-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FJCZpxYJ45iWvv3KCLuYp09+69TATJB2dnqEXSyv2DtaJYSR1NLW+TbDuJskCeqK KCGor1ARNe29/xhDkJbWfw== 0000950117-06-002138.txt : 20060509 0000950117-06-002138.hdr.sgml : 20060509 20060509164845 ACCESSION NUMBER: 0000950117-06-002138 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060509 DATE AS OF CHANGE: 20060509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BECTON DICKINSON & CO CENTRAL INDEX KEY: 0000010795 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 220760120 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04802 FILM NUMBER: 06821627 BUSINESS ADDRESS: STREET 1: ONE BECTON DR CITY: FRANKLIN LAKES STATE: NJ ZIP: 07417-1880 BUSINESS PHONE: 2018476800 MAIL ADDRESS: STREET 1: ONE BECTON DR CITY: FRANKLIN LAKE STATE: NJ ZIP: 07417 10-Q 1 a41964.htm BECTON, DICKINSON AND COMPANY

FORM 10-Q
UNITED STATES 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, 2006

OR

 

 

o

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

 

Becton, Dickinson and Company


(Exact name of registrant as specified in its charter)


 

 

 

New Jersey

 

22-0760120


 


(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer Identification No.)


 

 

 

 

1 Becton Drive, Franklin Lakes, New Jersey 07417-1880

 

 


 

 

(Address of principal executive offices)
(Zip Code)

 

 

 

 

 

(201) 847-6800

 

 


 

 

(Registrant’s telephone number, including area code)

 

 

 

 

 

N/A

 

 


 

 

(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 o

          Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

          Large accelerated filer x Accelerated filer o Non-accelerated filer o

          Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No x

          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 March 31, 2006


 


Common stock, par value $1.00

 

247,317,640



BECTON, DICKINSON AND COMPANY
FORM 10-Q
For the quarterly period ended March 31, 2006

TABLE OF CONTENTS

 

 

 

 

 

 

 

Page Number

 

 

 


Part I.

FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

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

 

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

23

Item 4.

Controls and Procedures

 

23

 

 

 

 

Part II.

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

24

Item 1A.

Risk Factors

 

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

25

Item 3.

Defaults Upon Senior Securities

 

25

Item 4.

Submission of Matters to a Vote of Security Holders

 

25

Item 5.

Other Information

 

27

Item 6.

Exhibits

 

27

 

 

 

 

Signatures

 

 

28

 

 

 

 

Exhibits

 

 

29

 

 

 

 

 

 

 

 

2


ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars

 

 

 

 

 

 

 

 

 

 

March 31,
2006

 

September 30,
2005

 

 

 


 


 

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

Cash and equivalents

 

$

776,534

 

$

1,042,890

 

Short-term investments

 

 

89,751

 

 

86,808

 

Trade receivables, net

 

 

864,697

 

 

842,806

 

Inventories:

 

 

 

 

 

 

 

Materials

 

 

107,345

 

 

93,963

 

Work in process

 

 

153,124

 

 

139,772

 

Finished products

 

 

582,243

 

 

542,214

 

 

 



 



 

 

 

 

842,712

 

 

775,949

 

Prepaid expenses, deferred taxes and other

 

 

232,917

 

 

226,861

 

 

 



 



 

Total Current Assets

 

 

2,806,611

 

 

2,975,314

 

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

4,428,539

 

 

4,305,129

 

Less allowances for depreciation and amortization

 

 

2,472,947

 

 

2,371,411

 

 

 



 



 

 

 

 

1,955,592

 

 

1,933,718

 

 

 

 

 

 

 

 

 

Goodwill

 

 

551,228

 

 

470,049

 

Core and Developed Technology, Net

 

 

246,753

 

 

165,381

 

Other Intangibles, Net

 

 

102,624

 

 

101,558

 

Capitalized Software, Net

 

 

203,744

 

 

229,793

 

Other

 

 

256,226

 

 

196,156

 

 

 



 



 

 

Total Assets

 

$

6,122,778

 

$

6,071,969

 

 

 



 



 

 

 

 

 

 

 

 

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Short-term debt

 

$

305,998

 

$

206,509

 

Payables and accrued expenses

 

 

981,301

 

 

1,092,866

 

 

 



 



 

Total Current Liabilities

 

 

1,287,299

 

 

1,299,375

 

 

 

 

 

 

 

 

 

Long-Term Debt

 

 

956,539

 

 

1,060,833

 

 

 

 

 

 

 

 

 

Long-Term Employee Benefit Obligations

 

 

204,877

 

 

301,933

 

 

 

 

 

 

 

 

 

Deferred Income Taxes and Other

 

 

165,188

 

 

125,876

 

 

 

 

 

 

 

 

 

Commitments and Contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity:

 

 

 

 

 

 

 

Common stock

 

 

332,662

 

 

332,662

 

Capital in excess of par value

 

 

772,677

 

 

615,846

 

Retained earnings

 

 

5,071,393

 

 

4,805,852

 

Deferred compensation

 

 

10,803

 

 

10,280

 

Common shares in treasury – at cost

 

 

(2,491,046

)

 

(2,297,493

)

Accumulated other comprehensive loss

 

 

(187,614

)

 

(183,195

)

 

 



 



 

Total Shareholders’ Equity

 

 

3,508,875

 

 

3,283,952

 

 

 



 



 

Total Liabilities and Shareholders’ Equity

 

$

6,122,778

 

$

6,071,969

 

 

 



 



 

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
March 31,

 

Six Months Ended
March 31,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 


 


 


 


 

Revenues

 

$

1,449,317

 

$

1,365,530

 

$

2,863,378

 

$

2,653,899

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

 

710,635

 

 

678,018

 

 

1,386,376

 

 

1,312,519

 

Selling and administrative

 

 

369,779

 

 

366,339

 

 

737,653

 

 

707,427

 

Research and development

 

 

129,099

 

 

65,988

 

 

198,424

 

 

128,071

 

 

 



 



 



 



 

Total Operating Costs and Expenses

 

 

1,209,513

 

 

1,110,345

 

 

2,322,453

 

 

2,148,017

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Income

 

 

239,804

 

 

255,185

 

 

540,925

 

 

505,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(19,805

)

 

(13,044

)

 

(36,565

)

 

(27,371

)

Interest income

 

 

16,991

 

 

8,488

 

 

31,662

 

 

13,693

 

Other expense, net

 

 

(451

)

 

(2,242

)

 

(1,614

)

 

(5,103

)

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income From Continuing Operations Before Income Taxes

 

 

236,539

 

 

248,387

 

 

534,408

 

 

487,101

 

Income tax provision

 

 

80,301

 

 

61,878

 

 

160,310

 

 

106,194

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income From Continuing Operations

 

 

156,238

 

 

186,509

 

 

374,098

 

 

380,907

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) Income From Discontinued Operations, net

 

 

(2,170

)

 

1,641

 

 

(2,170

)

 

2,594

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

154,068

 

$

188,150

 

$

371,928

 

$

383,501

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.63

 

$

0.74

 

$

1.51

 

$

1.51

 

(Loss) Income from Discontinued Operations

 

$

(0.01

)

$

0.01

 

$

(0.01

)

$

0.01

 

 

 



 



 



 



 

Basic Earnings Per Share (A)

 

$

0.62

 

$

0.74

 

$

1.50

 

$

1.52

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Continuing Operations

 

$

0.60

 

$

0.71

 

$

1.45

 

$

1.45

 

(Loss) Income from Discontinued Operations

 

$

(0.01

)

$

0.01

 

$

(0.01

)

$

0.01

 

 

 



 



 



 



 

Diluted Earnings Per Share (A)

 

$

0.60

 

$

0.72

 

$

1.45

 

$

1.46

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends Per Common Share

 

$

0.215

 

$

0.18

 

$

0.43

 

$

0.36

 

 

 



 



 



 



 

(A): Total per share amounts may not add due to rounding.

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,

 

 

 


 

 

 

2006

 

2005

 

 

 


 


 

Operating Activities

 

 

 

 

 

 

 

Net income

 

$

371,928

 

$

383,501

 

Loss (Income) from discontinued operations, net

 

 

2,170

 

 

(2,594

)

 

 


 


 

Income from continuing operations

 

 

374,098

 

 

380,907

 

Adjustments to income from continuing operations to derive net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

198,123

 

 

193,042

 

Share-based compensation

 

 

58,447

 

 

28,145

 

Acquired in-process research and development

 

 

53,300

 

 

 

Change in working capital

 

 

(227,822

)

 

(82,578

)

Pension obligation

 

 

(104,762

)

 

(62,167

)

Other, net

 

 

28,847

 

 

5,150

 

 

 


 


 

Net Cash Provided by Continuing Operating Activities

 

 

380,231

 

 

462,499

 

 

 


 


 

 

 

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

 

 

Capital expenditures

 

 

(151,005

)

 

(108,178

)

Capitalized software

 

 

(10,085

)

 

(10,433

)

Purchases of investments, net

 

 

(5,170

)

 

(19,118

)

Acquisition of GeneOhm, net of cash acquired

 

 

(230,433

)

 

 

Other, net

 

 

(36,456

)

 

(20,849

)

 

 


 


 

Net Cash Used for Continuing Investing Activities

 

 

(433,149

)

 

(158,578

)

 

 


 


 

 

 

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

 

 

Change in short-term debt

 

 

(516

)

 

91,636

 

Payments of long-term debt

 

 

(326

)

 

(104,384

)

Repurchase of common stock

 

 

(224,995

)

 

(224,934

)

Issuance of common stock from treasury

 

 

94,671

 

 

97,811

 

Excess tax benefit from stock option exercises

 

 

26,478

 

 

26,314

 

Dividends paid

 

 

(106,728

)

 

(92,326

)

 

 


 


 

Net Cash Used for Continuing Financing Activities

 

 

(211,416

)

 

(205,883

)

 

 


 


 

 

 

 

 

 

 

 

 

Discontinued Operations (Revised – See Note 9)

 

 

 

 

 

 

 

Net cash (used for) provided by operating activities

 

 

(2,170

)

 

2,265

 

Net cash provided by investing activities

 

 

 

 

1,583

 

Net cash used for financing activities

 

 

 

 

(12

)

 

 


 


 

Net Cash (Used for) Provided by Discontinued Operations

 

 

(2,170

)

 

3,836

 

 

 


 


 

Effect of exchange rate changes on cash and equivalents

 

 

148

 

 

4,245

 

 

 


 


 

Net (decrease) increase in cash and equivalents

 

 

(266,356

)

 

106,119

 

 

 

 

 

 

 

 

 

Opening Cash and Equivalents

 

 

1,042,890

 

 

719,378

 

 

 


 


 

Closing Cash and Equivalents

 

$

776,534

 

$

825,497

 

 

 


 


 

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, 2006

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 the 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 U.S. 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 2005 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. Certain reclassifications have been made to prior year amounts to conform to current year presentation.

Note 2 – Comprehensive Income

Comprehensive income was comprised of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 


 


 


 


 

Net Income

 

$

154,068

 

$

188,150

 

$

371,928

 

$

383,501

 

Other Comprehensive (Loss) Income, Net of Tax

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

24,686

 

 

(27,284

)

 

(2,919

)

 

122,647

 

Unrealized losses on investments, net of amounts recognized

 

 

(808

)

 

(3,631

)

 

(2,587

)

 

(2,271

)

Unrealized (losses) gains on cash flow hedges, net of amounts realized

 

 

(1,647

)

 

3,117

 

 

1,087

 

 

(2,548

)

 

 



 



 



 



 

Comprehensive Income

 

$

176,299

 

$

160,352

 

$

367,509

 

$

501,329

 

 

 



 



 



 



 

The amount of unrealized losses or gains on investments and cash flow hedges in comprehensive income has been adjusted to reflect any realized gains and recognized losses included in net income during the three and six months ended March 31, 2006 and 2005.

6


Note 3 - Earnings per Share

The computations of basic and diluted earnings per share (shares in thousands) were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 


 


 


 


 

Income from continuing operations

 

$

156,238

 

$

186,509

 

$

374,098

 

$

380,907

 

Preferred stock dividends

 

 

 

 

 

 

 

 

(367

)

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations available to common shareholders (A)

 

 

156,238

 

 

186,509

 

 

374,098

 

 

380,540

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends – using “if converted” method

 

 

 

 

 

 

 

 

367

 

 

 



 



 



 



 

Income from continuing operations available to common shareholders after assumed conversions (B)

 

$

156,238

 

$

186,509

 

$

374,098

 

$

380,907

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average common shares outstanding (C)

 

 

248,088

 

 

253,427

 

 

248,067

 

 

252,317

 

Dilutive stock equivalents from stock plans

 

 

10,211

 

 

8,589

 

 

9,078

 

 

8,848

 

Shares issuable upon conversion of preferred stock

 

 

 

 

 

 

 

 

1,228

 

 

 



 



 



 



 

Average common and common equivalent shares outstanding – assuming dilution (D)

 

 

258,299

 

 

262,016

 

 

257,145

 

 

262,393

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share – income from continuing operations (A/C)

 

$

0.63

 

$

0.74

 

$

1.51

 

$

1.51

 

 

 



 



 



 



 

Diluted earnings per share – income from continuing operations (B/D)

 

$

0.60

 

$

0.71

 

$

1.45

 

$

1.45

 

 

 



 



 



 



 

7


Note 4 - Contingencies

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

Given the uncertain nature of litigation generally, the Company is not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which it is a party. In accordance with U.S. generally accepted accounting principles, the Company establishes accruals to the extent probable future losses are estimable (in the case of environmental matters, without considering possible third-party recoveries). In view of the uncertainties of litigation, the Company could incur charges in excess of any currently established accruals and, to the extent available, excess liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on the Company’s consolidated results of operations and consolidated net cash flows in the period or periods in which they are recorded or paid. Further discussion of legal proceedings is included in Part II of this report.

Note 5 – Segment Data

The Company’s organizational structure is based upon its three principal business segments: BD Medical (“Medical”), BD Diagnostics (“Diagnostics”), and BD Biosciences (“Biosciences”). The Company evaluates segment performance based upon operating income. Segment operating income represents revenues reduced by product costs and operating expenses. Financial information for the Company’s segments was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 


 


 


 


 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical

 

$

795,338

 

$

731,665

 

$

1,566,038

 

$

1,425,487

 

Diagnostics

 

 

434,079

 

 

429,769

 

 

877,933

 

 

843,552

 

Biosciences

 

 

219,900

 

 

204,096

 

 

419,407

 

 

384,860

 

 

 



 



 



 



 

Total Revenues (A)

 

$

1,449,317

 

$

1,365,530

 

$

2,863,378

 

$

2,653,899

 

 

 



 



 



 



 

8


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 


 


 


 


 

Segment Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical

 

$

193,479

 

$

162,484

 

$

406,602

 

$

325,805

 

Diagnostics

 

 

59,721

(B)

 

116,779

 

 

181,239

(B)

 

219,675

 

Biosciences

 

 

54,023

 

 

46,178

 

 

101,077

 

 

83,477

 

 

 



 



 



 



 

Total Segment Operating

 

 

 

 

 

 

 

 

 

 

 

 

 

Income

 

 

307,223

 

 

325,441

 

 

688,918

 

 

628,957

 

Unallocated Items (C)

 

 

(70,684

)

 

(77,054

)

 

(154,510

)

 

(141,856

)

 

 



 



 



 



 

Income from Continuing Operations Before Income Taxes

 

$

236,539

 

$

248,387

 

$

534,408

 

$

487,101

 

 

 



 



 



 



 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

March 31,

 

March 31,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 


 


 


 


 

Revenues by Organizational

 

 

 

 

 

 

 

 

 

 

 

 

 

Units

 

 

 

 

 

 

 

 

 

 

 

 

 

BD Medical

 

 

 

 

 

 

 

 

 

 

 

 

 

Medical Surgical Systems

 

$

424,581

 

$

402,292

 

$

852,744

 

$

811,856

 

Diabetes Care

 

 

188,294

 

 

162,196

 

 

371,990

 

 

320,874

 

Pharmaceutical Systems

 

 

167,109

 

 

152,771

 

 

310,872

 

 

263,456

 

Ophthalmic Systems

 

 

15,354

 

 

14,406

 

 

30,432

 

 

29,301

 

 

 



 



 



 



 

 

 

$

795,338

 

$

731,665

 

$

1,566,038

 

$

1,425,487

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BD Diagnostics

 

 

 

 

 

 

 

 

 

 

 

 

 

Preanalytical Systems

 

$

226,861

 

$

204,835

 

$

449,024

 

$

413,356

 

Diagnostic Systems

 

 

207,218

 

 

224,934

 

 

428,909

 

 

430,196

 

 

 



 



 



 



 

 

 

$

434,079

 

$

429,769

 

$

877,933

 

$

843,552

 

 

 



 



 



 



 

BD Biosciences

 

 

 

 

 

 

 

 

 

 

 

 

 

Immunocytometry Systems

 

$

123,574

 

$

113,760

 

$

236,426

 

$

213,860

 

Pharmingen

 

 

41,597

 

 

37,925

 

 

78,543

 

 

71,626

 

Discovery Labware

 

 

54,729

 

 

52,411

 

 

104,438

 

 

99,374

 

 

 



 



 



 



 

 

 

$

219,900

 

$

204,096

 

$

419,407

 

$

384,860

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,449,317

 

$

1,365,530

 

$

2,863,378

 

$

2,653,899

 

 

 



 



 



 



 


 

 

(A)

Intersegment revenues are not material.

(B)

Includes the in-process research and development charge related to the GeneOhm acquisition. See Note 8 for additional information.

(C)

Includes primarily share-based compensation expense; interest, net; foreign exchange; and corporate expenses.

9


Note 6 – Share-Based Compensation

The Company grants share-based awards under the 2004 Employee and Director Equity-Based Compensation Plan (the “2004 Plan”), which provides for long-term incentive compensation to employees and directors. The Company believes such awards align the interest of its employees and directors with those of its shareholders and encourage employees and directors to act as equity owners of the Company.

Beginning with the annual share-based grant in November 2005 under the 2004 Plan, the Company granted stock appreciation rights (“SARs”) in addition to performance-based restricted stock units and time-vested restricted stock units, and discontinued the issuance of stock options. SARs vest over a four-year period and have a ten-year term, similar to the previously granted stock options. SARs represent the right to receive, upon exercise, shares of common stock having a value equal to the difference between the market price of common stock on the date of exercise and the exercise price on the date of grant.

Compensation expense relating to share-based payments is recognized in net income using a fair value measurement method. Under the fair value method, the estimated fair value of awards is charged to income on a straight-line basis over the requisite service period, which is generally the vesting period.

Share-based compensation expense reduced the Company’s results of operations as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

Six Months Ended
March 31,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 


 


 


 


 

Selling and administrative expense

 

$

17,572

 

$

12,747

 

$

42,574

 

$

21,855

 

Cost of products sold

 

 

3,827

 

 

2,360

 

 

9,679

 

 

3,908

 

Research and development expense

 

 

2,405

 

 

1,448

 

 

6,194

 

 

2,382

 

 

 



 



 



 



 

Income From Continuing Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

Before Income Taxes

 

$

23,804

 

$

16,555

 

$

58,447

 

$

28,145

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income

 

$

15,921

 

$

11,963

(A) 

$

39,132

 

$

20,457

(A)

 

 



 



 



 



 

(A) Share-based compensation attributable to discontinued operations was not material.

10


The increase in share-based compensation is primarily attributable to higher expense associated with certain fiscal 2005 and fiscal 2006 grants. These grants include a higher percentage of restricted stock units that have a shorter vesting period than previous grants. In addition, these grants reflect a shortened requisite service period resulting from such awards being recognized as of the earlier of the employees’ retirement eligibility date or the vesting date, whereas grants prior to the fiscal 2005 grant were recognized through the vesting date.

The amount of unrecognized compensation expense for all non-vested share-based awards as of March 31, 2006 was approximately $160,555, which is expected to be recognized over a weighted-average remaining life of approximately 2.3 years.

The fair values of SARs granted during the annual share-based grant in November of 2006 and stock options granted during the annual share-based grant in November of 2005 were estimated on the date of grant using a lattice-based binomial valuation model based on the following assumptions: risk-free interest rates of 4.48% and 3.93%, respectively; expected volatility of 28% and 29%, respectively; expected dividend yield of 1.46% and 1.28%, respectively; and expected life of 6.5 years for both periods.

Note 7 – Benefit Plans

The Company has defined benefit pension plans covering substantially all of its employees in the United States and certain foreign locations. The Company also provides certain postretirement healthcare and life insurance benefits to qualifying domestic retirees. Other postretirement benefit plans in foreign countries are not material.

Net pension and postretirement cost included the following components for the three months ended March 31:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Plans

 

Other Postretirement Benefits

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 


 


 


 


 

Service cost

 

$

18,860

 

$

15,294

 

$

1,017

 

$

913

 

Interest cost

 

 

18,106

 

 

16,698

 

 

3,716

 

 

3,832

 

Expected return on plan assets

 

 

(20,150

)

 

(14,710

)

 

 

 

 

Amortization of prior service cost

 

 

50

 

 

83

 

 

(1,558

)

 

(1,558

)

Amortization of loss

 

 

6,876

 

 

5,708

 

 

1,753

 

 

1,520

 

Other

 

 

 

 

 

 

16

 

 

16

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net pension and postretirement cost

 

$

23,742

 

$

23,073

 

$

4,944

 

$

4,723

 

 

 



 



 



 



 

11


Net pension and postretirement cost included the following components for the six months ended March 31:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pension Plans

 

Other Postretirement Benefits

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service cost

 

$

36,495

 

$

30,588

 

$

2,034

 

$

1,826

 

Interest cost

 

 

35,355

 

 

33,396

 

 

7,432

 

 

7,664

 

Expected return on plan assets

 

 

(39,293

)

 

(29,420

)

 

 

 

 

Amortization of prior service cost

 

 

95

 

 

166

 

 

(3,116

)

 

(3,116

)

Amortization of loss

 

 

13,672

 

 

11,416

 

 

3,506

 

 

3,040

 

Other

 

 

 

 

 

 

32

 

 

32

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net pension and postretirement costs

 

$

46,324

 

$

46,146

 

$

9,888

 

$

9,446

 

 

 



 



 



 



 

The Company made discretionary contributions to its U.S. pension plan of $150,000 and $50,000 during the first quarter of 2006 and 2005, respectively and $35,000 in the second quarter of 2005. In addition, the Company made a discretionary contribution to a foreign pension plan of approximately $18,000 during the first quarter of 2005.

Note 8 – Acquisition

On February 14, 2006, the Company acquired GeneOhm Sciences, Inc. (“GeneOhm”), a company that develops molecular diagnostic testing for the rapid detection of bacterial organisms, including those known to cause healthcare-associated infections. The acquisition provides the Company with expanded entry into the emerging field of healthcare-associated infections. The acquisition was accounted for as a business combination and the results of operations of GeneOhm were included in the Company’s results as of the acquisition date. Proforma information was not provided as the impact of the acquisition did not have a material effect on the Company’s consolidated results. The purchase price consisted of an up-front cash payment of $230,433, including transaction costs, and may include additional contingent payments of up to $25,000, based on future events occurring on or before December 31, 2007. The purchase price was allocated based upon the fair values of the assets and liabilities acquired. The allocation of the purchase price resulted in deferred tax assets of $34,888 consisting of net operating loss carry forwards and credits; other intangible assets, primarily core and developed technology, of $92,300; deferred tax liabilities of $31,400 associated with other intangible assets, and other net assets of $2,508. Core and developed technology will be amortized on a straight-line basis over its estimated useful life of approximately 15 years. The excess of the purchase price over the fair value of the assets acquired of $78,837 was recorded as goodwill, which was allocated to the Diagnostics segment. In connection with the acquisition, the Company also incurred a charge of $53,300 for acquired in-process research and development, which was recorded as Research and development expense. This charge, based on fair value, is associated with several products that have not reached technological feasibility and do not have alternative future use at the acquisition date. The fair value of each product was determined based upon the present value of projected cash flows utilizing an income approach reflecting the appropriate risk-adjusted discount rate based on the applicable technological and commercial risk of each product. These cash flows took into account the income and expenses associated with the further development and commercialization of the underlying products. The ongoing activity associated with each of these products is not material to the Company’s research and development expense.

12


Note 9 – Discontinued Operations

In August 2005, the Company completed the sale of the Clontech unit of the Biosciences segment. Clontech’s results of operations are reported separately as discontinued operations. During the three months ended March 31, 2006, the Company recorded certain post-closing adjustments to discontinued operations.

Results of discontinued operations were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

Six Months Ended
March 31,

 

 

 


 


 

 

 

2006

 

2005

 

2006

 

2005

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

 

$

15,236

 

$

 

$

28,675

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income from discontinued operations before income taxes

 

 

(3,500

)

 

2,656

 

 

(3,500

)

 

4,232

 

Income tax benefit (provision)

 

 

1,330

 

 

(1,015

)

 

1,330

 

 

(1,638

)

 

 



 



 



 



 

(Loss) income From discontinued operations, net

 

$

(2,170

)

$

1,641

 

$

(2,170

)

$

2,594

 

 

 



 



 



 



 

The Company has separately presented operating, investing and financing cash flows attributable to discontinued operations, which in the prior year were reported on a combined basis. In addition, the Consolidated Statements of Cash Flows for prior annual and interim periods were revised as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended
December 31,

 

Years Ended
September 30,

 

 

 


 


 

 

 

2005

 

2004

 

2005

 

2004

 

2003

 

 

 


 


 


 


 


 

Discontinued Operations (Revised)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used for) provided by operating activities

 

$

 

$

(1,458

)

$

1,000

 

$

(1,063

)

$

2,153

 

Net cash (used for) provided by investing activities

 

 

 

 

(53

)

 

1,260

 

 

(1,601

)

 

(330

)

Net cash used for financing activities

 

 

 

 

(6

)

 

(15

)

 

(62

)

 

(2,826

)

 

 



 



 



 



 



 

Net Cash (Used for) Provided by Discontinued

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operations

 

$

 

$

(1,517

)

$

2,245

 

$

(2,726

)

$

(1,003

)

 

 



 



 



 



 



 

13


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Company Overview
Becton, Dickinson and Company (“BD”) is a medical technology company engaged principally in the manufacture and sale of a broad range of medical supplies, devices, laboratory equipment and diagnostic products used by healthcare institutions, life science researchers, clinical laboratories, industry and the general public. Our business consists of three worldwide business segments – BD Medical (“Medical”), BD Diagnostics (“Diagnostics”) and BD Biosciences (“Biosciences”). Our products are marketed in the United States and internationally through independent distribution channels, directly to end-users and by independent sales representatives.

BD’s management operates the business consistent with the following core strategies:

 

 

 

 

to increase revenue growth by focusing on products that deliver greater benefits to patients, healthcare workers and researchers;

 

 

 

 

to improve operating effectiveness and balance sheet productivity; and,

 

 

 

 

to strengthen organizational and associate capabilities in the ever-changing healthcare environment.

In assessing the outcomes of these strategies and BD’s financial condition and operating performance, management generally reviews quarterly forecast data, monthly actual results, segment sales and other similar information. We also consider trends related to certain key financial data, including gross profit margin, selling and administrative expense, investment in research and development and cash flows.

The results of our strategies are reflected in our second quarter 2006 financial and operational performance. BD reported second quarter revenues of $1.449 billion, an increase of 6% from the same period a year ago, and reflected volume increases of approximately 9%, offset by a decrease due to unfavorable foreign currency translation of approximately 3%. Sales in the United States of safety-engineered devices grew 13% to $220 million in the second quarter of 2006.International sales of safety-engineered devices grew 14% to $77 million in the second quarter of 2006, including an estimated 4 to 5 percent unfavorable impact due to foreign currency translation. Overall, international revenue growth of 2% for the three-month period included a 5% unfavorable impact of foreign currency translation for the three-month period. As further discussed in our 2005 Annual Report on Form 10-K, we face currency exposure that arises from translating the results of our worldwide operations to the U.S. dollar at exchange rates that have fluctuated from the beginning of the period. We purchase option and forward contracts to partially protect against adverse foreign exchange rate movements.

14


Our balance sheet remains strong with net cash provided by continuing operations at approximately $380 million for the six months ended March 31, 2006, and our debt-to-capitalization ratio (shareholders’ equity, net non-current deferred income tax liabilities, and debt) decreasing to 25.7% at March 31, 2006 from 27.3% at September 30, 2005.

Our ability to sustain our long-term growth will depend on a number of factors, including our ability to expand our core business (including geographical expansion), develop innovative new products with higher gross profit margins across our business segments, and continue to improve operating efficiency and organizational effectiveness. Numerous factors can affect our ability to achieve these goals, including without limitation, U.S. and global economic conditions, increased competition and healthcare cost containment initiatives. We believe that there are several important factors relating to our business that tend to reduce the impact on BD of any potential economic or political events in countries in which we do business, including the effects of possible healthcare system reforms. These include the non-discretionary nature of the demand for many of our core products, which may reduce the impact of economic downturns, the international nature of our business and our ability to meet the needs of the worldwide healthcare industry with cost-effective and innovative products.

During fiscal 2006, we continued to experience higher resin purchase costs, primarily due to recent increases in world oil prices. BD purchases supplies of resins, which are oil-based components used in the manufacture of certain products. The impact of any further increases in resin purchase costs for the remainder of the year are expected to be mitigated through continued improvement in our profit margins resulting from increased sales of products with higher margins, cost reduction programs, productivity improvements and, to a lesser extent, periodic price increases and adjustments.

Our anticipated revenue growth over the next three years, excluding any impact relating to foreign exchange, is expected to come from the following:

 

 

 

 

Core business growth and expansion, including the continued transition to safety-engineered devices; and

 

 

 

 

Development in each business segment of new products and services that provide increased benefits to patients, healthcare workers and researchers.

On February 14, 2006, BD acquired GeneOhm Sciences, Inc. (“GeneOhm”), a company that has developed molecular diagnostic testing for the rapid detection of bacterial organisms, including those known to cause healthcare-associated infections. In connection with the acquisition, BD incurred a charge of $53 million for acquired in-process research and development. See Note 8 for additional discussion.

Results of Operations

Revenues

Refer to Note 5 in the Notes to Condensed Consolidated Financial Statements for segment financial data.

15


Medical Segment – Second quarter revenues of $795 million represented an increase of $64 million, or 9%, from the prior year’s quarter, including an estimated $19 million or a 3% unfavorable impact due to foreign currency translation. Primary drivers of this growth were strong sales in the Diabetes Care and Pharmaceutical Systems units. Medical revenues also reflect the continued conversion in the United States to safety-engineered products, which accounted for sales of $123 million, as compared with $115 million in the prior year’s quarter. The growth rate of safety-engineered products benefited, in part, from a favorable comparison to the prior year’s second quarter revenues, which were negatively impacted by reductions in inventory by a major U.S. distributor. International sales of safety-engineered products of $22 million grew 7% from the prior year’s quarter, including an estimated 3 to 4 percent unfavorable impact due to foreign currency translation. For the six-month period ended March 31, 2006, U.S. sales of safety-engineered products were $255 million, as compared with $241 million in the prior year’s period. In addition, international sales of safety-engineered products of $44 million grew 13% from the prior year’s period, including an estimated 2 to 3 percent unfavorable impact due to foreign currency translation. For the six-month period ended March 31, 2006, total BD Medical segment revenues increased by 10% from the prior year period.

Diagnostics Segment – Second quarter revenues of $434 million represented an increase of $4 million, or 1%, over the prior year quarter, including an estimated $10 million, or 2%, unfavorable impact due to foreign currency translation. The Preanalytical Systems unit of the segment reported revenue growth of 11 percent over the prior year’s quarter, benefiting from both BD Vacutainer Push Button Blood Collection Set sales in the current year’s quarter and a favorable comparison to the prior year’s revenues, which were negatively impacted by reductions in inventory by a major U.S. distributor. U.S. sales of safety-engineered products totaled $97 million, compared with $79 million in the prior year’s quarter. International sales of safety-engineered products of $55 million grew 16% from the prior year’s quarter, including an estimated 4 to 5 percent unfavorable impact due to foreign currency translation. For the six-month period ended March 31, 2006, the Preanalytical Systems unit of the segment reported 9% revenue growth and included U.S. sales of safety-engineered products of $193 million, compared with $165 million in the prior year’s period. Preanalytical Systems revenues for the six-month period also included international sales of safety-engineered products of $107 million, which grew 18% from the prior year’s period, including an estimated 3 to 4 percent unfavorable impact due to foreign currency translation. Second quarter revenues in the Diagnostics Systems unit of the segment declined 8%, despite strong sales from diagnostic instrument platforms. This decline in revenues was primarily due to a relatively mild flu season in fiscal 2006 compared with 2005, in both Japan and the United States. In addition, second quarter revenues were negatively impacted by the timing of early sales of flu diagnostic tests in the first fiscal quarter of 2006 and a comparison to strong sales of flu diagnostic tests in the prior year’s quarter in Japan. For the six-month period ended March 31, 2006, total BD Diagnostics segment revenues increased by 4% from the prior year period.

Biosciences Segment – Second quarter revenues of $220 million represented an increase of $16 million or 8% over the prior year’s quarter, including an estimated $7 million, or 3%, unfavorable impact due to foreign currency translation. Flow cytometry instruments and reagent sales continued to be the primary growth contributors. Sales in the Discovery Labware unit as well as sales of cell imaging products also contributed to sales growth. For the six-month period ended March 31, 2006, total BD Biosciences segment revenues increased by 9% from the prior year period, representing continued strong sales of flow cytometry instruments and reagents.

16


Segment Operating Income

Medical Segment
Segment operating income for the second quarter was $193 million, or 24.3% of Medical revenues, compared to $162 million, or 22.2%, in the prior year’s quarter. The increase in operating income as a percentage of revenues reflected increased sales of products that have relatively high gross profit margins, in particular insulin delivery products, and improved manufacturing efficiencies which more than offset higher raw material costs associated with resin-based products. See further discussion on gross profit margin below. Selling and administrative expense as a percent of Medical revenues in the second quarter of 2006 was low compared with the second quarter of 2005. Certain incremental investments to support the BGM initiative were more than offset by tight controls on base spending. Research and development expenses for the quarter grew 8.3% as the segment continues to invest in the development of innovative products. Segment operating income for the six-month period was $407 million, or 26.0% of Medical revenues, compared to $326 million, or 22.9%, in the prior year’s period.

Diagnostics Segment
Segment operating income for the second quarter was $60 million, or 13.8% of Diagnostics revenues, compared to $117 million, or 27.2%, in the prior year’s quarter. Segment operating income for the current quarter includes the in-process research and development charge of $53 million associated with the GeneOhm acquisition, as further discussed above, which reduced operating income as a percentage of Diagnostics revenues by 12.3%. Gross profit margin was slightly lower than the second quarter of 2005, in part, due to lower flu diagnostic revenues, which have relatively high overall gross profit margins. See further discussion on gross profit margin below. Selling and administrative expense as a percentage of Diagnostics revenues in the second quarter of 2006 was slightly below the comparable amount in the second quarter of 2005 primarily due to tight controls on spending. Research and development expenses in the second quarter of 2006 increased $56 million, which includes the in-process research and development charge. Segment operating income for the six-month period was $181 million, or 20.6% of Diagnostics revenues, compared to $220 million, or 26.0%, in the prior year’s period.

Biosciences Segment
Segment operating income for the second quarter was $54 million, or 24.6% of Biosciences revenues, compared to $46 million, or 22.6%, in the prior year’s quarter. The increase in operating income as a percentage of revenues reflected an increase in sales of products, in particular, flow cytometry instruments and reagents. Selling and administrative expense as a percent of Biosciences revenues for the quarter was lower compared with the prior year’s quarter. This decrease was attributable to revenue growth combined with continued effective spending control. Research and development expenses in the prior year’s quarter increased $1.4 million, or 8.8%, reflecting spending on new product development. Segment operating income for the six-month period was $101 million, or 24.1% of Biosciences revenues, compared to $83 million, or 21.7%, in the prior year’s period.

Gross Profit Margin
Gross profit margin was 51.0% for the second quarter and 51.6% for the six-month period, compared with 50.3% and 50.5%, respectively, for the comparable prior year periods. Gross profit margin in the second quarter of fiscal 2006 as compared to the prior period reflected an

17


estimated 1.0% improvement relating to increased sales of products with relatively high margins. This improvement was partially offset by an estimated 0.3%, primarily relating to higher raw material costs and an increase in share-based compensation. Gross profit margin in the six-month period of fiscal 2006 as compared to the prior period reflected an estimated 1.0% improvement relating to increased sales of products with relatively high margins, an estimated 0.3% improvement associated primarily with productivity gains and a 0.2% improvement resulting from foreign currency activity. These gross profit margin improvements were partially offset by an estimated 0.2% relating to higher raw material costs and an increase in share-based compensation of 0.2%. We expect gross profit margin to improve, on a reported basis, by about 50 to 60 basis points in fiscal 2006.

Selling and Administrative Expense
Selling and administrative expense was 25.5% of revenues for the second quarter and 25.8% for the six-month period, compared with 26.8% and 26.7%, respectively, for the prior year’s periods. Aggregate expenses for the current period reflect increases in base spending of $10 million, in line with inflation, in expenses related to the BGM initiative of $7 million and in share-based compensation expense of $5 million. These increases in selling and administrative expense were partially offset by proceeds from an insurance settlement of $10 million received in connection with the Company’s previously owned latex glove business and a favorable foreign exchange impact of $9 million. Aggregate expenses in the six-month period reflect increases in share-based compensation expense of $21 million, in base spending of $16 million, in line with inflation, and in expenses related to the BGM initiative of $15 million. These increases were partially offset by proceeds from insurance settlements of $17 million, as further discussed above, and a favorable foreign exchange impact of $14 million. Selling and administrative expense as a percentage of revenues is expected to decrease, on a reported basis, by about 40 basis points in fiscal 2006.

Research and Development Expense
Research and development expense was $129 million, or 8.9% of revenues for the second quarter, compared with the prior year’s amount of $66 million, or 4.8% of revenues. Research and development expense was $198 million, or 6.9% of revenues for the six-month period in the current year, compared with the prior year’s amount of $128 million, or 4.8% of revenues. The in-process research and development charge of $53 million associated with the GeneOhm acquisition was recorded to research and development expense in the three and six-month periods of 2006, respectively. Research and development expenditures also reflect increased spending for new programs in each of our segments for the three and six-month periods of 2006. We anticipate research and development expense to increase, on a reported basis, about 33% for fiscal 2006, including the in-process research and development charge.

Non-Operating Expense and Income
Interest expense increased to $20 million in the second quarter and $37 million in the six-month period compared with $13 million and $27 million, respectively, for the prior year’s periods. These increases reflect higher debt levels and the impact of higher interest rates on floating rate debt and on interest rate swap transactions, consisting of fair value hedges of certain fixed-rate debt instruments, under which the difference between fixed and floating interest rates is exchanged at specified intervals. Interest income increased to $17 million in the second quarter and $32 million in the six-month period from $8 million and $14 million, respectively, in the prior year’s periods. These increases reflect higher interest rates and cash balances.

18


Income Taxes
The income tax rate was 33.9% for the second quarter. The six-month tax rate was 30.0% compared with the prior year’s rate of 21.8%. The increase is principally due to the lack of a tax benefit related to the acquired in-process research and development charge associated with the GeneOhm acquisition. The six-month rate reflected a provision of approximately 0.3% relating to proceeds received from insurance settlements, as further discussed above. The prior year’s rate reflected an estimated 2.3% benefit due to the reversal of tax reserves in the first quarter in connection with the conclusion of tax examinations in four non-U.S. jurisdictions. The Company expects the reported tax rate for the full year to be approximately 27%.

Income from Continuing Operations and Diluted Earnings Per Share from Continuing Operations
Income from continuing operations and diluted earnings per share from continuing operations for the second quarter of 2006 were $156 million and 60 cents, respectively. This compared with income from continuing operations and diluted earnings per share from continuing operations for the prior year’s second quarter of $187 million and 71 cents, respectively. The in-process research and development charge associated with the GeneOhm acquisition reduced income from continuing operations for the current quarter by $53 million and diluted earnings per share from continuing operations by 21 cents. Proceeds from an insurance settlement increased income from continuing operations for the current quarter by $10 million and diluted earnings per share from continuing operations by 2 cents. For the six-month periods, income from continuing operations and diluted earnings per share from continuing operations were $374 million and $1.45, respectively, in 2006, which reflected the in-process research and development charge, and $381 million and $1.45, respectively, in 2005. Proceeds from insurance settlements increased income from continuing operations in the six-month period by $17 million and diluted earnings per share from continuing operations by 4 cents. The prior year’s six-month period included the effect of the reversal of tax reserves, as further discussed above, which increased income from continuing operations by $11 million and diluted earnings per share from continuing operations by 4 cents.

Liquidity and Capital Resources
Net cash provided by continuing operating activities, which continues to be our primary source of funds to finance operating needs and capital expenditures, was $380 million during the first six months of fiscal 2006, and $462 million in the same period in fiscal 2005. The decrease to the change in working capital of $228 million in the first six months of fiscal 2006, as compared to the prior year’s period of $83 million, was primarily due to a decrease in accounts payable and accrued expenses. Net cash provided by operations in the current period was reduced by a change in the pension obligation of $105 million, which reflected a discretionary cash contribution of $150 million in the first quarter of 2006.

Net cash used for continuing investing activities for the first six months of the current year was $433 million, compared to $159 million in the prior year period. The current year amount reflects $230 million of cash paid for the GeneOhm acquisition. Capital expenditures were $151 million in the first six months of fiscal 2006 and $108 million in the same period in fiscal 2005. We expect capital spending for fiscal 2006 to be in the $400 million range.

Net cash used for continuing financing activities in the first six months of the current year was

19


$211 million, compared to $206 million in the prior year period. As of March 31, 2006, total debt of $1.3 billion represented 25.7% of total capital (shareholders’ equity, net non-current deferred income tax liabilities, and debt), versus 27.3% at September 30, 2005. Short-term debt increased to 24% of total debt at the end of the six month period, from 16% at September 30, 2005.

For the first six months of the current and prior year, the Company repurchased approximately $225 million of its common stock. At March 31, 2006, approximately 0.7 million common shares remained available for purchase pursuant to a repurchase program for 10 million shares authorized by the Board of Directors (the “Board”) in November 2004. The Board authorized an additional repurchase program for 10 million shares in November 2005. Stock repurchases were offset, in part, by the issuance of common stock from treasury due to the exercising of stock options by employees.

We have in place a commercial paper borrowing program that is available to meet our short-term financing needs, including working capital requirements. Borrowings outstanding under this program were $200 million at March 31, 2006. We maintain a $900 million syndicated credit facility in order to provide backup support for our commercial paper program and for other general corporate purposes. This credit facility expires in August 2009 and includes a single financial covenant that requires BD to maintain an interest expense coverage ratio (ratio of earnings before income taxes, depreciation and amortization to interest expense) of not less than 5-to-1 for the most recent four consecutive fiscal quarters. On the last eight measurement dates, this ratio had ranged from 19-to-1 to 21-to-1. The facility, under which there were no borrowings outstanding at March 31, 2006, can be used to support the commercial paper program or for general corporate purposes. In addition, we have informal lines of credit outside the United States.

BD’s ability to generate cash flow from operations, issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms could be adversely affected in the event there was a material decline in the demand for BD’s products, deterioration in BD’s key financial ratios or credit ratings or other significantly unfavorable changes in conditions. While a deterioration in the Company’s credit ratings would increase the costs associated with maintaining and borrowing under its existing credit arrangements, such a downgrade would not affect the Company’s ability to draw on these credit facilities, nor would it result in an acceleration of the scheduled maturities of any outstanding debt.

As of March 31, 2006, we repatriated approximately $690 million of the approximately $1.3 billion of foreign earnings expected to be repatriated pursuant to our approved plan under the American Jobs Creation Act of 2004.

Cautionary Statement Pursuant to Private Securities Litigation Reform Act of 1995 — “Safe Harbor” for Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward-looking statements made by or on behalf of BD. BD and its representatives may from time to time make certain forward-looking statements, both written and oral, including statements contained in this report and filings with the Securities and Exchange Commission (“SEC”) and in our other reports to shareholders. Forward-looking statements may be identified

20


by the use of words like “plan,” “expect,” “believe,” “intend,” “will,” “anticipate,” “estimate” and other words of similar meaning in conjunction with, among other things, discussions of future operations and financial performance, as well as our strategy for growth, product development, regulatory approvals, market position and expenditures. All statements which address operating performance or events or developments that we expect or anticipate will occur in the future — including statements relating to volume growth, sales and earnings per share growth, gross profit margins, various expenditures and statements expressing views about future operating results — are forward-looking statements within the meaning of the Act.

Forward-looking statements are based on current expectations of future events. The forward-looking statements are and will be based on management’s then-current views and assumptions regarding future events and operating performance, and speak only as of their dates. Investors should realize that if underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. Furthermore, we undertake no obligation to update or revise any forward-looking statements whether as a result of new information, future events and developments or otherwise.

The following are some important factors that could cause our actual results to differ from our expectations in any forward-looking statements:

 

 

Regional, national and foreign economic factors, including inflation and fluctuations in interest rates and foreign currency exchange rates and the potential effect of such fluctuations on revenues, expenses and resulting margins.

 

 

We operate in a highly competitive environment. New product introductions by our current or future competitors could adversely affect our ability to compete in the global market. Patents attained by competitors, particularly as patents on our products expire, may also adversely impact our competitive position.

 

 

Recently, the U.S. Food and Drug Administration (“FDA”) and European authorities have approved a new inhaled form of insulin for adults, which could adversely impact sales of our insulin injection devices.

 

 

Changes in domestic and foreign healthcare industry practices and regulations resulting in increased pricing pressures, including the continued consolidation among healthcare providers; trends toward managed care and healthcare cost containment and government laws and regulations relating to sales and promotion, reimbursement and pricing generally.

 

 

The effects, if any, of governmental and media activities relating to U.S. Congressional hearings regarding the business practices of group purchasing organizations, which negotiate product prices on behalf of their member hospitals with BD and other suppliers.

 

 

Fluctuations in energy costs and their effect on, among other things, the costs of producing our products.

 

 

Fluctuations in the cost and availability of raw materials and the ability to maintain favorable supplier arrangements and relationships (particularly with respect to sole-source suppliers)

21


 

 

 

and the potential adverse effects of any disruption in the availability of such raw materials.

 

 

Our ability to obtain the anticipated benefits of any restructuring programs, if any, that we may undertake.

 

 

Adoption of or changes in government laws and regulations affecting domestic and foreign operations, including those relating to trade, monetary and fiscal policies, taxation, environmental matters, sales practices, price controls, licensing and regulatory approval of new products, or changes in enforcement practices with respect to any such laws and regulations.

 

 

Fluctuations in U.S. and international governmental funding and policies for life science research.

 

 

Difficulties inherent in product development, including the potential inability to successfully continue technological innovation, complete clinical trials, obtain regulatory approvals in the United States and abroad, or gain and maintain market approval of products, as well as the possibility of encountering infringement claims by competitors with respect to patent or other intellectual property rights, all of which can preclude or delay commercialization of a product.

 

 

Pending and potential litigation or other proceedings adverse to BD, including antitrust claims, product liability claims, and patent infringement claims, as well as other risks and uncertainties detailed from time to time in our SEC filings.

 

 

The effects, if any, of adverse media exposure or other publicity regarding BD’s business or operations.

 

 

Our ability to achieve earnings forecasts, which are generated based on projected volumes and sales of many product types, some of which are more profitable than others. There can be no assurance that we will achieve the projected level or mix of product sales.

 

 

The effect of market fluctuations on the value of assets in BD’s pension plans and the possibility that BD may need to make additional contributions to the plans as a result of any decline in the value of such assets.

 

 

Our ability to effect infrastructure enhancements and incorporate new systems technologies into our operations.

 

 

Product efficacy or safety concerns resulting in product recalls, regulatory action on the part of the FDA (or foreign counterparts) or declining sales.

 

 

Economic and political conditions in international markets, including civil unrest, governmental changes and restrictions on the ability to transfer capital across borders.

 

 

The effects of natural disasters, including hurricanes or pandemic diseases, on our ability to manufacture our products, particularly where production of a product line is concentrated in

22


 

 

 

one or more plants, or on our ability to source components from suppliers that are needed for such manufacturing.

 

 

Our ability to penetrate developing and emerging markets, which also depends on economic and political conditions, and how well we are able to acquire or form strategic business alliances with local companies and make necessary infrastructure enhancements to production facilities, distribution networks, sales equipment and technology.

 

 

The impact of business combinations, including acquisitions and divestitures, both internally for BD and externally, in the healthcare industry.

 

 

Issuance of new or revised accounting standards by the Financial Accounting Standards Board or the SEC.

The foregoing list sets forth many, but not all, of the factors that could impact our ability to achieve results described in any forward-looking statements. Investors should understand that it is not possible to predict or identify all such factors and should not consider this list to be a complete statement of all potential risks and uncertainties.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in information reported since the end of the fiscal year ended September 30, 2005.

Item 4. Controls and Procedures

An evaluation was carried out by BD’s management, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of BD’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of March 31, 2006. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were, as of the end of the period covered by this report, adequate and effective to ensure that material information relating to BD and its consolidated subsidiaries would be made known to them by others within these entities. There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2006 identified in connection with the above-referenced evaluation that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

23


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 as set forth in our 2005 Annual Report on Form 10-K and in our Quarterly Report on Form 10-Q for the first quarter of fiscal year 2006.

 

 

 

Given the uncertain nature of litigation generally, BD is not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which BD is a party. In accordance with U.S. generally accepted accounting principles, BD establishes accruals to the extent probable future losses are estimable (in the case of environmental matters, without considering possible third-party recoveries). In view of the uncertainties of litigation, BD could incur charges in excess of any currently established accruals and, to the extent available, excess liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on BD’s consolidated results of operations and consolidated cash flows in the period or periods in which they are recorded or paid.

24


 

 

Item 1A.

Risk Factors

 

 

 

Not applicable.

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

 

The table below sets forth certain information regarding our purchases of common stock of BD during the fiscal quarter ended March 31, 2006.

Issuer Purchases of Equity Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended
March 31, 2006

 

Total Number of
Shares Purchased (1)

 

Average Price
Paid per
Share

 

Total Number of
Shares Purchased
as Part of
Publicly
Announced Plans
or Programs (2)

 

Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs (2)

 


 



 


 



 



 

January 1 – 31, 2006

 

 

22,449

 

$

63.64

 

 

 

 

12,644,914

 

February 1 – 28, 2006

 

 

1,160,213

 

$

64.19

 

 

1,150,000

 

 

11,494,914

 

March 1 – 31, 2006

 

 

794,900

 

$

63.70

 

 

794,900

 

 

10,700,014

 

 

 



 



 



 



 

Total

 

 

1,977,562

 

$

63.99

 

 

1,944,900

 

 

10,700,014

 

 

 



 



 



 



 


 

 

(1)

Includes for the quarter 4,747 shares purchased in open market transactions by the trustee under BD’s Deferred Compensation Plan and 1996 Directors’ Deferral Plan. Also includes 27,915 shares delivered to the Company in connection with stock option exercises.

 

 

(2)

These repurchases were made pursuant to a repurchase program for 10 million shares announced on November 23, 2004 (the “2004 Program”). There is no expiration date for the 2004 Program. On November 22, 2005, the Board of Directors of BD authorized an additional repurchase program for 10 million shares.


 

 

Item 3.

Defaults Upon Senior Securities.

 

 

 

Not applicable.

 

 

Item 4.

Submission of Matters to a Vote of Security Holders.

 

 

 

Our Annual Meeting of Shareholders was held on January 31, 2006, at which the following matters were voted upon:


 

 

 

 

i.)

A management proposal for the election of three directors for the terms indicated below was voted upon as follows:

25


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Votes

 

 

 

 

 

 

 

 


 

 

Nominee

 

 

Term

 

 

For

 

 

Withheld

 

 


 

 


 

 


 

 


 

 

Edward J. Ludwig

 

 

3 Years

 

 

208,868,737

 

 

6,905,452

 

 

Willard J. Overlock, Jr.

 

 

3 Years

 

 

212,162,197

 

 

3,611,992

 

 

Bertram L. Scott

 

 

3 Years

 

 

209,297,765

 

 

6,476,424

 


 

 

 

 

 

The other directors whose term of office as a director continued after the meeting are: Basil L. Anderson, Henry P. Becton, Jr., Edward F. DeGraan, Gary A. Mecklenburg, James F. Orr, James E. Perrella, Alfred Sommer and Margaretha af Ugglas.

 

 

 

 

ii.)

A management proposal to ratify the selection of Ernst & Young LLP as independent registered public accounting firm for the fiscal year ending September 30, 2006 was voted upon. 211,302,059 shares were voted for the proposal, 2,964,216 shares were voted against, and 1,507,914 shares abstained.

 

 

 

 

iii.)

A shareholder proposal requesting that the Board of Directors publish a report evaluating the Company’s policies on brominated flame retardants and other toxic chemicals was voted upon. 14,393,882 shares were voted for the proposal, 150,699,713 shares were voted against, 26,390,342 shares abstained, and there were 24,290,252 broker non-votes.

 

 

 

 

iv.)

A shareholder proposal requesting that the Board of Directors take the necessary steps to provide for cumulative voting in the election of directors was voted upon. 74,079,013 shares were voted for the proposal, 97,376,269 shares were voted against, 20,028,655 shares abstained, and there were 24,290,252 broker non-votes.

26


 

 

Item 5.

Other Information.

 

 

 

Not applicable.

 

 

Item 6.

Exhibits


 

 

 

 

Exhibit 10(s)

Amended and Restated Aircraft Time Sharing Agreement between Becton, Dickinson and Company and Edward J. Ludwig dated as of March 28, 2006.

 

 

 

 

Exhibit 31

Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to SEC Rule 13a - 14(a).

 

 

 

 

Exhibit 32

Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a - 14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code.

27


SIGNATURES

          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)

 

Dated: May 9, 2006

 

 

 

 

/s/ John R. Considine

 

 


 

 

John R. Considine

 

 

Executive Vice President and

 

 

Chief Financial Officer

 

 

(Principal Financial Officer)

 

 

 

 

 

/s/ William A. Tozzi

 

 


 

 

William A. Tozzi

 

 

Vice President and Controller

 

 

(Chief Accounting Officer)

 

28


INDEX TO EXHIBITS

 

 

 

Exhibit Number

 

Description of Exhibits


 


10(s)

 

Amended and Restated Aircraft Time Sharing Agreement between Becton, Dickinson and Company and Edward J. Ludwig dated as of March 28, 2006.

 

 

 

31

 

Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to SEC Rule 13a - 14(a).

 

 

 

32

 

Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a - 14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code.

29


EX-10 2 ex10.htm EXHIBIT 10(S)

Exhibit 10(s)

AMENDED AND RESTATED
AIRCRAFT TIME SHARING AGREEMENT

          This Amended and Restated Aircraft Time Sharing Agreement (“Agreement”) is made and entered into as of the 28th day of March, 2006, by and between Becton, Dickinson and Company, a New Jersey corporation (“BD”), and Edward J. Ludwig.

          WHEREAS, BD operates (i) a Falcon 50 aircraft bearing Federal Aviation Administration (“FAA”) Registration No. N800BD and Manufacturer’s Serial No. 224, and (ii) a Falcon 900EX aircraft bearing FAA Registration No. N2BD and Manufacturer’s Serial 072 (collectively, the “Aircraft”); and

          WHEREAS, Mr. Ludwig is the Chairman, President and Chief Executive Officer of BD; and

          WHEREAS, the Board of Directors of BD, by resolution adopted on March 28, 2006 (the “Resolution”), has authorized and encouraged Mr. Ludwig to use the Aircraft for all travel purposes, including personal use, to the extent practicable within business constraints, taking into account competing business use for the Aircraft;

          WHEREAS, BD desires to make such Aircraft available for Mr. Ludwig’s personal use for the above operations on a time sharing basis in accordance with §91.501 of the Federal Aviation Regulations (“FARs”), subject to reimbursement of certain costs as defined more fully below, consistent with the Resolution and the terms of this Agreement; and

          NOW, THEREFORE, in consideration of the mutual covenants herein set forth, the parties agree as follows as to each of the Aircraft:

          1. Provision of Aircraft. BD agrees to provide the Aircraft to and operate Aircraft for Mr. Ludwig’s personal use, as permitted under the Resolution, on a time sharing basis in accordance with the provisions of §§ 91.501(b)(6), 91.501(c)(1) and 91.501(d) of the FARs for the term of this Agreement. To the extent the FARs and the Resolution conflict, the FARs shall govern.

          2. Reimbursement of Expenses. BD shall impose a charge for transportation furnished under this Agreement in an amount up to the sum of the expenses set forth in subsections (a)-(j) below in respect of the specific flight or flights to which such charge applies:

 

 

 

 

(a)

Fuel, oil, lubricants, and other additives;

 

(b)

Travel expenses of the crew, including food, lodging, and ground transportation;

 

(c)

Hangar and tie-down costs away from the Aircraft’s base of operation;

 

(d)

Insurance obtained for the specific flight;

 

(e)

Landing fees, airport taxes, and similar assessments;

 

(f)

Customs, foreign permit, and similar fees directly related to the flight;



 

 

 

 

(g)

In-flight food and beverages;

 

(h)

Flight planning and weather contract services; and

 

(i)

An additional charge equal to one hundred percent (100%) of the expenses listed in subsection (a) above.

          3. Invoicing and Payment. All payments to BD by Mr. Ludwig hereunder shall be paid in the manner set forth in this Section 3. BD will pay to suppliers, employees, contractors and governmental entities all expenses related to the operation of Aircraft hereunder in the ordinary course. As to each flight operated hereunder, BD will provide to Mr. Ludwig an invoice in an amount specified in Paragraph 2 of this Agreement (plus air transportation excise taxes, as applicable, imposed by the Internal Revenue Code and any other governmental imposed ad valorem taxes, charges or fees). Mr. Ludwig shall pay the full amount of such invoice within thirty (30) days of the date of the invoice. In the event BD has not received supplier invoices for reimbursable charges relating to such flight prior to such invoicing, BD may issue supplemental invoice(s) for such charge(s) to Mr. Ludwig, and Mr. Ludwig shall pay such charge(s) within thirty (30) days of the date of the supplemental invoice.

          4. Flight Notifications. Mr. Ludwig will provide BD with flight notifications and proposed flight schedules as far in advance as possible. Flight notifications shall be in a form, whether oral or written, mutually convenient to and agreed upon by the parties. Mr. Ludwig shall provide at least the following information for each proposed flight reasonably in advance of the desired departure time as required by BD or its flight crew:

 

 

 

 

(a)

departure point;

 

(b)

destination;

 

(c)

proposed date and time of flight;

 

(d)

number and identity of anticipated passengers;

 

(e)

nature and extent of baggage and/or cargo to be carried;

 

(f)

proposed date and time of return flight, if any; and

 

(g)

any other information concerning the proposed flight that may be pertinent to or required by BD or its flight crew, including any request for a particular Aircraft.

          5. Aircraft Scheduling. BD shall have final authority over all scheduling of the Aircraft, including determination of which Aircraft shall be operated on a particular flight, provided, however, that BD will use its reasonable efforts to accommodate Mr. Ludwig’s requests.

          6. Aircraft Maintenance. BD shall be solely responsible for securing scheduled and unscheduled maintenance, preventive maintenance, and required or otherwise necessary inspections of the Aircraft, and shall take such requirements into account in scheduling the Aircraft. Performance of maintenance or inspection shall not be postponed for the purpose of scheduling an Aircraft to accommodate Mr. Ludwig’s request, unless such maintenance or inspection can safely be conducted at a later time in compliance with applicable laws, regulations and requirements, and such postponement is consistent with the sound discretion of the pilot-in-command.


          7. Flight Crew. BD shall employ, pay for and provide a qualified flight crew for all flight operations under this Agreement.

          8. Operational Authority and Control. BD shall be responsible for all aspects of the physical and technical operation of the Aircraft and the safe performance of all flights, and shall retain full authority and control, including exclusive operational control, and possession of the Aircraft at all times during flights operated under this Agreement. In accordance with applicable FARs, the qualified flight crew provided by BD will exercise all required and/or appropriate duties and responsibilities in regard to the safety of each flight conducted hereunder. The pilot-in-command shall have absolute discretion in all matters concerning preparation of the Aircraft for flight and the flight itself, the load carried and its distribution, the decision whether or not a flight shall be undertaken, the route to be flown, the place where landings shall be made, and all other matters relating to operation of the Aircraft. Mr. Ludwig specifically agrees that the flight crew shall have final and complete authority to delay or cancel any flight for any reason or condition that in the sole judgment of the pilot-in-command could compromise the safety of the flight, and to take any other action that in the sole judgment of the pilot-in-command is necessitated by considerations of safety. No such action of the pilot-in-command shall create or support any liability to Mr. Ludwig or any other person for loss, injury, damage or delay. The parties further agree that BD shall not be liable for delay or failure to furnish an Aircraft and crew pursuant to this Agreement when such failure is caused by government regulation or authority, mechanical difficulty or breakdown, war, civil commotion, strike or labor dispute, weather conditions, act of God, or other circumstances beyond BD’s reasonable control.

          9. Insurance and Indemnification. (a) BD will maintain or cause to be maintained in full force and effect throughout the term of this Agreement aircraft liability insurance in respect of each Aircraft, covering Mr. Ludwig as an insured, in an amount at least equal to $300 million combined single limit for bodily injury to or death of persons (including passengers) and property damage liability.

          (b) BD shall use reasonable efforts to procure such additional insurance coverage as Mr. Ludwig may request, covering Mr. Ludwig as an insured; provided, that the cost of such additional insurance shall be borne by Mr. Ludwig pursuant to Paragraph 2(d) hereof.

          (c) Notwithstanding the obligations set forth in subparagraphs (a) and (b) of this Section 9, BD shall indemnify Mr. Ludwig and hold him harmless against all liabilities, obligations, losses, damages, penalties, and actions (including without limitation reasonable attorneys’ fees and expenses) of any nature which may be imposed on, incurred by or asserted against Mr. Ludwig caused by or arising out of any flight operated under this Agreement. The provisions of this subsection shall survive the termination of this Agreement.

          10. Warranties. Mr. Ludwig warrants that:

          (a) Mr. Ludwig will use the Aircraft under this Agreement consistent with the Resolution, and will not use such Aircraft for the purpose of providing transportation of passengers or cargo for compensation or hire;


          (b) Mr. Ludwig will not permit any lien, security interest or other charge or encumbrance to attach against an Aircraft as a result of his actions or inactions, and shall not convey, mortgage, assign, lease or in any way alienate an Aircraft or his rights hereunder; and

          (c) Throughout the term of this Agreement, Mr. Ludwig and other authorized passengers will abide by and conform to all such laws, rules and regulations as may from time to time be in effect and applicable to him relating in any way to the operation or use of an Aircraft under this Agreement.

          11. Base of Operations. Mr. Ludwig acknowledges that the base of operations of any Aircraft may be changed temporarily or permanently by BD without notice.

          12. Notices and Communications. All notices and other communications under this Agreement shall be in writing (except as permitted in Section 4) and shall be given (and shall be deemed to have been duly given upon receipt or refusal to accept receipt) by personal delivery, addressed as follows:

 

 

 

 

If to BD:

Becton, Dickinson and Company

 

 

1 Becton Drive

 

 

Franklin Lakes, NJ 07417

 

 

Attn: Chief Financial Officer

 

 

 

 

If to Mr. Ludwig:

Edward J. Ludwig

 

 

c/o Becton, Dickinson and Company

 

 

1 Becton Drive

 

 

Franklin Lakes, NJ 07417

or to such other person or address as either party may from time to time designate in writing.

          13. Further Acts. Each of BD and Mr. Ludwig shall from time to time perform such other and further acts and execute such other and further instruments as may be required by law or may be necessary (i) to carry out the intent and purpose of this Agreement, or (ii) to establish, maintain or protect the respective rights and remedies of the other party.

          14. Successors and Assigns. Neither this Agreement nor any party’s interest herein shall be assignable to any third party. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their representatives and their successors.

          15. Termination. Either party may terminate this Agreement for any reason upon written notice to the other, such termination to become effective thirty (30) days from the date of the notice; provided, that this Agreement may be terminated as a result of a breach by either party of its obligations under this Agreement on ten (10) days’ written notice by the non-breaching party to the breaching party; and provided further, that this Agreement may be


terminated on such shorter notice as may be required to comply with applicable laws, regulations or insurance requirements.

          16. Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions shall not be affected or impaired.

          17. Entire Agreement; Amendment or Modification. This Agreement supersedes and replaces any previous agreement between the parties hereto concerning the subject matter hereof, constitutes the entire agreement between the parties with respect to that subject matter, and is not intended to confer upon any person or entity any rights or remedies not expressly granted herein. This Agreement may be amended or modified only in writing duly executed by both parties hereto.

          18. TRUTH IN LEASING STATEMENT PURSUANT TO SECTION 91.23 OF THE FEDERAL AVIATION REGULATIONS. (a) BD CERTIFIES THAT THE AIRCRAFT HAS BEEN INSPECTED AND MAINTAINED WITHIN THE 12-MONTH PERIOD PRECEDING THE DATE OF THIS AGREEMENT IN ACCORDANCE WITH THE PROVISIONS OF PART 91 OF THE FEDERAL AVIATION REGULATIONS, AND THAT ALL APPLICABLE REQUIREMENTS FOR THE AIRCRAFTS’ MAINTENANCE AND INSPECTION THEREUNDER HAVE BEEN MET AND ARE VALID FOR THE OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT.

          (b) BD AGREES, CERTIFIES AND ACKNOWLEDGES THAT WHENEVER AN AIRCRAFT IS OPERATED UNDER THIS AGREEMENT, BD SHALL BE KNOWN AS, CONSIDERED, AND SHALL IN FACT BE THE OPERATOR OF THAT AIRCRAFT, AND THAT BD UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.

          (c) THE PARTIES UNDERSTAND THAT AN EXPLANATION OF FACTORS AND PERTINENT FEDERAL AVIATION REGULATIONS BEARING ON OPERATIONAL CONTROL CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE. BD FURTHER CERTIFIES THAT IT WILL SEND, OR CAUSE TO BE SENT, A TRUE COPY OF THIS AGREEMENT TO: FEDERAL AVIATION ADMINISTRATION, AIRCRAFT REGISTRATION BRANCH, ATTN. TECHNICAL SECTION (AVN-450), P.O. BOX 25724, OKLAHOMA CITY, OKLAHOMA 73125, WITHIN 24 HOURS AFTER ITS EXECUTION, AS REQUIRED BY SECTION 91.23(c)(1) OF THE FEDERAL AVIATION REGULATIONS.

[Remainder of Page Intentionally Left Blank]


          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

BECTON, DICKINSON AND COMPANY

 

 

 

By: 

/s/

 John R. Considine

 


 

Name: John R. Considine

Title: 

Executive Vice President

 

 

and Chief Financial Officer

 

/s/

 Edward J. Ludwig


 

 

Edward J. Ludwig

          The undersigned hereby consents to the transactions contemplated by this Aircraft Time Share Agreement between Becton, Dickinson and Company and Edward J. Ludwig.

FRANKLIN LAKES ENTERPRISES, L.L.C.

 

 

 

 

 

By:

/s/

 Dean J. Paranicas

 

 


 

Name: Dean J. Paranicas

Title: Manager



EX-31 3 ex31.htm EXHIBIT 31

Exhibit 31

CERTIFICATIONS

I, Edward J. Ludwig, certify that:

 

 

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Becton, Dickinson and Company;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and



 

 

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2006

 

 

 

/s/ Edward J. Ludwig

 


 

Edward J. Ludwig

 

Chairman, President and
Chief Executive Officer



I, John R. Considine, certify that:

 

 

 

1.

I have reviewed this Quarterly Report on Form 10-Q of Becton, Dickinson and Company;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

 

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and



 

 

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

 

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

 

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2006

 

 

 

/s/ John R. Considine

 


 

John R. Considine

 

Executive Vice President and
Chief Financial Officer



EX-32 4 ex32.htm EXHIBIT 32

Exhibit 32

          The certification set forth below is being submitted in connection with the Quarterly Report on Form 10-Q of Becton, Dickinson and Company for the quarter ended March 31, 2006 (the “Report”) for the purpose of complying with Rule 13a – 14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

          I, Edward J. Ludwig, the Chief Executive Officer of Becton, Dickinson and Company, certify that:

 

 

 

 

1.

such Report fully complies with the requirements of Section 13(a) of the Exchange Act; and

 

 

 

 

2.

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Becton, Dickinson and Company.

 

 

 

May 9, 2006

 

 

 

 

/s/ Edward J. Ludwig

 

 


 

 

Name: Edward J. Ludwig

 

Chief Executive Officer



          The certification set forth below is being submitted in connection with the Quarterly Report on Form 10-Q of Becton, Dickinson and Company for the quarter ended March 31, 2006 (the “Report”) for the purpose of complying with Rule 13a – 14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.

          I, John R. Considine, the Chief Financial Officer of Becton, Dickinson and Company, certify that:

 

 

 

 

1.

such Report fully complies with the requirements of Section 13(a) of the Exchange Act; and

 

 

 

 

2.

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Becton, Dickinson and Company.


 

 

 

May 9, 2006

 

 

 

 

/s/ John R. Considine

 

 


 

 

Name: John R. Considine

 

Chief Financial Officer



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