PORTIONS OF ANNUAL REPORT

Published on December 16, 1997



EXHIBIT 13

FINANCIAL TABLE OF CONTENTS

21 Financial Review
29 Six-Year Summary of Selected Financial Data
30 Summary by Business Segment
31 Summary by Geographic Area
32 Report of Management
33 Report of Ernst & Young LLP, Independent Auditors
34 Consolidated Statements of Income
35 Consolidated Balance Sheets
36 Consolidated Statements of Cash Flows
37 Notes to Consolidated Financial Statements


FINANCIAL REVIEW

Becton Dickinson is a medical technology company that manufactures and sells a
broad range of medical supplies and devices and diagnostic systems for use by
health care professionals, medical research institutions and the general public.
The Company focuses strategically on achieving growth in two worldwide business
segments -- the Medical Supplies and Devices Segment ("Medical") and the
Diagnostic Systems Segment ("Diagnostic"). The Company's financial results and
the operating performance of the segments are discussed below.

Acquisitions

In the third quarter of 1997, the Company completed acquisitions of
PharMingen, a manufacturer of reagents for biomedical research, and Difco
Laboratories Incorporated ("Difco"), a manufacturer of microbiology media and
supplies, for an aggregate amount of $187 million, net of cash acquired. The
Company recorded a $15 million charge for purchased in-process research and
development in connection with these acquisitions. The aggregate net revenues of
these companies for fiscal years 1997 and 1996 were approximately $117 million
and $103 million, respectively. Included in the Company's 1997 worldwide
revenues was $43 million related to these companies. The Company continues to
seek new strategic alliances and acquisitions that complement its existing
businesses and geographic presence, as well as contribute to the acceleration of
revenue growth.

Revenues and Earnings

Worldwide revenues rose 1.5% to $2.8 billion. Excluding the estimated
unfavorable impact of foreign currency translation of 3%, and the net impact of
acquisitions and divestitures, the resulting underlying growth rate was 5%. This
growth rate resulted primarily from volume increases and an improved product mix
in both segments. Price increases have been limited as a result of health care
cost containment pressures in the United States and abroad, as well as increased
competition in certain product lines.

21

Health care cost containment remains an important factor in many of the
markets served by the Company. By improving manufacturing productivity and
leveraging the Company's worldwide presence and capabilities, the Company's cost
to serve its customers has continued to decline. Health care providers have
increasingly demonstrated their preference to enter into comprehensive
arrangements with the Company to take full advantage of technology and marketing
incentives. Although such arrangements typically result in short-term pricing
pressures, they can also result in longer-term increases in volume, as well as
standardized buying practices that can contribute to manufacturing and
administrative efficiencies. On balance, these arrangements should benefit the
Company.

Medical revenues of $1.5 billion were about the same as last year.
Excluding the estimated impact of unfavorable foreign currency translation of 3%
and the decrease in revenues related to divested non-core product lines, Medical
revenues increased 7%. Revenue growth was led by market share gains for infusion
therapy products and increased sales of prefillable syringes to pharmaceutical
companies.

Medical operating income of $350 million increased 2% over 1996. Excluding
the estimated unfavorable effects of business divestitures and foreign currency
translation, Medical operating income increased 9%. This performance was
primarily due to revenue growth, improved sales mix and manufacturing
productivity.

Diagnostic revenues of $1.3 billion increased 3%. The incremental revenues
related to acquisitions were offset by the estimated impact of unfavorable
foreign currency translation of 4%. Growth in sample collection revenues was
strong, reflecting continued conversion of markets outside the United States to
safer and more convenient products and techniques. FACS brand flow cytometry
systems also continued to exhibit strong sales growth. The addition of
PharMingen to its flow cytometry business provided the Company with a broader
array of higher growth cell analysis products. These products are used by
researchers and clinicians working with immunological diseases and cancer.
Although revenues of infectious disease products increased as a result of the
Difco acquisition, revenue growth of these products continues to be affected by
cost containment in infectious disease testing. The acquisition of Difco
provides a platform for further expansion into the higher growth industrial
segment of the market for dehydrated culture media and prepared plated media.

Diagnostic operating income of $195 million increased 11% over 1996.
Excluding the impact of acquisitions, including related charges of $15 million
for purchased in-process research and development, and the estimated impact of
unfavorable foreign currency translation, Diagnostic operating income increased
29%. This strong performance reflects an improved sales mix and operating
expense productivity programs in the United States and Europe.

On a geographical basis, revenues outside the United States of $1.3 billion
declined 2%. Excluding the estimated impact of unfavorable foreign currency
translation of 6% and the net impact of divestitures and acquisitions, the
resulting underlying growth rate was 7%. Double-digit increases were achieved in
sales of prefillable syringes to pharmaceutical companies, sample collection
devices and diabetes health care products. The Asia-Pacific region, including
China and India where the Company recently completed manufacturing facilities,
continued to be the Company's area of fastest revenue growth.

Revenues in the United States were $1.5 billion, an increase of 4%. The
incremental revenues related to acquisitions were offset by the impact of
divestitures. Sales of infusion therapy products were particularly strong,
reflecting market share gains and sales of new products. As mentioned earlier,
sales of infectious disease products continued to be negatively affected by the
effects of cost containment on such testing.

Gross profit margin rose sharply to 49.7%, compared with 48.4% last year,
reflecting the Company's continued success in improving manufacturing efficiency
as well as a more profitable mix of products sold.

22

Selling and administrative expense of $766 million was 27.3% of revenues,
the same percentage as in 1996. Aggregate expenses were slightly higher,
reflecting increased investment in new international markets and new strategic
initiatives, partially offset by savings achieved through the Company's
productivity improvements.

Investment in research and development increased to $181 million, or 6.4%
of revenues. Excluding the $15 million of charges for purchased in-process
research and development referred to above, research and development was 5.9% of
revenues, as compared with 5.6% in 1996. This spending included additional
funding for new blood collection and infusion therapy safety products, and
emerging new platforms, such as next generation products for blood glucose
monitoring, to support the Company's efforts to accelerate its rate of sales
growth. Excluding acquisitions, sales of new products introduced in the last
five years represented 12% and 17% of revenues in 1997 and 1996, respectively.

Operating income in 1997 was $451 million, an increase of 4.5%. Excluding
the estimated impact of unfavorable foreign currency translation and the net
impact of divestitures and acquisitions, including related charges of $15
million for purchased in-process research and development, operating income
increased 17%, primarily from improved gross profit margin. The Company's
operating margin improved to 16.0% of revenues compared with 15.6% in 1996.

Net interest expense of $39 million in 1997 was $2 million higher than in
1996, primarily due to the financing of operations in Mexico and Brazil, which
was partially offset by an increase in capitalized interest.

"Other income (expense), net" in 1997, included $8 million of gains from
the disposition of non-core business lines and a gain of $6 million on the sale
of an investment. Also included were foreign exchange losses of $5 million,
including hedging costs.

The effective tax rate in 1997 was 29% as compared with 28% in 1996,
principally due to the lack of a tax benefit associated with the $15 million of
purchased in-process research and development charges recorded in 1997, as
discussed earlier, which was partially offset by a slight improvement in the mix
in income among tax jurisdictions.

Net income was $300 million, an increase of 6% over $283 million in 1996.
Earnings per share were $2.30, an increase of 9% over $2.11 in 1996. The
purchased in-process research and development charges recorded in 1997 decreased
earnings per share by $.11, and the estimated impact of unfavorable foreign
currency translation was $.17 per share. Adjusting for these two items, earnings
per share grew 22% over last year.

In accordance with Statement of Financial Accounting Standards ("SFAS") No.
52 "Foreign Currency Translation," the net monetary assets ($16 million and $9
million at September 30, 1997 and 1996, respectively) of the Company's Brazilian
subsidiary, whose functional currency is the U.S. dollar, were translated at
current exchange rates, with the related translation gains and losses included
in net earnings. During the year, the Brazilian three-year cumulative inflation
rate fell below 100%. The Company is currently assessing the appropriateness of
continuing to consider its Brazilian business to be operating in a highly
inflationary economy. Effective January 1, 1997, the Company also considered its
Mexican business to be operating in a highly inflationary economy. The net
monetary assets of the Company's Mexican subsidiary at January 1, 1997 and
September 30, 1997, were $30 million and $45 million, respectively.

The net assets of foreign operations, whose functional currencies are the
local currencies, are translated at current exchange rates. The Company
generally does not hedge these translation exposures since such amounts are
recorded as cumulative currency translation adjustments, a separate component of
shareholders' equity, and do not affect reported earnings or current cash flow.
The net assets of these foreign operations were $849 million and $907 million at
September 30, 1997 and 1996, respectively. This decline is attributable
primarily to the exclusion of Mexico at September 30, 1997, as a result of the
change in functional currency, as discussed earlier.

23

The Company has certain receivables, payables and short-term borrowings,
denominated in currencies other than the functional currencies of the Company
and its subsidiaries, which create foreign exchange risk. The Company utilizes
simple derivative instruments to manage its foreign exchange and interest rate
risks. These instruments are selectively employed solely to hedge exposures in
those instances in which their use reduces the volatility of the impact of
foreign exchange or interest rate movements. At September 30, 1997, the Company
had the following significant foreign exchange instruments:



(Dollar Amounts in Thousands)

U.S.$ Forward
Local Amount Contract Fair Maturity
Forward Contracts Currency Buy (Sell) Rate Per U.S.$ Value Date
------------------------------------------------------------------------------

Non-U.S. Dollar
Functional
Currency: Japanese Yen $ 39,383 JPY 113.92 $ 2,234 10/24/97
Japanese Yen 19,422 JPY 118.58 189 12/22/97
Italian Lira 28,385 ITL 1779.12 (842) 10/24/97
French Franc 25,974 FRF 6.13 (921) 10/24/97
French Franc 15,063 FRF 5.91 39 10/24/97
Spanish Peseta 15,476 ESP 150.41 (129) 10/24/97
Spanish Peseta 10,608 ESP 135.05 988 01/28/98
Irish Pound (43,660) IEP 0.67 (918) 10/24/97
Irish Pound (74,170) IEP 0.68 (1,231) 11/25/97
Irish Pound (19,150) IEP 0.68 (285) 12/22/97
Irish Pound (38,201) IEP 0.66 (1,719) 01/23/98
Irish Pound (29,699) IEP 0.67 (729) 09/18/98
Singapore Dollar (53,646) SGD 1.47 (2,008) 10/24/97
Australian Dollar 6,560 AUD 1.39 (64) 12/19/97
Swiss Franc (6,829) CHF 1.45 40 12/22/97

U.S. Dollar
Functional
Currency: British Pound $ 19,000 GBP 0.62 $ (45) 10/30/97
Italian Lira 17,600 ITL 1724.40 (22) 10/30/97
Japanese Yen 10,000 JPY 120.00 (3) 10/30/97
German Mark 9,000 DEM 1.76 (6) 10/30/97
Australian Dollar 5,800 AUD 1.38 (5) 10/30/97
Canadian Dollar 5,000 CAD 1.38 (3) 10/30/97
Irish Pound (18,600) IEP 0.69 8 10/30/97
French Franc (6,300) FRF 5.91 7 10/30/97




U.S.$ Forward
Forward Cross Local Contract Contract Fair Maturity
Rate Contracts Currency Amount Cross Rate Value Date
--------------------------------------------------------------------------------

Buy Irish Pound/ $ 11,462 IEP 8.77/FRF $(185) 10/24/97
Sell French Franc

Buy Irish Pound/ 11,054 ESP 215.30/IEP 21 01/26/98
Sell Spanish Peseta

Buy Irish Pound/ 16,722 IEP 2557.25/ITL (169) 01/22/99
Sell Italian Lira

Buy Belgian Franc/ 6,817 FRF .16/BEF (3) 10/24/97
Sell French Franc




Purchased U.S.$ Option Strike
Currency Local Amount Price Per Fair Maturity
Options Currency Buy (Sell) U.S. $ Value Date
----------------------------------------------------------------------------------

U.S. Dollar
Functional
Currency: New Mexican Peso Put/ $39,000 NMP 7.88 $ 49 10/10/97
U.S.$ Call
Non-U.S. Dollar
Functional
Currency: Colombian Peso Put/ 4,000 COP 1193.16 184 10/24/97
U.S.$ Call


The Company enters into interest rate swap agreements in order to reduce
the impact of fluctuating interest rates on its foreign currency short-term
floating rate third party and intercompany debt and investments outside the
United States. Under these agreements, the Company agrees with other parties to
pay or receive fixed rate payments, generally on an annual basis, in exchange
for paying or receiving variable rate payments, generally on a quarterly basis,
calculated on an agreed-upon notional amount. At September 30, 1997, the Company
had the following interest rate swap agreements:



Notional Amount Variable
U.S. Dollar Fixed Rate At Fair Maturity
Interest Rate Swaps Equivalent Rate Year End Value Date
-----------------------------------------------------------

French Franc $16,910 4.63% 3.40% $(106) 01/17/98
Japanese Yen 7,057 2.48% 0.64% (80) 05/08/98
Japanese Yen 7,057 2.44% 0.59% (102) 05/10/98
Japanese Yen 3,321 1.87% 0.58% (36) 05/30/98
Italian Lira 11,622 8.29% 6.90% (590) 07/23/99
Irish Pound 29,130 6.64% 6.25% 642 08/23/99
Irish Pound 29,130 5.92% 6.25% 304 10/22/99
Irish Pound 29,130 6.27% 6.16% 430 12/20/99


24

At September 30, 1997, the Company's Brazilian subsidiary entered into an
agreement under which it will pay interest of 21.05% per annum in local currency
on the Brazilian Real equivalent of a notional amount of $21.8 million and
receive the Brazilian Real equivalent of 8.65% per annum on the notional amount,
plus an amount equal to the currency devaluation for the period. This agreement,
which matures on February 2, 1998, was entered into to protect the Company from
a devaluation of the Brazilian Real versus the U.S. dollar. The fair value of
this instrument approximated the carrying value of zero at September 30, 1997.

For further discussion of derivative instruments, see Notes 1 and 9 of the
Notes to Consolidated Financial Statements.

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share." This Statement specifies the computation,
presentation and disclosure requirements for earnings per share for entities
with publicly held common stock or potential common stock. The Company is
required to adopt the provisions of SFAS No. 128 for the quarter ending December
31, 1997. The principal difference between the provisions of SFAS No. 128 and
previous authoritative pronouncements is related to the exclusion of common
stock equivalents in the determination of Basic Earnings Per Share and the
market price at which common stock equivalents are calculated in the
determination of Diluted Earnings Per Share. For further discussion, see Note 1
of the Notes to Consolidated Financial Statements.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company is required to adopt the
provisions of these Statements no later than its 1999 fiscal year. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components in a primary financial statement. The Company is currently evaluating
the reporting formats recommended under this Statement. SFAS No. 131 establishes
a new method by which companies will report operating segment information. This
method is based on the manner in which management organizes the segments within
a company for making operating decisions and assessing performance. The Company
continues to evaluate the provisions of SFAS No. 131 and, upon adoption,
different operating segments may be reported by the Company.

As the end of the twentieth century approaches, many companies are faced
with adapting their existing computer systems to accommodate the year 2000. The
Company is currently evaluating alternatives for modifying or replacing existing
software to address issues presented by the year 2000 and does not expect the
incremental costs associated with these issues to have a material impact on the
Company's results of operations, financial condition or cash flows.

Financial Condition

Cash provided by operations continued to be the Company's primary source of
funds to finance operating needs and capital expenditures. In 1997, net cash
provided by operating activities was $443 million, compared with $460 million in
1996.

Capital expenditures were $170 million in 1997, compared with $146 million
in the prior year. Medical capital spending, which totaled $106 million in 1997,
included the acquisition of equipment for the ongoing expansion of the
prefillable syringe, diabetes health care and hypodermic businesses. In
addition, funds were expended to complete a new manufacturing facility in China,
which began producing hypodermic syringes, intravenous catheters and anesthesia
needles during the year. Also, work continued on a new manufacturing facility in
India, which initially will produce products for diabetes health care. Funds
also were expended to support global manufacturing productivity improvement
programs. Diagnostic capital spending, which totaled $50 million in 1997,
included the acquisition of additional equipment by the sample collection
business for the new SAFETY-LOK blood collection set. Funds also were expended
to increase the capacity of the Company's warehouse in Japan and for the
acquisition of equipment to support capacity expansion and cost reduction
programs, primarily in the sample collection, infectious disease diagnostics and
flow cytometry businesses. Funds expended outside of the above segments included
the upgrade of information technology and telecommunication systems in the
United States. The Company expects capital expenditures in 1998 to be somewhat
higher than in 1997.

25

The Company expended $201 million, net of cash acquired, for business
acquisitions. Business divestitures in 1997 resulted in cash proceeds of $24
million. The divested operations included an infusion systems business and a
small product line related to the Company's microbiology business. The Company
intends to use substantial amounts of excess cash that is expected to be
generated over the next several years to pursue strategic alliances and
acquisitions.

Net cash used for financing activities was $92 million during 1997 as
compared with $412 million in 1996. This change was due primarily to
a reduction in common share repurchases, as well as net proceeds received from
newly issued debt, which were partially offset by the repayment of commercial
paper.

The Company repurchased 3.2 million of its common shares at an average cost
of $46.30 for a total expenditure of $150 million in 1997, compared with
repurchases totaling $325 million in 1996. At September 30, 1997, authorization
to repurchase up to an additional 11.6 million shares remained under a July 23,
1996 Board of Directors' resolution.

During 1997, total debt increased $102 million, primarily as a result of
increased spending on acquisitions, which was partially offset by lower spending
on common stock repurchases. Short-term debt was 17% of total debt at year end,
compared with 33% in 1996. The change in the percentage was principally
attributable to the repayment of short-term debt with the proceeds of the
Company's issuances of long-term debt. The Company's weighted average cost of
total debt at the end of 1997 was 7.6% compared with 7.7% at the end of last
year. Total debt to capitalization at year end increased to 36.3% from 34.3%
last year.

In November 1996, the Company entered into a five-year, $500 million
syndicated and committed revolving credit facility that was undrawn at September
30, 1997. The facility supports the Company's commercial paper program, under
which $79 million was outstanding at September 30, 1997, and is also available
for other general corporate purposes. In addition, the Company has unconfirmed
lines of credit outside the United States. In October 1996, the Company issued
to the public $100 million of 10-year non-redeemable notes with a coupon rate of
6.9% and an effective rate of 7.34%. In July 1997, the Company publicly issued
$200 million of 30-year non-redeemable debentures with a coupon rate of 7% and
an effective rate of 7.23%. Proceeds of both debt issues were used to repay
commercial paper. In October 1997, the Company increased its existing shelf
registration statement to issue up to $500 million of debt securities. Based on
its strong financial condition, the Company has a high degree of confidence in
its ability to refinance maturing short-term and long-term debt, as well as to
incur substantial additional debt, if required.

Return on equity increased to 22.1% in 1997 from 20.8% in 1996.

The Company manufactures various medical products in Brazil for sale in
that country and for export. In addition, the Company imports other medical and
diagnostic products from affiliates for distribution within Brazil. While the
Brazilian economy has experienced very high inflation rates and significant
devaluation of its currency in the past, more recently, inflation and the rate
of currency devaluation have declined significantly. The Company also
manufactures in Mexico and imports from affiliates various medical and
diagnostic products for sale in Mexico. Since December 1994, the Mexican economy
has experienced a period of high inflation, recession and currency instability.
More recently, Mexico's economy and currency have shown signs of stabilizing.
The Brazilian and Mexican economies have the potential for creating volatility
in the revenues and earnings of the Company's operations in these countries,
including the risk of foreign exchange losses as a result of fluctuations in
their local currencies. The Company has successfully managed these risks by
adjusting the selling prices of its products in line with inflation and by
taking steps to limit the size of its foreign exchange exposures. In the
aggregate, the Company's Brazilian and Mexican operations constituted 7% or less
of each of the Company's consolidated revenues, net income and total assets.

In the second half of 1997, the currencies of many countries in Southeast
Asia, in which the Company maintains operations, depreciated against the U.S.
dollar. The Company was able to offset the foreign exchange transaction losses
of these devaluations through the hedging of its exposures in the affected
currencies. Consequently, the impact on the Company was insignificant. The
Company's operations in Southeast Asia constituted less than 2% of each of the
Company's consolidated revenues, net income and total assets.

26

The Company believes that the fundamentally noncyclical nature of its core
medical and diagnostic businesses, its international diversification, and its
ability to meet the needs of the worldwide health care industry for cost-
effective and innovative products will continue to cushion the long-term impact
on the Company of economic and political dislocations in the countries in which
it does business, including the effects of possible health care system reforms.
In 1997, inflation did not have a material impact on the Company's overall
operations.

The Company believes that its operations comply in all material respects
with applicable laws and regulations. The Company is a party to a number of
Federal proceedings in the United States brought under the Comprehensive
Environmental Response, Compensation and Liability Act, also known as
"Superfund," and similar state laws. For all sites, there are other potentially
responsible parties that may be jointly or severally liable to pay all cleanup
costs. The Company accrues costs for an estimated environmental liability based
upon its best estimate within the range of probable losses, without considering
possible third-party recoveries. The Company believes that any reasonably
possible losses in excess of accruals would be immaterial to the Company's
financial condition.

The Company, along with a number of other manufacturers, has been named as
a defendant in approximately 75 product liability lawsuits related to natural
rubber latex that have been filed in various state and Federal courts. Cases
pending in Federal Court are being coordinated under the matter In re Latex
Gloves Products Liability Litigation (MDL Docket No. 1148) in Philadelphia, and
an analogous procedure has been implemented in the California State Courts.
Generally, these actions allege that medical personnel have suffered allergic
reactions ranging from skin irritation to anaphylaxis as a result of exposure to
medical gloves containing natural rubber latex. In 1986, the Company acquired a
business which manufactured, among other things, latex surgical gloves. In 1995,
the Company divested this glove business. The Company intends to mount a
vigorous defense in these lawsuits.

The Company is also involved in other legal proceedings and claims which
arise in the ordinary course of business, both as a plaintiff and a defendant.

In the opinion of the Company, the results of the above matters,
individually and in the aggregate, are not expected to have a material effect on
its results of operations, financial condition or cash flows.

1996 Compared with 1995

Worldwide revenues for 1996 rose 2% to $2.8 billion. Excluding the
estimated impacts of unfavorable foreign currency translation of 1% and the
decrease in revenues related to divested businesses, the resulting underlying
growth rate was 6%. This growth rate resulted primarily from volume increases
and an improved product mix in both segments. Price increases averaged less than
1%. Medical revenues for 1996 of $1.5 billion increased 1% over the prior year.
Excluding the impact of divested businesses, the most significant of which was
the medical glove business sold in June 1995, Medical revenues increased 6%.
Revenue growth was led by strong sales of injection systems products due to the
continuing shift toward the use of devices with safety features and increased
use of prefillable syringes by pharmaceutical companies. Sales of infusion
therapy products also continued to grow from market share gains, geographic
expansion and introductions of new products. Diagnostic revenues for 1996 of
$1.3 billion increased 4%, or 5% excluding the estimated unfavorable impact of
foreign currency translation. Growth in sample collection was led by the
continued strong demand for safety products, the introduction of several new and
innovative products, and overall increased demand outside the United States.
FACS brand flow cytometry systems also exhibited strong sales growth. Sales of
infectious disease products were about the same as 1995, which was consistent
with the overall market trend for infectious disease testing, and reflected the
continuing worldwide focus on infectious disease cost containment by health care
providers.

The Company's gross profit margin rose to 48.4%, compared with 47.0% in
1995, reflecting a more profitable mix of products sold, continued productivity
improvements and the absence of lower margins associated with divested
businesses.

Selling and administrative expense was 27.3% of revenues, about the same as
the 1995 ratio. Higher spending relating to a refocusing of sales and marketing
resources toward critical strategic initiatives and international expansion was
largely offset by savings achieved through reorganizations in the United States
and Europe, including the consolidation of certain field

27

sales organizations. Investment in research and development increased to $154
million, or 5.6% of revenues, reflecting the additional funding directed toward
safety products, as well as emerging new platforms for long-term growth, such as
DNA probe technology and next generation products for blood glucose monitoring
and sample collection.

Operating income in 1996 was $431 million, an increase of 9%. Excluding the
estimated impacts of divestitures and unfavorable foreign exchange, as well as
the write-down of assets and other provisions relating to the cellular imaging
business, operating income grew 11%, primarily from improved gross profit
margin. The Company's operating margin improved to 15.6% of revenues compared
with 14.6% in 1995.

Net interest expense of $37 million in 1996 was $5 million lower than in
1995, primarily due to higher short-term investments in Europe, lower financing
expense in Japan and higher capitalized interest primarily related to a project
in China.

"Other income (expense), net" in 1996 included income of $8 million from a
net cash settlement received in connection with one of the Company's patents and
foreign exchange losses of $8 million, including hedging costs.

The effective tax rate of 28.0% was the same as the rate in 1995.

Net income was $283 million, an increase of 13% over $252 million in 1995.
Earnings per share were $2.11, an increase of 18% over $1.79 in 1995.

Cash provided by operations continues to be the Company's primary source of
funds to finance operating needs and capital expenditures. Capital expenditures
were $146 million, compared with $124 million in 1995. Medical and Diagnostic
capital spending totaled $91 million and $50 million, respectively, in 1996.

Business divestitures in 1996 resulted in cash proceeds of $38 million. The
divested operations included a contract packaging business and certain other
non-core product lines.

Net cash used for financing activities was $412 million during 1996 as
compared with $421 million in 1995.

During 1996, total debt decreased $68 million as a result of strong cash
flow from operations and proceeds from business divestitures. Short-term debt
was 33% of total debt at year end, compared with 27% in 1995. The change in the
ratio was principally attributable to an increase in commercial paper
outstanding and the Company's early redemption on June 1, 1996 of $66.4 million
of its outstanding 9.25% Sinking Fund Debentures due June 1, 2016.

Return on equity increased to 20.8% in 1996, from 17.5% in 1995.

28

SIX-YEAR SUMMARY OF SELECTED FINANCIAL DATA Becton, Dickinson and Company
Years Ended September 30


Thousands of dollars,
except per share amounts 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------

Operations Revenues $2,810,523 $2,769,756 $2,712,525 $2,559,461 $2,465,405 $2,365,317
Gross Profit Margin 49.7% 48.4% 47.0% 45.3% 44.5% 45.0%
Operating Income 450,515 431,249 396,650 325,038 270,425 328,592
Interest Expense, Net 39,373 37,409 42,833 47,624 53,412 49,116
Income Before Income
Taxes and Cumulative
Effect of Accounting
Changes 422,640 393,676 349,578 296,159 222,894 269,457
Income Tax Provision 122,566 110,229 97,882 68,985 10,054 68,704
Income Before
Cumulative Effect of
Accounting Changes 300,074 283,447 251,696 227,174 212,840 200,753
Net Income 300,074 283,447 251,696 227,174 71,783/A/ 200,753
Earnings Per Share:
- Before Cumulative
Effect of Accounting
Changes 2.30 2.11 1.79 1.52 1.35 1.28
- Net Income 2.30 2.11 1.79 1.52 .44/A/ 1.28
Dividends Per Common Share .52 .46 .41 .37 .33 .30
Average Common and Common
Equivalent Shares
Outstanding 128,972 132,795 138,402 146,666 153,860 154,056
- ---------------------------------------------------------------------------------------------------------------------
Financial Current Assets $1,312,609 $1,276,841 $1,327,518 $1,326,551 $1,150,742 $1,221,209
Position Current Liabilities 678,197 766,122 720,035 678,321 636,062 713,335
Current Ratio 1.9 1.7 1.8 2.0 1.8 1.7
Property, Plant and
Equipment, Net 1,250,705 1,244,148 1,281,031 1,376,349 1,403,070 1,429,519
Total Assets 3,080,252 2,889,752 2,999,505 3,159,533 3,087,565 3,177,675
Long-Term Debt 665,449 468,223 557,594 669,157 680,581 685,081
Shareholders' Equity 1,385,433 1,325,183 1,398,385 1,481,694 1,456,953 1,594,926
Book Value Per Common
Share 11.35 10.72 10.74 10.54 9.75 10.50
- ---------------------------------------------------------------------------------------------------------------------
Financial Income Before Income
Relationships Taxes and Cumulative
Effect of Accounting
Changes as a Percent
of Revenues 15.0% 14.2% 12.9% 11.6% 9.0% 11.4%
Return on Total Assets/B/ 15.9% 15.2% 13.3% 11.5% 9.2%/C/ 11.1%
Return on Equity 22.1% 20.8% 17.5% 15.5% 13.3%/C/ 13.6%
Debt to Capitalization/D/ 36.3% 34.3% 35.2% 36.1% 37.8% 36.1%
- ---------------------------------------------------------------------------------------------------------------------
Additional Depreciation and
Data Amortization $ 209,771 $ 200,482 $ 207,756 $ 203,705 $ 189,756 $ 169,638
Capital Expenditures 170,349 145,929 123,760 123,017 184,168 185,559
Research and Development
Expense 180,526 154,220 144,201 144,227 139,141 125,207
Number of Employees 18,900 17,900 18,100 18,600 19,000 19,100
Number of Shareholders 8,944 8,027 7,712 7,489 7,463 7,086

/A/ Includes after-tax charge of $141,057, or $.91 per share, for the
cumulative effect of accounting changes.
/B/ Earnings before interest expense and taxes as a percent of average total
assets.
/C/ Excludes the cumulative effect of accounting changes.
/D/ Total debt as a percent of the sum of total debt, shareholders' equity
and net non-current deferred income tax liabilities.

29

SUMMARY BY BUSINESS SEGMENT Becton, Dickinson and Company
(See Note 13 to Financial Statements)


Thousands of dollars 1997 1996 1995
-------------------------------------------------------------------------

Revenues Medical Supplies and Devices $1,510,881 $1,509,417 $1,500,075
Diagnostic Systems 1,299,642 1,260,339 1,212,450
-------------------------------------------------------------------------
Total Segments $2,810,523 $2,769,756 $2,712,525
=========================================================================

Segment Operating Income Medical Supplies and Devices $ 349,613 $ 342,015 $ 330,368
Diagnostic Systems 194,611 174,656 157,673
-------------------------------------------------------------------------
Total Segments 544,224 516,671 488,041
Unallocated Expenses (121,584) (122,995) (138,463)
-------------------------------------------------------------------------
Income Before Income Taxes $ 422,640 $ 393,676 $ 349,578
=========================================================================

Identifiable Assets Medical Supplies and Devices $1,324,035 $1,337,355 $1,348,860
Diagnostic Systems 1,423,612 1,209,970 1,210,888
-------------------------------------------------------------------------
Total Segments 2,747,647 2,547,325 2,559,748
Corporate/A/ 332,605 342,427 439,757
------------------------------------------------------------------------
Total $3,080,252 $2,889,752 $2,999,505
=========================================================================

Capital Expenditures Medical Supplies and Devices $ 106,298 $ 90,918 $ 77,062
Diagnostic Systems 50,390 49,651 43,776
-------------------------------------------------------------------------
Total Segments 156,688 140,569 120,838
Corporate 13,661 5,360 2,922
-------------------------------------------------------------------------
Total $ 170,349 $ 145,929 $ 123,760
=========================================================================

Depreciation and Medical Supplies and Devices $ 88,603 $ 89,727 $ 96,517
Amortization Diagnostic Systems 108,971 101,618 102,540
-------------------------------------------------------------------------
Total Segments 197,574 191,345 199,057
Corporate 12,197 9,137 8,699
-------------------------------------------------------------------------
Total $ 209,771 $ 200,482 $ 207,756
=========================================================================


/A/ Consists principally of cash and cash equivalents, short-term and long-term
investments in marketable securities, buildings and equipment, and
investments in non-affiliated companies.

30

SUMMARY BY BUSINESS SEGMENT Becton, Dickinson and Company
(See Note 13 to Financial Statements)


Thousands of dollars 1997 1996 1995
-------------------------------------------------------------------------

Revenues United States $1,486,701 $1,423,883 $1,438,459
Europe 787,335 835,984 792,908
Other 536,487 509,889 481,158
-------------------------------------------------------------------------
Total/A/ $2,810,523 $2,769,756 $2,712,525
=========================================================================

Area Operating Income United States $ 383,186 $ 349,560 $ 341,277
Europe 147,040 148,812 116,229
Other 13,998 18,299 30,535
-------------------------------------------------------------------------
Total 544,224 516,671 488,041
Unallocated Expenses (121,584) (122,995) (138,463)
-------------------------------------------------------------------------
Income Before Income Taxes $ 422,640 $ 393,676 $ 349,578
=========================================================================

Identifiable Assets United States $1,653,144 $1,459,260 $1,466,376
Europe 601,398 649,206 673,546
Other 493,105 438,859 419,826
-------------------------------------------------------------------------
Total 2,747,647 2,547,325 2,559,748
Corporate/B/ 332,605 342,427 439,757
-------------------------------------------------------------------------
Total $3,080,252 $2,889,752 $2,999,505
=========================================================================

/A/ Interarea revenues to affiliates amounted to $406,898 in 1997, $368,834 in
1996 and $346,905 in 1995. These revenues, which are principally from the
United States, are eliminated in consolidation. Intersegment revenues are
not material.
/B/ Consists principally of cash and cash equivalents, short-term and long-term
investments in marketable securities, buildings and equipment, and
investments in non-affiliated companies.

See notes to consolidated financial statements

31




Consolidated Statements of Income Becton, Dickinson and Company
Years Ended September 30
Thousands of dollars, except per share amounts 1997 1996 1995
- ----------------------------------------------------------------------------------------------------


Operations Revenues $ 2,810,523 $ 2,769,756 $ 2,712,525
Cost of products sold 1,413,311 1,429,177 1,436,358
Selling and administrative expense 766,071 755,110 735,316
Research and development expense 180,626 154,220 144,201
---------------------------------------------------------------------------------------
Total Operating Costs and Expenses 2,360,008 2,338,507 2,315,875
---------------------------------------------------------------------------------------
Operating Income 450,515 431,249 396,650
Interest expense, net (39,373) (37,409) (42,833)
Other income (expense), net 11,498 (164) (4,239)
---------------------------------------------------------------------------------------
Income Before Income Taxes 422,640 393,676 349,578
Income tax provision 122,566 110,229 97,882
---------------------------------------------------------------------------------------
Net Income $ 300,074 $ 283,447 $ 251,696
=======================================================================================

---------------------------------------------------------------------------------------
Earnings Per Share $ 2.30 $ 2.11 $ 1.79
=======================================================================================


See notes to consolidated financial statements


34



Consolidated Balance Sheets Becton, Dickinson and Company
September 30
Thousands of dollars, except per share amounts 1997 1996
- -------------------------------------------------------------------------------------------------------------------------------


Assets Current Assets
Cash and equivalents $ 112,639 $ 135,151
Short-term investments 28,316 29,949
Trade receivables, net 595,685 580,313
Inventories 438,337 402,482
Prepaid expenses, deferred taxes and other 137,632 128,946
--------------------------------------------------------------------------------------------------
Total Current Assets 1,312,609 1,276,841
Investments in Marketable Securities -- 23,800
Property, Plant and Equipment, Net 1,250,705 1,244,148
Goodwill, Net 164,097 93,873
Other Intangibles, Net 167,847 81,992
Other 184,994 169,098
-----------------------------------------------------------------------------------------------------
Total Assets $ 3,080,252 $ 2,889,752
=====================================================================================================
Liabilities Current Liabilities
Short-term debt $ 132,440 $ 227,424
Accounts payable 128,476 128,046
Accrued expenses 226,182 210,987
Salaries, wages and related items 145,396 137,288
Income taxes 45,703 62,377
--------------------------------------------------------------------------------------------------
Total Current Liabilities 678,197 766,122
Long-Term Debt 665,449 468,223
Long-Term Employee Benefit Obligations 306,514 295,122
Deferred Income Taxes and Other 44,659 35,102
Commitments and Contingencies -- --

Shareholders' Equity ESOP convertible preferred stock -
$1 par value: authorized - 1,016,949 shares; issued and
outstanding - 866,286 shares in 1997 and 897,046 shares in 1996 51,111 52,927
Common stock - $1 par value: authorized - 320,000,000 shares;
issued - 167,244,580 shares in 1997 and 170,484,080 shares in 1996 167,245 170,484
Capital in excess of par value 83,422 58,378
Cumulative currency translation adjustments (86,870) (14,959)
Retained earnings 2,249,463 2,160,279
Unearned ESOP compensation (28,620) (32,787)
Common shares in treasury - at cost - 45,161,091 shares in 1997
and 46,873,585 shares in 1996 (1,050,318) (1,069,139)
-----------------------------------------------------------------------------------------------------
Total Shareholders' Equity 1,385,433 1,325,183

-----------------------------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $ 3,080,252 $ 2,889,752
=====================================================================================================


See notes to consolidated financial statements


35



Consolidated Statements of Cash Flows Becton, Dickinson and Company
Years Ended September 30
Thousands of dollars 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------

Operating Activities Net income $ 300,074 $ 283,447 $ 251,696
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 209,771 200,482 207,756
Deferred income taxes (29,695) (13,497) (13,540)
Purchased in-process research and development 14,750 -- --
Change in:
Trade receivables (30,014) (21,589) 21,930
Inventories (24,074) (10,141) (7,866)
Prepaid expenses, deferred taxes and other 8,301 (20,581) (6,218)
Accounts payable, income taxes and other liabilities (11,760) 28,596 (2,609)

Other, net 5,394 13,726 21,049
------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 442,747 460,443 472,198

Investing Activities Capital expenditures (170,349) (145,929) (123,760)
Proceeds from sale of equity investment -- -- 47,805
Acquisitions of businesses, net of cash acquired (200,832) (16,501) (3,839)
Proceeds from dispositions of businesses 24,343 38,027 79,479
Proceeds of short-term investments, net 2,544 5,190 69,577
Proceeds from sales of long-term investments 31,307 29,208 6,926
Purchases of long-term investment (6,000) (3,125) --
Other, net (45,079) (16,736) (20,240)
------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by investing activities (364,066) (109,866) 55,948
------------------------------------------------------------------------------------------------------------
Financing Change in short-term debt (77,687) 71,103 (12,680)
Activities Proceeds of long-term debt 292,168 -- 107,278
Payment of long-term debt (118,686) (130,597) (177,226)
Issuance of common stock 29,393 35,366 19,789
Repurchase of common stock (150,003) (325,874) (299,723)
Dividends paid (67,161) (61,660) (58,347)
------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (91,976) (411,662) (420,909)

------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and equivalents (9,217) (2,270) (3,644)

------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and equivalents (22,512) (63,355) 103,593
------------------------------------------------------------------------------------------------------------
Opening cash and equivalents 135,151 198,506 94,913
------------------------------------------------------------------------------------------------------------
Closing cash and equivalents $ 112,639 $ 135,151 $ 198,506
------------------------------------------------------------------------------------------------------------


See notes to consolidated financial statements


36

Notes to Consolidated Financial Statements
Becton, Dickinson and Company
Thousands of dollars, except per share amounts
- --------------------------------------------------------------------------------

Index
Note Subject Page

1 Summary of Significant Accounting Policies 37
2 Acquisitions 38
3 Employee Stock Ownership Plan (ESOP)/Savings Plan 39
4 Benefit Plans 39
5 Other Income (Expense) Net 41
6 Income Taxes 41
7 Supplemental Balance Sheet Information 42
8 Debt 43
9 Financial Instruments 44
10 Shareholders' Equity 46
11 Commitments and Contingencies 47
12 Stock Plans 47
13 Business Segment Data 49

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

note
1

Principles of Consolidation

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

Reclassifications

The Company has reclassified certain prior year information to conform with the
current year presentation.

Cash Equivalents

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

Inventories

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

Property, Plant and Equipment

Property, plant and equipment are stated at cost, less accumulated depreciation
and amortization. The cost of additions, improvements, and interest on
construction are capitalized, while maintenance and repairs are charged to
expense when incurred. Depreciation and amortization are provided on the
straight-line basis over estimated useful lives which range from twenty to
forty-five years for buildings, four to ten years for machinery and equipment
and three to twenty years for leasehold improvements.

Goodwill and Other Intangibles

Goodwill represents costs in excess of net assets of businesses acquired.
Goodwill and patents are being amortized over periods ranging from five to forty
years, using the straight-line method. An impairment loss is recognized in
operating results if impairment indicators are present and the undiscounted cash
flows estimated to be generated by the related assets are less than their
carrying amounts. As a result of a change in the strategic direction for the
cellular imaging business, the Company recorded a provision in the amount of
$12,275 in 1995 primarily to write off goodwill associated with that business.

Revenue Recognition

Substantially all revenue is recognized when products are shipped to customers.

Warranty

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

Income Taxes

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

Earnings Per Share

Earnings per share are computed in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 15, "Earnings per Share," using the
weighted average number of common and common equivalent shares outstanding
during the year, and related income amounts after adjustment for dividends on
preferred shares. The weighted average number of shares used in the computations
were 128,972,000 in 1997, 132,795,000 in 1996 and 138,402,000 in 1995. Common
equivalent shares relate to employee stock plans.


37

In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings per
Share." This Statement supercedes APB Opinion No. 15 and specifies the
computation, presentation and disclosure requirements for earnings per share for
entities with publicly held common stock or potential common stock. The Company
is required to adopt the provisions of SFAS No. 128 for the quarter ending
December 31, 1997. The principal difference between the provisions of SFAS No.
128 and previous authoritative pronouncements is related to the exclusion of
common stock equivalents in the determination of Basic Earnings Per Share and
the market price at which common stock equivalents are calculated in the
determination of Diluted Earnings Per Share. Earning per share, computed in
accordance with the provisions of SFAS No. 128, for the years ended September
30, 1997, 1996 and 1995 are presented in the table below:

- --------------------------------------------------------------------------------
1997 1996 1995
---------------------------------
Earnings Per Share
Basic $2.42 $2.21 $1.85
Diluted $2.30 $2.11 $1.77
================================================================================

Use of Estimates

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

Derivative Financial Instruments

Derivative financial instruments are utilized by the Company in the management
of its foreign currency and interest rate exposures. The Company does not use
derivative financial instruments for trading or speculative purposes.

The Company reduces its foreign currency exposures by entering into
forward exchange contracts and purchased currency options for the future
purchase and sale of foreign currencies. The Company also occasionally enters
into interest rate swaps, interest rate caps, interest rate collars, and forward
rate agreements in order to reduce the impact of fluctuating interest rates on
its short-term floating rate third party and intercompany debt and investments.
In connection with issuances of long-term debt, the Company may also enter into
interest rate hedge agreements in order to protect itself from fluctuating
interest rates during the period in which the sale of the debt is being
arranged.

The Company accounts for its derivative financial instruments using the
deferral method of accounting, whereby gains and losses related to these hedges
are recognized in income as part of, and concurrent with, the hedged
transactions. The carrying value of derivative financial instruments is recorded
and included in the caption Prepaid expenses, deferred taxes and other, or in
Accrued expenses on the balance sheet, as appropriate.

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

Stock-Based Compensation

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

- --------------------------------------------------------------------------------
Acquisitions
- --------------------------------------------------------------------------------

note
2

In May 1997, the Company acquired PharMingen, a manufacturer of reagents
for biomedical research, and Difco Laboratories Incorporated ("Difco"), a
manufacturer of microbiology media and supplies, for an aggregate amount of
$187,200, net of cash acquired.

The PharMingen and Difco acquisitions were recorded under the purchase
method of accounting, and accordingly, their results of operations for the
post-acquisition period have been included in the accompanying consolidated
financial statements. The purchase prices have been allocated to assets acquired
and liabilities assumed based on estimated fair values. In connection with these
acquisitions, certain research and development projects acquired were determined
to have not reached technological feasibility. Accordingly, a charge of $14,750
for purchased in-process research and development was included in the 1997
results of operations. The aggregate


38

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

- --------------------------------------------------------------------------------
Working capital, net of cash acquired $ 27,545
Property, plant and equipment 20,651
Other intangibles 86,316
Goodwill 78,833
Other assets 3,210
Long-term liabilities (44,105)
- --------------------------------------------------------------------------------

Included in the assumed liabilities for these acquisitions, is $17,813
representing severance, and other exit costs in connection with the closing of
certain Difco facilities.

Goodwill related to PharMingen and Difco is being amortized on a
straight-line basis over 15 and 20 years, respectively. Unaudited pro forma
consolidated revenues, as if the acquisitions had taken place at the beginning
of fiscal 1996, would have been approximately $2,884,256 and $2,872,519 for
fiscal years 1997 and 1996, respectively. Unaudited pro forma consolidated
income and earnings per share would not have been materially different from the
reported amounts for either year. Such unaudited pro forma amounts are not
necessarily indicative of what the actual consolidated results of operations
might have been had the acquisitions been in effect at the beginning of fiscal
1996.

- --------------------------------------------------------------------------------
Employee Stock Ownership Plan (ESOP)/Savings Plan
- --------------------------------------------------------------------------------

note
3

The Company has an Employee Stock Ownership Plan ("ESOP") as part of its
voluntary defined contribution plan (savings plan) covering most domestic
employees. The ESOP is intended to satisfy all or part of the Company's
obligation to match 50% of employees' contributions, up to a maximum of 3% of
each participant's salary. To accomplish this, in 1990, the ESOP borrowed
$60,000 in a private debt offering and used the proceeds to buy the Company's
ESOP convertible preferred stock. Each share of preferred stock has a guaranteed
liquidation value of $59 per share and is convertible into 3.2 shares of the
Company's common stock. The preferred stock pays an annual dividend of $3.835
per share, a portion of which is used by the ESOP, together with the Company's
contributions, to repay the ESOP debt. Since the ESOP debt is guaranteed by the
Company, it is reflected on the consolidated balance sheet as short-term and
long-term debt with a related amount shown in the shareholders' equity section
as unearned ESOP compensation.

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

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

- --------------------------------------------------------------------------------
1997 1996 1995
--------------------------------

Total expense of the savings plan $ 4,257 $ 5,115 $ 7,659
Compensation expense
(included in total expense above) $ 2,087 $ 2,693 $ 5,080
Dividends on ESOP shares used for debt service $ 3,366 $ 3,484 $ 3,596
Number of preferred shares allocated
at September 30 357,465 325,632 288,785
================================================================================

The Company guarantees employees' contributions to the fixed income fund
of the Savings Plan. The amount guaranteed was $90,521 at September 30, 1997.

- --------------------------------------------------------------------------------
Benefit Plans
- --------------------------------------------------------------------------------

note
4

The Company and certain of its subsidiaries have defined benefit pension
plans which cover a substantial number of its employees. The largest plan,
covering most of the Company's domestic employees, is a "final average pay"
plan.

A summary of the costs of the defined benefit pension plans follows:

- --------------------------------------------------------------------------------
1997 1996 1995
--------------------------------
Service cost: benefits earned during the year $ 19,946 $ 20,217 $ 16,884
Interest cost on projected benefit obligation 31,389 29,204 27,312
Return on assets:
Actual gain (103,350) (53,055) (71,964)
Deferred portion 65,187 18,014 42,790
- --------------------------------------------------------------------------------
Expected return (38,163) (35,041) (29,174)
- --------------------------------------------------------------------------------
Net pension cost $ 13,172 $ 14,380 $ 15,022
================================================================================


39

Rate assumptions used in accounting for the domestic defined benefit plans
were:

- --------------------------------------------------------------------------------
1997 1996 1995
--------------------------------
Discount rate:
End of year 7.50% 7.75% 7.50%
Beginning of year 7.75% 7.50% 8.00%
Rate of increase in compensation 5.25% 5.25% 5.25%
Expected long-term rate of return on assets 10.00% 10.00% 10.00%
================================================================================

The following table sets forth the funded status and amounts recognized in
the consolidated balance sheets at September 30, 1997 and 1996 for the Company's
domestic defined benefit pension plans:

- --------------------------------------------------------------------------------
1997 1996
------------------------
Actuarial present value of benefit obligations:
Vested benefit obligation $ 339,139 $ 294,564
================================================================================
Accumulated benefit obligation $ 354,440 $ 308,208
================================================================================
Projected benefit obligation $ 467,866 $ 413,062
Plan assets at fair value 480,435 385,468
- --------------------------------------------------------------------------------
Plan assets in excess of (less than) projected
benefit obligation 12,569 (27,594)
Unrecognized net gain (85,336) (33,579)
Unrecognized net asset at October 1, 1985,
net of amortization (1,820) (2,427)
- --------------------------------------------------------------------------------
Net pension liability recognized
in the consolidated balance sheets $ 74,587 $ 63,600
================================================================================

Plan assets are composed primarily of investments in publicly traded
securities. The Company's funding policy is to contribute amounts to the plans
sufficient to meet the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, as amended, plus such additional amounts
as the Company may determine to be appropriate from time to time.

Employees in foreign countries are covered by various postretirement
benefit arrangements, some of which are considered to be defined benefit plans
for accounting purposes. Such plans are immaterial to the Company's consolidated
financial position and results of operations.

In addition to providing pension benefits, the Company and its domestic
subsidiaries provide certain health care and life insurance benefits for retired
employees. Substantially all of the Company's domestic employees may become
eligible for these benefits upon retirement from the Company. The Company's cost
of benefits for foreign retirees is minimal as health care and life insurance
coverage is generally provided through government plans.

Postretirement benefit costs include the following components:

- --------------------------------------------------------------------------------
1997 1996 1995
---------------------------------
Service cost: benefits earned during the year $ 2,154 $ 2,251 $ 2,108
Interest cost on projected benefit obligation 11,467 10,925 10,860
Amortization of gain from plan amendments (6,364) (6,334) (6,499)
- --------------------------------------------------------------------------------
Postretirement benefit cost $ 7,257 $ 6,842 $ 6,469
================================================================================

The postretirement benefit plans other than pensions are not funded. The
present value of the Company's obligation included in the consolidated balance
sheets at September 30, 1997 and 1996 was as follows:

- --------------------------------------------------------------------------------
1997 1996
------------------------
Accumulated postretirement benefit obligation:
Retirees $ 123,044 $ 113,377
Fully eligible active participants 14,892 14,157
Other active participants 28,204 26,060
- --------------------------------------------------------------------------------
Total 166,140 153,594
Unrecognized gain from plan amendments 69,432 75,744
Unrecognized actuarial loss (21,225) (11,246)
- --------------------------------------------------------------------------------
Accrued postretirement benefit liability $ 214,347 $ 218,092
================================================================================

At September 30, 1997 and 1996, health care cost trends of 11% and 12%,
respectively, pre-age 65 and 8% and 9%, respectively, post-age 65 were assumed.
These rates were assumed to decrease gradually to an ultimate rate of 5.75%
beginning in 2003 for pre-age 65 and 2000 for post-age 65. The effect of a 1%
annual increase in these assumed cost trend rates would increase the accumulated
postretirement benefit obligation at September 30, 1997 by $4,947 and the
postretirement cost for 1997 by $371. The discount rate used to estimate the
postretirement benefit cost was 7.75% in 1997 and 7.5% in 1996. The discount
rate used to estimate the accumulated postretirement benefit obligation at
September 30, 1997 was 7.5% and 7.75% at September 30, 1996.


40

The Company utilizes a service-based approach in applying the provisions
of SFAS No. 112, "Employers' Accounting For Postemployment Benefits," for most
of its postemployment benefits. Such an approach recognizes that actuarial gains
and losses may result from experience that differs from baseline assumptions. In
1997, the Company recorded a $5,963 curtailment loss for severance in connection
with productivity programs in the United States and Europe.

- --------------------------------------------------------------------------------
1997 1996 1995
---------------------------------
Postemployment benefit costs $25,500 $12,200 $10,300
================================================================================

- --------------------------------------------------------------------------------
Other Income (Expense) Net
- --------------------------------------------------------------------------------

note
5

Other income, net in 1997, included $8,191 of gains from the dispositions
of non-core business lines and a gain of $5,763 on the sale of an investment.
Also included in Other income, net were foreign exchange losses of $5,021,
including hedging costs.

Other (expense), net in 1996 includes income of $8,216 from a net cash
settlement received in connection with one of the Company's patents and foreign
exchange losses, including hedging costs, of $8,127.

Other (expense), net in 1995 includes a net cash settlement of $10,995
received in connection with a favorable arbitration ruling relating to one of
the Company's patents offset by losses of $6,301 from the sale of the medical
glove business and foreign exchange losses, including hedging costs, of $12,074.

- --------------------------------------------------------------------------------
Income Taxes
- --------------------------------------------------------------------------------

note
6

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

- --------------------------------------------------------------------------------
1997 1996 1995
=================================
Current:
Domestic:
Federal $ 81,588 $ 70,769 $ 53,388
State and local, including Puerto Rico 34,442 33,521 28,212
Foreign 36,231 19,436 29,822
- --------------------------------------------------------------------------------
152,261 123,726 111,422
- --------------------------------------------------------------------------------
Deferred:
Domestic (15,798) (19,769) (7,070)
Foreign (13,897) 6,272 (6,470)
- --------------------------------------------------------------------------------
(29,695) (13,497) (13,540)
- --------------------------------------------------------------------------------
$ 122,566 $ 110,229 $ 97,882
================================================================================

In accordance with SFAS No. 109, "Accounting for Income Taxes," deferred
tax assets and liabilities are netted on the balance sheet by separate tax
jurisdictions. At September 30, 1997 and 1996, net current deferred tax assets
of $62,702 and $44,845, respectively, were included in Prepaid expenses,
deferred taxes and other. Net non-current deferred tax assets of $49,046 and
$43,602, respectively, were included in Other non-current assets. Net current
deferred tax liabilities of $8,313 in 1997 were included in Current Liabilities
- - Income taxes. There were no net current deferred tax liabilities in 1996. Net
non-current deferred tax liabilities of $15,389 and $8,274, respectively, were
included in Deferred income taxes and other. Deferred taxes are not provided on
substantially all undistributed earnings of foreign and Puerto Rican
subsidiaries. At September 30, 1997, the cumulative amount of such undistributed
earnings approximated $964,000 against which United States tax-free liquidation
provisions or substantial tax credits are available. Determining the tax
liability that would arise if these earnings were remitted is not practicable.


41

Deferred income taxes at September 30 consisted of:



- -------------------------------------------------------------------------------------------------------------------
1997 1996 1995
---------------------------- ----------------------------- -------------------------
Assets Liabilities Assets Liabilities Assets Liabilities
- -------------------------------------------------------------------------------------------------------------------

Compensation and benefits $ 143,665 $ -- $ 133,061 $ -- $ 128,676 $ --
Property and equipment -- 100,169 -- 108,455 -- 117,748
Other 131,319 74,163 89,853 27,400 79,858 19,899
- -------------------------------------------------------------------------------------------------------------------
274,984 174,332 222,914 135,855 208,534 137,647
Valuation allowance (12,606) -- (6,886) -- (9,475) --
- -------------------------------------------------------------------------------------------------------------------
$ 262,378 $174,332 $ 216,028 $135,855 $ 199,059 $137,647
===================================================================================================================


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

- --------------------------------------------------------------------------------
1997 1996 1995
---------------------------------
Federal statutory tax rate 35.0% 35.0% 35.0%
State and local income taxes,
net of federal tax benefit 1.3 1.4 1.5
Effect of foreign and Puerto Rican income (5.3) (4.2) (6.0)
Foreign tax credits (2.3) (2.5) (1.9)
Research tax credit (.3) (.3) (.2)
Purchased in-process research and development 1.2 -- --
Other, net (.6) (1.4) (.4)
- --------------------------------------------------------------------------------
29.0% 28.0% 28.0%
================================================================================

The approximate dollar and per share amounts of tax reductions related to
tax holidays in various countries in which the Company does business were: 1997
- - $17,400 and $.13; 1996 - $17,700 and $.13; and 1995 - $18,400 and $.13. The
tax holidays expire at various dates through 2010.

The Company made income tax payments, net of refunds, of $151,050 in 1997,
$126,236 in 1996 and $132,650 in 1995.

The components of income before income taxes follow:

- --------------------------------------------------------------------------------
1997 1996 1995
------------------------------------
Domestic, including Puerto Rico $264,910 $231,021 $218,695
Foreign 157,730 162,655 130,883
- --------------------------------------------------------------------------------
$422,640 $393,676 $349,578
================================================================================

- --------------------------------------------------------------------------------
Supplemental Balance Sheet Information
- --------------------------------------------------------------------------------

note
7

Trade Receivables

Allowances for doubtful accounts and cash discounts netted against trade
receivables were $28,733 and $28,056 at September 30, 1997 and 1996,
respectively.

- --------------------------------------------------------------------------------
Inventories 1997 1996
------------------------
Materials $ 92,307 $ 91,154
Work in process 79,519 66,005
Finished products 266,511 245,323
- --------------------------------------------------------------------------------
$ 438,337 $ 402,482
================================================================================

Inventories valued under the LIFO method were $252,243 in 1997 and
$233,714 in 1996. Inventories valued under the LIFO method would have been
higher by approximately $32,200 in 1997 and $33,700 in 1996, if valued on a
current cost basis.


42

- --------------------------------------------------------------------------------
Property, Plant and Equipment 1997 1996
----------------------------
Land $ 60,912 $ 52,090
Buildings 893,696 879,316
Machinery, equipment and fixtures 1,561,521 1,500,969
Leasehold improvements 33,699 29,860
- --------------------------------------------------------------------------------
2,549,828 2,462,235
Less allowances for depreciation
and amortization 1,299,123 1,218,087
- --------------------------------------------------------------------------------
$1,250,705 $1,244,148
================================================================================

- --------------------------------------------------------------------------------
Goodwill 1997 1996
----------------------------
Goodwill $ 212,870 $ 139,676
Less accumulated amortization 48,773 45,803
- --------------------------------------------------------------------------------
$ 164,097 $ 93,873
================================================================================

- --------------------------------------------------------------------------------
Other Intangibles 1997 1996
----------------------------
Patents and other $ 299,420 $ 212,928
Less accumulated amortization 131,573 130,936
- --------------------------------------------------------------------------------
$ 167,847 $ 81,992
================================================================================

- --------------------------------------------------------------------------------
Debt
- --------------------------------------------------------------------------------

note
8

The components of short-term debt follow:

- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Loans payable:
Domestic $ 78,500 $ 51,700
Foreign 46,281 54,497
Current portion of long-term debt 7,659 121,227
- --------------------------------------------------------------------------------
$132,440 $227,424
================================================================================

Domestic loans payable consist of commercial paper. Foreign loans payable
consist of short-term borrowings from financial institutions. The weighted
average interest rates for loans payable were 5.5% and 4.9% at September 30,
1997 and 1996, respectively. In November 1996, the Company entered into a
$500,000 five-year syndicated and committed revolving credit facility that was
undrawn at September 30, 1997. The facility supports the Company's commercial
paper borrowing program under which $78,500 was outstanding at September 30,
1997. It can also be used for other general corporate purposes. Restrictive
covenants under this agreement include a minimum tangible net worth level. At
September 30, 1996, the Company had lines of credit to support commercial paper
borrowings consisting of $300,000 in short-term lines of credit and $70,000 in
long-term lines of credit, all of which were unused. In addition, the Company
had unused foreign lines of credit pursuant to informal arrangements of
approximately $197,000 and $200,000 at September 30, 1997 and 1996,
respectively.

The components of long-term debt follow:

- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Domestic notes due through 2015
(average year-end interest rate:
5.9% - 1997; 5.4% - 1996) $ 15,614 $109,691
Foreign notes due through 2011 (average year-end
interest rate: 6.2% - 1997; 6.1% - 1996) 16,493 20,768
9.95% Notes due March 15, 1999 100,000 100,000
8.80% Notes due March 1, 2001 100,000 100,000
9.45% Guaranteed ESOP Notes due through July 1, 2004 33,342 37,764
6.90% Notes due October 1, 2006 100,000 --
8.70% Debentures due January 15, 2025 100,000 100,000
7.00% Debentures due August 1, 2027 200,000 --
- --------------------------------------------------------------------------------
$665,449 $468,223
================================================================================

In October 1996, the Company issued $100,000 of 6.9% notes due on October
1, 2006, with an effective yield including the results of an interest rate hedge
and other financing costs of 7.34%. In July 1997, the Company issued $200,000 of
7% Debentures due on August 1, 2027. Prior to the issuance, the Company entered
into an interest rate hedge agreement to protect itself from the impact of
fluctuating interest rates during the period in which the sale of the debentures
was being arranged. The effective yield of the debentures including the results
of the interest rate hedge and other financing costs was 7.23%. The cost of each
interest rate hedge agreement is being amortized over the life of the related
debt.


43

In October 1997, the Company filed a shelf registration statement to
increase its capacity to issue up to $500,000 of debt securities.

The aggregate annual maturities of long-term debt during the fiscal years
ending September 30, 1999 to 2002 are as follows: 1999 - $107,130; 2000 -
$6,447; 2001 - $106,912; 2002 - $7,449.

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

- --------------------------------------------------------------------------------
1997 1996 1995
-------------------------------------
Charged to operations $51,134 $54,162 $60,628
Capitalized 6,469 5,368 4,064
- --------------------------------------------------------------------------------
$57,603 $59,530 $64,692
================================================================================

Interest paid, net of amounts capitalized, was $48,573 in 1997, $59,053 in
1996, and $58,726 in 1995.

- --------------------------------------------------------------------------------
Financial Instruments
- --------------------------------------------------------------------------------

note
9

Fair Value of Financial Instruments

Cash equivalents, short-term investments and short-term debt are carried
at cost which approximate fair values. Investments in marketable securities,
which are classified as held-to-maturity and other investments, which are
classified as available-for-sale securities are also carried at cost. Fair
values were estimated based on market prices, where available, or dealer quotes.
The fair value of certain long-term debt is based on redemption value.
Investments in marketable securities were primarily composed of Puerto Rico
government bonds.

The estimated fair values of the Company's financial instruments at
September 30, 1997 and 1996 were as follows:



- -----------------------------------------------------------------------------------------
1997 1996
--------------------- ----------------------
Carrying Fair Carrying Fair
Value Value Value Value
- -----------------------------------------------------------------------------------------

Assets:
Investments in marketable securities $ -- $ -- $ 23,800 $ 23,518
Other investments (non-current)(A) 9,000 8,380 5,987 15,092
Forward exchange contracts(B) -- -- 3,417 3,069
Purchased currency options(B) 279 233 170 166
Liabilities:
Long-term debt $665,449 $ 698,852 $468,223 $493,402
Forward exchange contracts(C) 5,979 5,270 -- --
Interest rate swaps 130 (462) 135 921
Rate hedge agreement -- -- -- 807
=========================================================================================


(A) Included in Other non-current assets.

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

(C) Included in Accrued expenses.

Off-Balance Sheet Risk

The Company has certain receivables, payables and short-term borrowings
denominated in currencies other than the functional currency of the Company and
its subsidiaries. During the year, the Company hedged substantially all of these
exposures by entering into forward exchange contracts and purchased and written
currency options. The Company principally hedges the following foreign
currencies: Irish pound, Japanese yen, Singapore dollar, French franc, Italian
lira, Mexican peso, Spanish peseta, British pound and Australian dollar.

At September 30, the stated or notional amounts of the Company's
outstanding forward exchange contracts and purchased currency options,
classified as held for purposes other than trading, were as follows:

- --------------------------------------------------------------------------------
1997 1996
------------------------
Forward exchange contracts $630,363 $720,076
Purchased currency options:
Colombian peso put, U.S. dollar call $ 4,000 $ 2,300
Brazilian real put, U.S. dollar call -- 15,000
Mexican peso call, U.S. dollar put -- 12,000
Mexican peso put, U.S. dollar call 39,000 --
================================================================================


44

At September 30, 1997, $520,453 of the forward exchange contracts mature
within 90 days, $93,188 at various other dates in fiscal 1998 and $16,722 on
January 22, 1999. The purchased currency options at September 30, 1997 expire
within 30 days.

The Company's foreign exchange hedging activities do not generally create
exchange rate risk since gains and losses on these contracts generally offset
losses and gains on the related non-functional currency denominated receivables,
payables and short-term borrowings.

At September 30, 1997, the Company's Brazilian subsidiary entered into an
agreement under which it will pay interest of 21.05% per annum in local currency
on the Brazilian Real equivalent of a notional amount of $21,800 and receive the
Brazilian Real equivalent of 8.65% per annum on the notional amount, plus an
amount equal to the currency devaluation for the period. The fair value of this
instrument, which matures on February 2, 1998, approximated the carrying value
of zero at September 30, 1997.

The Company enters into interest rate swap and interest rate cap
agreements, classified as held for purposes other than trading, in order to
reduce the impact of fluctuating interest rates on its foreign currency
short-term floating rate third party and intercompany debt and investments
outside the United States. At September 30, 1997 and 1996, the Company had
foreign interest rate swap agreements, with maturities at various dates through
1999. Under these agreements, the Company agrees with other parties to pay or
receive fixed rate payments, generally on an annual basis, in exchange for
paying or receiving variable rate payments, generally on a quarterly basis,
calculated on an agreed-upon notional amount. At September 30, the notional
amounts of the Company's outstanding interest rate swap agreements were as
follows:

- --------------------------------------------------------------------------------
1997 1996
------------------------
Interest rate swap agreements $133,357 $104,946
================================================================================

At September 30, 1996, the Company had a foreign interest rate cap
agreement with a notional U.S. dollar equivalent amount of $8,077, which limited
the potential interest rate fluctuations on a portion of the Company's Japanese
yen denominated short-term debt. This agreement effectively entitled the Company
to receive from a financial institution the amount, if any, by which the
Company's interest payments on $8,077 of its floating rate yen denominated
short-term debt exceeded 2%. The cap expired in May 1997.

For additional discussion of derivative instruments, see Financial Review
on pages 24 and 25.

Concentration of Credit Risk

Substantially all of the Company's trade receivables are due from entities in
the health care industry. Due to the large number and diversity of the Company's
customer base, concentrations of credit risk with respect to trade receivables
are limited. The Company does not normally require collateral. The Company is
exposed to credit loss in the event of nonperformance by financial institutions
with which it conducts business. The Company minimizes exposure to such risk,
however, by dealing only with major international banks and financial
institutions.


45



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

note
10

Series B,
ESOP
Preferred Common Capital in Unearned

Stock Stock Excess of Retained ESOP

Issued Issued Par Value Earnings Compensation



- ------------------------------------------------------------------------------------------------------------------------------------

Balance at October 1, 1994 $56,331 $170,698 $26,251 $1,752,360 $(41,096)

Net income 251,696
Cash dividends:
Common ($.41 per share) (54,725)
Preferred ($3.835 per share), net of tax benefits (2,695)
Common stock issued for employee stock plans, net 6,251
Repurchase of common stock
Reduction in unearned ESOP compensation for the year 4,155
Adjustment for redemption provisions and other (1,618) 350

- ------------------------------------------------------------------------------------------------------------------------------------

Balance at September 30, 1995 54,713 170,698 32,852 1,946,636 (36,941)

Net income 283,447
Cash dividends:
Common ($.46 per share) (58,147)
Preferred ($3.835 per share), net of tax benefits (2,675)
Common stock issued for:
Employee stock plans, net 17,164
Business acquisition 8,077
Repurchase of common stock
Common stock held in trusts
Retirement of common stock (214) (101) (8,982)
Reduction in unearned ESOP compensation for the year 4,154
Adjustment for redemption provisions and other (1,786) 386
- ------------------------------------------------------------------------------------------------------------------------------------

Balance at September 30, 1996 52,927 170,484 58,378 2,160,279 (32,787)

Net income 300,074
Cash dividends:
Common ($.52 per share) (63,768)
Preferred ($3.835 per share), net of tax benefits (2,647)
Common stock issued for employee stock plans, net 26,942
Repurchase of common stock
Common stock held in trusts
Retirement of common stock (3,239) (2,289) (144,475)
Reduction in unearned ESOP compensation for the year 4,167
Adjustment for redemption provisions and other (1,816) 391
===================================================================================================================================

Balance at September 30, 1997 $51,111 $167,245 $83,422 $2,249,463 $(28,620)




Treasury Stock
--------------------------
Shares Amount

- -----------------------------------------------------------------------------------------
Balance at October 1, 1994 (30,142,262) $ (491,423)

Net income
Cash dividends:
Common ($.41 per share)
Preferred ($3.835 per share), net of tax benefits
Common stock issued for employee stock plans, net 1,047,936 13,538
Repurchase of common stock (11,540,800) (299,723)
Reduction in unearned ESOP compensation for the year
Adjustment for redemption provisions and other 87,746 1,268
- -----------------------------------------------------------------------------------------
Balance at September 30, 1995 (40,547,380) (776,340)

Net income
Cash dividends:
Common ($.46 per share)
Preferred ($3.835 per share), net of tax benefits
Common stock issued for:
Employee stock plans, net 1,456,040 18,202
Business acquisition 331,734 4,176
Repurchase of common stock (8,404,200) (324,970)
Common stock held in trusts (20,707) (904)
Retirement of common stock 214,012 9,297
Reduction in unearned ESOP compensation for the year
Adjustment for redemption provisions and other 96,916 1,400
- -----------------------------------------------------------------------------------------
Balance at September 30, 1996 (46,873,585) (1,069,139)

Net income
Cash dividends:
Common ($.52 per share)
Preferred ($3.835 per share), net of tax benefits
Common stock issued for employee stock plans, net 1,683,547 20,513
Repurchase of common stock (3,239,500) (150,003)
Common stock held in trusts (69,473) (3,117)
Retirement of common stock 3,239,500 150,003
Reduction in unearned ESOP compensation for the year
Adjustment for redemption provisions and other 98,420 1,425
- -----------------------------------------------------------------------------------------
Balance at September 30, 1997 (45,161,091) $(1,050,318)
=======================================================================================


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

The excess of cost over par value of common stock retirements is charged
proportionally to Capital in Excess of Par Value and Retained Earnings.


46

Cumulative Currency Translation Adjustments

Generally, the net assets of foreign operations are translated into U.S. dollars
using current exchange rates. The U.S. dollar results that arise from such
translation, as well as exchange gains and losses on intercompany balances of a
long-term investment nature (net of allocated income taxes), are included in the
cumulative currency translation adjustment account in Shareholders' Equity. The
following is an analysis of the account:

- --------------------------------------------------------------------------------
1997 1996 1995
----------------------------------------

Balance at October 1 $(14,959) $ 6,767 $ 8,573
Translation adjustment (71,911) (21,726) (1,587)
Allocated income taxes -- -- (219)
- --------------------------------------------------------------------------------
Balance at September 30 $(86,870) $(14,959) $ 6,767
================================================================================

Preferred Stock Purchase Rights

In 1995, the Board of Directors adopted a new shareholder rights plan (the "New
Plan") to replace the original rights plan upon its expiration in 1996. In
accordance with the New Plan, each certificate representing a share of
outstanding common stock of the Company also represents one-half of a Preferred
Stock Purchase Right (a "Right"). Each whole Right will entitle the registered
holder to purchase from the Company one two-hundredth of a share of Preferred
Stock, Series A, par value $1.00 per share, at a price of $270. The Rights will
not become exercisable unless and until, among other things, a third party
acquires 20% or more of the Company's outstanding common stock. The Rights are
redeemable under certain circumstances at $.01 per Right and will expire, unless
earlier redeemed, on April 25, 2006. There are 500,000 shares of Preferred Stock
designated Series A, none of which have been issued.

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

note
11

Commitments

Rental expense for all operating leases amounted to $48,200 in 1997,
$52,000 in 1996 and $53,000 in 1995. Future minimum rental commitments on
noncancelable leases are as follows: 1998 - $29,000; 1999 - $22,200; 2000 -
$17,200; 2001 - $14,200; 2002 - $11,900 and an aggregate of $19,800 thereafter.

As of September 30, 1997, the Company had entered into certain commitments
for future capital expenditures, aggregating approximately $70,700 which will be
expended over the next several years.

Contingencies

The Company believes that its operations comply in all material respects with
applicable laws and regulations. The Company is a party to a number of Federal
proceedings in the United States brought under the Comprehensive Environmental
Response, Compensation and Liability Act, also known as "Superfund," and similar
state laws. For all sites, there are other potentially responsible parties that
may be jointly or severally liable to pay all cleanup costs. The Company accrues
costs for an estimated environmental liability based upon its best estimate
within the range of probable losses, without considering third-party recoveries.
The Company believes that any reasonably possible losses in excess of accruals
would be immaterial to the Company's financial condition.

The Company, along with a number of other manufacturers, has been named as
a defendant in approximately 75 product liability lawsuits related to natural
rubber latex that have been filed in various state and Federal courts. Cases
pending in Federal court are being coordinated under the matter In re Latex
Gloves Products Liability Litigation (MDL Docket No. 1148) in Philadelphia, and
an analogous procedure has been implemented in the California state courts.
Generally, these actions allege that medical personnel have suffered allergic
reactions ranging from skin irritation to anaphylaxis as a result of exposure to
medical gloves containing natural rubber latex. In 1986, the Company acquired a
business which manufactured, among other things, latex surgical gloves. In 1995,
the Company divested this glove business. The Company intends to mount a
vigorous defense in these lawsuits.

The Company is also involved in other legal proceedings and claims which
arise in the ordinary course of business, both as a plaintiff and a defendant.
In the opinion of the Company, the results of the above matters, individually
and in the aggregate, are not expected to have a material effect on its results
of operations, financial condition or cash flows.

- --------------------------------------------------------------------------------
Stock Plans
- --------------------------------------------------------------------------------

note
12

Stock Option Plans

The Company has stock option plans under which employees have been granted
options to purchase shares of the Company's common stock at prices established
by the Compensation and Benefits Committee of the Board of Directors. The 1990
Stock Option Plan, adopted in 1991, made available 8,000,000 shares, as adjusted
for the two-for-one stock splits in 1996 and 1993, of the Company's common stock
for the granting of options. The 1995 Stock Option Plan, adopted in 1995, made
available an additional


47

12,000,000 shares, as adjusted for the two-for-one stock split in 1996, of the
Company's common stock for the granting of options. At September 30, 1997,
53,032 and 5,092,654 shares were available for future grant under the 1990 and
1995 Plans, respectively.

A summary of changes in outstanding options is as follows:



- ------------------------------------------------------------------------------------------------------------------------------------

1997 1996 1995
--------------------------- -------------------------- -------------------------
Options Weighted Avg Options Weighted Avg Options Weighted Avg
for Shares Exercise Price for Shares Exercise Price for Shares Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------


Balance at October 1 13,525,712 $ 24.30 11,830,092 $ 18.92 10,161,918 $ 16.97
Granted 3,295,072 49.45 3,285,684 40.38 2,817,636 24.87
Exercised (1,629,229) 18.10 (1,395,540) 16.46 (976,742) 15.78
Forfeited, canceled or expired (107,292) 32.73 (194,524) 24.82 (172,720) 18.59
- ------------------------------------------------------------------------------------------------------------------------------------

Balance at September 30 15,084,263 30.41 13,525,712 24.30 11,830,092 18.92
====================================================================================================================================

Exercisable at September 30 9,550,165 23.84 10,937,251 23.33 8,778,116 18.28
====================================================================================================================================

Weighted average fair value of options granted $14.15 $10.49
====================================================================================================================================

Available for grant at September 30 5,145,686 8,331,816 11,422,976
====================================================================================================================================



The maximum term of options is 10 years. Options outstanding as of September 30,
1997 expire on various dates from June 1998 through May 2007.



- ------------------------------------------------------------------------------------------------------------------------------------

September 30, 1997
------------------------------------------------------------------------------------------------

Options Outstanding Options Exercisable
------------------------------------------------------------------------------------------------

Weighted Avg
Number Weighted Avg Remaining Number Weighted Avg
Range of Option Exercise Price Outstanding Exercise Price Contractual Life Exercisable Exercise Price
- ------------------------------------------------------------------------------------------------------------------------------------


$13.05 - $25.10 8,630,915 $19.50 5.7 years 7,339,445 $18.81
37.66 - 49.63 6,453,348 44.99 8.9 years 2,210,720 40.55
- ------------------------------------------------------------------------------------------------------------------------------------

15,084,263 30.41 7.7 years 9,550,165 23.84
====================================================================================================================================



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

Both the 1995 and 1990 Plans have a provision whereby unqualified options
may be granted at, below, or above market value of the Company's stock. If the
option price is less than the market value of the Company's stock on the date of
grant, the discount is recorded as compensation expense over the service period
in accordance with the provisions of APB Opinion No. 25. There was no such
compensation expense in 1997 or 1996. In 1995 such compensation expense amounted
to $1,961.

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

The following pro forma net income and earnings per share information has
been determined as if the Company had accounted for its 1997 and 1996 stock
based compensation awards using the fair value method. Under the fair value
method, the estimated fair value of awards would be charged against income on a
straight-line basis over the vesting period which generally ranges from zero to
three years. The pro forma effect on net income for 1997 and 1996 is not
representative of the pro forma effect on net income in future years since
compensation cost is allocated on a


48

straight-line basis over the vesting periods of the grants, which extends beyond
the reported years.

- --------------------------------------------------------------------------------
1997 1996
--------------------------- -----------------------------
As Reported Pro Forma As Reported Pro Forma
- --------------------------------------------------------------------------------
Net Income $ 300,047 $ 290,697 $ 283,447 $ 267,953
Earnings Per Share 2.30 2.26 2.11 2.02
================================================================================

The pro forma amounts and fair value of each option grant is estimated on
the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions used for grants in 1997 and 1996: risk
free interest rates of 6.51% and 5.64% in 1997 and 1996, respectively; expected
dividend yields of 1.42% and 1.64% in 1997 and 1996 respectively; expected lives
of 6 years in 1997 and 1996; expected volatility of 18.0% and 19.2% in 1997 and
1996, respectively.

Other Stock Plans

The Company has a compensatory Stock Award Plan which allows for grants of
common shares to certain key employees. Distribution of 25% or more of each
award, as elected by the grantee, is deferred until after retirement or
involuntary termination. Commencing on the first anniversary of a grant, the
remainder is distributable in five equal annual installments. During 1997,
74,270 shares were distributed. No awards were granted in 1997, 1996 or 1995. At
September 30, 1997, 1,384,770 shares were reserved for future issuance, of which
awards for 334,076 shares have been granted.

The Company has a compensatory Restricted Stock Plan for Non-Employee
Directors which reserves for issuance 150,000 shares of the Company's common
stock. Restricted shares of 780, 4,970 and 7,550 were issued in 1997, 1996 and
1995, respectively, in accordance with the provisions of the plan.

In November 1996, in connection with the discontinuation of pension
benefits that otherwise would have been accrued and provided to directors of the
Company, the Company established the 1996 Directors' Deferral Plan. This Plan
allowed members of the Board of Directors to defer receipt of the lump sum
present value of all their accrued and unpaid past service pension benefits as
of December 1, 1996, in the form of shares of the Company's common stock or
cash. In addition, the Plan provides a means to defer director compensation,
from time to time, on a deferred stock or cash basis. As of September 30, 1997,
55,889 shares were held in trust, of which 6,564 shares represented directors'
compensation in 1997, in accordance with the provisions of the Plan. Under the
Plan, which is unfunded, directors have an unsecured contractual commitment from
the Company to pay directors the amounts due to them under the Plan.

- --------------------------------------------------------------------------------
Business Segment Data
- --------------------------------------------------------------------------------

note
13

The Company's operations are composed of two business segments, Medical
Supplies and Devices and Diagnostic Systems. Distribution of products is both
through distributors and directly to hospitals, laboratories and other end
users.

Medical Supplies and Devices

The major products in this segment are hypodermic products, specially designed
devices for diabetes care, prefillable drug delivery systems, infusion therapy
products and elastic support products and thermometers. The Medical Supplies and
Devices segment also includes disposable scrubs, specialty needles and specialty
and surgical blades.

Diagnostic Systems

The major products in this segment are clinical and industrial microbiology
products, sample collection products, flow cytometry systems for cellular
analysis, tissue culture labware, hematology instruments and other diagnostic
systems, including immunodiagnostic test kits.

Sales to a distributor which supplies the Company's products to many end
users accounted for approximately 10% of revenues in 1997, 11% in 1996 and 13%
of revenues in 1995, and were from both the Diagnostic Systems and Medical
Supplies and Devices segments. No other customer accounted for 10% or more of
revenues in each of the three years presented.

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

Segment and geographic area operating income represent revenues reduced by
product costs and operating expenses. Unallocated expenses include costs related
to management of corporate assets, foreign exchange and interest expense, net.

Financial information with respect to business segment and geographic data
for the years ended September 30, 1997, 1996 and 1995 is presented on pages 30
and 31 and is considered to be an integral part of the notes to the consolidated
financial statements.


49

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information." The
Company is required to adopt the provisions of this Statement no later than its
1999 fiscal year. SFAS No. 131 establishes a new method by which companies will
report operating segment information.

This method is based on the manner in which management organizes the segments
within a company for making operating decisions and assessing performance. The
Company continues to evaluate the provisions of SFAS No. 131 and, upon adoption,
different operating segments may be reported by the Company.

================================================================================

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

- --------------------------------------------------------------------------------
1997 1st 2nd 3rd 4th Year
----------------------------------------------------------
Revenues $655,799 $699,207 $706,539 $748,978 $2,810,523
Gross Profit 312,667 346,533 353,794 384,218 1,397,212
Net Income 58,108 82,671 70,148 89,147 300,074
Earnings Per Share .44 .63 .54 .69 2.30

- --------------------------------------------------------------------------------
1996 1st 2nd 3rd 4th Year
----------------------------------------------------------
Revenues $639,935 $705,725 $692,945 $731,151 $2,769,756
Gross Profit 291,189 337,016 341,094 371,280 1,340,579
Net Income 44,522 74,790 77,167 86,968 283,447
Earnings Per Share .32 .55 .58 .66 2.11
- --------------------------------------------------------------------------------

50

COMMON STOCK PRICES AND DIVIDENDS

By Quarter

- -------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------
High Low Dividends High Low Dividends
--------------------------- -----------------------------
First $45 1/2 $37 $.13 $38 $31 1/16 $.11 1/2
Second 51 5/8 42 5/8 .13 44 9/16 36 13/16 .11 1/2
Third 53 1/4 42 3/4 .13 42 3/4 37 7/16 .11 1/2
Fourth 55 5/8 46 3/4 .13 44 7/8 35 3/8 .11 1/2
- -------------------------------------------------------------------------------

CORPORATE DATA

Annual Meeting
2:30 p.m.
Tuesday, February 10, 1998
1 Becton Drive
Franklin Lakes, NJ 07417-1880

Dividend Reinvestment
The Becton Dickinson Dividend Reinvestment Plan offers shareholders an
opportunity to purchase additional shares, commission-free, through automatic
dividend reinvestment and/or optional cash investments. Additional information
may be obtained by writing to First Chicago Trust Company of New York, Dividend
Reinvestment Plan, Becton Dickinson, P.O. Box 2598, Jersey City, NJ 07303-2598.

Direct Stock Purchase Plan
It is anticipated that in February 1998, the Becton Dickinson Dividend
Reinvestment Plan will be replaced by a new direct stock purchase plan
established through First Chicago Trust Company of New York, which will enhance
the services provided to existing shareholders and facilitate initial
investments in Becton Dickinson shares. Participants in the Dividend
Reinvestment Plan and all shareholders of record will be enrolled automatically
in the new plan and will be sent plan materials. Additional information may be
obtained by calling First Chicago Trust Company of New York at 1-800-317-4445.

Shareholder Information
Shareholders may receive, without charge, a copy of the company's 1997 Annual
Report to the Securities and Exchange Commission on Form 10-K by contacting:

Investor Relations
Becton Dickinson and Company
1 Becton Drive
Franklin Lakes, NJ 07417-1880
Phone: 1-800-284-6845

Transfer Agent and Registrar
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, NJ 07303-2500
Phone: 1-800-519-3111
E-mail: fctc@em.fcnbd.com
Internet: http://www.fctc.com

Independent Auditors
Ernst & Young LLP
433 Hackensack Avenue
Hackensack, NJ 07601-6371
Phone: (201) 343-4095

EVA(R) is a registered trademark of Stern Stewart & Co.

All other trademarks indicated by CAPITAL LETTERS are the property of, licensed
to, promoted or distributed by Becton Dickinson and Company, its subsidiaries or
related companies.

NYSE Symbol BDX
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