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, 1996
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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 At 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, 1997
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Common stock, par value $1.00 122,957,853
PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements.
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Condensed Consolidated Balance Sheets at December 31, 1996 and
September 30, 1996
Condensed Consolidated Statements of Income for the three months ended
December 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows for the three months
ended December 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
2
ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
December 31, September 30,
Assets 1996 1996
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(Unaudited)
Current Assets:
Cash and equivalents $ 152,677 $ 135,151
Short-term investments 17,773 29,949
Trade receivables, net 508,383 580,313
Inventories (Note 2):
Materials 89,198 91,154
Work in process 63,268 66,005
Finished products 251,077 245,323
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403,543 402,482
Prepaid expenses, deferred taxes and other 141,372 128,946
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Total Current Assets 1,223,748 1,276,841
Investments in Marketable Securities 23,800 23,800
Property, plant and equipment 2,482,706 2,462,235
Less allowances for depreciation and amortization 1,248,622 1,218,087
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1,234,084 1,244,148
Intangibles, Net
Patents and other 82,290 81,992
Goodwill 86,419 93,873
Other 171,777 169,098
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Total Assets $ 2,822,118 $ 2,889,752
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Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 161,487 $ 227,424
Payables and accrued expenses 514,700 538,698
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Total Current Liabilities 676,187 766,122
Long-Term Debt 468,249 468,223
Long-Term Employee Benefit Obligations 302,730 295,122
Deferred Income Taxes and Other 38,946 35,102
Commitments and Contingencies 0 0
Shareholders' Equity:
Preferred stock 52,493 52,927
Common stock 169,424 170,484
Capital in excess of par value 61,711 58,378
Cumulative currency translation adjustments (5,171) (14,959)
Retained earnings 2,159,040 2,160,279
Unearned ESOP compensation (32,778) (32,787)
Shares in treasury - at cost (1,068,713) (1,069,139)
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Total Shareholders' Equity 1,336,006 1,325,183
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Total Liabilities and Shareholders' Equity $ 2,822,118 $ 2,889,752
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See notes to condensed consolidated financial statements
3
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Thousands of Dollars, Except Per Share Data
(Unaudited)
Three Months Ended
December 31,
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1996 1995
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REVENUES $ 655,799 $ 639,935
Cost of products sold 343,132 348,746
Selling and administrative 186,530 181,909
Research and development 39,656 37,334
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TOTAL OPERATING COSTS AND EXPENSES 569,318 567,989
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OPERATING INCOME 86,481 71,946
Interest expense, net (9,447) (9,287)
Other income (expense), net 4,808 (823)
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INCOME BEFORE INCOME TAXES 81,842 61,836
Income tax provision 23,734 17,314
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NET INCOME $ 58,108 $ 44,522
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EARNINGS PER SHARE $ .44 $ .32
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DIVIDENDS PER SHARE $ .13 $ .115
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Average common and common
equivalent shares outstanding 129,365 134,686
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See notes to condensed consolidated financial statements
4
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(UNAUDITED)
Three Months Ended
December 31,
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1996 1995
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Operating Activities:
Net income $ 58,108 $ 44,522
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 49,659 51,035
Change in working capital 9,926 (14,695)
Other, net 21,297 7,981
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Net cash provided by operating activities 138,990 88,843
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Investing Activities:
Capital expenditures (30,775) (30,643)
Acquisitions of businesses 0 (10,418)
Proceeds from divestitures of businesses 20,860 0
Change in investments, net 12,185 7,891
Other, net (12,849) 5,379
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Net cash used for investing activities (10,579) (27,791)
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Financing Activities:
Change in short-term debt (64,272) 17,717
Proceeds of long-term debt 97,838 0
Payments of long-term debt (101,071) (1,604)
Issuance of common stock 3,554 5,020
Repurchase of common stock (44,994) (79,852)
Dividends paid (858) (881)
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Net cash used for financing activities (109,803) (59,600)
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Effect of exchange rate changes on cash and equivalents (1,082) (753)
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Net increase in cash and equivalents 17,526 699
Opening Cash and Equivalents 135,151 198,506
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Closing Cash and Equivalents $ 152,677 $ 199,205
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See notes to condensed consolidated financial statements
5
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 1996 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.
Note 3 - Debt Issuance
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In October 1996, the Company issued $100 million of 6.90% Notes which mature on
October 1, 2006. The effective interest rate of the notes was 7.34%. Interest
on the notes is payable on April 1 and October 1 of each year, commencing with
April 1, 1997. The notes are not redeemable prior to maturity and will not be
entitled to any sinking fund. The Company used the net proceeds to repay a
portion of its outstanding commercial paper.
6
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 revenues of $656 million exceeded prior year revenues by 3%.
Reported revenue growth for the quarter was unfavorably impacted by the effect
of a stronger dollar versus the prior year which reduced revenues by an
estimated $11 million, and the absence of approximately $27 million of revenues
associated with divested businesses, all of which occurred in the Medical
Supplies and Devices segment. Adjusting for the effects of these items, revenue
growth would have been approximately 9%. Medical Supplies and Devices segment
revenues of $348 million were slightly higher than last year. Adjusting for the
absence of sales related to divested businesses, and the estimated unfavorable
effect of foreign currency translation, Medical Supplies and Devices segment
revenues would have increased approximately 11%. Diagnostic Systems segment
revenues of $308 million increased 5%, or 7% after excluding the estimated
unfavorable impact of foreign currency translation.
Domestic Medical segment revenues of $171 million decreased 2%. Excluding the
unfavorable impact from the absence of sales of divested businesses, Domestic
Medical segment revenues increased approximately 9%. International Medical
segment revenues of $178 million increased 3%, or 12%, adjusting for both the
estimated unfavorable impact of foreign currency translation and the absence of
sales of divested businesses. 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. Strong international sales
growth also continued in the pharmaceutical systems business.
Domestic Diagnostic segment revenues of $160 million increased 4%. Diagnostic
segment revenue growth continues to be unfavorably impacted by U.S. cost
containment initiatives in the infectious disease diagnostics business.
International Diagnostic segment revenues of $147 million increased 6%, or 10%
after excluding the estimated unfavorable effect of foreign currency
translation. Strong sales growth was achieved worldwide in the sample
collection and flow cytometry businesses.
The gross profit margin of 47.7% improved more than two percentage points over
last year's first quarter rate of 45.5%. The improvement reflects a more
profitable mix of products sold, including the absence of lower margins on
divested businesses as well as continuing productivity improvements. Selling
and administrative expense of $187 million was 28.4% of revenues which was the
same as last year's first quarter ratio. Investment of $40 million in research
and development increased 6% over last year's first quarter expenditures,
reflecting the acceleration of investment in strategic areas of the Company's
core businesses.
7
Operating income of $86 million increased 20% from last year's first quarter
amount of $72 million. The improvement in the operating margin from 11.2% to
13.2% primarily reflects the improved gross profit margin.
Net interest expense of $9 million was about the same as last year's first
quarter amount. Other income (expense), net was $6 million favorable to last
year's first quarter amount primarily due to a $4 million gain on the sale of
the infusion pump business in the first quarter of this year. The first quarter
income tax rate was 29.0%, compared with last year's first quarter rate of
28.0%, reflecting the forecasted mix in income among tax jurisdictions.
Net income was $58 million compared with $45 million last year, an increase of
31%. Earnings per share of $.44 increased 38% over last year's $.32. Strong
growth in operating income as well as a continuation of the Company's share
repurchase program contributed to this favorable earnings per share growth.
Financial Condition
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During the first quarter of 1997, cash provided by operations was $139 million,
compared with $89 million during the first quarter of last year principally due
to improvement in net income and lower working capital requirements. Capital
expenditures for the quarter of $31 million were about the same as last year.
For the full year, capital expenditures are expected to be slightly higher than
last year's full year amount of $146 million. In the first quarter, the Company
also collected $21 million in proceeds from the sale of the European infusion
pump business.
In the first quarter of 1997, the Company issued $100 million of 6.90% Notes
(see Note 3 to Condensed Consolidated Financial Statements), the proceeds of
which were used to repay a portion of the Company's outstanding commercial
paper, which had been classified as long-term debt at September 30, 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 31.9%, compared with 36.5% a year ago.
Also in the first quarter of 1997, the Company entered into a $500 million five
year revolving credit facility with a group of banks. Restrictive covenants
under this agreement include a minimum tangible net worth level. 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 1997, the Company repurchased 1.1 million shares of
its common stock for a total expenditure of $45 million. At December 31, 1996,
authorization from the Board of Directors remained outstanding to acquire an
additional 13.7 million shares.
8
At its November 1996 meeting, the Board of Directors increased the Company's
quarterly dividend from $.115 to $.13 per common share.
The Company has operations in Mexico which represented approximately $88 million
of the Company's $2.8 billion revenues in fiscal 1996. As a result of the three
year cumulative inflation rate for Mexico exceeding 100%, effective January 1,
1997, the Company will consider its Mexican business to be operating in a highly
inflationary economy in accordance with Statement of Financial Accounting
Standards No. 52, Foreign Currency Translation and, accordingly, translation
gains and losses will be included in the determination of net income. The
results of this change are not expected to have a material impact on the
Company's results of operations or financial condition.
9
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
The following reports on Form 8-K were filed by the registrant with
the Securities and Exchange Commission:
(i) Form 8-K dated October 7, 1996 reported Item 7 in connection
with the registrant's anticipated offering of up to $100
million principal amount of notes pursuant to a Prospectus
Supplement dated October 8, 1996 under the registrant's
Registration Statement on Form S-3 (Registration No. 33-
47957). The registrant filed the following exhibits on Form
8-K:
12 - Calculation of Ratio of Earnings to Fixed Charges.
(ii) Form 8-K dated October 15, 1996 reported Item 7 in connection
with the registrant's sale of $100 million principal amount
of notes pursuant to a Prospectus Supplement dated October 8,
1996 under the Registrant's Registration Statement on Form S-
3 (Registration No. 33-47957). The registrant filed the
following exhibits on Form 8-K:
1 - Pricing Agreement dated October 8, 1996 between the
Registrant and Goldman, Sachs & Co.
4(d) - Form of Definitive Global 6.90% Note Due October 1,
2006.
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
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(Registrant)
Date February 13, 1997
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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)
11
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