Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

May 13, 1994

Documents

10-Q: Quarterly report pursuant to Section 13 or 15(d)

Published on May 13, 1994



FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1994
------------------------------------------

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 1-4802
---------

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 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, 1994
--------------------- ---------------------------------------
Common stock, par value $1.00 71,678,462

Page 1 of 13 Pages (Exhibit Index is on Page 12)

PART I - FINANCIAL INFORMATION
------------------------------


Item 1. Financial Statements.
---------------------

Condensed Consolidated Balance Sheets at March 31, 1994 and September
30, 1993

Condensed Consolidated Statements of Operations for the three and six
month periods ended March 31, 1994 and 1993

Condensed Consolidated Statements of Cash Flows for the six months
ended March 31, 1994 and 1993

Notes to Condensed Consolidated Financial Statements

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


March 31, September 30,
Assets 1994 1993
- - ------ ----------- -------------
(Unaudited)

Current Assets:
Cash and equivalents $ 31,008 $ 39,126
Short-term investments 18,597 25,753
Trade receivables, net 509,846 557,803
Inventories (Note 2):
Materials 87,298 89,549
Work in process 67,845 67,257
Finished products 290,351 289,071
----------- ------------
445,494 445,877
Prepaid expenses, deferred taxes and other 76,174 82,183
----------- ------------
Total Current Assets 1,081,119 1,150,742

Investments in marketable securities 123,597 123,605

Property, plant and equipment 2,410,655 2,363,856
Less allowances for depreciation and amortization 1,030,529 960,786
----------- ------------
1,380,126 1,403,070
Intangibles, net
Patents and other 106,555 110,820
Goodwill 101,535 105,272

Other 198,269 194,056
----------- ------------
Total Assets $ 2,991,201 $ 3,087,565
=========== ============
Liabilities and Shareholders' Equity

Current Liabilities:
Short-term debt $ 187,064 $ 206,763
Payables and other liabilities 380,264 429,299
----------- ------------
Total Current Liabilities 567,328 636,062

Long-term debt 704,537 680,581

Long-term employee benefit obligations 298,229 294,054

Deferred income taxes and other 23,968 19,915

Shareholders' Equity:
Preferred stock 57,403 58,108
Common stock 85,349 85,349
Capital in excess of par value 105,105 104,954
Cumulative currency translation adjustments (27,687) (22,048)
Retained earnings 1,635,646 1,581,196
Unearned ESOP compensation (44,687) (45,249)
Shares in treasury - at cost (413,990) (305,357)
----------- ------------
Total Shareholders' Equity 1,397,139 1,456,953
----------- ------------
Total Liabilities and Shareholders' Equity $ 2,991,201 $ 3,087,565
=========== ============



See notes to condensed consolidated financial statements

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BECTON DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Thousands of Dollars, Except Per Share Data
(Unaudited)



Three Months Ended Six Months Ended
March 31, March 31,
--------------------- ------------------------
1994 1993* 1994 1993*
--------- --------- ----------- ----------

REVENUES $ 634,814 $ 612,534 $ 1,188,894 $ 1,172,996

Cost of products sold 343,082 340,249 655,964 659,357
Selling and administrative 162,617 163,254 319,993 321,795
Research and development 35,684 34,084 70,487 66,772
--------- --------- ----------- -----------
TOTAL OPERATING COSTS AND EXPENSES 541,383 537,587 1,046,444 1,047,924
--------- --------- ----------- -----------

OPERATING INCOME 93,431 74,947 142,450 125,072

Interest expense, net (13,655) (14,019) (24,498) (26,962)
Other (expense) income, net (4,653) 8,309 (9,019) 1,563
--------- --------- ---------- -----------

INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGES 75,123 69,237 108,933 99,673

Income tax provision 18,030 13,241 26,144 20,333
--------- --------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 57,093 55,996 82,789 79,340

Cumulative effect of accounting changes,
net of taxes - - - (141,057)
--------- --------- ----------- -----------
NET INCOME (LOSS) $ 57,093 $ 55,996 $ 82,789 $ (61,717)
========= ========= =========== ===========

EARNINGS (LOSS) PER SHARE
- - -------------------------
INCOME BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES $ .76 $ .71 $ 1.09 $ 1.01
Cumulative effect of accounting changes
net of taxes - - - (1.83)
--------- --------- ----------- -----------
NET INCOME (LOSS) $ .76 $ .71 $ 1.09 $ ( .82)
========= ========= =========== ===========
DIVIDENDS PER SHARE $ .185 $ .165 $ .37 $ .33
========= ========= =========== ===========
Average common and common
equivalent shares outstanding 73,540 77,406 74,148 77,475
========= ========= =========== ===========


* Restated to reflect adoption of SFAS Nos. 106, 109, and 112 in the fourth
quarter of fiscal 1993 retroactive to October 1, 1992.


See notes to condensed consolidated financial statements


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BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)

Six Months Ended
March 31,
----------------------------
1994 1993*
--------- ----------

Operating Activities:

Net income (loss) $ 82,789 $ (61,717)
Adjustments to net income (loss) to derive net cash
provided by operating activities:
Cumulative effect of accounting changes, net of taxes - 141,057
Depreciation and amortization 99,756 93,475
Change in working capital 230 (8,603)
Other, net 13,378 (948)
--------- ----------
Net cash provided by operating activities 196,153 163,264
--------- ----------
Investing Activities:

Capital expenditures (57,016) (81,283)
Change in investments, net 7,840 (4,475)
Other, net (19,886) (23,075)
--------- ----------
Net cash used for investing activities (69,062) (108,833)
--------- ----------
Financing Activities:

Change in short-term debt (9,013) (22,347)
Proceeds of long-term debt 27,750 39,012
Payments of long-term debt (16,106) (1,432)
Issuance of common stock 5,754 11,313
Repurchase of common stock (114,387) (10,385)
Dividends paid (28,696) (27,109)
--------- ----------
Net cash used for financing activities (134,698) (10,948)
--------- ----------

Effect of Exchange Rate Changes on Cash and Equivalents (511) (3,400)
--------- ----------
Net (decrease) increase in cash and equivalents (8,118) 40,083

Opening Cash and Equivalents 39,126 56,631
--------- ----------
Closing Cash and Equivalents $ 31,008 $ 96,714
========= ==========

* Restated to reflect the adoption of SFAS Nos. 106, 109 and 112 in the fourth
quarter of fiscal 1993 retroactive to October 1, 1992.


See notes to condensed consolidated financial statements


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BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1994

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 1993 Annual Report on Form 10-K. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year.

Note 2 - Inventory Valuation
- - ----------------------------

An actual valuation of inventory under the LIFO method can be made only at the
end of each fiscal year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management's estimates of
expected year-end inventory levels and costs.

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ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
--------------------------------------------


Results of Operations
- - ---------------------

Second Quarter 1994 vs. Second Quarter 1993
- - -------------------------------------------

Second quarter revenues of $635 million exceeded the prior year's revenues of
$613 million by 4%. Revenues would have increased 6% after excluding the
estimated $12 million adverse impact of foreign currency translation. Orders
for high volume Medical and Diagnostic products in the Company's core businesses
in the United States and Europe continued to be at expected growth rates,
confirming that there does not seem to be an adverse effect from the uncertainty
about health care reform. The Company's growth in core businesses continues to
be driven by the heightened concern for safety for health care workers. Medical
Supplies and Devices segment revenues of $352 million increased 5% and
Diagnostic Systems segment revenues of $283 million increased 2%, but would have
increased 8% and 3%, respectively, after excluding the estimated adverse impact
of foreign currency translation.

Domestic Medical segment revenues increased 4%. International Medical segment
revenues increased 6.5% but would have increased 11.5% after excluding the
estimated adverse impact of foreign currency translation. The growth rates
reflect strong sales of safety products, and of diabetic and prefillable
syringes.

Domestic Diagnostic segment revenues increased 2%. International Diagnostic
segment revenues increased 2%, or 5% after excluding the estimated adverse
impact of foreign currency translation. In comparison with last year, revenue
growth was adversely affected by prior year amounts which reflected shipments of
new systems after a period of pent-up demand. International revenues were also
affected by the continuing economic weakness in European countries, especially
Italy and Spain. Good growth rates continued in Japan and Latin America.

The gross profit margin of 46.0% was substantially higher than last year's
second quarter rate of 44.5%. The mix of product revenues, as well as
productivity improvements, were the principal reasons for the improvement.
Selling and administrative expense was 25.6% of revenues, which was more than a
full percentage point better than last year's second quarter ratio of 26.7%,
reflecting tight spending controls and cost reduction programs. Reported
expense of $163 million was about the same as last year's second quarter
expense. Investment of $36 million in research and development increased 5%
over last year's second quarter expenditures. As a percent of revenues,
research and development expense was 5.6%, the same as in last year's second
quarter.

Operating income of $93 million increased 25% from last year's second quarter
amount of $75 million despite the adverse effect of a stronger dollar. The
improvement of the operating margin from 12.2% in the second quarter last year
to 14.7% in the current quarter reflects productivity improvements in both
manufacturing and operating expenses.

Net interest expense of $14 million was about the same as last year's second
quarter amount. Lower interest rates offset a reduction in capitalized
interest.

-7-

Other (expense) income, net was $13 million unfavorable compared with last
year's second quarter. $5 million of the change was due to a capital gain
recorded in last year's second quarter in connection with the February 18, 1993
merger of Applied Biosystems, Inc. with The Perkin-Elmer Corporation as well as
the Company's share of earnings of Applied Biosystems, Inc. In addition, higher
charges related to foreign exchange in the current quarter resulted in an
unfavorable comparison of $5 million with the prior year's second quarter.

The income tax rate of 24.0%, compared with last year's second quarter rate of
19.1%, resulted from the projected mix of income from the various tax rate
jurisdictions in which the Company operates.

Earnings per share were $.76, an increase of 7% over last year's $.71 which
included a gain of $.04 related to the Perkin-Elmer transaction. Foreign
currency translation decreased earnings per share by an estimated $.03. Without
the estimated adverse impact from foreign currency translation and the gain
related to the Perkin-Elmer transaction, earnings per share would have increased
18%.

Six Months 1994 vs. Six Months 1993
- - -----------------------------------

Reported revenues of $1.189 billion exceeded the prior year level of $1.173
billion by 1%. Revenues would have increased 4% without the estimated adverse
impact of foreign currency translation. Medical Supplies and Devices segment
revenues increased 2% to $648 million. Diagnostic Systems segment revenues were
$541 million, an increase of 1%. Geographically, domestic revenues increased 2%
to $664 million and international revenues increased less than 1% to $525
million, but would have increased 7% after excluding the estimated adverse
impact of foreign currency translation.

The gross profit margin of 44.8% was higher than last year's rate of 43.8%.
Selling and administrative expense was 26.9%, lower than last year's rate of
27.4%, reflecting effective spending controls and cost reduction programs.
Investment of $70 million in research and development expense increased 6% over
last year's expenditures. As a percent of revenues, research and development
expense was 5.9%, compared with last year's 5.7%.

Operating income of $142 million increased $17 million over last year. As a
percent of revenues, operating income was 12.0% compared with last year's 10.7%,
resulting from productivity improvements in both manufacturing and operating
expenses.

Other (expense) income, net was $11 million unfavorable compared with last year.
The change is principally due to the absence of a capital gain recorded last
year in connection with the Perkin-Elmer transaction, as well as the Company's
share of earnings of Applied Biosystems, Inc., in the amount of $6 million, and
miscellaneous other income.

The income tax rate of 24.0%, compared with last year's rate of 20.4%, resulted
from the projected mix of income from the various tax rate jurisdictions in
which the Company operates.

Income before cumulative effect of accounting changes was $83 million compared
with $79 million last year, an increase of 4%. Net income was $83 million,
compared with a net loss of $62 million last year which included an after-tax
charge of $141 million, or $1.83 per share, representing the cumulative effect
of accounting changes adopted in 1993.

-8-

Earnings per share were $1.09, an increase of 8% over last year's $1.01 before
the cumulative effect of accounting changes, which included a gain of $.04
related to the Perkin-Elmer transaction. Foreign currency translation decreased
earnings per share by an estimated $.07.

Financial Condition
- - -------------------

During the first six months of 1994, cash provided by operations was $196
million, compared with $163 million during the first six months of last year.

Debt remained basically unchanged during the first six months of 1994. The
percentage of debt to capitalization (defined as the sum of shareholders'
equity, net non-current deferred income tax liabilities, and debt) was 38.8%,
lower than 39.7% a year ago. Last year's ratio has been restated to reflect the
cumulative effect of accounting changes referred to previously.

Capital expenditures for the six months were $57 million compared with $81
million during the first six months of last year, due to the absence of any
major projects. For the full year, capital expenditures are expected to be less
than $150 million.

Because of its strong credit ratings, the Company believes it has the capacity
to arrange significant additional borrowings should the need arise.

During the first six months of 1994, the Company repurchased 3.1 million shares
of its common stock for a total cost of $114 million. At March 31, 1994,
authorizations from the Board of Directors remained outstanding to acquire an
additional 2.1 million shares.

-9-

PART II - OTHER INFORMATION
---------------------------

Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------

a) The Annual Meeting of Shareholders of the Company was held on
February 8, 1994.

c) (i) A management proposal for the election of three directors for
the terms indicated below was voted upon as follows:



Nominee Term Votes For Votes Withheld
------- ---- --------- --------------

Harry N. Beaty 3 Years 63,560,587 853,690

Raymond V.
Gilmartin 3 Years 63,566,402 847,875

Frank A. Olson 3 Years 63,561,381 852,896



(ii) A management proposal to ratify the selection of Ernst & Young
as independent auditors for fiscal year 1994 was voted upon.
64,050,033 shares were voted for the proposal, 149,243 shares
were voted against and 215,001 shares abstained.

(iii) A management proposal to approve the 1994 Restricted Stock Plan
for Non-Employee Directors was voted upon. 61,287,700 shares
were voted for the proposal, 2,543,258 shares were voted against
and 583,319 shares abstained.

(iv) A shareholder proposal to recommend that the Company disclose in
newspapers of general publication a detailed statement of
political contributions made by the Company was voted upon.
3,361,576 shares were voted for the proposal, 54,014,055 shares
were voted against and 2,436,775 shares abstained.


Item 6. Exhibits and Reports on Form 8-K.
---------------------------------

a) Exhibits

11 - Computation of Earnings Per Share.

b) Reports on Form 8-K

There were no reports on Form 8-K filed for the quarter ended
March 31, 1994.

-10-

SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Becton, Dickinson and Company
-----------------------------
(Registrant)

Date May 12, 1994
-------------------



/s/Robert A. Reynolds
-----------------------------------
Robert A. Reynolds
Vice President - Finance and Controller
(Principal Financial and Accounting Officer)

-11-

EXHIBIT INDEX
-------------





Exhibit Method of Sequential
Number Description Filing Page Number
- - --------- ----------------------- ----------- -----------


11 Computation of Earnings Filed with 13
Per Share this report



-12-