When discussing BD's financial performance, we at times will present certain non-GAAP financial measures, as follows: o BD presents its revenue growth rates at constant foreign exchange rates. Management believes that presenting growth rates at constant foreign exchange rates allows investors to view the actual operating results of BD and of its segments without the impact of fluctuations in foreign currency exchange rates, thereby facilitating comparisons to prior periods. o BD presents its earnings per share and other financial measures after excluding the impact of significant charges and the impact of unusual or non-recurring items. Management believes that excluding such impact from earnings per share and other financial measures allows investors to more easily compare BD's financial performance to prior periods and to understand the operating results of BD without the effects of these significant charges and unusual or non-recurring items. BD's management considers these non-GAAP financial measures internally in evaluating our performance for the reasons expressed above. Investors should consider these non-GAAP measures in addition to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. 19 BECTON DICKINSON AND COMPANY SUPPLEMENTAL REVENUE INFORMATION REVENUES BY BUSINESS SEGMENTS AND UNITS Three Months Ended March 31, (Unaudited; Amounts in thousands)

U.S. Revenues ------------------------------ 2004 2003 % Change -------- -------- -------- BD MEDICAL Medical Surgical Systems $196,418 $180,731 8.7 Diabetes Care 88,730 83,658 6.1 Pharmaceutical Systems 30,276 22,795 32.8 Ophthalmic Systems 5,263 5,610 (6.2) -------- -------- ---- TOTAL $320,687 $292,794 9.5 -------- -------- ---- BD DIAGNOSTICS Preanalytical Systems $109,464 $102,958 6.3 Diagnostic Systems 101,955 103,248 (1.3) -------- -------- ---- TOTAL $211,419 $206,206 2.5 -------- -------- ---- BD BIOSCIENCES Discovery Labware $ 24,465 $ 23,226 5.3 Immunocytometry Systems 36,129 29,141 24.0 Clontech 8,234 8,399 (2.0) Pharmingen 18,489 17,779 4.0 -------- -------- ---- TOTAL $ 87,317 $ 78,545 11.2 -------- -------- ---- TOTAL UNITED STATES $619,423 $577,545 7.3 -------- -------- ----

20 BECTON DICKINSON AND COMPANY SUPPLEMENTAL REVENUE INFORMATION REVENUES BY BUSINESS SEGMENTS AND UNITS Three Months Ended March 31, (continued) (Unaudited; Amounts in thousands)

International Revenues ------------------------------------------------------- % Change --------------------------------- 2004 2003 Reported FX Neutral FX Impact -------- -------- -------- ---------- --------- BD MEDICAL Medical Surgical Systems $187,062 $160,667 16.4 4.6 11.8 Diabetes Care 61,338 50,174 22.3 7.5 14.8 Pharmaceutical Systems 105,100 91,011 15.5 0.1 15.4 Ophthalmic Systems 8,454 7,173 17.9 4.0 13.9 -------- -------- ---- ---- ---- TOTAL $361,954 $309,025 17.1 3.7 13.4 -------- -------- ---- ---- ---- BD DIAGNOSTICS Preanalytical Systems $ 86,479 $ 73,099 18.3 4.1 14.2 Diagnostic Systems 84,977 77,495 9.7 (1.5) 11.2 -------- -------- ---- ---- ---- TOTAL $171,456 $150,594 13.9 1.2 12.7 -------- -------- ---- ---- ---- BD BIOSCIENCES Discovery Labware $ 24,088 $ 20,160 19.5 6.3 13.2 Immunocytometry Systems 67,434 54,339 24.1 10.5 13.6 Clontech 8,553 8,889 (3.8) (14.3) 10.5 Pharmingen 17,615 13,489 30.6 14.7 15.9 -------- -------- ---- ---- ---- TOTAL $117,690 $ 96,877 21.5 7.9 13.6 -------- -------- ---- ---- ---- TOTAL INTERNATIONAL $651,100 $556,496 17.0 3.8 13.2 -------- -------- ---- ---- ----

21 BECTON DICKINSON AND COMPANY SUPPLEMENTAL REVENUE INFORMATION REVENUES BY BUSINESS SEGMENTS AND UNITS Three Months Ended March 31, (continued) (Unaudited; Amounts in thousands)

Total Revenues ----------------------------------------------------------- % Change --------------------------------- 2004 2003 Reported FX Neutral FX Impact ---------- ---------- -------- ---------- --------- BD MEDICAL Medical Surgical Systems $ 383,480 $ 341,398 12.3 6.7 5.6 Diabetes Care 150,068 133,832 12.1 6.6 5.5 Pharmaceutical Systems 135,376 113,806 19.0 6.6 12.4 Ophthalmic Systems 13,717 12,783 7.3 (0.5) 7.8 ---------- ---------- ---- ---- ---- TOTAL $ 682,641 $ 601,819 13.4 6.5 6.9 ---------- ---------- ---- ---- ---- BD DIAGNOSTICS Preanalytical Systems $ 195,943 $ 176,057 11.3 5.4 5.9 Diagnostic Systems 186,932 180,743 3.4 (1.4) 4.8 ---------- ---------- ---- ---- ---- TOTAL $ 382,875 $ 356,800 7.3 2.0 5.3 ---------- ---------- ---- ---- ---- BD BIOSCIENCES Discovery Labware $ 48,553 $ 43,386 11.9 5.8 6.1 Immunocytometry Systems 103,563 83,480 24.1 15.2 8.9 Clontech 16,787 17,288 (2.9) (8.3) 5.4 Pharmingen 36,104 31,268 15.5 8.6 6.9 ---------- ---------- ---- ---- ---- TOTAL $ 205,007 $ 175,422 16.9 9.4 7.5 ---------- ---------- ---- ---- ---- TOTAL REVENUES $1,270,523 $1,134,041 12.0 5.5 6.5 ---------- ---------- ---- ---- ----

22 BECTON DICKINSON AND COMPANY SUPPLEMENTAL REVENUE INFORMATION REVENUES BY BUSINESS SEGMENTS AND UNITS Six Months Ended March 31, (Unaudited; Amounts in thousands)

U.S. Revenues ---------------------------------- 2004 2003 % Change ---------- ---------- -------- BD MEDICAL Medical Surgical Systems $ 394,937 $ 373,482 5.7 Diabetes Care 163,579 159,154 2.8 Pharmaceutical Systems 54,631 44,322 23.3 Ophthalmic Systems 11,288 12,262 (7.9) ---------- ---------- ---- TOTAL $ 624,435 $ 589,220 6.0 ---------- ---------- ---- BD DIAGNOSTICS Preanalytical Systems $ 216,091 $ 203,981 5.9 Diagnostic Systems 208,245 193,757 7.5 ---------- ---------- ---- TOTAL $ 424,336 $ 397,738 6.7 ---------- ---------- ---- BD BIOSCIENCES Discovery Labware $ 47,880 $ 46,346 3.3 Immunocytometry Systems 64,897 52,340 24.0 Clontech 15,087 16,262 (7.2) Pharmingen 34,482 32,934 4.7 ---------- ---------- ---- TOTAL $ 162,346 $ 147,882 9.8 ---------- ---------- ---- TOTAL UNITED STATES $1,211,117 $1,134,840 6.7 ---------- ---------- ----

23 BECTON DICKINSON AND COMPANY SUPPLEMENTAL REVENUE INFORMATION REVENUES BY BUSINESS SEGMENTS AND UNITS Six Months Ended March 31, (continued) (Unaudited; Amounts in thousands)

International Revenues ----------------------------------------------------------- % Change --------------------------------- 2004 2003 Reported FX Neutral FX Impact ---------- ---------- -------- ---------- --------- BD MEDICAL Medical Surgical Systems $ 363,386 $ 313,435 15.9 4.0 11.9 Diabetes Care 119,515 94,223 26.8 11.2 15.6 Pharmaceutical Systems 185,944 162,729 14.3 (1.4) 15.7 Ophthalmic Systems 16,229 13,849 17.2 3.9 13.3 ---------- ---------- ---- ---- ---- TOTAL $ 685,074 $ 584,236 17.3 3.6 13.7 ---------- ---------- ---- ---- ---- BD DIAGNOSTICS Preanalytical Systems $ 164,832 $ 139,279 18.3 4.3 14.0 Diagnostic Systems 194,652 151,437 28.5 15.5 13.0 ---------- ---------- ---- ---- ---- TOTAL $ 359,484 $ 290,716 23.7 10.1 13.6 ---------- ---------- ---- ---- ---- BD BIOSCIENCES Discovery Labware $ 45,556 $ 38,915 17.1 3.8 13.3 Immunocytometry Systems 120,810 95,192 26.9 13.3 13.6 Clontech 16,053 16,781 (4.3) (14.7) 10.4 Pharmingen 31,960 25,009 27.8 11.8 16.0 ---------- ---------- ---- ---- ---- TOTAL $ 214,379 $ 175,897 21.9 8.3 13.6 ---------- ---------- ---- ---- ---- TOTAL INTERNATIONAL $1,258,937 $1,050,849 19.8 6.2 13.6 ---------- ---------- ---- ---- ----

24 BECTON DICKINSON AND COMPANY SUPPLEMENTAL REVENUE INFORMATION REVENUES BY BUSINESS SEGMENTS AND UNITS Six Months Ended March 31, (continued) (Unaudited; Amounts in thousands)

Total Revenues ----------------------------------------------------------- % Change --------------------------------- 2004 2003 Reported FX Neutral FX Impact ---------- ---------- -------- ---------- --------- BD MEDICAL Medical Surgical Systems $ 758,323 $ 686,917 10.4 4.9 5.5 Diabetes Care 283,094 253,377 11.7 5.9 5.8 Pharmaceutical Systems 240,575 207,051 16.2 3.8 12.4 Ophthalmic Systems 27,517 26,111 5.4 (1.6) 7.0 ---------- ---------- ---- ----- ---- TOTAL $1,309,509 $1,173,456 11.6 4.8 6.8 ---------- ---------- ---- ----- ---- BD DIAGNOSTICS Preanalytical Systems $ 380,923 $ 343,260 11.0 5.3 5.7 Diagnostic Systems 402,897 345,194 16.7 11.0 5.7 ---------- ---------- ---- ----- ---- TOTAL $ 783,820 $ 688,454 13.9 8.1 5.8 ---------- ---------- ---- ----- ---- BD BIOSCIENCES Discovery Labware $ 93,436 $ 85,261 9.6 3.6 6.0 Immunocytometry Systems 185,707 147,532 25.9 17.1 8.8 Clontech 31,140 33,043 (5.8) (11.0) 5.2 Pharmingen 66,442 57,943 14.7 7.8 6.9 ---------- ---------- ---- ----- ---- TOTAL $ 376,725 $ 323,779 16.4 9.0 7.4 ---------- ---------- ---- ----- ---- TOTAL REVENUES $2,470,054 $2,185,689 13.0 6.5 6.5 ---------- ---------- ---- ----- ----

Cautionary Statement Pursuant to Private Securities Litigation Reform Act of 1995 -- "Safe Harbor" for Forward-Looking Statements The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe harbor for forward-looking statements made by or on behalf of Becton, Dickinson and Company ("BD"). BD and its representatives may from time to time make certain forward-looking statements in publicly-released materials, both written and oral, including statements contained in this report and filings with the Securities and Exchange Commission and in our other reports to 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 25 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, particularly 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 industry practices and regulations resulting in increased 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 The effects, if any, of governmental and media activities relating to U.S. Congressional hearings regarding the business practices of group purchasing organizations, which negotiate product prices on behalf of their member hospitals with BD and other suppliers. o Fluctuations in the cost and availability of raw materials and the ability to maintain favorable supplier arrangements and relationships. o Our ability to obtain the anticipated benefits of any restructuring programs that we may undertake. o Adoption of or changes in government laws and regulations affecting domestic and foreign operations, including those relating to trade, monetary and fiscal policies, taxation, environmental matters, sales practices, price controls, licensing and regulatory approval of new products, or changes in enforcement practices with respect to any such laws and regulations. o Difficulties inherent in product development, including the potential inability to successfully 26 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 pending and potential litigation or other proceedings adverse to BD, including product liability claims, patent infringement claims, and antitrust claims, as well as other risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings. o The effects, if any, of adverse media exposure or other publicity regarding BD's business, operations or allegations made or related to litigation pending against BD. 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 The effect of market fluctuations on the value of assets in BD's pension plans and the possibility that BD may need to make additional contributions to the plans as a result of any decline in the value of such assets. o Our ability to effect infrastructure enhancements and incorporate new systems technologies into our operations. o Product efficacy or safety concerns resulting in product recalls, regulatory action on the part of the 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 our ability to successfully 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 Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board. 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. 27 Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in information reported since the fiscal year ended September 30, 2003. Item 4. Controls and Procedures An evaluation was carried out by BD's management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of BD's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, 2004. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were, as of the end of the period covered by this report, effective and designed to ensure that material information relating to BD and its consolidated subsidiaries would be made known to them by others within these entities. There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2004 identified in connection with the above-referenced evaluation that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings We are involved, both as a plaintiff and a defendant, in various legal proceedings which arise in the ordinary course of business, including product liability and environmental matters. A more complete description of legal proceedings has been set forth in our 2003 Annual Report on Form 10-K (the "10-K") and our Form 10-Q for the quarter ended December 31, 2003. During the quarter ended March 31, 2004 and subsequent thereto, the following changes have occurred. Litigation - Other than Environmental RTI Litigation In the action entitled Retractable Technologies, Inc. vs. Becton Dickinson and Company, et al. (Civil Action No. 501 CV 036, United States District Court, Eastern District of Texas), the Court, by an order dated January 23, 2004, reset the trial date in this action from February 3, 2004 to July 6, 2004. We continue to vigorously defend this matter. Cardozo In the action entitled Danielle Cardozo, by her litigation guardian, Darlene Cardozo v. Becton Dickinson and Company (Civil Action No. 583059, Supreme Court of British Columbia), plantiff filed an amended Statement of Claim on January 7, 2004 28 adding to the class all persons who had sexual contact with those persons who were tested by the BD ProbeTec'TM' ET instrument in use in British Columbia between November 1, 2000 and May 24, 2002. We continue to vigorously defend this matter. Summary We currently are engaged in discovery or are otherwise in the early stages with respect to certain of the litigation to which we are a party, and therefore, it is difficult to predict the outcome of such litigation. In addition, given the uncertain nature of litigation generally and the uncertainty of the current litigation environment, it is difficult to predict the outcome of any litigation regardless of its stage. A number of the cases pending against BD present complex factual and legal issues and are subject to a number of variables, including, but not limited to, the facts and circumstances of each particular case, the jurisdiction in which each suit is brought, and differences in applicable law. As a result, we are not able to estimate the amount or range of loss that could result from an unfavorable outcome of such matters. In accordance with generally accepted accounting principles, the Company establishes reserves to the extent probable future losses are estimable. While we believe that the claims against BD are without merit and, upon resolution, should not have a material adverse effect on BD, in view of the uncertainties discussed above, we could incur charges in excess of currently established reserves and, to the extent available, excess liability insurance. Accordingly, in the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on BD's consolidated results of operations and consolidated net cash flows in the period or periods in which they are recorded or paid. We continue to believe that we have a number of valid defenses to each of the suits pending against BD and are engaged in a vigorous defense of each of these matters. 29 Environmental Matters We are also 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. While we believe that, upon resolution, the environmental claims against BD should not have a material adverse effect on BD, we could incur charges in excess of presently established reserves and, to the extent available, excess liability insurance. Accordingly, in the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on BD's consolidated results of operations and consolidated net cash flows in the period or periods in which they are recorded or paid. Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities. The table below sets forth certain information regarding our purchases of common stock of BD during the fiscal quarter ended March 31, 2004. Issuer Repurchases of Equity Securities

- --------------------------------------------------------------------------------------------------------- Total Number of Shares Purchased as Part of Maximum Number of Total Number of Publicly Shares that may yet For the three months ended Shares Purchased Average Price Announced Plans be Purchased Under March 31, 2004 (1) Paid per Share or Programs (2) the Plans or Programs - --------------------------------------------------------------------------------------------------------- January 1 - 31, 2004 24,506 $41.99 -- 11,741,000 - --------------------------------------------------------------------------------------------------------- February 1 - 29, 2004 1,400,453 $47.99 1,400,000 10,341,000 - --------------------------------------------------------------------------------------------------------- March 1 - 31, 2004 660,482 $49.34 660,000 9,681,000 - --------------------------------------------------------------------------------------------------------- Total 2,085,441 $48.34 2,060,000 9,681,000 - ---------------------------------------------------------------------------------------------------------

(1) Includes 25,441 shares purchased during the second quarter in open market transactions by the trustee under the Deferred Compensation Plan and the 1996 Directors' Deferral Plan. (2) These repurchases were made pursuant to a repurchase program for 10 million shares announced on January 28, 2003 (the "2003 Program") and a repurchase program for 10 million shares announced on January 27, 2004 (the "2004 Program"). BD completed its share repurchases under the 2003 program in March 2004. There is no expiration date for the 2004 Program. 30 Item 3. Defaults Upon Senior Securities. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. Our Annual Meeting of Shareholders was held on February 11, 2004, at which the following matters were voted upon: i.) A management proposal for the election of four directors for the terms indicated below was voted upon as follows:

Votes ------- Votes Nominee Term For Withheld ------- ------- ----------- ---------- Henry P. Becton, Jr. 3 Years 188,899,723 27,520,833 Edward F. DeGraan 3 Years 192,439,564 23,980,992 James F. Orr 3 Years 205,784,112 10,636,444 Margaretha af Ugglas 3 Years 210,906,540 5,514,016

The directors whose term of office as a director continued after the meeting are: Harry N. Beaty, Edward J. Ludwig, Frank A. Olson, Willard J. Overlock, Jr., James E. Perrella, Bertram L. Scott and Alfred Sommer. ii.) A management proposal to ratify the selection of Ernst & Young, LLP as independent auditors for the fiscal year ending September 30, 2004 was voted upon. 210,424,481 shares were voted for the proposal, 4,780,579 shares were voted against, and 1,215,495 shares abstained. iii.) A management proposal to approve the 2004 Employee and Director Equity-Based Compensation Plan was voted upon. 149,740,395 shares were voted for the proposal, 41,480,018 shares were voted against, and 1,743,985 shares abstained. iv.) A shareholder proposal requesting the Board of Directors take the necessary steps to provide for cumulative voting in the election of directors was voted upon. 67,196,260 shares were voted for the proposal, 108,537,306 shares were voted against, 17,230,833 shares abstained, and there were 23,456,156 broker non-votes. Item 5. Other Information. Not applicable. 31 Item 6. Exhibits and Reports on Form 8-K. a) Exhibits Exhibit 10 2004 Employee and Director Equity-Based Compensation Plan, as amended and restated as of March 23, 2004. Exhibit 31 Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to SEC Rule 13a - 14(a). Exhibit 32 Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a - 14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code. b) Reports on Form 8-K During the three-month period ended March 31, 2004, we filed the following Current Reports on Form 8-K: (1) In a report dated January 26, 2004, we announced recent developments in the matter of Rectractable Technologies, Inc. vs. Becton Dickinson and Company, et al. (2) In a report dated January 27, 2004, we announced the declaration of our quarterly dividend and Board authorization of additional share repurchases. (3) In a report dated March 29, 2004, we announced the election of Basil L. Anderson to our Board of Directors. In addition, during the three-month period ended March 31, 2004, we furnished the following information pursuant to a Current Report on Form 8-K: (1) In a report dated January 29, 2004, we announced our results for the first quarter ended December 31, 2003. (2) In a report dated January 30, 2004, we furnished information regarding a voluntary product recall. (3) In a report dated February 17, 2004, we furnished information regarding a change in beneficial ownership by an executive officer. (4) In a report dated February 19, 2004, we furnished information regarding a change in beneficial ownership by an executive officer. (5) In a report dated February 25, 2004, we furnished information regarding a stock option exercise by an executive officer. 32 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Becton, Dickinson and Company (Registrant) Dated: May 14, 2004 /s/ John R. Considine ---------------------------------------------------- John R. Considine Executive Vice President and Chief Financial Officer (Principal Financial Officer) /s/ William A. Tozzi --------------------------------- William A. Tozzi Vice President and Controller (Chief Accounting Officer) 33 INDEX TO EXHIBITS Exhibit Number Description of Exhibits - -------------- ----------------------- 10 2004 Employee and Director Equity-Based Compensation Plan, as amended and restated as of March 23, 2004. 31 Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to SEC Rule 13a - 14(a). 32 Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a - 14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code. 34 STATEMENT OF DIFFERENCES The trademark symbol shall be expressed as............................... 'TM'