FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_______________________________to_____________
Commission file number 001-4802
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Becton, Dickinson and Company
-----------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-0760120
- ---------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Becton Drive Franklin Lakes, New Jersey 07417-1880
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(Address of principal executive offices)
(Zip Code)
(201) 847-6800
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X. No ____.
-
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class of Common Stock Shares Outstanding as of April 30, 2000
--------------------- ---------------------------------------
Common stock, par value $1.00 252,428,019
BECTON, DICKINSON AND COMPANY
FORM 10-Q
For the quarterly period ended March 31, 2000
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION Page Number
- ------- --------------------- -----------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets .................... 3
Condensed Consolidated Statements of Income .............. 4
Condensed Consolidated Statements of Cash Flows .......... 5
Notes to Condensed Consolidated Financial Statements ..... 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk.. 14
Part II. OTHER INFORMATION
- -------- -----------------
Item 1 Legal Proceedings .......................................... 15
Item 2 Changes in Securities and Use of Proceeds .................. 16
Item 3 Defaults Upon Senior Securities ............................ 16
Item 4 Submission of Matters to a Vote of Security Holders......... 16
Item 5 Other Information .......................................... 17
Item 6 Exhibits and Reports on Form 8-K ........................... 17
Signature .......................................................... 19
Exhibits .......................................................... 20
2
ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
March 31, September 30,
Assets 2000 1999
- ------ -------------- --------------
(Unaudited)
Current Assets:
Cash and equivalents $ 65,064 $ 59,932
Short-term investments 11,310 4,660
Trade receivables, net 768,874 812,544
Inventories (Note 2):
Materials 170,724 160,332
Work in process 107,695 94,627
Finished products 407,082 387,574
-------------- -----------------
685,501 642,533
Prepaid expenses, deferred taxes and other 177,481 164,056
-------------- -----------------
Total Current Assets 1,708,230 1,683,725
Property, plant and equipment 3,038,348 2,932,804
Less allowances for depreciation and amortization 1,551,828 1,501,655
-------------- -----------------
1,486,520 1,431,149
Goodwill, Net 514,228 526,942
Core and Developed Technology, Net 318,900 329,460
Other Intangibles, Net 171,276 178,285
Other 331,546 287,397
-----------------
--------------
Total Assets $ 4,530,700 $ 4,436,958
============== =================
Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities:
Short-term debt $ 729,721 $ 631,254
Payables and accrued expenses 734,913 698,068
-------------- -----------------
Total Current Liabilities 1,464,634 1,329,322
Long-Term Debt 819,927 954,169
Long-Term Employee Benefit Obligations 327,613 344,068
Deferred Income Taxes and Other 44,121 40,711
Commitments and Contingencies - -
Shareholders' Equity:
Preferred stock 45,066 46,717
Common stock 332,662 332,662
Capital in excess of par value 62,208 44,626
Retained earnings 2,686,022 2,539,020
Unearned ESOP compensation (20,856) (20,310)
Deferred compensation 6,463 5,949
Shares in treasury - at cost (988,364) (997,333)
Accumulated other comprehensive income (248,796) (182,643)
-------------- -----------------
Total Shareholders' Equity 1,874,405 1,768,688
-------------- -----------------
Total Liabilities and Shareholders' Equity $4,530,700 $ 4,436,958
============== =================
See notes to condensed consolidated financial statements
3
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Thousands of Dollars, Except Per-share Data
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------------- -----------------------------------
2000 1999 2000 1999
---------------- --------------- ---------------- -----------------
Revenues $ 925,132 $ 873,964 $ 1,784,296 $ 1,642,930
Cost of products sold 473,987 429,260 923,938 814,970
Selling and administrative 244,063 233,004 477,901 456,120
Research and development 57,175 67,251 110,918 116,561
-------------- ------------- -------------- ---------------
Total Operating Costs and Expenses 775,225 729,515 1,512,757 1,387,651
-------------- ------------- -------------- ---------------
Operating Income 149,907 144,449 271,539 255,279
Interest expense, net (21,199) (18,758) (42,756) (36,629)
Other income, net 36,399 1,460 38,073 2,485
-------------- ------------- -------------- ---------------
Income Before Income Taxes 165,107 127,151 266,856 221,135
Income tax provision 45,936 37,037 72,391 54,863
-------------- ------------- -------------- ---------------
Net Income $ 119,171 $ 90,114 $ 194,465 $ 166,272
============== ============= ============== ===============
Earnings Per Share:
Basic $ .47 $ .36 $ .77 $ .66
============== ============= ============== ===============
Diluted $ .45 $ .34 $ .74 $ .63
============== ============= ============== ===============
Dividends Per Common Share $ .0925 $ .085 $ .185 $ .17
============== ============= ============== ===============
See notes to condensed consolidated financial statements
4
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)
Six Months Ended
March 31,
------------------------------------------
2000 1999
-------------- -----------------
Operating Activities
Net income $ 194,465 $ 166,272
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 141,469 128,484
Gain on sale of investment (33,159) -
Purchased in-process research and development - 16,800
Change in working capital (24,949) (204,207)
Other, net (10,577) 17,708
-------------- -----------------
Net Cash Provided by Operating Activities 267,249 125,057
-------------- -----------------
Investing Activities
Capital expenditures (165,621) (132,855)
Acquisitions of businesses, net of cash acquired (21,573) (153,247)
Change in investments, net 34,876 (18,159)
Capitalized software (28,603) (28,863)
Other, net (15,206) (30,683)
-------------- -----------------
Net Cash Used for Investing Activities (196,127) (363,807)
-------------- -----------------
Financing Activities
Change in short-term debt (7,247) 371,349
Proceeds of long-term debt - 185
Payments of long-term debt (29,941) (108,395)
Issuance of common stock from treasury 19,338 15,383
Dividends paid (47,196) (43,163)
-------------- -----------------
Net Cash (Used for) Provided by Financing Activities (65,046) 235,359
-------------- -----------------
Effect of exchange rate changes on cash and equivalents (944) (6,005)
-------------- -----------------
Net increase (decrease) in cash and equivalents 5,132 (9,396)
Opening Cash and Equivalents 59,932 83,251
-------------- -----------------
Closing Cash and Equivalents $ 65,064 $ 73,855
============== =================
See notes to condensed consolidated financial statements
5
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar and Share Amounts in Thousands, Except Per-share Data
March 31, 2000
Note 1 - Basis of Presentation
- ------------------------------
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion of
the management of the Company, include all adjustments which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However,
the financial statements do not include all information and footnotes required
for a presentation in accordance with generally accepted accounting principles.
These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included or
incorporated by reference in the Company's 1999 Annual Report on Form 10-K. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year. Prior year
information has been reclassified to conform to current year presentation.
Note 2 - Inventory Valuation
- ----------------------------
An actual valuation of inventory under the LIFO method can be made only at the
end of each fiscal year based on the inventory levels and costs at that time.
Accordingly, interim LIFO calculations are based on management's estimates of
expected year-end inventory levels and costs.
Note 3 - Comprehensive Income
- -----------------------------
Comprehensive income for the Company includes the following:
Three Months Ended Six Months Ended
March 31, March 31,
----------------------------------- -----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
Net income $ 119,171 $ 90,114 $ 194,465 $ 166,272
Other Comprehensive Income,
Net of Tax
Foreign currency translation
adjustments (39,033) (72,785) (77,718) (79,667)
Unrealized (loss) gain on
investments, net of
amounts realized (1,503) 2,482 11,565 (4,251)
--------------- --------------- --------------- ---------------
Comprehensive Income $ 78,635 $ 19,811 $ 128,312 $ 82,354
=============== =============== =============== ===============
6
During the second quarter of fiscal 2000, the Company sold portions of an
investment for a net gain of approximately $33,000 before taxes. The proceeds
from these sales were approximately $38,000. The cost of this investment was
determined based upon the specific identification method. The amount of
unrealized gains or losses on investments in comprehensive income has been
adjusted to reflect the realized gains included in net income for investments
sold during the year.
Note 4 - Earnings per Share
- ---------------------------
The following table sets forth the computations of basic and diluted earnings
per share:
Three Months Ended Six Months Ended
March 31, March 31,
----------------------------------- -----------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
Net income $ 119,171 $ 90,114 $ 194,465 $ 166,272
Preferred stock dividends (732) (785) (1,478) (1,576)
--------------- --------------- --------------- ---------------
Income available to
common shareholders (A) 118,439 89,329 192,987 164,696
Preferred stock dividends - using
"if converted" method 732 785 1,478 1,576
Additional ESOP contribution -
using "if converted" method (165) (201) (339) (405)
--------------- --------------- --------------- ---------------
Income available to common
shareholders after assumed
conversions (B) $ 119,006 $ 89,913 $ 194,126 $ 165,867
=============== =============== =============== ===============
Average common shares
outstanding (C) 252,055 249,276 251,690 248,793
Dilutive stock equivalents from
stock plans 6,432 10,308 6,407 11,291
Shares issuable upon conversion
of preferred stock 4,889 5,230 4,889 5,230
--------------- --------------- --------------- ---------------
Average common and common
equivalent shares outstanding -
assuming dilution (D) 263,376 264,814 262,986 265,314
=============== =============== =============== ===============
Basic earnings per share (A/C) $ .47 $ .36 $ .77 $ .66
=============== =============== =============== ===============
Diluted earnings per share (B/D) $ .45 $ .34 $ .74 $ .63
=============== =============== =============== ===============
7
Note 5 - Contingencies
- ----------------------
The Company is involved, both as a plaintiff and a defendant, in various legal
proceedings which arise in the ordinary course of business, including product
liability and environmental matters. In the opinion of the Company, the results
of these matters, individually and in the aggregate, are not expected to have a
material impact on its results of operations, financial condition or cash flows.
Note 6 - Segment Data
- ---------------------
The Company's organizational structure is based upon its three principal
business segments: BD Medical Systems, BD Biosciences, and BD Preanalytical
Solutions. The Company evaluates performance based upon operating income.
Segment operating income represents revenues reduced by product costs and
operating expenses.
Financial information for the Company's segments is as follows:
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------------------- ----------------------------------------
2000 1999 2000 1999
------------------ ------------------ ------------------ ------------------
Revenues
- --------
Medical Systems $ 489,329 $ 483,779 $ 951,935 $ 908,944
Biosciences 296,317 262,325 560,733 485,604
Preanalytical Solutions 139,486 127,860 271,628 248,382
----------------- ------------------ ------------------ ------------------
Total Revenues (A) $ 925,132 $ 873,964 $ 1,784,296 $ 1,642,930
================= ================== ================== ==================
Segment Operating Income
- ------------------------
Medical Systems $ 95,487 $ 100,505 $ 190,188 $ 181,331
Biosciences 46,763 28,490 72,074 57,947
Preanalytical Solutions 34,679 32,091 61,987 60,220
----------------- ------------------ ------------------- -----------------
Total Segment Operating
Income 176,929 161,086 324,249 299,498
Unallocated Expenses (B) (11,822) (33,935) (57,393) (78,363)
----------------- ------------------ ------------------- -----------------
Income Before
Income Taxes $ 165,107 $ 127,151 $ 266,856 $ 221,135
================= ================== =================== =================
(A) Intersegment revenues are not material.
(B) Includes interest, net, foreign exchange, and corporate expenses.
8
Note 7 - Special Charges
- ------------------------
The Company recorded special charges in fiscal 1999 and 1998 associated with two
restructuring programs, primarily designed to improve the Company's cost
structure, refocus certain businesses, and write down impaired assets. A
summary of the special charge accrual activity during the first six months of
fiscal 2000 follows:
Severance Restructuring Other
-------------- ------------- ------------
Accrual Balances at
September 30, 1999 $ 13,100 $ 9,250 $ 6,100
Payments (3,500) (5,000) (1,700)
-------------- -------------- ------------
Accrual Balances at
March 31, 2000 $ 9,600 $ 4,250 $ 4,400
============== ============== ============
The 1998 restructuring plan included charges associated with the restructuring
of certain manufacturing operations. As of March 31, 2000, approximately 100
positions have been eliminated, and the Company expects that an additional 150
people will be affected by this plan, upon the closure of a U.S. surgical blade
plant scheduled for the first half of fiscal year 2002. The remaining 1998
restructuring accruals related to this closure consist primarily of severance.
Note 8 - Acquisition Reserves
- -----------------------------
During fiscal year 1997, the Company acquired Difco Laboratories Incorporated
("Difco"). The assumed liabilities for the Difco acquisition included
approximately $17,500 for severance and other exit costs associated with the
closing of certain Difco facilities. As of March 31, 2000, approximately $3,700
of these reserves remained. The Company expects to substantially utilize these
remaining reserves over the next three months.
Note 9 - Product Recall
- -----------------------
On February 23, 2000, the Company announced that it was voluntarily recalling
certain manufacturing lots of the BD Insyte(R) AutoGuard(TM) shielded IV
catheter after receiving reports of localized skin irritation following product
use. The actual percentage of products for which the Company received reports
was less than .01 percent of such products used. While there have been no
confirmed reports of serious problems or complications, the Company decided to
voluntarily recall this product in order to minimize additional concerns. The
Company has since adjusted its Insyte AutoGuard manufacturing process to address
the problem, and shipments of this product resumed at the beginning of the third
quarter.
In the current quarter, the Company recorded recall costs of approximately
$13,000, which consisted primarily of costs associated with product returns,
disposal of the affected product, and other direct recall costs. These recall
costs were reported in cost of products sold.
9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
- -------------
Recent Developments
- -------------------
During the second quarter of fiscal 2000, we sold portions of an investment for
a net gain of approximately $33 million before taxes. The proceeds from these
sales were approximately $38 million. The cost of this investment was determined
based upon the specific identification method.
On February 23, 2000, we announced that we were voluntarily recalling certain
manufacturing lots of the BD Insyte(R) AutoGuard(TM) shielded IV catheter after
receiving reports of localized skin irritation following product use. The
actual percentage of products for which we received reports was less than .01
percent of such products used. While there have been no confirmed reports of
serious problems or complications, we decided to voluntarily recall this product
in order to minimize additional concerns. We have since adjusted our Insyte
AutoGuard manufacturing process to address the problem, and shipments of this
product resumed at the beginning of the third quarter. In the second quarter,
we recorded recall costs of approximately $13 million, which consisted primarily
of costs associated with product returns, disposal of the affected product, and
other direct recall costs. These recall costs were reported in cost of products
sold. The recall modestly affected second quarter revenues in the BD Medical
Systems segment due to the product being temporarily unavailable. We do not
expect revenues for the balance of the year to be further affected by this
recall.
Results of Operations
- ---------------------
Second quarter revenues exceeded prior year revenues by 6%. Revenues for the
six months increased $141 million or 9% from last year. Revenue growth was
unfavorably affected by the strengthened dollar against the Euro as compared to
the prior year. The impact of foreign currency translation reduced revenues by
an estimated $18 million and $29 million for the three and six month periods,
respectively. Revenues for the quarter were modestly affected by the voluntary
product recall and the shifting of purchases by customers into the first quarter
in anticipation of potential Year 2000 disruptions.
Three Months Ended March 31, Six Months Ended March 31,
-------------------------------------------------------------------------------------
Segment Revenues
(Dollars in millions) 2000 1999 % Change 2000 1999 % Change
==============================================================================================================
Medical Systems
- ---------------
United States $232 $227 3 $439 $419 5
International 257 257 - 513 490 5
- --------------------------------------------------------------------------------------------------------------
Total $489 $484 1 $952 $909 5
==============================================================================================================
Biosciences
- -----------
United States $171 $142 20 $322 $266 21
International 125 120 4 239 220 9
- --------------------------------------------------------------------------------------------------------------
Total $296 $262 13 $561 $486 16
==============================================================================================================
10
Segment Revenues Three Months Ended March 31, Six Months Ended March 31,
-------------------------------------------------------------------------------------
(Dollars in millions) 2000 1999 % Change 2000 1999 % Change
==============================================================================================================
Preanalytical Solutions
- -----------------------
United States $78 $69 13 $148 $133 11
International 61 59 4 124 115 7
- --------------------------------------------------------------------------------------------------------------
Total $139 $128 9 $272 $248 9
==============================================================================================================
Total Revenues
- --------------
United States $482 $438 10 $908 $817 11
International 443 436 2 876 826 6
- --------------------------------------------------------------------------------------------------------------
Total $925 $874 6 $1,784 $1,643 9
==============================================================================================================
Recent acquisitions, primarily in the United States, added about $20 million to
BD Biosciences ("Biosciences") revenues and about $9 million to BD Medical
Systems ("Medical") revenues for the quarter. Medical segment revenues increased
4% for the quarter after excluding the estimated unfavorable impact of foreign
currency translation. Such revenues were reduced by the shifting of purchases,
primarily in Europe, into the first quarter, in anticipation of potential
disruptions related to the Year 2000, the impact of the product recall, and the
absence of revenues from divested home health care products. Biosciences
revenues, which increased 14% for the quarter after excluding the estimated
unfavorable impact of foreign currency translation, reflected strong growth in
flow cytometry products. BD Preanalytical ("Preanalytical") revenues increased
12% for the quarter after excluding the estimated unfavorable impact of foreign
currency translation. Worldwide revenues for the Medical and Preanalytical
segments reflected good growth in sales of advanced protection devices.
International revenues grew approximately 6% for the quarter after excluding the
unfavorable impact of foreign currency translation.
Medical segment operating income decreased 5% from the prior year's quarter
primarily due to the factors discussed above. Biosciences segment operating
income for the quarter grew 7%, excluding last year's purchased in-process
research and development charge, primarily due to revenue growth. Amortization
associated with 1999 acquisitions for this segment also affected the growth
rate. Preanalytical segment operating income increased 8% from the prior
year's quarter reflecting the increase in sales growth in advanced protection
devices. (See Note 6 in "Notes to Condensed Consolidated Financial Statements"
for additional segment income information.)
Reported gross profit margin was 48.8% for the quarter and 48.2% for the six
months. Excluding the product recall costs, gross profit margin would have been
50.2% for the quarter and 49% for the six months, compared with last year's
ratios of 50.9% and 50.4%, respectively. This decline reflects a less
profitable mix of products sold and higher costs associated with the scale up of
production of advanced protection devices.
Selling and administrative expense was 26.4% of revenues for the quarter and
26.8% for the six months compared with the prior year's ratios of 26.7% and
27.8%, respectively. The improvement in the ratio reflects savings achieved
through spending controls and productivity improvements.
11
Investment in research and development was 6.2% of revenues for both the quarter
and six months. Excluding a $15 million charge for purchased in-process
research and development associated with an acquisition completed during the
second quarter of fiscal 1999, last year's ratios were 5.9% for the quarter and
6.2% for the six months.
Operating income increased 4% and 6% for the quarter and six months,
respectively. Operating margin was 16.2% for the quarter and 15.2% for the six
months. Excluding the product recall costs and last year's in-process research
and development charge, operating margin for the quarter and six months would
have been 17.6% and 16%, respectively, compared with last year's ratios of 18.3%
and 16.5%, respectively. This decline primarily reflects the decrease in gross
profit margin, as discussed earlier.
Net interest expense was $6 million higher for the six months compared with the
prior year, due to additional borrowings to fund prior year acquisitions. Other
income, net was $35 million higher for the quarter and $36 million higher for
the six months compared with the prior year, primarily due to the gain on the
sale of an investment in the second quarter.
The income tax rate was 27.8% for the quarter and 27.1% for the six months and
reflected the higher rate on the gain on investment sale as well as the
product recall costs. The prior year's second quarter rate of 29.1% reflected
the lack of a tax benefit associated with the in-process research and
development charge. Excluding these items, the second quarter rate would have
been 26% for both years.
Net income of $119 million and diluted earnings per share of $.45 increased 32%
over the prior year, reflecting the items discussed above.
Financial Condition
- -------------------
During the first six months of 2000, cash provided by operating activities was
$267 million compared with $125 million during the first six months of last
year. This improvement reflects lower build-up of inventories and lower trade
receivable balances compared with the prior year's second quarter as well as
more stringent cash management policies. Capital expenditures during the first
six months were $166 million compared with last year's amount of $133 million.
We expect capital spending for fiscal 2000 to be about $375 million, reflecting
increased investment in additional manufacturing capacity for advanced
protection devices. Capitalized software represents expenditures associated
with our enterprise-wide business systems upgrade program.
Trade receivables of $769 million decreased $44 million from fiscal year-end
levels primarily from increased collection activity. Inventory levels increased
$43 million since fiscal year-end primarily due to the building of inventory
needed for the acceleration of revenues over the third and fourth quarters.
As of March 31, 2000, total debt of $1.5 billion represented 45.1% of total
capital (shareholders' equity, net non-current deferred income tax liabilities,
and debt), down from 45.4% a year ago. Because of our strong credit rating, we
believe we have the capacity to arrange additional borrowings should the need
arise.
12
Year 2000 Update
- ----------------
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 sought to ensure
that our 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.
Based upon our identification, assessment, remediation and testing efforts, we
believe we have completed all modifications to and replacements of our computer
equipment and software that were necessary to avoid any potential Year 2000-
related disruptions or malfunctions that had been identified. We have not
experienced any major disruptions to our business nor are we aware of any
significant Year 2000-related disruptions impacting our customers or suppliers.
As of March 31, 2000, we incurred approximately $17 million in total costs
related to our Year 2000 project, which was funded through operating cash flows.
We do not anticipate any additional significant costs related to our plan. None
of our other information technology projects have been delayed or deferred as a
result of the implementation of the plan.
Adoption of New Accounting Standards
- ------------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". 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. In June 1999, the
FASB issued SFAS No. 137, which deferred the effective date of SFAS No. 133. As
a result, we will be adopting the provisions of this Statement no later than our
first quarter of fiscal 2001. We are in the process of evaluating this
Statement and have not yet determined the future impact on our consolidated
financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements". This SAB provides the SEC's views in applying generally accepted
accounting principles to selected revenue recognition issues. We are required
to adopt the provisions of this SAB no later than our first quarter of fiscal
2001. We are in the process of evaluating this SAB and have not yet determined
the future impact on our consolidated financial statements.
Forward-Looking Statements
- --------------------------
This interim report on Form 10-Q may contain certain forward looking statements
(as defined under Federal securities laws) regarding the performance for Becton,
Dickinson and Company ("BD"), including future revenues, products and income,
which 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
13
economic conditions, changes in interest or foreign currency exchange rates,
delays in product introductions, litigation, the effects of Year 2000-related
issues, and changes in health care or other governmental regulation, as well as
other factors discussed herein and in other of BD's filings with the Securities
and Exchange Commission.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
-----------------------------------------------------------
There have been no material changes in information reported since the
fiscal year ended September 30, 1999.
14
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings.
-----------------
We are involved, both as a plaintiff and a defendant, in various legal
proceedings which arise in the ordinary course of business, including
product liability and environmental matters.
Latex Cases
-----------
As described more fully in our 1999 Annual Report on Form 10-K, we,
along with a number of other manufacturers, have been named as a
defendant in approximately 365 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 and New Jersey. We are
vigorously defending these lawsuits.
Needle-Stick Cases
------------------
Also as discussed in our 1999 Annual Report on Form 10-K, we 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. Another manufacturer and
several medical product distributors also have been named as defendants
in most of these cases. The cases have been filed on behalf of an
unspecified number of health care workers in eleven different states
seeking class action certification under the laws of these states.
On January 13, 2000, in the matter of Usrey v. Becton, Dickinson and
Company, et al. (Case No. 342-173329-98, Tarrant County District Court),
filed in Texas court on April 9, 1998, the Court signed an order
conditionally granting plaintiffs' motion for class certification on
behalf of certain Texas health care workers, subject to modification and
alteration under Texas procedural law. Under Texas law, the order is
subject to an immediate appeal, and any trial in the matter is stayed
pending appeal. An appeal from the order was filed on February 1, 2000
and we will otherwise continue to vigorously defend this matter.
On January 13, 2000, in the matter of Benner v. Becton, Dickinson and
Company, et al., originally filed on June 1, 1999 in Supreme Court of
the State of New York (Case No. 99-111372) and removed to federal court
on July 1, 1999 (No. 99 Civ. 4785, United States District Court,
Southern District of New York), the Court granted our motion to dismiss
the plaintiff's complaint for failure to state a cause of action. The
Benner matter was an action seeking class action certification on behalf
of certain New York health care workers alleging that syringes and other
medical devices were defectively designed. The Court dismissed the
complaint without prejudice, giving the plaintiff twenty-one days within
which to file an amended complaint, which has been stayed subject to
further court order.
On March 9, 2000, in the matter of Brown v. Becton, Dickinson and
Company, et al. (Case No. 9811-3474, Court of Common Pleas of
Philadelphia County), filed in Pennsylvania Court on May 7, 1999, the
Court signed an order granting our preliminary objections and dismissing
plaintiff's claims. The Brown matter was an action seeking class action
certification on behalf of certain Pennsylvania health care workers
alleging that syringes and other medical
15
devices were defectively designed. The Court dismissed plaintiff's
strict liability claims with prejudice, and dismissed plaintiff's
negligence claim with leave to replead within twenty days. On March 29,
2000, Plaintiff Christine McGeehan filed a complaint against the Company
under the same case number. Plaintiff Harriet Brown is not named in this
complaint. We intend to vigorously defend this matter.
To date no other class has been certified in these cases. Generally,
these 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.
Summary
-------
In our opinion, the outcome 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.
Item 2. Changes in Securities and Use of Proceeds.
------------------------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities.
--------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
a.) Our Annual Meeting of Shareholders was held on February 8, 2000.
c.)i. A management proposal for the election of five directors, each for
three-year terms, was voted upon as follows:
Votes Votes
Nominee For Withheld
------- --- --------
Harry N. Beaty, M.D 223,942,838 2,387,851
Clateo Castellini 223,646,261 2,684,428
Edward J. Ludwig 223,971,706 2,358,983
Frank A. Olson 223,911,107 2,419,582
Willard J. Overlock, Jr 223,968,933 2,361,756
ii.) A management proposal to approve the selection of Ernst & Young, LLP as
independent auditors for the fiscal year 2000 was voted upon. 224,855,321
shares were voted for the proposal, 735,773 shares were voted against,
and 739,595 shares abstained.
16
iii.) A shareholder proposal requesting the Board of Directors take
the necessary steps to provide for cumulative voting in the
election of directors was voted upon. 64,608,705 shares were
voted for the proposal, 117,533,508 shares were voted against
and 18,950,630 shares abstained.
Item 5. Other Information.
------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
a) Exhibits
3 (b) - By-Laws, as amended and restated as of March 28, 2000.
4 (e) (i) - Amended and Restated Rights Agreement, dated as of
March 28, 2000, between Becton, Dickinson and Company
and First Chicago Trust Company of New York, as Rights
Agent, including the form of Rights Certificate as
Exhibit A and the Summary of Rights to Purchase
Preferred Stock as Exhibit B (the "Amended and
Restated Rights Agreement").
4 (e) (ii) - Amendment No. 1 to the Amended and Restated Rights
Agreement, dated as of April 24, 2000.
10 (b) (i) - Form of Employment Agreement providing for certain
payments to Executive Officers in the event of a
discharge or significant change in such officers'
respective duties after a change of control of the
registrant.
10 (b)(ii) - Form of Employment Agreement providing for certain
payments to Corporate Officers in the event of a
discharge or significant change in such officer's
respective duties after a change of control of the
registrant.
10 (o) - Non-Employee Directors 2000 Stock Option Plan.
27 Financial Data Schedule.
b) Reports on Form 8-K
During the three-month period ended March 31, 2000, we filed three
Current Reports on Form 8-K:
(i) In a report dated January 13, 2000, we updated the status
of two of our product liability lawsuits.
17
(ii) In a report dated January 20, 2000, we announced our
results for the quarter ended December 31, 1999.
(iii) In a report dated February 23, 2000, we announced our
voluntary recall of certain manufacturing lots of the BD
Insyte (R) Autoguard (TM) shielded IV catheter.
18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Becton, Dickinson and Company
-----------------------------
(Registrant)
Date May 12, 2000
--------------
/s/ Richard M. Hyne
----------------------------
Richard M. Hyne
Vice President and Controller
(Principal Financial and Accounting Officer)
19
EXHIBIT INDEX
-------------
Exhibit
Number Description Method of Filing
- ------- ----------- ----------------
3 (b) By-Laws, as amended and restated as of Incorporated by reference
March 28, 2000 to Exhibit 3 (b) to the
registrant's Report on
Form 8-K filed on April
20, 2000.
4 (e) (i) Amended and Restated Rights Incorporated by reference
Agreement, dated as of November 28, to Exhibit 1 to the
1995 and Amended and Restated Amendment to a
as of March 28, 2000, between Becton, Registration Statement
Dickinson and Company and First Chicago filed by the registrant on
Trust Company of New York, as April 18, 2000 on Form
Rights Agent, including the form 8-A/A.
of Rights Certificate as Exhibit
A and the Summary of Rights to
Purchase Preferred Stock as
Exhibit B (the "Amended and
Restated Rights Agreement").
4 (e) (ii) Amendment No. 1 dated as of Incorporated by reference
April 24, 2000, to the Amended and to Exhibit1 to the
Restated Rights Agreement. Amendment to a
Registration Statement
filed by the Registrant
on May 12, 2000 on
Form 8-A/A.
10 (b) (i) Form of Employment Agreement Filed with this report.
providing for certain payments to
Executive Officers in the event
of a discharge or significant
change in such officers'
respective duties after a change
of control of the registrant.
10 (b) (ii) Form of Employment Agreement Filed with this report.
providing for certain payments to
Corporate Officers in the event
of a discharge or significant
change in such officers'
respective duties after a change
of control of the registrant.
10 (o) Non-Employee Directors 2000 Stock Filed with this report.
Option Plan.
27 Financial Data Schedule Filed with this report
20