- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM 11-K ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 [X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4802 BECTON, DICKINSON AND COMPANY SAVINGS INCENTIVE PLAN (FULL TITLE OF THE PLAN) BECTON, DICKINSON AND COMPANY (NAME OF ISSUER OF SECURITIES HELD PURSUANT TO THE PLAN) 1 Becton Drive 07417-1880 Franklin Lakes, New Jersey (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICER) (201) 847-6800 (TELEPHONE NUMBER) - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1. FINANCIAL STATEMENTS AND SCHEDULES. The following financial data for the Plan are submitted herewith: Report of Independent Auditors Statements of Net Assets Available for Benefits, with Fund Information as of June 30, 1998 and 1997 Statement of Changes in Net Assets Available for Benefits, with Fund Information for the year ended June 30, 1998 Notes to Financial Statements Item 27a--Schedule of Assets Held for Investment Purposes as of June 30, 1998 Item 27d--Schedule of Reportable Transactions for the year ended June 30, 1998 2.1 EXHIBITS. See Exhibit Index for a list of Exhibits filed or incorporated by reference as part of this report. 2 Becton, Dickinson and Company Savings Incentive Plan Audited Financial Statements and Schedules June 30, 1998
CONTENTS Report of Independent Auditors.................................................... F-1 Financial Statements Statements of Net Assets Available for Benefits, with Fund Information as of June 30, 1998 and 1997....................................................... F-2 Statement of Changes in Net Assets Available for Benefits, with Fund Information for the year ended June 30, 1998................................................ F-4 Notes to Financial Statements..................................................... F-5 Schedules Item 27a--Schedule of Assets Held for Investment Purposes as of June 30, 1998..... F-13 Item 27d--Schedule of Reportable Transactions for the year ended June 30, 1998.... F-15
Report of Independent Auditors Savings Incentive Plan Committee Becton, Dickinson and Company We have audited the accompanying statements of net assets available for benefits of the Becton, Dickinson and Company Savings Incentive Plan as of June 30, 1998 and 1997, and the related statement of changes in net assets available for benefits for the year ended June 30, 1998. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at June 30, 1998 and 1997, and the changes in its net assets available for benefits for the year ended June 30, 1998, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental schedule of assets held for investment purposes as of June 30, 1998, and schedule of reportable transactions for the year then ended are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974, and are not a required part of the basic financial statements. The fund information in the statements of net assets available for benefits and the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the net assets available for benefits and changes in net assets available for benefits of each fund. The supplemental schedules and fund information have been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Hackensack, New Jersey December 4, 1998 F-1 Becton, Dickinson and Company Savings Incentive Plan Statement of Net Assets Available for Benefits, with Fund Information June 30, 1998
Fund Information ----------------------------------------------------------- Becton, Becton, Dickinson Dickinson Fixed S&P 500 and Company and Company Income Index Common Preferred Fund Fund Stock Fund Stock Fund ----------------------------------------------------------- Assets Investments at fair value: Becton, Dickinson and Company Common Stock (6,062,104 shares) $ 234,560,006 $ 725,462 Becton, Dickinson and Company Series B ESOP Convertible Preferred Stock (837,613 shares) (Note 6) 208,063,120 State Street Bank and Trust Company S&P 500 Flagship Fund Series A (574,418 units) 107,738,476 State Street Bank and Trust Company MidCap Index Fund Series A (2,214,514 units) Barclays Global Investors Commingled Fund (1,179,187 units) Investment Contracts at contract value (equivalent to cost): Allstate Life Insurance Company $ 31,353,804 Caisse des Depots CDC 3,280,269 Hartford Life Insurance Company 6,532,192 John Hancock Mutual Life Insurance Company 18,132,815 Metropolitan Life Insurance Company 18,226,767 People's Security Life Insurance Company 23,836,646 Continental Assurance 13,953,050 Prudential Cap Max 5,000,000 Security Life of Denver Insurance Company 6,108,911 Trans America Life & Annuity Company 10,129,263 State Street Bank and Trust Company 16,191,512 ----------------------------------------------------------- Total investments 152,745,229 107,738,476 234,560,006 208,788,582 Receivables: Interest 795,336 4,529 Dividends 803,290 Participants' contributions 4,928 4,928 Employer contributions 4,462,935 Other receivable 358,806 91,913 Loans receivable from participants (Note 2) Cash and cash equivalents 1,508,470 2,323,606 1,010,782 ----------------------------------------------------------- Total assets 155,407,841 107,835,317 236,888,540 215,070,118 Liabilities Accrued interest payable 1,784,351 Debt obligations (Notes 6 and 7) 37,764,028 Investment management fees payable 74,701 37,292 51,460 Other 109,360 4,801 ----------------------------------------------------------- Total liabilities 184,061 37,292 56,261 39,548,379 ----------------------------------------------------------- Net assets available for benefits $155,223,780 $107,798,025 $236,832,279 $ 175,521,739 ===========================================================
See accompanying notes. F-2 Becton, Dickinson and Company Savings Incentive Plan Statement of Net Assets Available for Benefits, with Fund Information June 30, 1998 (continued)
Loans MidCap Index Receivable Holding Balanced Fund Fund Account Account Total ------------------------------------------------------------------------- Assets Investments at fair value: Becton, Dickinson and Company Common Stock (6,062,104 shares) $235,285,468 Becton, Dickinson and Company Series B ESOP Convertible Preferred Stock (837,613 shares) (Note 6) 208,063,120 State Street Bank and Trust Company S&P 500 Flagship Index Fund Series A (574,418 units) 107,738,476 State Street Bank and Trust Company MidCap Index Fund Series A (2,214,514 units) $25,187,883 25,187,883 Barclays Global Investors Commingled Fund (1,179,187 units) $25,701,548 25,701,548 Investment Contracts at contract value (equivalent to cost): Allstate Life Insurance Company 31,353,804 Caisse des Depots CDC 3,280,269 Hartford Life Insurance Company 6,532,192 John Hancock Mutual Life Insurance Company 18,132,815 Metropolitan Life Insurance Company 18,226,767 People's Security Life Insurance Company 23,836,646 Continental Assurance 13,953,050 Prudential Cap Max 5,000,000 Security Life of Denver Insurance Company 6,108,911 Trans America Life & Annuity Company 10,129,263 State Street Bank and Trust Company 16,191,512 ------------------------------ ----------- Total investments 25,701,548 25,187,883 754,721,724 Receivables: Interest 4 799,869 Dividends 803,290 Participants' contributions 1,643 4,928 16,427 Employer contributions 4,462,935 Other receivable 8,729 13,197 472,645 Loans receivable from participants (Note 2) 16,425,438 16,425,438 Cash and cash equivalents 50 1,605,143 6,448,051 ------------------------------------------------------------------------ Total assets 25,711,974 25,206,008 16,425,438 1,605,143 784,150,379 Liabilities Accrued interest payable 1,784,351 Debt obligations (Notes 6 and 7) 37,764,028 Investment management fees payable 17,967 22,232 203,652 Other 114,161 --------------------------------- ----------- Total liabilities 17,967 22,232 39,866,192 --------------------------------- ----------- Net assets available for benefits $25,694,007 $25,183,776 $16,425,438 $ 1,605,143 $744,284,187 ========================================================================
Becton, Dickinson and Company Savings Incentive Plan Statement of Net Assets Available for Benefits, with Fund Information June 30, 1997
Fund Information ------------------------------------------------------------------- Becton, Becton, Dickinson Dickinson Fixed S&P 500 and Company and Company Income Index Common Preferred Fund Fund Stock Fund Stock Fund ------------------------------------------------------------------- Assets Investments at fair value: Becton, Dickinson and Company Common Stock (6,717,862 shares) $170,045,781 $ 82 Becton, Dickinson and Company Series B ESOP Convertible Preferred Stock (873,698 shares) (Note 6) 141,539,050 State Street Bank and Trust Company S&P 500 Flagship Index Fund (561,403 units) $80,850,400 State Street Bank and Trust Company MidCap Index Fund (524,824 units) Barclays Global Investors Commingled Fund (987,486 units) Investment Contracts at contract value (equivalent to cost): Allstate Life Insurance Company $ 16,648,345 Caisse des Depots CDC 1,872,027 The Canada Life Assurance Company 4,136,125 Hartford Life Insurance Company 6,089,486 John Hancock Mutual Life Insurance Company 20,426,286 Metropolitan Life Insurance Company 23,191,463 New York Life Insurance Company 7,726,349 Provident Life and Accident 17,006,989 Providian Capital Management 24,541,124 Security Life of Denver Insurance Company 5,773,721 Trans America Life & Annuity Company 5,098,926 State Street Bank and Trust Company 16,593,121 ------------------------------------------------------------------- Total investments 149,103,962 80,850,400 170,045,781 141,539,132 Receivables: Interest 795,059 1,466 4,449 Dividends 837,800 Participants' contributions 13,294 Employer contributions 4,167,655 Loans receivable from participants (Note 2) Cash and cash equivalents 6,397,032 34 1,117,142 996,729 ------------------------------------------------------------------- Total assets 156,296,053 80,863,728 171,164,389 147,545,765 Liabilities Accrued interest payable 1,974,436 Debt obligations (Notes 6 and 7) 41,787,010 Payable for investments purchased 350,922 Investment management fees payable 16,019 24,067 17,364 Other 795,371 (889,378) 1,077,338 Loan repayments 16,673 (2,491) (7,662) ------------------------------------------------------------------- Total liabilities 828,063 (867,802) 1,437,962 43,761,446 ------------------------------------------------------------------- Net assets available for benefits $155,467,990 $81,731,530 $169,726,427 $103,784,319 ===================================================================
See accompanying notes. F-3 Becton, Dickinson and Company Savings Incentive Plan Statement of Net Assets Available for Benefits, with Fund Information June 30, 1997 (continued)
MidCap Loans Balanced Index Receivable Fund Fund Account Total --------------------------------------------------------------- Assets Investments at fair value: Becton, Dickinson and Company Common Stock (6,717,862 shares) $170,045,863 Becton, Dickinson and Company Series B ESOP Convertible Preferred Stock (873,698 shares) (Note 6) 141,539,050 State Street Bank and Trust Company S&P 500 Flagship Index Fund (561,403 units) 80,850,400 State Street Bank and Trust Company MidCap Index Fund (524,824 units) $15,939,941 15,939,941 Barclays Global Investors Commingled Fund (987,486 units) $17,295,264 17,295,264 Investment Contracts at contract value (equivalent to cost): Allstate Life Insurance Company 16,648,345 Caisse des Depots CDC 1,872,027 The Canada Life Assurance Company 4,136,125 Hartford Life Insurance Company 6,089,486 John Hancock Mutual Life Insurance Company 20,426,286 Metropolitan Life Insurance Company 23,191,463 New York Life Insurance Company 7,726,349 Provident Life and Accident 17,006,989 Providian Capital Management 24,541,124 Security Life of Denver Insurance Company 5,773,721 Trans America Life & Annuity Company 5,098,926 State Street Bank and Trust Company 16,593,121 ------------------------------- ------------ Total investments 17,295,264 15,939,941 574,774,480 Receivables: Interest 77 801,051 Dividends 837,800 Participants' contributions 27,674 6,947 47,915 Employer contributions 4,167,655 Loans receivable from participants (Note 2) $12,829,334 12,829,334 Cash and cash equivalents 100,013 8,610,950 -------------------------------------------------------------- Total assets 17,423,028 15,946,888 12,829,334 602,069,185 Liabilities Accrued interest payable 1,974,436 Debt obligations (Notes 6 and 7) 41,787,010 Payable for investments purchased 350,922 Investment management fees payable 10,336 67,786 Other (642,960) (168,415) 171,956 Loan repayments 1,588 490 8,598 ----------------------------- ------------ Total liabilities (641,372) (157,589) 44,360,708 -------------------------------------------------------------- Net assets available for benefits $18,064,400 $16,104,477 $12,829,334 $557,708,477 ==============================================================
Becton Dickinson and Company Savings Incentive Plan Statement of Changes in Net Assets Available for Benefits, with Fund Information Year ended June 30, 1998
FUND INFORMATION ---------------------------------------------------------------------------- BECTON, BECTON, DICKINSON DICKINSON AND AND FIXED COMPANY COMPANY INCOME S&P 500 COMMON PREFERRED BALANCED FUND Index Fund STOCK FUND STOCK FUND FUND ---------------------------------------------------------------------------- Additions: Participants' contributions $ 10,610,807 $ 7,407,458 $ 5,894,615 $ 2,374,927 Rollover contributions 1,197,926 444,062 576,873 177,429 Company contributions $ 4,462,935 Loan repayments 1,726,398 1,125,840 2,168,883 275,513 Interest income 10,158,634 1,588 55,128 34,832 2,027 Dividends 1,798,364 3,269,957 59 Other 90,638 Transfers between funds 955,762 1,859,282 (8,141,804) (83,622) 2,497,221 ---------------------------------------------------------------------------- 24,649,527 10,838,230 2,442,697 7,684,102 5,327,176 Deductions: Distributions to participants 21,827,595 7,729,636 15,313,945 5,113,540 2,096,730 Loan withdrawals 2,903,775 1,640,581 3,091,489 420,120 358,963 Interest expense 3,568,700 Administrative expenses 162,367 53,020 66,254 18,082 Other 271,625 ---------------------------------------------------------------------------- 24,893,737 9,423,237 18,471,688 9,373,985 2,473,775 Net appreciation in fair value of investments 24,651,502 83,134,843 73,427,303 4,776,206 ---------------------------------------------------------------------------- Net increase (decrease) (244,210) 26,066,495 67,105,852 71,737,420 7,629,607 Net assets available for benefits at beginning of year 155,467,990 81,731,530 169,726,427 103,784,319 18,064,400 ---------------------------------------------------------------------------- Net assets available for benefits at end of year (Note 3) $155,223,780 $107,798,025 $236,832,279 $175,521,739 $25,694,007 ============================================================================ ---------------------------------------------------------------- LOANS MIDCAP INDEX RECEIVABLE HOLDING FUND ACCOUNT ACCOUNT TOTAL ---------------------------------------------------------------- Additions: Participants' contributions $ 3,018,420 $1,605,143 $ 30,911,370 Rollover contributions 200,068 2,596,358 Company contributions 4,462,935 Loan repayments 374,840 $ (5,671,474) - Interest income 146 1,032,269 11,284,624 Dividends 5,068,380 Other 90,638 Transfers between funds 2,913,161 - --------------------------------------------------------------- 6,506,635 (4,639,205) 1,605,143 54,414,305 Deductions: Distributions to participants 1,613,969 646,181 54,341,596 Loan withdrawals 466,562 (8,881,490) - Interest expense 3,568,700 Administrative expenses 32,477 332,200 Other 271,625 --------------------------------------------------------------- 2,113,008 (8,235,309) 58,514,121 Net appreciation in fair value of investments 4,685,672 190,675,526 --------------------------------------------------------------- Net increase (decrease) 9,079,299 3,596,104 1,605,143 186,575,710 Net assets available for benefits at beginning of year 16,104,477 12,829,334 557,708,477 --------------------------------------------------------------- Net assets available for benefits at end of year (Note 3) $25,183,776 $ 16,425,438 $ 1,605,143 $ 744,284,187 ================================================================
See accompanying notes. F-4 Becton, Dickinson and Company Savings Incentive Plan Notes to Financial Statements June 30, 1998 1. SIGNIFICANT ACCOUNTING POLICIES Accounting records of the Becton, Dickinson and Company Savings Incentive Plan (the "Plan") are maintained on the accrual basis whereby all income, costs and expenses are recorded when earned or incurred. Investments are recorded on the basis of cost but are reported in the Plan's financial statements at fair value, redemption value or contract value. Fair value of marketable equity securities is determined by quoted market prices in an active market. The value of the Becton, Dickinson and Company Series B ESOP Convertible Preferred Stock was determined based upon the guaranteed redemption value of $59 per share or 640% of the fair value of the Becton, Dickinson and Company Common Stock, whichever is higher. The underlying investments in the Fixed Income Fund are contracts with insurance companies which are fully benefit responsive and valued at contract value. Contract value represents contributions made, plus interest at the contract rate and transfers, less distributions. Interests in commingled trust funds and mutual funds are valued at the redemption price established by the trustee or investment manager of the respective fund. Participant loans are valued at unpaid principal balances with maturities ranging from three months to four and one-half years for ordinary loans and twenty years for primary residence loans. Cash equivalents are stated at cost, which approximates fair value. The Company considers all highly-liquid investments with a maturity of 90 days or less when purchased to be cash equivalents. Investment management fees, brokerage fees, commissions, stock transfer taxes, and other expenses related to each investment fund are paid out of the respective fund. Becton Dickinson pays trustee fees and other administrative expenses directly from corporate funds. All ESOP fees are paid by Becton, Dickinson and Company. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. DESCRIPTION OF THE PLAN The Plan is a defined contribution plan established for the purpose of encouraging and assisting employees in following a systematic savings program and to provide an opportunity for employees, at no cost to themselves, to become shareholders of Becton, Dickinson and Company. Employees of Becton, Dickinson and Company and certain of its domestic subsidiaries (the "Company") are eligible for participation in the Plan on the first enrollment date coincident with or next following the date on which the employee commences employment with the Company. F-5 Becton, Dickinson and Company Savings Incentive Plan Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) Eligible employees who are members of the Plan can authorize a payroll deduction for a contribution to the Plan in an amount per payroll period equal to any selected whole percentage of pay from 2% to 20% inclusive. For purposes of the Plan, total pay includes base pay, overtime compensation and commissions. Pre- tax contributions are subject to annual limitations of $10,000 and $9,500 for 1998 and 1997, respectively, which may be increased annually based on the Consumer Price Index. Individual employee contributions of up to 6% of total pay are eligible for a matching Company contribution. The Board of Directors of the Company may, within prescribed limits, establish, from time to time, the rate of Company contributions. It has authorized the Company to make a monthly contribution to the Plan in an amount equal to 50% of eligible employee contributions during said month minus any forfeitures. Employee contributions can be in either before-tax ("401(k)") dollars or after- tax dollars or a combination of both. Employee contributions in before-tax dollars result in savings going into the Plan before most federal, state or local taxes are withheld. Taxes are deferred until the employee withdraws the 40l(k) contributions from the Plan. Participating employees are not liable for federal income taxes on amounts earned in the Plan or on amounts contributed by the Company until such time that their participating interest is distributed to them. In general, a participating employee is subject to tax on the amount by which the distribution paid to him exceeds the amount of after-tax dollars he has contributed to the Plan. Employee contributions are invested in five funds as described below: Fixed Income Fund: A fixed income fund with the full principal amount of employee contributions guaranteed by the Company. S&P 500 Index Fund: A diversified portfolio of common stocks and securities convertible into common stock. The Trustee's investment approach will be to hold all the common stocks included in Standard and Poor's 500 Stock Index (S&P 500) and, as a result, to produce an investment return very similar to that of the Index. Becton, Dickinson and Company Common Stock Fund: A fund which is comprised entirely of the Company's common stock. F-6 Becton, Dickinson and Company Savings Incentive Plan Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) Balanced Fund: A balanced fund comprised of fixed income securities, common stocks and convertible securities. MidCap Index Fund: A diversified portfolio of common stocks and securities convertible into common stock that make up the S&P MidCap 400 Stock Index. These stocks represent companies whose total market values are generally below those of the stocks in the S&P 500 Index. The fund seeks greater capital appreciation than the S&P 500 Flagship Fund Series A, but with greater volatility. Employee contributions are invested, at the option of the employee, in the Fixed Income, the S&P 500 Index, the Becton, Dickinson and Company Common Stock, the Balanced and the MidCap Index Funds in any combination of 1%, with a maximum of 100% (50% prior to August 1, 1996) of the employee's contribution being contributed to the Becton, Dickinson and Company Common Stock Fund. The assets of the Fixed Income Fund are invested in contracts with various insurance companies, which provide known rates of return on deposited funds, provided that the contracts remain in force until their maturity. The weighted average yield for the investment contracts was 6.46% and 6.42% at June 30, 1998 and 1997, respectively. The crediting interest rates range from 5.55% to 7.49% at June 30, 1998 and 5.28% to 7.27% at June 30, 1997. Crediting interest rates are determined based on the balance and duration of the contract, with certain contracts subject to quarterly rate resets based on market indices. There are no minimum crediting interest rates or limitations on guarantees under the terms of the contracts. No valuation reserves have been established to adjust contract amounts. The fair value of the investment contracts recorded at contract value is approximately $155,922,000 at June 30, 1998. State Street Bank & Trust Company ("State Street Bank") is the Plan's Trustee. State Street Bank is also the investment manager of the S&P 500 Index Fund, the MidCap Index Fund and the Becton, Dickinson and Company Common Stock Fund. PRIMCO Capital Management Inc. is the investment manager of the Fixed Income Fund. Barclays Global Investors is the investment manager of the Balanced Fund. The assets of the Company Common Stock Fund are invested in shares of the Company's common stock. The Trustee has advised that its present intention is to purchase the Company's common stock exclusively on the open market. F-7 Becton, Dickinson and Company Savings Incentive Plan Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) Contributions to the Company Common Stock Fund are comprised of both employee contributions, as well as employer matching contributions. For recordkeeping purposes, separate funds have been created to account for the respective contributions. These funds are referred to as Fund C for employer matching contributions and Fund D for employee contributions. Funds C and D have been combined into one investment fund, referred to as the Becton, Dickinson and Company Common Stock Fund, for financial statement purposes. Any portion of the Funds, pending permanent investment or distribution, may be held on a short-term basis in cash or cash equivalents. The holding account represents funds received awaiting allocation to an investment fund. The Company implemented an Employee Stock Ownership Plan (ESOP) whereby the Becton, Dickinson and Company Preferred Stock Fund was created to account for employer matching contributions being invested in convertible preferred stock on behalf of employees. Refer to Note 6. The Plan also has a loan provision whereby employees are allowed to take loans on their vested account balances. Loans originating during a year bear a fixed rate of interest which is set annually. Employees are required to pay installment payments at each payroll date. The outstanding balance of a loan becomes due and payable upon an employee's termination. Should an employee, upon his termination, elect not to repay the outstanding balance, the loan is canceled and deemed a distribution under the Plan. The Plan provides for vesting in employer matching contributions based on months of participation as follows: FULL MONTHS OF PARTICIPATION PERCENTAGE ------------------------------------------ Less than 24 months 0% 24 but less than 36 months 50% 36 but less than 48 months 75% 48 months or more 100% Any participating employee with 5 or more years of service regardless of months of participation will have a 100% vested percentage in the Company's matching contributions. Also, participants may become fully vested on the date of termination of employment by reasons of death, retirement or disability, or attainment of age 65. Participants may be partially vested under certain F-8 Becton, Dickinson and Company Savings Incentive Plan Notes to Financial Statements (continued) 2. DESCRIPTION OF THE PLAN (CONTINUED) conditions in the event of termination of employment or participation in the Plan for any other reason. Non-vested Company contributions forfeited by participants are applied to reduce future Company contributions. Participants' contributions are always 100% vested. The Board of Directors of the Company reserves the right to terminate, modify, alter or amend the Plan at any time and at its own discretion, provided that no such termination, modification, alteration or amendment shall permit any of the funds established pursuant to the Plan to be used for any purpose other than the exclusive benefit of the participating employees. The right to modify, alter or amend includes the right to change the percentage of the Company's contributions. Amounts allocated to withdrawn participants which have not yet been distributed from the Plan as of June 30, 1998 and 1997 amounted to $839,972 and $5,562,000, respectively. For the purpose of preparing the Plan's Form 5500 such amounts are recorded as liabilities. 3. UNIT VALUES The number of units and unit values of each Fund at June 30, 1998 and 1997 were as follows: NUMBER OF UNIT/SHARE UNITS/SHARES VALUE --------------------------- June 30, 1998: Fixed Income Fund 18,042,512 $ 8.611487 S&P 500 Index Fund 2,953,268 36.468983 Becton, Dickinson and Company Common Stock Fund 6,579,262 35.997180 Becton, Dickinson and Company Preferred Stock Fund 370,645 248.400000 Balanced Fund 11,752,827 2.185357 MidCap Index Fund 10,755,407 2.339824 F-9 Becton, Dickinson and Company Savings Incentive Plan Notes to Financial Statements (continued) 3. UNIT VALUES (CONTINUED)
NUMBER OF UNIT/SHARE UNITS/SHARES VALUE ------------------------------ June 30, 1997: Fixed Income Fund 19,243,372 $ 8.079041 S&P 500 Index Fund 2,914,202 28.045943 Becton, Dickinson and Company Common Stock Fund 7,275,641 23.328037 Becton, Dickinson and Company Preferred Stock Fund 351,199 162.000000 Balanced Fund 10,277,335 1.757693 MidCap Index Fund 8,748,582 1.840810
4,595,940 units and 1,983,322 units of the Company Common Stock Fund were allocated to participant accounts in Funds C and D, respectively, as of June 30, 1998. As of June 30, 1997, 5,207,371 units and 2,068,270 units of the Company Common Stock Fund were allocated to participant accounts in Funds C and D, respectively. In the Becton, Dickinson and Company Preferred Stock Fund, 370,645 and 351,199 of the total preferred shares of 837,613 and 873,698 held as of June 30, 1998 and 1997, respectively, were allocated to participant accounts. 4. INCOME TAX STATUS The Internal Revenue Service has ruled (December 30, 1994) that the Plan qualifies under Section 401(a) and 401(k) of the Internal Revenue Code (IRC) and is, therefore, not subject to tax under present income tax law. Once qualified, the Plan is required to operate in conformity with the IRC to maintain its qualification. The Plan Administrator is not aware of any course of action or series of events that have occurred that might adversely affect the Plan's qualified status. 5. RELATED PARTY TRANSACTIONS During the year ended June 30, 1998, the Plan purchased and distributed 386,226 shares and 1,041,984 shares, respectively, of the Company's common stock and recorded $1,798,364 in dividends on the common stock from the Company. In addition, the Plan distributed 36,085 shares of the Series B ESOP convertible preferred stock of the Company and recorded $3,269,957 in dividends on the preferred stock from the Company. F-10 Becton, Dickinson and Company Savings Incentive Plan Notes to Financial Statements (continued) 6. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) The Company maintains an Employee Stock Ownership Plan (ESOP) as part of the Savings Incentive Plan. The ESOP operates 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 covered compensation. To accomplish this, the ESOP borrowed $60,000,000 in a private debt offering and used the proceeds to buy the Company's Series B ESOP convertible preferred stock. Each share of preferred stock has a guaranteed liquidation value of $59 per share and is convertible into 6.4 shares of the Company's common stock. The preferred stock pays an annual dividend of $3.835 per share which will be used by the ESOP, together with Company contributions to repay the ESOP borrowings. The allocated and unallocated shares at cost and market at June 30 were as follows:
JUNE 30, 1998 June 30, 1997 ----------------------------------------------------- ALLOCATED UNALLOCATED ALLOCATED UNALLOCATED ----------------------------------------------------- Becton, Dickinson and Company Series B ESOP Convertible Preferred Stock: Number of shares 370,645 466,968 351,199 522,499 Cost $21,868,233 $ 27,551,337 $20,720,725 $30,827,416 Market 92,068,269 115,994,851 56,894,228 84,644,822
Over a 15 year period, the trust will repay the loan; and as the loan is gradually repaid, a portion of the preferred stock will be released and used to match participants' contributions in the Plan. The initial allocation of preferred stock to plan participants began in March 1990. Each year, a pre- determined number of preferred shares will be released and available to be allocated to participants' accounts. If the total value of the preferred shares released (as the ESOP loan is repaid) is not sufficient to fully match the participants' contributions, the remaining portion of the match will be made to the Company Common Stock Fund (Fund C). 7. DEBT OBLIGATIONS In connection with the Employee Stock Ownership Plan feature, the Plan issued $60,000,000 of ESOP notes in a private placement. The notes bear interest at 9.45% and are guaranteed by the Company. The notes, which are due July 1, 2004, F-11 Becton, Dickinson and Company Savings Incentive Plan Notes to Financial Statements (continued) 7. DEBT OBLIGATIONS (CONTINUED) require semi-annual interest payments and annual principal payments. The aggregate annual maturities of the debt obligations during the years ended June 30, 1999 to 2003 are as follows: 1999-$4,422,000; 2000-$4,861,000; 2001- $5,343,000; 2002-$5,873,000 and 2003-$6,455,000. 8. YEAR 2000 READINESS DISCLOSURES (UNAUDITED) The Plan Sponsor has developed a Company-wide Year 2000 plan (the "Year 2000 Plan") with the intent to ensure that its internal information technology systems will function properly into the Year 2000. The Year 2000 Plan also includes determining whether third-party service providers have reasonable plans in place to become Year 2000 compliant. Detailed evaluations of critical third- party service providers have been initiated through questionnaires, interviews, on-site visits and other available means. The Plan Sponsor intends to monitor the progress made by those parties, to test critical system interfaces and to formulate appropriate contingency plans to address third-party issues identified through its evaluations and assessments. The Plan Sponsor presently believes it has an effective Year 2000 Plan in place to anticipate and resolve any potential Year 2000 issues in a timely manner. In the event, however, that the Plan Sponsor does not properly identify Year 2000 issues, or the compliance, assessment, remediation and testing is not conducted on a timely basis with respect to Year 2000 issues identified, there can be no assurance that Year 2000 issues will not materially affect the Plan and its operations. 9. SUBSEQUENT EVENT On August 20, 1998, Becton, Dickinson and Company distributed to shareholders an additional share of common stock for each share owned on August 10, 1998 to effect a two-for-one stock split. Accordingly, all Becton, Dickinson and Company common share and per share data have been adjusted to reflect the stock split. F-12 Becton, Dickinson and Company Savings Incentive Plan Item 27a--Schedule of Assets Held for Investment Purposes June 30, 1998
NUMBER CONTRACT IDENTITY OF ISSUE, BORROWER, LESSOR OR SIMILAR OF UNITS OR FAIR PARTY AND DESCRIPTION OF INVESTMENT OR SHARES COST VALUE - ---------------------------------------------------------------------------------------- STATE STREET BANK & TRUST COMPANY *Becton, Dickinson and Company Common Stock 6,062,104 $40,854,803 $235,285,468 STATE STREET BANK & TRUST COMPANY *Becton, Dickinson and Company Series B ESOP Convertible Preferred Stock 837,613 49,419,570 208,063,120 STATE STREET BANK & TRUST COMPANY S&P 500 Flagship Series A Fund 574,418 92,434,926 107,738,476 STATE STREET BANK & TRUST COMPANY S&P MidCap Index Fund Series A 2,214,514 23,422,651 25,187,883 BARCLAYS GLOBAL INVESTORS Commingled Fund 1,179,187 17,289,162 25,701,548 ALLSTATE LIFE INSURANCE COMPANY GIC #GA/5483A, due 7/28/98, at 5.85% 3,900,752 3,900,752 GIC #GA/77016A, due 2/15/03, at 6.37% 16,904,064 16,904,064 GIC #GA/5506A, due 9/16/98, at 5.73% 3,728,471 3,728,471 GIC #GA/31028, due 2/15/02, at 6.23% 6,820,517 6,820,517 CAISSE DES DEPOTS BR-239-01, due 5/31/00, at 6.08% 1,283,766 1,283,766 BR-239-02, due 12/12/02, at 5.77% 1,996,503 1,996,503 HARTFORD LIFE INSURANCE COMPANY GIC #GA/10120, due 8/2/99, at 7.27% 6,532,192 6,532,192 JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY GIC #GA/7238, due 11/12/98, at 5.59% 1,355,229 1,355,229 GIC #GA/7238-1, due 12/2/02, at 6.04% 1,500,000 1,500,000 GIC #GA/7433, due 5/1/04, at 5.79% 15,277,586 15,277,586 METROPOLITAN LIFE INSURANCE COMPANY GIC #GA/13669, due 2/15/99, at 5.61% 6,370,010 6,370,010 GIC #GA/13817, due 1/2/01, at 6.35% 11,856,757 11,856,757 PRUDENTIAL CAP MAX GIC #10008/211, due 6/19/08, at 6.05% 5,000,000 5,000,000
* As Becton, Dickinson and Company is the plan sponsor, these represent party- in-interest transactions. F-13 Becton, Dickinson and Company Savings Incentive Plan Item 27a--Schedule of Assets Held for Investment Purposes (continued) June 30, 1998
NUMBER CONTRACT IDENTITY OF ISSUE, BORROWER, LESSOR OR SIMILAR OF UNITS OR FAIR PARTY AND DESCRIPTION OF INVESTMENT OR SHARES COST VALUE - ----------------------------------------------------------------------------------------------------- CONTINENTAL ASSURANCE COMPANY GIC #630/05752, due 9/15/00, at 7.49% $ 13,953,050 $ 13,953,050 PEOPLES SECURITY LIFE INSURANCE COMPANY #BDA00027TR1, due 6/15/04, at 6.82% 23,836,646 23,836,646 SECURITY LIFE OF DENVER INSURANCE COMPANY GIC #FR108, due 12/31/99, at 6.53% 6,108,911 6,108,911 STATE STREET BANK AND TRUST GIC #96034, due 12/31/00, at 6.70% 16,191,512 16,191,512 TRANS AMERICA LIFE INSURANCE AND ANNUITY COMPANY GIC #76572, due 11/15/04, at 5.62% 10,129,263 10,129,263 -------------------------------- Total investments 376,166,341 754,721,724 Loans receivable from participants (original loan amounts ranging from $1,000 to $50,000 bearing interest at rates ranging from 7% to 11.5%) 16,425,438 16,425,438 -------------------------------- $392,591,779 $771,147,162 ================================
F-14 Becton, Dickinson and Company Savings Incentive Plan Item 27d--Schedule of Reportable Transactions Year ended June 30, 1998
TOTAL NUMBER OF AGGREGATE AGGREGATE GAIN DESCRIPTION PURCHASES VALUE OF VALUE OF OR IDENTITY OF PARTY INVOLVED OF ASSETS OR SALES PURCHASES SALES (LOSS) - ------------------------------------------------------------------------------------------------------------------- CATEGORY (i)-INDIVIDUAL TRANSACTIONS IN EXCESS OF 5% State Street Bank and Trust Company S&P 500 Flagship Fund $ 90,025,993 State Street Bank and Trust Company S&P 500 Flagship Fund $90,025,993 $45,207,160 CATEGORY (iii)-SERIES OF TRANSACTIONS IN EXCESS OF 5% State Street Bank and Trust Company S&P 500 Flagship Fund 106 106,326,094 State Street Bank and Trust Company S&P 500 Flagship Fund 79 104,090,114 $48,434,867 State Street Bank and Trust Company Short-term 356 113,745,769 Investment Fund State Street Bank and Trust Company Short-term 276 118,390,237 Investment Fund State Street Bank and Trust Company Midcap Index Fund Series A 63 26,095,891 State Street Bank and Trust Company Midcap Index Fund Series A 61 2,783,328 110,087 Becton Dickinson and Company Common Stock 104 11,944,700 Becton Dickinson and Company Commom Stock 151 29,925,531 18,669,636
There were no category (ii) or (iv) reportable transactions during 1998. F-15 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE MEMBERS OF THE SAVINGS INCENTIVE PLAN COMMITTEE HAVE DULY CAUSED THIS ANNUAL REPORT TO BE SIGNED BY THE UNDERSIGNED HEREUNTO DULY AUTHORIZED. Becton, Dickinson and Company Savings Incentive Plan /s/ Gerald Caporicci _____________________________________ GERALD CAPORICCI MEMBER, SAVINGS INCENTIVE PLAN COMMITTEE Date: December 11, 1998 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION METHOD OF FILING - ------- ----------- ---------------- 23 Consent of Independent Auditors Filed with this report