11-K: Annual report of employee stock purchase, savings and similar plans
Published on December 11, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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)
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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
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
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)
Becton, Dickinson and Company
Savings Incentive Plan
Statement of Net Assets Available for Benefits, with Fund Information
June 30, 1997
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)
Becton Dickinson and Company
Savings Incentive Plan
Statement of Changes in Net Assets Available for Benefits, with Fund Information
Year ended June 30, 1998
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
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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)
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:
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
* 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
F-14
Becton, Dickinson and Company
Savings Incentive Plan
Item 27d--Schedule of Reportable Transactions
Year ended June 30, 1998
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