PORTIONS OF 1999 ANNUAL REPORT TO SHAREHOLDERS

Financial Review Becton, Dickinson and Company

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Company Overview
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Becton Dickinson and Company ("BD") is a medical technology company that
manufactures and sells a broad range of supplies, devices and systems for use by
health care professionals, medical research institutions, industry and the
general public. We focus strategically on achieving growth in three worldwide
business segments--BD Medical Systems ("Medical"), BD Biosciences
("Biosciences") and BD Preanalytical Solutions ("Preanalytical"). Our products
are marketed in the United States both through independent distribution channels
and directly to end-users. Our products are marketed outside the United States
through independent distribution channels and sales representatives, and, in
some markets, directly to end-users.
We now generate close to 50% of our revenues outside the United States.
Demand for health care products and services continues to be strong worldwide,
despite the ongoing focus on health care cost containment around the world. The
health care marketplace continues to be competitive and consolidation in our
customer base has resulted in recent pricing pressures, particularly in the
Medical segment. We will continue to manage these issues by capitalizing on our
market-leading positions in many of our product offerings and by leveraging our
cost structure. The health care environment favors good continued growth in
medical delivery systems due to new products and opportunities. In particular,
the U.S. market is poised for broad scale conversion to advanced protection
devices due to the growing awareness of benefits of protecting health care
workers against accidental needlesticks and a high level of current legislative
and regulatory activity favoring conversion. We are a leader in a number of
platforms in the Biosciences segment. In the last few years, we made key
acquisitions in the areas of immunology, cell biology and molecular biology.
Growth in research products is driven by the expansion in genomic research and
increased pharmaceutical and government spending in this area. In the
Preanalytical segment, we have strong market-leading positions. We also have
opportunities for further growth in this segment. For example, nearly half of
the world's population lives in medical markets that do not currently use
evacuated blood collection systems, one of our principal products in this
segment.

We continue to improve operating effectiveness by focusing on four key
initiatives. The first is "One Company" selling which takes advantage of our
broad market presence to cross-sell our products to our medical and clinical
customers. The second initiative is "One Company" manufacturing, where we are
leveraging our worldwide manufacturing network to improve our cost
effectiveness. The third area is procurement, where we are making efforts
across our operations to be more focused and systematic. Finally, efforts
continue to implement an enterprise-wide program to upgrade our business
information systems ("Genesis") which began in 1998 and are expected to be
completed by the end of year 2001. Anticipated benefits from this project
include inventory reductions, operating improvements and more complete and
timely access to information throughout our enterprise.
Our financial results and the operating performance of our segments are
discussed below. The following references to years relate to our fiscal year,
which ends on September 30.

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Special and Other Charges
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We recorded special charges in 1999 and 1998 associated with two restructuring
programs. The third quarter 1999 special charges of $76 million were associated
with the exiting of product lines and other activities, primarily in the area of
home health care, the impairment of assets, and an enhanced voluntary retirement
incentive program. We also recorded charges of $27 million in cost of products
sold in the third quarter of 1999 to reflect the write-off of inventories and to
provide appropriate reserves for expected future returns relating to the exited
product lines. We have completed implementation of the exit plans. We also
reversed $6 million of 1998 special charges in the third quarter of 1999 as a
result of our decision not to exit certain activities as originally planned.
The 1998 special charges of $91 million were primarily associated with
the restructuring of certain manufacturing operations and the write-down of
impaired assets. The plan for restructuring our manufacturing operations
included the closure of a surgical blade plant in the United States, scheduled
for the latter part of fiscal year 2001. We also recorded $22 million of
charges in 1998 associated with the reengineering component of Genesis. The
majority of these charges were included in selling and administrative expense.
For additional discussion of the above charges, see Note 5 of the Notes
to Consolidated Financial Statements.

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Acquisitions
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During 1999, we acquired ten businesses for an aggregate of $382 million in cash
and 357,522 shares of our common stock. We also granted options to purchase an
aggregate of 73,074 shares of our common stock to eligible employees of one of
the acquired companies. These acquisitions included the August 1999 purchase for
$201 million in cash, subject to certain post-closing adjustments, of Clontech
Laboratories, Inc. ("Clontech"). Clontech is a privately-held company serving
the life sciences market in the areas of gene-based life science research and
drug discovery. We recorded a total charge of $49 million for purchased in-
process research and development in connection with the current year
acquisitions, of which $32 million related to the Clontech acquisition. These
charges represented the fair value of certain acquired research and development
projects relating to gene chip technology, gene expression, gene cloning and
fluorescent gene reporter

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Becton, Dickinson and Company

tools which were determined not to have reached technological feasibility and
which do not have alternative future uses. During 1998, we acquired six
businesses for an aggregate of $546 million in cash and 595,520 shares of our
common stock. These acquisitions included the Medical Devices Division ("MDD")
of the BOC Group for approximately $457 million in cash. In connection with this
acquisition, we recorded a charge of $30 million in 1998 for purchased
in-process research and development relating to projects associated with the
development of medical catheters and other devices. All acquisitions were
recorded using the purchase method of accounting and the results of operations
of the acquired companies are included in our consolidated results from their
respective acquisition dates.

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Revenues and Earnings
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Worldwide revenues in 1999 were $3.4 billion, an increase of 10% over 1998, with
acquisitions contributing 5%. The impact of foreign currency translation on
revenue growth was not significant. Underlying revenue growth, which excludes
the effects of foreign currency translation and acquisitions in 1999 and 1998,
resulted primarily from volume increases in all segments.
Medical revenues in 1999 increased 12% over 1998 to $1.9 billion with
acquisitions contributing 8%. Underlying revenue growth was led by strong sales
of prefillable syringes to pharmaceutical companies and increased sales of
infusion therapy products, particularly advanced protection devices.
Underperformance of home health care products unfavorably affected revenue
growth in 1999.
Medical operating income in 1999 was $343 million, an increase of 7%
compared to 1998. Excluding the impact in both years of special and other
charges, and the incremental impact of acquisitions, including related charges
of $30 million recorded in 1998 for purchased in-process research and devel-
opment, Medical operating income increased 5%. Revenue growth and productivity
improvements were partially offset by increased investment in the areas of
advanced protection devices and home health care and the impact of cost contain-
ment pricing pressures. As discussed above, we decided to exit several product
lines in the home health care area during the third quarter of 1999.
Biosciences revenues in 1999 increased 7% over 1998 to $986 million with
acquisitions contributing 2%. Underlying revenue growth was led by market share
gains in flow cytometry products fueled by the continued introduction of
innovative new products. Infectious disease product revenues continue to be
adversely affected by cost containment in testing in the United States.
Biosciences operating income in 1999 was $76 million, a decrease of 1%
compared to 1998. Excluding the impact in both years of special and other
charges, and the incremental impact of acquisitions, including related charges
of $49 million recorded in 1999 for purchased in-process research and devel-
opment, Biosciences operating income increased 8%. This performance reflects an
improved sales mix, as well as manufacturing and operational productivity
gains. These gains were partially offset by increased research and development
spending, particularly in the area of genomic research, and reengineering and
other costs relating to Genesis.
Preanalytical revenues in 1999 increased 6% over 1998 to $509 million.
Significant volume increases in advanced protection devices were partially
offset by cost containment pricing pressures in several markets.
Preanalytical operating income of $124 million in 1999 represented a 7%
increase compared to 1998. Excluding the impact in both years of special and
other charges, and the incremental impact of acquisitions, Preanalytical
operating income increased 9% primarily due to revenue growth. Savings achieved
through productivity improvements and expense control programs were partially
offset by increased investment for advanced protection programs and cost con-
tainment pricing pressures.
On a geographical basis, revenues outside the United States in 1999
increased 17% to $1.7 billion with acquisitions contributing 8%. The impact of
foreign currency translation on revenue growth was not significant in 1999.
Underlying revenue growth was led by strong sales of prefillable syringes in
Europe and FACS brand flow cytometry systems and infectious disease diagnostic
products in Japan. Underlying revenue growth in the Asia Pacific region was led
by strong increases in sales of hypodermic and infusion therapy products.
Revenues in the United States in 1999 were $1.7 billion, an increase of
3% over 1998. Sales of FACS brand flow cytometry systems, infusion therapy
products, and sample collection devices demonstrated good growth. As mentioned
above, sales of infectious disease products continued to be negatively
affected by cost containment in testing. Underperformance of home health care
products also unfavorably affected revenue growth.
Gross profit margin was 49.9% in 1999, compared with 50.6% last year.
Excluding the impact of other charges relating to the exited product lines, as
discussed above, gross profit margin was 50.7% in 1999.
Selling and administrative expense of $932 million in 1999 was 27.3% of
revenues. Excluding reengineering and other charges relating to Genesis, selling
and administrative expense in 1999 was 26.8% of revenues. The prior year's ratio
was 27.6%, or 27.0% excluding reengineering charges for Genesis. Savings
achieved through spending controls and productivity improvements offset
increased investment relating to advanced protection programs and the impact of
acquisitions.

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Financial Review Becton, Dickinson and Company

Investment in research and development in 1999 increased to $254
million, or 7.4% of revenues, including the $49 million charge for purchased in-
process research and development related to current year acquisitions. In 1998,
we recorded a charge of $30 million for purchased in-process research and
development associated with the MDD acquisition. Excluding the effect of
purchased in-process research and development in both years, investment in
research and development was 6% of revenues, or an increase of 9% over 1998.
This increase includes additional funding directed toward the development of
advanced protection devices and new diagnostic platforms.
Operating income in 1999 was $445 million, compared to last year's $405
million. Excluding the impact of special and other charges and purchased in-
process research and development charges, operating income would have been
17.4% of revenues in 1999. Operating income of $405 million in 1998 also
included certain charges, as discussed above.
Net interest expense of $72 million in 1999 was $16 million higher than
in 1998, primarily due to additional borrowings to fund acquisitions.
"Other (expense) income, net" in 1999 was $1 million of net expense,
compared to $8 million of net expense in 1998, primarily due to lower foreign
exchange losses, gains on the sale of assets, as well as settlements in 1999.
The effective tax rate in 1999 was 26.0%, compared to 30.6% in 1998. The
decrease is principally due to a $7 million favorable tax judgment in Brazil and
a favorable mix in income among tax jurisdictions, partially offset by the lack
of a tax benefit associated with a larger purchased in-process research and
development charge recorded in 1999 as compared to 1998.
Net income in 1999 was $276 million, compared to $237 million in 1998.
Diluted earnings per share in 1999 were $1.04, compared to $.90 in 1998.
Excluding the special and other charges and purchased in-process research and
development charges, diluted earnings per share in 1999 were $1.49. Diluted
earnings per share of $.90 in 1998 also included certain charges, as discussed
above.

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Financial Instrument Market Risk
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We selectively use financial instruments to manage the impact of foreign
exchange rate and interest rate fluctuations on earnings. The counterparties to
these contracts are highly-rated financial institutions, and we do not have
significant exposure to any one counterparty. We do not enter into financial
instruments for trading or speculative purposes.
Our foreign currency exposure is primarily in Western Europe, Asia
Pacific, Japan, Brazil and Mexico. Foreign exchange risk arises when we enter
into transactions in non-hyperinflationary countries, generally on an
intercompany basis, that are denominated in currencies other than the func-
tional currency. During 1999 and 1998, we hedged substantially all of our
foreign exchange exposures primarily through the use of forward contracts and
currency options. These derivative instruments typically have average maturities
of less than six months. Gains or losses on these derivative instruments are
largely offset by the gains or losses on the underlying hedged transactions.
Therefore, with respect to derivative instruments outstanding at September 30,
1999 and 1998, a 10% appreciation or depreciation of the U.S. dollar from the
September 30, 1999 and 1998 market rates would not have a material effect on our
earnings.
Our primary interest rate exposure results from changes in short-term
U.S. dollar interest rates. In an effort to manage interest rate exposures, we
strive to achieve an acceptable balance between fixed and floating rate debt and
may enter into interest rate swaps to help maintain that balance. Based on our
overall interest rate exposure at September 30, 1999 and 1998, a change of 10%
in interest rates would not have a material effect on our earnings or cash flows
over a one-year period. An increase of 10% in interest rates would decrease the
fair value of our long-term debt and interest rate swaps at September 30, 1999
and 1998 by approximately $54 million and $48 million, respectively. A 10%
decrease in interest rates would increase the fair value of our long-term debt
and interest rate swaps at September 30, 1999 and 1998 by approximately $61
million and $54 million, respectively.
We manufacture products in Brazil for sale in that country and for
export. In addition, we import products from affiliates for distribution within
Brazil. Effective January 1, 1998, we no longer considered our Brazilian
business to be operating in a highly inflationary economy as defined by
Statement of Financial Accounting Standard ("SFAS") No. 52 "Foreign Currency
Translation." Over the course of 1999, the Brazilian Real devalued by 62%. We
were able to offset the foreign exchange transaction impact of the devaluation
by hedging our exposure with foreign exchange forward contracts and options.
Consequently, the impact of the devaluation on our earnings was minimal. We also
manufacture in Mexico and import various products from affiliates for sale in
Mexico. In past years, the Mexican economy had experienced periods of high
inflation, recession and currency instability. More recently, Mexico's economy
and currency have shown signs of stabilizing. Effective January 1, 1999, we no
longer considered our Mexican business to be operating in a highly inflationary
economy as defined by SFAS No. 52.

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Liquidity and Capital Resources
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Cash provided by operations continued to be our primary source of funds to
finance operating needs and capital expenditures. In 1999, net cash provided by
operating activities was $432 million, compared to $501 million in 1998.
Capital expenditures were $312 million in 1999, compared to $181
million in the prior year. Medical capital spending, which totaled $188 million
in 1999, included spending for capacity expansion for advanced protection
devices and continued spending on a new syringe manufacturing facility in India.
Funds also were expended for capacity expansion for prefillable syringes in
Mexico and France. Biosciences capital spending, which totaled $42 million in
1999, included spending on new manufacturing facilities. Preanalytical spend-
ing, which totaled $54 million, included spending on additional capacity for
advanced protection devices. Funds expended outside of the above segments
included amounts related to Genesis. We expect capital expenditures to increase
about 10 to 15% in 2000, primarily to fund increased capacity expansion for
advanced protection devices.
Over the last three years, we have expended approximately $1.1 billion
for business acquisitions. We expect our acquisition activity to slow
considerably in 2000 as we focus on integrating recently acquired businesses
into existing operations.
Net cash provided by financing activities was $365 million during 1999,
as compared to $242 million during 1998. This change was primarily due to the
elimination of common share repurchases and to increased issuance of commercial
paper in 1999, compared with 1998, offset by the repayment of long-term debt.
In 1999, we did not repurchase any of our common shares, compared with
repurchases totaling $44 million in 1998. This reduction in share repurchases
was consistent with our long-standing strategy of allocating funds to meet the
needs of businesses and to finance strategic acquisitions before funding share
repurchases. In April 1999, the Executive Committee of our Board of Directors
rescinded a March 24, 1998 resolution which had authorized repurchase of our
stock, under which 21.3 million shares remained to be repurchased.
During 1999, total debt increased $435 million, primarily as a result of
increased spending on acquisitions. Short-term debt was 40% of total debt at
year end, compared to 33% at the end of 1998. The change in this percentage was
principally attributable to the use of short-term debt to finance a portion of
our acquisition activities. Our weighted average cost of total debt at the end
of 1999 was 6.5%, compared to 7.3% at the end of last year. Debt to
capitalization at year end increased to 47.2%, from 41.4% last year, due to
additional borrowings related to acquisitions. We anticipate generating excess
cash in 2000 which we expect to use to repay debt.
In 1999, we negotiated a new 364-day $300 million syndicated line of
credit to supplement both our existing five-year, $500 million syndicated and
committed revolving credit facility and an additional $100 million credit line.
There were no borrowings outstanding under any of these facilities at September
30, 1999. These facilities can be used to support our commercial paper program,
under which $573 million was outstanding at September 30, 1999, and for other
general corporate purposes. In addition, we have informal lines of credit
outside the United States. In September 1999, we issued to the public $200
million of 10-year 7.15% notes at an effective yield of 7.34%. We utilized the
proceeds to repay commercial paper issued in connection with the Clontech
acquisition. In September 1999, Moody's adjusted our long-term debt rating from
"A1" to "A2," while reaffirming our "P-1" commercial paper rating, and
characterized our ratings outlook as stable. Standard and Poor's reaffirmed our
"A+" long-term debt rating and our "A-1" commercial paper rating, while
changing our rating outlook to negative. We continue to have a high degree of
confidence in our 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 16.3% in 1999, from 15.8% in 1998.

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Year 2000 Readiness Disclosure
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General
We designed and implemented a company-wide Year 2000 plan to ensure that our
computer equipment and software and devices with date-sensitive embedded
technology would be Year 2000-compliant. In other words, we wanted to ensure
that this equipment and software and these devices would be able to distinguish
between the year 1900 and the year 2000 and would function properly with respect
to all dates, whether in the twentieth or twenty-first centuries.
Our plan included a series of initiatives to ensure that all of our
computer equipment and software will function properly into the next millennium.
Computer equipment (or hardware) and software includes systems generally thought
to depend on information technology, such as accounting, data processing and
telephone equipment. It also includes systems that do not obviously depend on
information technology, such as manufacturing equipment, telecopier machines and
security systems. Since these systems may contain embedded technology, our plan
included broad identification, assessment, remediation and testing efforts.
Based upon our identification, assessment, remediation and testing
efforts to date, we believe we have completed all modifications to and
replacements of our computer equipment and software that are necessary to avoid
any of the potential Year 2000-related disruptions or malfunctions that have
been identified.

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Financial Review Becton, Dickinson and Company

In addition, as we periodically replace computer equipment and software in the
ordinary course of business, we seek to acquire only Year 2000-compliant
software and hardware.

Project
Our plan includes four major areas of focus: information technology, or "IT"
systems; non-IT systems; third-party considerations; and products.
The tasks common to each of these areas of focus are:
. the identification and assessment of Year 2000 issues
. prioritization of the identified issues
. assessment of compliance
. remediation
. testing
. design and implementation of contingency and business continuation
plans.
We utilized, and will continue to utilize, both internal and external
resources to ensure that we are Year 2000-compliant prior to any impact of the
new millennium that is currently anticipated. We have completed all the tasks we
have identified to date relating to the areas of focus and goals described
below. Through these efforts, we have sought not only to avoid any Year 2000-
related disruption of our operations but also to ensure that our products, and
those of our third-party suppliers, are Year 2000-compliant.

Year 2000 Areas of Focus and Goals
IT Systems
We have reviewed our computer equipment and software to ensure that it is Year
2000-compliant, and as necessary, we have modified or replaced this equipment
and software. In addition we have established contingency and business contin-
uation plans in the event of disruption in our IT systems.

Non-IT Systems
We have sought to ensure that the hardware, software and associated embedded
computer technologies that are used to operate our facilities and equipment, as
well as other activities that are not related to IT systems, are Year 2000-
compliant. We believe we have undertaken and completed all reasonable
initiatives that are necessary or prudent to address potential Year 2000 issues
affecting our non-IT systems. We have also completed contingency and business
continuation planning to ensure that products and services will continue with a
minimum of disruption if a problem arises that cannot be directly controlled or
predicted.

Third-Party Considerations
We have identified, prioritized and communicated with critical suppliers,
distributors and customers to determine the extent to which we may be vulnerable
in the event those parties fail to properly identify and remediate their own
Year 2000 issues. Detailed evaluations of the most critical third parties have
been completed through questionnaires, interviews, on-site visits and other
available means. We monitor the progress made by those parties, and we have
tested critical system interfaces. We have identified alternative vendors, if
available, to provide Year 2000-compliant products and services if needed.
Where vendors provide services or products for which few or no alternatives are
available, we have formulated contingency and business continuation plans to
address potential third-party issues identified through its evaluations and
assessments.

Products
Most of our products do not contain date-sensitive embedded technology. For
those that do, we have performed remediation and testing efforts and will
continue testing through the balance of the year, as appropriate. In addition,
we have identified some of our products that are already in use by customers
and that contain date-sensitive technology. For these products, we have
undertaken the additional step of distributing and installing any requisite
remediating product upgrades and/or replacements. We believe we have deployed
approximately 100% of these customer product upgrades. Each segment of the
Company has developed contingency and business continuation planning with
respect to its products.

Costs
The estimated total cost of the plan is approximately $18 million, which has
been, and will continue to be, funded through operating cash flows. As of
September 30, 1999, we had incurred approximately $14 million in costs related
to our Year 2000 project. We anticipate that the remaining costs of the plan
include $2 million allocated to unanticipated contingencies and $2 million for
internal and external project-related costs. Of the total remaining costs of the
plan, $1 million represents the redeployment of existing resources. None of our
other information technology projects has been delayed or deferred as a result
of the implementation of the plan.

Risks
We believe we have an effective plan in place to anticipate and resolve any
potential Year 2000 issues affecting us and our products, as well as those of
third-party suppliers, in a timely manner. We cannot assure you, however, that
Year 2000 issues will not materially and adversely affect our results of opera-
tions, cash flows or relationships with third parties in the event that
. we have not properly identified our Year 2000 issues
or the potential business disruption among third par-
ties with whom we conduct significant business, or
. our compliance assessment, remediation and testing
activities, and our deployment of product upgrades,
have not effectively addressed all relevant Year 2000
issues affecting us and our products.
In addition, disruptions in the economy generally resulting from Year
2000 issues could materially and adversely affect us. At this time we cannot
reasonably estimate the amount of potential liability and lost revenue that
would be reasonably

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likely to result from the failure by us and certain key third parties to
achieve Year 2000 compliance on a timely basis.
The estimated costs of our plan and our belief that we have completed
each of the phases of the plan are based upon management's best estimates, which
rely upon numerous assumptions regarding future events, including the continued
availability of certain resources, third-party remediation plans and other
factors. These estimates, however, may prove not to be accurate, and actual
results could differ materially from those anticipated. Factors that could
result in material differences include, without limitation, the availability
and cost of personnel with the requisite training and experience; the ability
to appropriately identify, assess, remediate and test all devices, all relevant
computer codes and embedded technology; and similar uncertainties. In addition,
Year 2000-related issues may lead to possible third-party claims, the impact of
which we cannot yet estimate. We cannot assure you that the aggregate cost of
defending and resolving such claims, if any, would not have a material adverse
effect on us.

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Other Matters
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On January 1, 1999, eleven member countries of the European Union began the
transition to the euro as a common currency. Prior to the full implementation of
the new currency on January 1, 2002, there is a transition period during which
parties may use either their national currencies or the euro. We have completed
the necessary system modifications to accommodate euro-denominated transactions
with suppliers and customers. We are continuing to convert historical
information from the respective national currencies to the euro. We believe that
the creation of the euro will not significantly change our foreign exchange
market risk. The adoption of a common European currency may result in changes to
competitive practices, product pricing and marketing strategies. Although we
are unable to quantify these effects, if any, management currently does not
anticipate that the euro conversion will have a material adverse impact on our
results of operations, financial condition or cash flows.
We believe that the fundamentally non-cyclical nature of our core
products, our international diversification and our 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 us of economic and political
dislocations in the countries in which we do business, including the effects of
possible health care system reforms. In 1999, inflation did not have a material
impact on our overall operations.

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Litigation
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We, along with a number of other manufacturers, have been named as a defendant
in approximately 300 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 analogous
procedures have been implemented in the state courts of California,
Pennsylvania, New Jersey and New York. Generally, these actions allege that med-
ical 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, we acquired a business which manufactured, among other things,
latex surgical gloves. In 1995, we divested this glove business. We are
vigorously defending these lawsuits.
We, along with another manufacturer and several medical product
distributors, have been named as a defendant in eleven product liability
lawsuits relating to health care workers who allegedly sustained accidental
needle sticks, but have not become infected with any disease. The case brought
in California under the caption Chavez vs. Becton Dickinson (Case No. 722978,
San Diego County Superior Court), filed on August 4, 1998 was dismissed in a
judgment filed March 19, 1999 which has been appealed by plaintiffs. The case
brought in Florida under the caption Delgado vs. Becton Dickinson et al. (Case
No. 98-5608, Hillsborough County Circuit Court), filed on July 24, 1998 was
voluntarily withdrawn by the plaintiffs on March 8, 1999. Cases have been filed
on behalf of an unspecified number of health care workers in nine other states,
seeking class action certification under the laws of these states. To date, no
class has been certified in any of these cases. The nine remaining actions are
pending in state court in Texas, under the caption Usrey vs. Becton Dickinson et
al. (Case No. 342-173329-98, Tarrant County District Court), filed on April 9,
1998; in Federal court in Ohio, under the caption Grant vs. Becton Dickinson et
al. (Case No. C2 98-844, Southern District of Ohio), filed on July 22, 1998; in
state court in Illinois, under the caption McCaster vs. Becton Dickinson et al.
(Case No. 98L09478, Cook County Circuit Court), filed on August 13, 1998; in
state court in Oklahoma, under the caption Palmer vs. Becton Dickinson et al.
(Case No. CJ-98-685, Sequoyah County District Court), filed on October 27, 1998;
in state court in Alabama, under the caption Daniels vs. Becton Dickinson et al.
(Case No. CV 1998 2757, Montgomery County Circuit Court), filed on October 30,
1998; in state court in South Carolina, under the caption Bales vs. Becton
Dickinson et al. (Case No. 98-CP-40-4343, Richland County Court of Common
Pleas), filed on November 25, 1998; in state court in Pennsylvania, under the
caption Brown vs. Becton Dickinson et al. (Case No. 03474, Philadelphia County
Court of Common Pleas), filed on November 27, 1998; in state court in New
Jersey, under the caption Pollak, Swartley vs. Becton Dickinson et al. (Case No.
L-9449-98, Camden County Superior Court), filed on December 7, 1998;

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Financial Review Becton, Dickinson and Company

and in state court in New York, under the caption Benner vs. Becton Dickinson et
al. (Case No. 99-111372, Supreme Court of the State of New York), filed on June
1, 1999.
Generally, these remaining actions allege that health care workers have
sustained needle sticks using hollow-bore needle devices manufactured by us and,
as a result, require medical testing, counseling and/or treatment. Several
actions additionally allege that the health care workers have sustained mental
anguish. Plaintiffs seek money damages in all remaining actions.
In June 1999, a class certification hearing was held in the matter of
Usrey vs. Becton Dickinson et al. which first was filed in Texas state court on
April 9, 1998, under the caption Calvin vs. Becton Dickinson et al. The Court
has advised the parties by letter received on October 27, 1999, that it believes
that it is appropriate to address the issues in the case by way of a class
action under Texas procedural law. The Court has scheduled a meeting with the
parties' counsel in mid-December to discuss the wording of an appropriate order.
We continue to oppose class action certification in these cases and will
continue vigorously to defend these lawsuits, including pursuing all appropriate
rights of appeal.
We, along with another manufacturer, a group purchasing organization
("GPO") and three hospitals, have been named as a defendant in an antitrust
action brought pursuant to the Texas Free Enterprise Act ("TFEA"). The action is
pending in state court in Texas, under the caption Retractable Technologies
Inc. vs. Becton Dickinson and Company et al. (Case No. 5333*JG98, Brazoria
County District Court), filed on August 4, 1998. Plaintiff, a manufacturer of
retractable syringes, alleges that our contracts with GPOs exclude plaintiff
from the market in syringes and blood collection products, in violation of the
TFEA. Plaintiff also alleges that we have conspired with other manufacturers to
maintain our market share in these products. Plaintiff seeks money damages. The
pending action is in preliminary stages. We intend to mount a vigorous defense
in this action.
We are also involved in other legal proceedings and claims which arise
in the ordinary course of business, both as a plaintiff and a defendant.
In our opinion, the results of the above matters, individually and in
the aggregate, are not expected to have a material effect on our results of
operations, financial condition or cash flows.

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Environmental Matters
- --------------------------------------------------------------------------------

We believe that our operations comply in all material respects with applicable
laws and regulations. We are a party to a number of Federal proceedings in the
United States brought under the Comprehensive Environment Response, Compensa-
tion 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. We accrue costs for an estimated
environmental liability based upon our best estimate within the range of
probable losses, without considering possible third-party recoveries. We believe
that any reasonably possible losses in excess of accruals would not have a
material effect on our results of operations, financial condition, or cash
flows.

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Adoption of New Accounting Standards
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In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities." We
are required to adopt the provisions of this Statement no later than its fiscal
year 2000. This Statement provides guidance on the financial reporting of start-
up and organization costs and requires such costs, as defined, to be expensed as
incurred. Adoption of this Statement is not expected to have a material impact
on our results of operations or financial condition.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." We are required to adopt the provisions of
this Statement no later than the beginning of its fiscal year 2001. This
Statement requires that all derivatives be recorded in the balance sheet as
either an asset or liability measured at fair value and that changes in fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. We are in the process of evaluating this Statement and have
not yet determined the future impact on our consolidated financial statements.

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1998 Compared With 1997
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Worldwide revenues for 1998 rose 11%, to $3.1 billion. Excluding the estimated
impact of unfavorable foreign currency translation, worldwide revenues grew 14%
with acquisitions contributing 7%. Underlying revenue growth, which excludes the
effects of foreign currency translation and acquisitions in 1998 and 1997,
resulted primarily from volume increases and an improved product mix in all
segments. Medical revenues for 1998 were $1.7 billion, an increase of 14% over
1997. Underlying revenue growth in the Medical segment was led by strong sales
of infusion therapy and hypodermic products and increased sales of prefillable
syringes to pharmaceutical companies. Biosciences revenues for 1998 of $924
million represented an increase of 8% over 1997. Underlying revenue growth in
the Biosciences segment was led by strong sales of FACS brand flow cytometry
systems. Preanalytical revenues for 1998 were $478 million, an increase of 7%,
primarily due to continued strong sales of sample collection devices fueled by
the conversion of the market to advanced protection devices.

24

Becton, Dickinson and Company

Gross profit margin was 50.6% in 1998, compared with 49.7% in 1997,
reflecting our continued success in improving manufacturing efficiency, as well
as a more profitable mix of products sold.
Selling and administrative expense of $862 million was 27.6% of
revenues, compared to 27.3% in 1997, and was unfavorably affected by the 1998
reengineering charges related to Genesis. Investment in research and development
in 1998 increased to $218 million, or 7.0% of revenues, including the $30
million charge for purchased in-process research and development related to the
MDD acquisition. In 1997, we recorded a charge of $15 million for purchased in-
process research and development associated with two acquisitions. Excluding the
effect of purchased in-process research and development in both years,
investment in research and development remained at 6% of revenues, or an
increase of 13% over 1997. This increase includes additional funding directed
toward emerging new platforms, such as DNA probe technology and other new
diagnostic platforms, to support our efforts to accelerate our rate of revenue
growth.
Operating income in 1998 of $405 million decreased from $451 million in
1997. Excluding the special and other charges in 1998 and purchased in-process
research and development in 1998 and 1997, operating income would have been
17.6% of revenues in 1998, compared to 16.6% in 1997. This increase in operating
margin resulted from an improved gross profit margin, as well as a lower selling
and administrative expense ratio.
Net interest expense of $56 million in 1998 was $17 million higher than
in 1997, primarily due to additional borrowings to fund acquisitions.
"Other (expense) income, net" in 1998 included foreign exchange losses
of $11 million, including hedging costs, and a gain of $3 million on the sale of
an investment. "Other (expense) income, 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 in 1997 were foreign exchange losses
of $5 million, including hedging costs.
The effective tax rate in 1998 was 30.6% compared to 29% in 1997. The
increase is principally due to the lack of a tax benefit associated with a
larger purchased in-process research and development charge recorded in 1998, as
compared to 1997.
Net income in 1998 was $237 million, compared to $300 million in 1997.
Diluted earnings per share were $.90, compared to $1.15 in 1997. The effects of
the special and other charges and the purchased in-process research and develop-
ment charge recorded in 1998 decreased diluted earnings per share by $.40, and
the estimated impact of unfavorable foreign currency translation was $.07 per
share. Exclusive of these items and the in-process research and development
charges recorded in 1997, diluted earnings per share grew 13% over 1997.
Capital expenditures were $181 million, compared to $170 million in
1997. Medical, Biosciences and Preanalytical capital spending totaled $105
million, $38 million and $28 million, respectively, in 1998.
We expended $537 million, net of cash acquired, for business
acquisitions in 1998, compared to $201 million in 1997.
Net cash provided by financing activities was $242 million during 1998
as compared with a use of cash of $92 million during 1997. This change was due
primarily to a reduction in common share repurchases, as well as net proceeds
received from the issuance of commercial paper in 1998 versus net repayments in
1997.
During 1998, total debt increased $352 million, primarily as a result of
increased spending on acquisitions. Short-term debt was 33% of total debt at
year end, compared to 17% at the end of 1997. The change in this percentage was
principally attributable to the use of short-term debt to finance a portion of
the MDD acquisition.
Return on equity decreased to 15.8% in 1998, from 22.1% in 1997,
primarily due to the impact of special and other charges and the purchased in-
process research and development charge.

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Forward-Looking Statements
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The Private Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements (as defined under Federal securities laws) made by or
on behalf of BD. BD and its representatives from time to time may make certain
verbal or written forward-looking statements regarding BD's performance
(including future revenues, products and income), or events or developments that
BD expects to occur or anticipates occurring in the future. All such statements
are based upon current expectations of BD and involve a number of business risks
and uncertainties. Actual results could vary materially from anticipated results
described in any forward-looking statement. Factors that could cause actual
results to vary materially include, but are not limited to, competitive
factors, changes in regional, national or foreign economic conditions, changes
in interest or foreign currency exchange rates, delays in product introductions,
Year 2000 issues, and changes in health care or other governmental practices or
regulation, as well as other factors discussed herein and in other of BD's
filings with the Securities Exchange Commission.

25

Becton, Dickinson and Company