FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________________to__________________
Commission file number 1-4802
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Becton, Dickinson and Company
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(Exact name of registrant as specified in its charter)
New Jersey 22-0760120
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Becton Drive Franklin Lakes, New Jersey 07417-1880
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(Address of principal executive offices)
(Zip Code)
(201) 847-6800
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No ___.
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class of Common Stock Shares Outstanding as of January 31, 1996
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Common stock, par value $1.00 64,004,929
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements.
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Condensed Consolidated Balance Sheets at December 31, 1995 and
September 30, 1995
Condensed Consolidated Statements of Income for the three months ended
December 31, 1995 and 1994
Condensed Consolidated Statements of Cash Flows for the three months
ended December 31, 1995 and 1994
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
December 31, September 30,
Assets 1995 1995
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(Unaudited)
Current Assets:
Cash and equivalents $ 199,205 $ 198,506
Short-term investments 33,587 41,495
Trade receivables, net 527,378 573,093
Inventories (Note 2):
Materials 90,510 87,116
Work in process 65,365 71,316
Finished products 254,536 250,203
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410,411 408,635
Prepaid expenses, deferred taxes and other 113,764 105,789
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Total Current Assets 1,284,345 1,327,518
Investments in Marketable Securities 44,400 44,400
Property, plant and equipment 2,436,746 2,423,080
Less allowances for depreciation and amortization 1,169,165 1,142,049
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1,267,581 1,281,031
Intangibles, Net
Patents and other 85,002 84,403
Goodwill 102,982 97,098
Other 156,349 165,055
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Total Assets $2,940,659 $2,999,505
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Liabilities and Shareholders' Equity
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Current Liabilities:
Short-term debt $ 222,155 $ 205,799
Payables and accrued expenses 485,110 514,236
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Total Current Liabilities 707,265 720,035
Long-Term Debt 556,310 557,594
Long-Term Employee Benefit Obligations 297,616 289,711
Deferred Income Taxes and Other 35,195 33,780
Commitments and Contingencies - -
Shareholders' Equity:
Preferred stock 54,269 54,713
Common stock 85,349 85,349
Capital in excess of par value 120,739 118,201
Cumulative currency translation adjustments (2,254) 6,767
Retained earnings 1,976,254 1,946,636
Unearned ESOP compensation (36,818) (36,941)
Shares in treasury - at cost (853,266) (776,340)
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Total Shareholders' Equity 1,344,273 1,398,385
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Total Liabilities and Shareholders' Equity $2,940,659 $2,999,505
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See notes to condensed consolidated financial statements
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BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Thousands of Dollars, Except Per Share Data
(Unaudited)
Three Months Ended
December 31,
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1995 1994
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REVENUES $ 639,935 $ 593,476
Cost of products sold 348,746 327,065
Selling and administrative 181,909 171,606
Research and development 37,334 35,223
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TOTAL OPERATING COSTS AND EXPENSES 567,989 533,894
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OPERATING INCOME 71,946 59,582
Interest expense, net (9,287) (10,554)
Other expense, net (823) (1,382)
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INCOME BEFORE INCOME TAXES 61,836 47,646
Income tax provision 17,314 14,102
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NET INCOME $ 44,522 $ 33,544
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EARNINGS PER SHARE $ .65 $ .46
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DIVIDENDS PER SHARE $ .23 $ .205
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Average common and common
equivalent shares outstanding 67,343 70,411
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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)
Three Months Ended
December 31,
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1995 1994
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Operating Activities:
Net income $ 44,522 $ 33,544
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 51,035 50,270
Change in working capital (14,695) 20,470
Other, net 7,981 1,231
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Net cash provided by operating activities 88,843 105,515
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Investing Activities:
Capital expenditures (30,643) (22,938)
Acquisitions of businesses (10,418) -
Change in investments, net 7,891 21,174
Other, net 5,379 4,926
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Net cash (used for) provided by investing activities (27,791) 3,162
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Financing Activities:
Change in short-term debt 17,717 66,199
Payments of long-term debt (1,604) (1,626)
Issuance of common stock 5,020 2,623
Repurchase of common stock (79,852) (150,147)
Dividends paid (881) (915)
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Net cash used for financing activities (59,600) (83,866)
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Effect of exchange rate changes on cash and equivalents (753) (687)
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Net increase in cash and equivalents 699 24,124
Opening Cash and Equivalents 198,506 94,913
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Closing Cash and Equivalents $ 199,205 $ 119,037
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See notes to condensed consolidated financial statements
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BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note 1 - Basis of Presentation
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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 1995 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
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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.
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Results of Operations
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First quarter reported revenues of $640 million exceeded the prior year's
revenues by 8%. The favorable effect of a weaker dollar versus the prior year
added an estimated $9 million to revenues, or 1.5 percentage points. Reported
revenue growth was unfavorably impacted by the decrease in revenues as a result
of the divestiture of the glove business last year. This reduction was offset
by the estimated increase in sales in the first quarter due to the reduction in
promotional activity at the end of the prior fiscal year. Medical Supplies and
Devices segment revenues of $347 million increased 8%, or 7% after excluding
the estimated favorable effect of foreign currency translation. Diagnostic
Systems segment revenues of $293 million increased 7%, or 6% after excluding the
estimated impact of foreign currency translation.
Domestic Medical segment revenues of $174 million increased 5%. Domestic
Medical segment revenues were unfavorably impacted by the absence of sales due
to the divestiture of the gloves business. This impact was offset by the
increase in sales in the quarter which resulted from the reduction in
promotional activity in the fourth quarter of last year. International Medical
segment revenues of $173 million increased 12%, or 8% after excluding the
estimated favorable impact of foreign currency translation. Good growth rates
were experienced worldwide by both the injection systems and infusion therapy
businesses which continue to benefit from the conversion to safety products.
Domestic Diagnostic segment revenues of $153 million increased 2%. Diagnostic
segment revenue growth continues to be unfavorably impacted by cost containment
initiatives in the marketplace. The Company is responding to these trends by
continuing the effort to develop innovative and cost effective products.
International Diagnostic segment revenues of $140 million increased 14%, or 11%
after excluding the estimated favorable effect of foreign currency translation.
Strong sales growth continued in the sample collection and flow cytometry
products lines in Europe, Japan and the Asia-Pacific region. This strength was
partially offset by unfavorable trends related to cost containment initiatives
in the infectious disease diagnostics business.
The gross profit margin of 45.5% was over one-half of a percentage point higher
than last year's first quarter rate of 44.9%. The improvement reflects
productivity improvements and a more profitable mix of products sold as well as
favorable foreign currency translation. Selling and administrative expense of
$182 million was 28.4% of revenues. This ratio is an improvement of one-half of
a percentage point over last year's ratio of 28.9%, despite the increase in some
targeted investments in sales and marketing for critical strategic initiatives
and international expansion. Investment of $37 million in research and
development increased 6% over last year's first quarter expenditures, reflecting
the funding of strategic choices made last year.
Operating income of $72 million increased 21% from last year's first quarter
amount of $60 million. The improvement in the operating margin from 10.0% to
11.2% primarily reflects the improved gross profit margin and improved expense
ratios.
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Net interest expense of $9 million was $1 million lower than last year's first
quarter amount, reflecting the Company's strong cash flow and reduced working
capital requirements. Other expense, net was $1 million which was approximately
the same as last year's first quarter amount. The first quarter income tax rate
was 28.0%, compared with last year's first quarter rate of 29.6%, reflecting the
forecasted mix in income among tax jurisdictions.
Net income was $45 million compared with $34 million last year, an increase of
33%. Earnings per share of $.65 increased 41% over last year's $.46, or
approximately 33% after excluding the estimated $.04 favorable effect of foreign
currency translation. Strong growth in operating income as well as the
Company's continuation of the share repurchase program contributed to this
favorable earnings per share growth.
Financial Condition
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During the first quarter of 1996, cash provided by operations was $89 million,
compared with $106 million during the first quarter of last year. In the first
quarter of 1996, net working capital decreased $30 million reflecting the
emphasis on asset management. Total debt increased $15 million during the first
quarter of 1996. The percentage of debt to capitalization (wherein
capitalization is defined as the sum of shareholders' equity, net non-current
deferred income tax liabilities, and debt) was 36.5%, significantly lower than
40.4% a year ago.
Capital expenditures for the quarter were $31 million compared with $23 million
during the first quarter of last year. For the full year, capital expenditures
are expected to be approximately $150 million. In the first quarter, the
Company also expended $10 million to complete acquisitions in the infectious
disease and sample collection businesses.
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 quarter of 1996, the Company repurchased 1.2 million shares of
its common stock for a total expenditure of $80 million. At December 31, 1995,
authorization from the Board of Directors remained outstanding to acquire an
additional 2.9 million shares. For the full year, the Company expects to spend
less than $300 million for share repurchases.
At its November 1995 meeting, the Board of Directors increased the Company's
quarterly dividend from $.205 to $.23 per common share.
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PART II - OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K.
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a) Exhibits
11 - Computation of Earnings Per Share.
27 - Financial Data Schedule
b) Reports on Form 8-K
A report on Form 8-K dated November 28, 1995 was filed with the
Securities and Exchange Commission by the registrant on December
14, 1995. Item 5 ("Other Events") was reported and disclosed the
registrant's adoption of a new shareholder rights plan. Pursuant to
the new plan, one Right will be issued for each outstanding share
of common stock, par value $1.00 per share, of the registrant on
the expiration of the existing rights (April 25, 1996). A
description of the terms of the Rights was included and referred to
in the report.
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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
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(Registrant)
Date February 12, 1996
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/s/ Edward J. Ludwig
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Edward J. Ludwig
Senior Vice President - Finance
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
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EXHIBIT INDEX
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Exhibit Method of
Number Description Filing
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11 Computation of Earnings Filed with
Per Share this report
27 Financial Data Schedule Filed with
this report
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