-----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, PSB08IDGiLuzsXsINXfwUfV/OYwWpUpvSxRIXH9MOftshArWXsDzlwLS4o7RHXT5 tSi3rVacAqD0virB13FxYg== 0000950130-95-002805.txt : 19951228 0000950130-95-002805.hdr.sgml : 19951228 ACCESSION NUMBER: 0000950130-95-002805 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951227 SROS: NYSE 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04802 FILM NUMBER: 95604722 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-K 1 FORM 10-K - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1995 COMMISSION FILE NUMBER 1-4802 BECTON, DICKINSON AND COMPANY (Exact name of registrant as specified in its charter) NEW JERSEY 22-0760120 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1 BECTON DRIVE FRANKLIN LAKES, NEW JERSEY 07417-1880 (Address of principal executive (Zip Code) offices) (201) 847-6800 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE ON WHICH TITLE OF EACH CLASS REGISTERED Common Stock, Par Value $1.00 New York Stock Exchange Preferred Stock Purchase Rights New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] As of November 30, 1995, 64,253,730 shares of the registrant's common stock were outstanding and the aggregate market value of such common stock held by nonaffiliates of the registrant was approximately $4,466,837,000. DOCUMENTS INCORPORATED BY REFERENCE (1) Portions of the registrant's Annual Report to Shareholders for the fiscal year ended September 30, 1995 are incorporated by reference into Parts I and II hereof. (2) Portions of the registrant's Proxy Statement for the Annual Meeting of Shareholders to be held February 13, 1996 are incorporated by reference into Part III hereof. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS. GENERAL Becton, Dickinson and Company was incorporated under the laws of the State of New Jersey in November 1906, as successor to a New York business started in 1897. Its executive offices are located at 1 Becton Drive, Franklin Lakes, New Jersey 07417-1880 and its telephone number is (201) 847-6800. All references herein to "the Company" refer to Becton, Dickinson and Company and its domestic and foreign subsidiaries unless otherwise indicated by the context. The Company is engaged principally in the manufacture and sale of a broad line of medical supplies and devices and diagnostic systems used by health care professionals, medical research institutions and the general public. BUSINESS SEGMENTS AND GEOGRAPHIC AREAS The Company's operations consist of two worldwide business segments: Medical Supplies and Devices, and Diagnostic Systems. The countries in which the Company has local revenue-generating operations have been combined into the following geographic areas: United States (including Puerto Rico); Europe; and Other (which is comprised of Canada, Latin America, Japan and Asia Pacific). Information with respect to revenues, operating income and identifiable assets attributable to each of the Company's business segments and geographic areas of operation, as well as capital expenditures and depreciation and amortization attributable to each of the Company's business segments, appears on pages 30-31 of the Company's Annual Report to Shareholders for the fiscal year ended September 30, 1995 (the "1995 Annual Report"), and is incorporated herein by reference. MEDICAL SUPPLIES AND DEVICES SEGMENT The major products in this segment are hypodermic products, specially designed devices for diabetes care, prefillable drug delivery systems, vascular access products and surgical devices (including disposable scrubs, specialty and surgical blades and pre-surgery patient prep kits). This segment also includes specialty needles, drug infusion systems, elastic support products, thermometers and contract packaging services. The Company's contract packaging services are provided to pharmaceutical, cosmetic and toiletry companies. DIAGNOSTIC SYSTEMS SEGMENT The major products in this segment are classical and instrumented microbiology products, blood collection products, instrumentation systems for cellular analysis, including flow cytometry and cellular imaging products, tissue culture labware, hematology instruments and other diagnostic systems. DISPOSITIONS OF BUSINESSES The Company's radioimmunoassay business was sold in May 1995 and its medical glove business in June 1995. The operating results of these businesses until their respective dates of sale are reflected in the Consolidated Financial Statements incorporated herein by reference as Exhibit 13. FOREIGN OPERATIONS The Company's products are manufactured and sold worldwide. The principal markets for the Company's products outside the United States are Europe, Japan, Mexico, Asia Pacific, Canada and Brazil. The principal products sold by the Company outside of the United States are hypodermic needles and syringes, diagnostic systems, VACUTAINER (R) brand blood collection products, HYPAK (R) brand prefillable syringe systems, and intravenous catheters. The Company has manufacturing operations in Australia, Brazil, France, Germany, Ireland, Japan, Mexico, Singapore, Spain and the United Kingdom, and in 1995 commenced construction in China of a new hypodermic facility. 1 Foreign economic conditions and exchange rate fluctuations have caused the profitability on foreign revenues to fluctuate more than on domestic revenues. The Company believes its foreign business involves greater risk than its domestic business due to the foregoing factors as well as local political and governmental conditions. REVENUES AND DISTRIBUTION The Company's products and services are marketed in the United States both through independent distribution channels and directly to end-users. The Company's products are marketed outside the United States through independent distributors and sales representatives, and in some markets directly to end- users. Sales to a distributor, which supplies the Company's products to many end-users, accounted for approximately 13% of total Company revenues in fiscal 1995, and were from both business segments. Order backlog is not material to the Company's business inasmuch as orders for the Company's products are generally received and filled on a current basis, except for items temporarily out of stock. Substantially all revenue is recognized when products are shipped to customers. RESEARCH AND DEVELOPMENT The Company conducts its research and development activities at its operating units, its Research Center in Research Triangle Park, North Carolina and in collaboration with selected universities and medical centers. The Company also retains individual consultants to support its efforts in specialized fields. The Company spent $144,201,000 on research and development during the fiscal year ended September 30, 1995 and $144,227,000 and $139,141,000, respectively, during the two immediately preceding fiscal years. COMPETITION A number of companies, some of which are more specialized than the Company, compete in the medical technology field. In each such case, competition involves only a part of the Company's product lines. Competition in the Company's markets is based on a combination of factors including price, quality, service, reputation, distribution and promotion. Ongoing investments in research, quality management, quality and product improvement and productivity improvement are required to maintain an advantage in the competitive environments in which the Company operates. New companies have entered the medical technology field and established companies have diversified their business activities into this area. Other firms engaged in the distribution of medical technology products have become manufacturers as well. Some of the Company's competitors have greater financial resources than the Company. The Company is also faced with competition from products manufactured outside the United States. PATENTS, TRADEMARKS AND LICENSES The Company owns numerous patents, patent applications and trademarks in the United States and other countries. The Company is also licensed under domestic and foreign patents, patent applications and trademarks owned by others. In the aggregate, these patents, patent applications, trademarks and licenses are of material importance to the Company's business. RAW MATERIALS The Company purchases many different types of raw materials including plastics, glass, metals, yarn and yarn goods, paper products, agricultural products, electronic and mechanical sub-assemblies and various biological, chemical and petrochemical products. All but a few of the Company's principal raw materials are available from multiple sources. REGULATION The Company's medical technology products and operations are subject to regulation by the federal Food and Drug Administration and various other federal and state agencies, as well as by a number of foreign governmental agencies. The Company believes it is in compliance in all material 2 respects with the regulations promulgated by such agencies, and that such compliance has not had, and is not expected to have, a material adverse effect on its business. The Company also believes that its operations comply in all material respects with applicable environmental laws and regulations. Such compliance has not had, and is not expected to have, a material adverse effect on the Company's capital expenditures, earnings or competitive position. EMPLOYEES As of September 30, 1995, the Company had approximately 18,100 employees, of whom approximately 9,600 were employed in the United States. The Company believes that its employee relations are satisfactory. ITEM 2. PROPERTIES. The executive offices of the Company are located in Franklin Lakes, New Jersey. The Company owns and leases approximately 10,686,000 square feet of manufacturing, warehousing, administrative and research facilities throughout the world. The domestic facilities, including Puerto Rico, comprise approximately 5,642,000 square feet of owned and 1,779,000 square feet of leased space. The foreign facilities comprise approximately 2,248,000 square feet of owned and 1,017,000 square feet of leased space. Sales offices and distribution centers included in the total square footage are also located throughout the world. Operations in both of the Company's business segments are carried on at both domestic and foreign locations. Primarily at foreign locations, facilities often serve both business segments and are used for multiple purposes, such as administrative/sales, manufacturing and/or warehousing/distribution. The Company generally seeks to own its manufacturing facilities, although some are leased. Most of the Company's administrative, sales and warehousing/distribution facilities are leased. The Company believes that its facilities are of good construction and in good physical condition, are suitable and adequate for the operations conducted at those facilities, and are, with minor exceptions, fully utilized and operating at normal capacity. The domestic facilities are grouped as follows: --Eastern Sector includes facilities in Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, South Carolina and Puerto Rico and is comprised of approximately 3,680,000 square feet of owned and 1,018,000 square feet of leased space. --Central Sector includes facilities in Illinois, Indiana, Michigan, Missouri, Nebraska, Ohio, Texas and Wisconsin and is comprised of approximately 993,000 square feet of owned and 473,000 square feet of leased space. --Western Sector includes facilities in California and Utah and is comprised of approximately 969,000 square feet of owned and 288,000 square feet of leased space. The foreign facilities are grouped as follows: --Canada includes approximately 4,000 square feet of leased space. --Europe includes facilities in Belgium, France, Germany, Greece, Ireland, Italy, the Netherlands, Spain, Sweden, Switzerland and the United Kingdom and is comprised of approximately 1,219,000 square feet of owned and 708,000 square feet of leased space. --Latin America includes facilities in Brazil, Colombia, Mexico, Uruguay and Panama and is comprised of approximately 629,000 square feet of owned and 157,000 square feet of leased space. 3 --Asia Pacific includes facilities in Australia, Hong Kong, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand and is comprised of approximately 400,000 square feet of owned and 148,000 square feet of leased space. The table below summarizes property information by business segment:
BUSINESS SEGMENT -------------------------------------------------------------- MEDICAL SUPPLIES AND DIAGNOSTIC CATEGORY DEVICES SYSTEMS MIXED(A) TOTAL -------- ------------ ---------- --------- ----- Owned Facilities............. 16 21 10 47 Square feet............ 3,073,000 2,730,000 2,087,000 7,890,000 Manufacturing (B)...... 1,731,000(16) 1,196,000(15) 453,000(5) 3,380,000(36) Leased Facilities............. 21 12 60 93 Square feet............ 462,000 256,000 2,078,000 2,796,000 Manufacturing (B)...... 230,000(6) 47,000(7) 15,000(2) 292,000(15) Total Facilities............. 37 33 70 140 Square feet............ 3,535,000 2,986,000 4,165,000 10,686,000 Manufacturing (B)...... 1,961,000(22) 1,243,000(22) 468,000(7) 3,672,000(51)
- -------- (A) Facilities used by both business segments. (B) Aggregate square footage and number of facilities (noted in parentheses) by category used for manufacturing purposes. ITEM 3. LEGAL PROCEEDINGS. The Company is a party to a number of federal proceedings in the United States brought under the Comprehensive Environmental Response, Compensation and Liability Act, also known as Superfund, and similar state laws. The Company is also involved in other legal proceedings and claims which arise in the ordinary course of business, both as a plaintiff and a defendant. The results of these matters, individually and in the aggregate, are not expected to have a material effect on the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF DECEMBER 1, 1995) The following is a list of the executive officers of the Company, their ages and all positions and offices held by each of them during the past five years. There is no family relationship between any of the named persons.
AGE POSITION NAME --- -------- Clateo Castellini........ 60 Director, Chairman of the Board, President and Chief Executive Officer since June 1994 and prior thereto Sector President -- Medical. John W. Galiardo......... 61 Director, Vice Chairman of the Board and General Counsel since June 1994 and prior thereto Vice President and General Counsel.
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AGE POSITION NAME --- -------- Vincent L. De Caprio.... 45 Senior Vice President -- Planning and Technology since July 1995; Sector President -- Technique Products from October 1994 to June 1995; and prior thereto President -- Becton Dickinson Vascular Access. Edward J. Ludwig........ 44 Senior Vice President--Finance and Chief Financial Officer since July 1995; Vice President -- Finance from May 1995 to June 1995; Vice President -- Finance and Controller from January 1995 to May 1995; and prior thereto President -- Becton Dickinson Diagnostic Instrument Systems. Walter M. Miller........ 52 Senior Vice President since July 1995; Sector President -- Infectious Disease Diagnostics from October 1994 to June 1995; and prior thereto Sector President -- Diagnostic. Mark C. Throdahl........ 44 Senior Vice President since July 1995; Sector President -- Drug Delivery from October 1994 to June 1995; President -- Nippon Becton Dickinson Company, Ltd. from May 1991 to September 1994; and prior thereto Director -- Corporate Planning. Kenneth R. Weisshaar.... 45 Senior Vice President since July 1995; Sector President -- Cellular Analysis Diagnostics from October 1994 to June 1995; President -- Becton Dickinson Division from March 1992 to September 1994; and prior thereto Vice President -- Planning, Performance and Development.
PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock is listed on the New York Stock Exchange. As of November 30, 1995, there were approximately 7,816 shareholders of record. The balance of the information required by this item appears under the caption "Common Stock Prices and Dividends" on page 51 of the Company's 1995 Annual Report and is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA. The information required by this item is included under the caption "Six Year Summary of Selected Financial Data" on pages 28-29 of the Company's 1995 Annual Report and is incorporated herein by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information required by this item is included in the text contained under the caption "Financial Review" on pages 21-27 of the Company's 1995 Annual Report and is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this item appears on pages 30-31 and pages 34-48 of the Company's 1995 Annual Report and is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. 5 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information relating to directors required by this item will be contained under the captions "BOARD OF DIRECTORS", "ELECTION OF DIRECTORS" and "CONTINUING DIRECTORS" in a definitive Proxy Statement involving the election of directors which the registrant will file with the Securities and Exchange Commission not later than 120 days after September 30, 1995 (the "Proxy Statement"), and such information is incorporated herein by reference. The information relating to executive officers required by this item is included herein in Part I under the caption "Executive Officers of the Registrant". The information required pursuant to Item 405 of Regulation S-K will be contained under the caption "Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the Company's Proxy Statement, and such information is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION. The information required by this item will be contained under the captions "BOARD OF DIRECTORS" and "EXECUTIVE COMPENSATION" in the Company's Proxy Statement, and such information is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item will be contained under the caption "SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS" in the Company's Proxy Statement, and such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1) FINANCIAL STATEMENTS The following consolidated financial statements of the Company included in the Company's 1995 Annual Report at the pages indicated in parentheses, are incorporated by reference in Item 8 hereof: Consolidated Statements of Income--Years ended September 30, 1995, 1994 and 1993 (page 34) Consolidated Balance Sheets--September 30, 1995 and 1994 (page 35) Consolidated Statements of Cash Flows--Years ended September 30, 1995, 1994 and 1993 (page 36) Notes to Consolidated Financial Statements (pages 37-48) (a)(2) FINANCIAL STATEMENT SCHEDULES The following consolidated financial statement schedule of the Company is included herein at the page indicated in parentheses: Schedule II--Valuation and Qualifying Accounts (page 10) 6 All other schedules for which provision is made in the applicable accounting regulation of the Securities Exchange Act of 1934 are not required under the related instructions or are inapplicable, and therefore have been omitted. (a)(3) EXHIBITS See Exhibit Index on pages 11, 12 and 13 hereof for a list of all management contracts, compensatory plans and arrangements required by this item (Exhibit Nos. 10(a)(i) through 10(l)), and all other Exhibits filed or incorporated by reference as a part of this report. (b) REPORTS ON FORM 8-K The registrant filed no reports on Form 8-K during the last quarter of the year ended September 30, 1995. 7 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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 /s/ John W. Galiardo By__________________________________ JOHN W. GALIARDO Vice Chairman of The Board and General Counsel Dated: December 27, 1995 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW ON THE 27TH DAY OF DECEMBER, 1995 BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED. NAME CAPACITY /s/ Clateo Castellini Chairman of the Board, President, - ------------------------------------- Chief Executive Officer and Director CLATEO CASTELLINI (Principal Executive Officer) /s/ Edward J. Ludwig Senior Vice President-Finance and - ------------------------------------- Chief Financial Officer(Principal EDWARD J. LUDWIG Financial and Accounting Officer) /s/ Harry N. Beaty, M.D. Director - ------------------------------------- HARRY N. BEATY, M.D. /s/ Henry P. Becton, Jr. Director - ------------------------------------- HENRY P. BECTON, JR. /s/ Gerald M. Edelman, M.D. Director - ------------------------------------- GERALD M. EDELMAN, M.D. /s/ Edmund B. Fitzgerald Director - ------------------------------------- EDMUND B. FITZGERALD /s/ John W. Galiardo Director - ------------------------------------- JOHN W. GALIARDO /s/ Richard W. Hanselman Director - ------------------------------------- RICHARD W. HANSELMAN /s/ Thomas A. Holmes Director - ------------------------------------- THOMAS A. HOLMES /s/ Frank A. Olson Director - ------------------------------------- FRANK A. OLSON /s/ James E. Perrella Director - ------------------------------------- JAMES E. PERRELLA /s/ Gloria M. Shatto Director - ------------------------------------- GLORIA M. SHATTO /s/ Raymond S. Troubh Director - ------------------------------------- RAYMOND S. TROUBH 8 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors Becton, Dickinson and Company We have audited the consolidated financial statements and related schedule of Becton, Dickinson and Company listed in the accompanying index to financial statements (Item 14(a)). These financial statements and related schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and related schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and related schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and related schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements listed in the accompanying index to financial statements (Item 14(a)) present fairly, in all material respects, the consolidated financial position of Becton, Dickinson and Company at September 30, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in Note 1 to the financial statements, in 1993 the Company changed its methods of accounting for postretirement benefits other than pensions, postemployment benefits, and income taxes. /s/ ERNST & YOUNG LLP ----------------------- ERNST & YOUNG LLP Hackensack, New Jersey November 7, 1995 9 BECTON, DICKINSON AND COMPANY SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED SEPTEMBER 30, 1995, 1994, AND 1993 (THOUSANDS OF DOLLARS) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E - -------------------------------------------------------------------------------- ADDITIONS BALANCE CHARGED AT TO COSTS BALANCE AT BEGINNING AND END OF DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD - -------------------------------------------------------------------------------- 1995 Against trade receivables: For doubtful accounts............ $13,937 $ 4,943 $ 1,956(A) $16,924 For cash discounts............... 8,221 27,295 27,394 8,122 ------- -------- ------- ------- Total........................ $22,158 $ 32,238 $29,350 $25,046 ======= ======== ======= ======= 1994 Against trade receivables: For doubtful accounts............ $12,077 $ 5,323 $ 3,463(A) $13,937 For cash discounts............... 6,821 28,813 27,413 8,221 ------- -------- ------- ------- Total........................ $18,898 $ 34,136 $30,876 $22,158 ======= ======== ======= ======= 1993 Against trade receivables: For doubtful accounts............ $13,090 $ 4,906 $ 5,919(A) $12,077 For cash discounts............... 7,509 25,173 25,861 6,821 ------- -------- ------- ------- Total........................ $20,599 $30,079 $31,780 $18,898 ======= ======== ======= =======
- -------- (A) Accounts written off. 10 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION METHOD OF FILING ------- ----------- ---------------- 3(a) Restated Certificate of Incorporation, Incorporated by reference to Exhibit as amended January 22, 1990 3(a) to the registrant's Annual Re- port on Form 10-K for the fiscal year ended September 30, 1990 3(b) By-Laws, as amended May 30, 1989 Incorporated by reference to Exhibit 3(b) to the registrant's Annual Re- port on Form 10-K for the fiscal year ended September 30, 1989 4(a) Indenture, dated as of December 1, Incorporated by reference to Exhibit 4 1982, between the registrant and Man- to Registration Statement No. 2-80707 ufacturers Hanover Trust Company on Form S-3 filed by the registrant 4(b) First Supplemental Indenture, dated as Incorporated by reference to Exhibit of May 15, 1986, between the regis- 4(b) to Registration Statement No. trant and Manufacturers Hanover Trust 33-5663 on Form S-3 filed by the reg- Company istrant 4(c) Second Supplemental Indenture, dated Incorporated by reference to Exhibit as of January 10, 1995, between the 4(c) to Form 8-K filed by the Regis- Registrant and Chemical Bank (as suc- trant on January 12, 1995 (the regis- cessor by merger to Manufacturers trant hereby agrees to furnish to the Hanover Trust Company) Commission upon request a copy of any other instruments which define the rights of holders of long-term debt of the registrant) 10(a)(i) Employment Agreement, dated June 18, Incorporated by reference to Exhibit 1986, between the registrant and 10(b)(i) to the registrant's Annual Clateo Castellini Report on Form 10-K for the fiscal year ended September 30, 1986 10(a)(ii) Employment Agreement, dated June 18, Incorporated by reference to Exhibit 1986, between the registrant and John 10(b)(ii) to the registrant's Annual W. Galiardo Report on Form 10-K for the fiscal year ended September 30, 1986 10(a)(iii) Employment Agreement, dated June 9, Incorporated by reference to Exhibit 1987, between the registrant and Wal- 10(b)(v) to the registrant's Annual ter M. Miller Report on Form 10-K for the fiscal year ended September 30, 1989 10(b) Certified Resolution authorizing cer- Incorporated by reference to Exhibit tain payments to certain corporate 10(k) to the registrant's Annual Re- officers in the event of a discharge, port on Form 10-K for the fiscal year resignation due to removal from posi- ended September 30, 1986 tion or a significant change in such officers' respective duties within two years after a change in control of the registrant
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EXHIBIT NUMBER DESCRIPTION METHOD OF FILING - ------- ----------- ---------------- 10(c) Form of Split Dollar Agreement and re- Incorporated by reference to Exhibit lated Collateral Assignment covering 10(e) to the registrant's Annual Re- the providing to corporate officers port on Form 10-K for the fiscal year of a life insurance policy in an ended September 30, 1987 amount equal to two times base salary in lieu of full participation in the registrant's group life insurance program 10(d) Stock Award Plan, as amended and re- Incorporated by reference to Exhibit stated effective February 11, 1992 10(d) to the registrant's Annual Re- port on Form 10-K for the fiscal year ended September 30, 1992 10(e) Executive Bonus Plans Incorporated by reference to Exhibit 10(e) to the registrant's Annual Re- port on Form 10-K for the fiscal year ended September 30, 1994 10(f) 1982 Incentive Stock Option Plan, as Incorporated by reference to Exhibit amended and restated February 8, 1994 10(f) to the registrant's Annual Re- port on Form 10-K for the fiscal year ended September 30, 1994 10(g) 1982 Unqualified Stock Option Plan, as Incorporated by reference to Exhibit amended and restated February 8, 1994 10(g) to the registrant's Annual Re- port on Form 10-K for the fiscal year ended September 30, 1994 10(h) Salary and Bonus Deferral Plan Incorporated by reference to Exhibit 10(h) to the registrant's Annual Re- port on Form 10-K for the fiscal year ended September 30, 1994 10(i) 1990 Stock Option Plan, as amended and Incorporated by reference to Exhibit restated February 8, 1994 10(i) to the registrant's Annual Re- port on Form 10-K for the fiscal year ended September 30, 1994 10(j) Retirement Benefit Restoration Plan Incorporated by reference to Exhibit and related Benefit Restoration Plan 10(j) to the registrant's Annual Re- Trust port on Form 10-K for the fiscal year ended September 30, 1992 10(k) 1994 Restricted Stock Plan for Non- Incorporated by reference to Exhibit A Employee Directors to the registrant's Proxy Statement dated January 5, 1994 10(l) 1995 Stock Option Plan Incorporated by reference to Exhibit A to the registrant's Proxy Statement dated December 29, 1994 11 Computation of Earnings Per Share Filed with this report 13 Portions of the registrant's Annual Filed with this report Report to Shareholders for fiscal year 1995 (graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report)
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EXHIBIT NUMBER DESCRIPTION METHOD OF FILING - ------- ----------- ---------------- 21 Subsidiaries of the registrant Filed with this report 23 Consent of independent auditors Filed with this report 27 Financial Data Schedule Filed with this report
Copies of any Exhibits not accompanying this Form 10-K are available at a charge of 25 cents per page by contacting: Investor Relations, Becton, Dickinson and Company, 1 Becton Drive, Franklin Lakes, New Jersey 07417- 1880, Phone: 1-800-284-6845. 13 EX-11 2 COMPUTATIONS OF EARNINGS PER SHARE EXHIBIT 11 BECTON, DICKINSON AND COMPANY COMPUTATION OF EARNINGS PER SHARE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993 (ALL AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
1995 1994 1993 - --------------------------------------------------------------------------------- PRIMARY EARNINGS PER SHARE -------------------------- Net income: Income before cumulative effect of accounting changes........................................... $251,696 $227,174 $212,840 Less preferred stock dividends..................... (3,596) (3,711) (3,800) -------- -------- -------- Income before cumulative effect of accounting changes applicable to common stock................ 248,100 223,463 209,040 Cumulative effect of accounting changes, net of taxes............................................. -- -- (141,057) -------- -------- -------- Net income applicable to common stock.............. $248,100 $223,463 $ 67,983 ======== ======== ======== Shares: Average shares outstanding...................... 67,072 72,237 75,833 Add dilutive stock equivalents from stock plans. 2,129 1,096 1,097 -------- -------- -------- Weighted average number of common and common equivalent shares outstanding during the year.. 69,201 73,333 76,930 ======== ======== ======== Earnings per share: Income before cumulative effect of accounting changes........................................... $3.59 $3.05 $ 2.71 Cumulative effect of accounting changes, net of taxes............................................. -- -- (1.83) -------- -------- -------- Net income......................................... $3.59 $3.05 $ .88 ======== ======== ======== FULLY DILUTED EARNINGS PER SHARE (A) ------------------------------------ Net income: Income before cumulative effect of accounting changes applicable to common stock................ $248,100 $223,463 $209,040 Add preferred stock dividends using the "if converted" method................................. 3,596 3,711 3,800 Less additional ESOP contribution, using the "if converted" method................................. (1,420) (1,540) (1,652) -------- -------- -------- Income before cumulative effect of accounting changes for fully diluted earnings per share...... 250,276 225,634 211,188 Cumulative effect of accounting changes, net of taxes............................................. -- -- (141,057) -------- -------- -------- Net income for fully diluted earnings per share.... $250,276 $225,634 $ 70,131 ======== ======== ======== Shares: Average shares outstanding...................... 67,072 72,237 75,833 Add: Dilutive stock equivalents from stock plans... 2,725 1,949 1,106 Shares issuable upon conversion of preferred stock........................................ 1,484 1,528 1,576 -------- -------- -------- Weighted average number of common shares used in calculating fully diluted earnings per share... 71,281 75,714 78,515 ======== ======== ======== Fully diluted earnings per share: Income before cumulative effect of accounting changes........................................... $3.51 $2.98 $ 2.69 Cumulative effect of accounting changes, net of taxes............................................. -- -- (1.80) -------- -------- -------- Net income......................................... $3.51 $2.98 $ .89 ======== ======== ========
- -------- (A) Excluding the assumed conversion of preferred shares in 1993 would yield the following results: Income before cumulative effect of accounting changes; $2.71; Cumulative effect of accounting changes, net of taxes; ($1.83); and Net income; $.88. EX-13 3 PORTIONS OF ANNUAL REPORT EXHIBIT 13 Financial Table of Contents Financial Review 21 Six Year Summary of Selected Financial Data 28 Summary by Business Segment 30 Summary by Geographic Area 31 Report of Management 32 Report of Ernst & Young LLP, Independent Auditors 33 Consolidated Statements of Income 34 Consolidated Balance Sheets 35 Consolidated Statements of Cash Flows 36 Notes to Consolidated Financial Statements 37 Financial Review Becton Dickinson is a medical technology company which manufactures and sells a broad range of medical supplies and devices and diagnostic systems for use by health care professionals, medical research institutions and the general public. The Company focuses strategically on achieving growth in two worldwide business segments - Medical Supplies and Devices (Medical) and Diagnostic Systems (Diagnostic). The Company's financial results and the operating performance of the segments are discussed below. Revenues and Earnings Worldwide revenues of $2.7 billion rose 6%. Excluding the estimated impacts of favorable foreign currency translation of 3% and of certain initiatives which reduced 1995 revenues, as discussed below, the resulting underlying growth rate remained at 6%, which resulted primarily from volume increases and an improved product mix in both segments. Price increases averaged less than 1%. Revenue growth was achieved in the U.S. and international markets by both segments. Revenues were unfavorably impacted by programs designed to normalize quarterly revenue patterns through a reduction in the number of year-end sales promotions. In addition, the Company divested certain businesses, the most significant of which were the medical glove business and the radioimmunoassay (RIA) business. While health care cost containment continues to be pursued in the United States and Europe, the Company has responded successfully by continuing to develop cost-effective and innovative products which respond to unmet customer needs and enhance opportunities in these markets. Sales forces and supply chain services are being reorganized so that the Company will continue to effectively serve its customers, including larger, more integrated health care providers. These efforts will enable the Company to continue to successfully reach all distribution channels and customer segments as the marketplace evolves. Medical segment revenues of $1.5 billion increased 6% over last year. The estimated favorable impact of foreign currency translation of 3% was offset by the decrease in revenues related to business divestitures and the estimated impact of reduced levels of year-end sales promotions. Revenue growth was led by strong sales of the Company's diabetes health care products, a result of both market share gains and market growth. This market growth was largely attributable to the gradual trend toward more frequent insulin injections resulting from more intensive therapies. Strong increases in revenues were also realized in injection systems by the continuing shift toward the use of hypodermic safety devices and increased use of prefillable syringes by pharmaceutical companies for vaccines and other drugs. Revenue growth in infusion therapy was led by the Company's increasing market share of intravenous catheters. Revenues of the medical glove business, which was sold on June 30, 1995, were $85 million and $104 million in 1995 and 1994, respectively. Medical segment operating income of $330 million increased 20% over 1994 primarily due to revenue growth, improved sales mix, manufacturing productivity, and the benefits gained from the recent centralization of warehousing and distribution activities in Europe. The estimated favorable impact of foreign currency translation and the effect of special 21 charges in 1994 were offset by the decrease in income related to business divestitures and the estimated impact of reduced levels of year-end sales promotions. Diagnostic segment revenues of $1.2 billion increased 7%. Excluding the estimated impacts of favorable foreign currency translation of 4% and of reduced levels of year-end sales promotions, as well as the decrease in revenues related to business divestitures, Diagnostic segment revenues increased 5%. Growth in sample collection was led by continued strong sales of VACUTAINER brand blood collection products, fueled by the continued conversion of the market to higher value, lower cost-in-use safety products. FACS brand flow cytometry systems, including several new product offerings, also exhibited strong sales growth. The Company's new FACSCALIBUR four-color flow cytometry system, along with new products designed to increase efficiency in sample handling and data management, have received excellent market acceptance. The rate of revenue growth of infectious disease products, though slightly lower than historical levels, was at the market rate which is estimated at 2%. Revenue growth in infectious disease products continues to be impacted by worldwide cost containment initiatives in diagnostic testing. The Company is responding to these developments through its ongoing efforts to develop cost-effective and innovative products. Diagnostic segment operating income of $158 million increased 42% over 1994. During the fourth quarter of 1995, the Company recorded a provision of $12 million primarily to write off goodwill associated with the cellular imaging business. This provision resulted from the Company's recognition that the slower than anticipated market growth of this business would not result in expected returns. Excluding the impact of this provision, and the estimated impacts of favorable foreign currency translation and of reduced levels of year-end sales promotions, as well as the effect of special charges in 1994, Diagnostic segment operating income increased 24%. This growth was primarily due to revenue growth, improved gross profit margins from increased manufacturing productivity and improved product mix, as well as tight expense management. On a geographic basis, revenues outside the United States of $1.3 billion rose 12%. Excluding the estimated impacts of favorable foreign currency translation of 8% and of reduced levels of year-end sales promotions, as well as the decrease in revenues related to business divestitures, such revenues increased 6%. Double-digit revenue increases were achieved by FACS and VACUTAINER brand products in many markets, while sales of prefillable syringes to pharmaceutical companies and intravenous catheter revenues were also strong. In Mexico, revenues were slightly lower than last year as a result of the weakness of the Mexican peso and the ongoing recession in that country. The Company's revenue growth benefited from the continued stability of Brazil's currency. In the aggregate, economic and currency issues in Mexico and Brazil had an immaterial impact on the Company's net income. Revenues in the United States were $1.4 billion, an increase of 1%. Excluding the decrease in revenues related to business divesti- Operating Income (Millions of Dollars) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] Return on Revenues* (Percent) *Excludes cumulative effect of accounting changes in 1993. [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] Gross Profit Margin (Percent) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] 22 tures and the estimated impact of reduced levels of year-end sales promotions, such revenues increased 5%. Sales of VACUTAINER and FACS brand products and insulin syringes grew at double-digit rates, while sales of the hypodermic business continued to benefit from the increased use of safety products. Strong performance from core medical and diagnostic products supports the Company's successful strategy of focusing on cost-effective and innovative products. The Company's gross profit margin rose to 47.0%, compared with 45.3% last year, despite significant increases in the cost of certain raw materials, principally plastic resins and corrugated paper materials. As anticipated, this improvement was the result of the Company's continued success in increasing manufacturing efficiency as well as a favorable product mix. Selling and administrative expense of $735 million was 27% of revenues, compared with last year's ratio of 25.8%. The percentage increase resulted from a lower revenue base due to business divestitures, the estimated impact of lower year-end sales promotions, and the write-off of goodwill associated with the cellular imaging business, as discussed above. In addition, aggregate expenses outside the United States were higher, reflecting increased investment in new markets. Costs associated with relocating the Company's Japanese headquarters also unfavorably impacted selling and administrative expense. Investment in research and development was $144 million, the same as last year, and equaled 5.3% of revenues. The decision made at the end of 1994 to exit several product lines and refocus certain diagnostic businesses resulted in discontinued investment in some areas. Additional funding was directed toward areas with greater opportunities for value and growth, such as DNA probes for infectious disease diagnostics. Sales of new products introduced in the last five years represented 18% and 16% of revenues in 1995 and 1994, respectively. Operating income in 1995 was $397 million, an increase of 22%. Excluding the estimated impacts of favorable foreign currency translation and of certain initiatives which reduced 1995 revenues, as well as special charges in 1994, operating income grew 15%, primarily from improved gross profit margin. As anticipated, the Company began realizing the benefits from the recent centralization of its warehousing and distribution activities within Europe. The Company's operating margin improved to 14.6% of revenues compared with 12.7% in 1994. This improvement was primarily the consequence of enhanced diagnostic and international profitability. Net interest expense of $43 million in 1995 was $5 million lower than in 1994, primarily due to lower financing expense in Brazil and lower working capital requirements in Europe, partially offset by higher interest expense in the United States resulting from the issuance in the second quarter of 1995 of $100 million of long-term debentures with a coupon rate of 8.7%. "Other (expense) income, net" of $4 million expense included a net settlement of $11 million received in connection with a favorable arbitration ruling relating to one of the Company's patents. Also included is a loss of $6 million resulting from the sale of the medical glove business, as well as Revenue Per Employee (Thousands of Dollars) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] Research and Development Expense (Millions of Dollars) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] Operating Income (Percent of Revenues) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] 23 foreign exchange losses of $12 million, including hedging costs. Despite volatility in the Mexican peso and various European currencies, the Company's management and hedging of these foreign exchange exposures mitigated the impact of exchange rate fluctuations on earnings, holding losses to a level similar to the prior year. In accordance with Statement of Financial Accounting Standards (SFAS) No. 52, Foreign Currency Translation, the net monetary assets ($7 million and $6 million at September 30, 1995 and 1994, respectively) of the Company's Brazilian subsidiary, where the functional currency is the U.S. dollar, are translated at current exchange rates, with the related translation gains and losses included in net earnings. The Company also has certain receivables, payables and short- term borrowings denominated in currencies other than the functional currencies of its subsidiaries. The functional currency is almost always the currency of the country in which the subsidiary is located. The net assets of foreign operations, where the functional currencies are the local currencies, are translated at current exchange rates. The Company does not generally hedge these translation exposures since such amounts are recorded as cumulative translation adjustments, a separate component of shareholders' equity, and do not impact reported earnings or current cash flow. The net assets of these foreign operations were $881 million and $829 million at September 30, 1995 and 1994, respectively. The Company utilizes simple derivative instruments to manage its interest rate and foreign exchange risks. These instruments are selectively employed solely to hedge exposures in those instances where their use will reduce the volatility of the impact of foreign exchange and interest rate movements. For further discussion of derivative instruments, see Note 9 of the Notes to Consolidated Financial Statements. As anticipated, the effective tax rate of 28.0% was significantly higher than the 23.3% rate in 1994. The higher tax rate in 1995 resulted primarily from a reduction in the tax benefits generated from operations in Puerto Rico, as provided in the Omnibus Budget Reconciliation Act of 1993. It is expected that the Company's 1996 tax rate will be comparable to the 1995 tax rate. Net income was $252 million, an increase of 11% over $227 million in 1994. Earnings per share were $3.59 per share, an increase of 18% over $3.05 per share in 1994. Foreign currency translation had an estimated $.18 favorable impact on earnings per share in 1995. In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. This Statement establishes accounting standards for the assessment and measurement of impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. The Company is presently assessing the effect of adopting SFAS No. 121, which is required to be adopted by the Company by the first quarter of fiscal 1997. Financial Condition Cash provided by operations continues to be the Company's primary Inventories (Millions of Dollars) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] Capital Expenditures (Millions of Dollars) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] Income Before Cumulative Effect of Accounting Changes (Millions of Dollars) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] 24 source of funds to finance operating needs and capital expenditures. In 1995, net cash provided by operating activities was $472 million, compared to $480 million in 1994. Capital expenditures were $124 million, compared with $123 million in the prior year. Medical segment capital spending, which totaled $77 million in 1995, included the acquisition of equipment for the ongoing expansion of the prefillable syringe business, and for the diabetes health care, hypodermic and vascular access businesses. In addition, funds were expended to support manufacturing productivity improvement programs. Diagnostic segment capital spending, which totaled $44 million in 1995, included the acquisition of equipment to support quality enhancement and cost reduction programs, primarily in the sample collection and infectious disease diagnostics businesses. In addition, funds were expended for routine replacement of machinery and equipment, primarily in the blood collection and infectious disease businesses, as well as to support capacity expansion programs in selected regions of the world for the blood collection business. The Company expects capital expenditures in 1996 to be slightly higher than in 1995, and will include spending to manufacture hypodermic syringes, intravenous catheters and anesthesia needles in China. Business divestitures in 1995 resulted in cash proceeds of $79 million. In addition, the Company received proceeds of $48 million from the disposition of a foreign investment in 1994. Net cash used for financing activities was $421 million during 1995 as compared with $292 million in 1994. This change was primarily due to the Company's repurchase of 5.8 million of its common shares on the open market at an average cost of $51.94 per share, totaling $300 million, an increase from $210 million in 1994. At September 30, 1995, 4.1 million shares remained to be purchased under a September 1994 Board of Directors' resolution that authorized the repurchase of up to 10 million common shares. It is the Company's intention to use substantial amounts of excess cash that is expected to be generated over the next several years to pursue strategic acquisition opportunities and to continue to repurchase its common shares. During 1995, total debt decreased $79 million as a result of strong cash flow from operations, working capital management and proceeds from business divesti- tures. Short-term debt was 27% of total debt at year end, compared with 21% in 1994. The change in the ratio was principally attributable to a net reduction in long-term debt as well as a relatively small increase in short-term debt. The Company's weighted average cost of total debt at the end of 1995 was 7.8% compared with 7.2% at the end of last year. Total debt to capitalization at year end declined to 35.2%, compared with 36.1% last year. The current ratio was 1.8 at the end of 1995 compared to last year's 2.0. Book value per share increased 2% to $21.49. In the United States, the Company had unused committed short-term and long- term lines of credit of $225 million and $145 million, respectively. In addition, the Company has unconfirmed lines of credit outside of the United States. The Company has a high degree of confidence in its ability to Book Value Per Share (Dollars) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] Debt to Capitalization (Percent) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] Dividends Per Common Share (Dollars) [Graphic material contained under the caption "Financial Review" is not included in the electronic filing of this report] 25 refinance maturing short-term and long-term debt, including $107 million of long-term debt maturities in 1997, as well as to incur substantial additional debt, if required, based on its strong financial condition. Subsidiaries operating in Puerto Rico have invested in high-grade marketable securities, the cash proceeds of which can be used by the Company. During 1995, the Company repatriated $112 million from certain of these subsidiaries. Return on equity was 17.5% in 1995 compared with 15.5% in 1994, reflecting the Company's progress toward increasing this ratio to an initial target of 20%. The Company manufactures various medical products in Brazil for sale in that country and for export. In addition, the Company imports other medical and diagnostic products for distribution within Brazil. Although the economic situation in Brazil has recently shown signs of stabilizing, the Brazilian economy has experienced very high inflation rates and significant devaluations of its currency in the past. The Company also manufactures and imports various medical and diagnostic products in Mexico for sale in that country. Since December 1994, the Mexican economy has experienced a period of high inflation, recession and currency instability. These situations have created volatility in the recording of revenues and earnings of the Company's Brazilian and Mexican operations, as well as the risk of foreign exchange losses as a result of fluctuations in the Brazilian and Mexican currencies. The Company has successfully managed these risks by raising the selling prices of its products in line with inflation and by taking steps to limit the size of its foreign exchange exposures. In the aggregate, the Company's Brazilian and Mexican operations comprise 8% or less of each of the Company's consolidated revenues, net income and total assets. The Company believes that the fundamentally non-cyclical nature of its core medical and diagnostic businesses, its international diversification, and its ability to meet the needs of the worldwide health care industry for cost- effective and innovative products will continue to cushion the long-term impact on the Company of economic or political dislocations in the countries in which it does business, including possible reforms of their health care systems. Inflation did not have a material impact on the Company's overall operations. The Company believes that its operations comply in all material respects with applicable laws and regulations. The Company is a party to a number of federal proceedings in the United States brought under the Comprehensive Environmental Response, Compensation and Liability Act, also known as Superfund, and similar state laws. The Company is also involved in other legal proceedings and claims which arise in the ordinary course of business, both as a plaintiff and a defendant. In the opinion of the Company, the results of these matters, individually and in the aggregate, are not expected to have a material effect on its results of operations, financial condition or cash flows. 1994 Compared With 1993 Worldwide revenues for 1994 of $2.6 billion rose 4%, or 5% after excluding the estimated unfavorable impact of foreign currency translation. Medical segment revenues of $1.4 billion increased 5% compared with 1993. Excluding the estimated unfavorable impact of foreign currency translation, Medical segment revenues increased 6%, almost all of which was from unit volume increases and shifts in product mix. Growth was led by strong sales of hypodermic products, notably safety products, as well as insulin and prefillable syringes. Diagnostic segment revenues of $1.1 billion increased 3%, or 4% after excluding the estimated unfavorable impact of foreign currency translation. Volume growth contributed approximately 2%, with the balance from shifts in product mix and price increases. Growth was led by strong sales of VACUTAINER brand blood collection products, including the Company's newer proprietary safety products, and increased placements of the BACTEC brand 9000 blood culture systems. The rate of growth of traditional microbiology products was slower than historical levels as a result of some adjustments being made in microbiology test protocols due to cost containment initiatives in the United States and Europe. Sales of FACS brand flow cytometry systems to research institutions and clinical laboratories were also adversely impacted by competition, regulatory delays for new products, and tight research budgets. The Company's gross profit margin rose to 45.3%, compared with 44.5% in 1993, primarily due to favorable product mix and manufacturing cost reductions. Also contributing to this improvement was the favorable impact of medical plan changes, as discussed below. Selling and administrative expense was 25.8% of revenues, compared with the 1993 rate of 26.8%, reflecting the Company's 26 tight spending controls and cost reduction programs. Investment in research and development increased to $144 million, or 5.6% of revenues. In 1994, the Company recorded a one-time expense of $5 million in connection with an early retirement program offered to certain eligible employees. In addition, the Company made significant modifications to its U.S. medical plans including employee and retiree contributions, higher deductibles and a medical cost inflation cap. As expected, the favorable impact of these plan changes more than offset the ongoing costs in 1994 with respect to the 1993 employee benefit related accounting changes which reduced 1993 earnings before cumulative effect of accounting changes by $.14 per share. In 1994, the Company recorded special charges of $30 million, or $.26 per share, primarily related to write-offs of property, plant and equipment, inventories and other assets associated with exited product lines and refocused businesses. No significant changes in estimates used to determine this provision have been required subsequent to 1994. Revenues associated with exited product lines approximated $19 million and $22 million in 1994 and 1993, respectively. Operating income in 1994 was $325 million, an increase of 20%. Excluding the estimated unfavorable impact of foreign currency translation and the effects of special charges in 1994 and 1993, operating income increased 22% primarily from improved gross profit margin and better control of selling and administrative expense. Net interest expense of $48 million in 1994 was $6 million lower than in 1993, primarily due to lower financing costs in Brazil. "Other income (expense), net" of $19 million income included a gain of $36 million, or $.30 per share, from the disposition of a foreign investment. Also included in "Other income (expense), net" were foreign exchange losses of $11 million in 1994. Included in "Other income (expense), net" in 1993 was a gain of $11 million from the sale of an investment and foreign exchange losses of $12 million. The effective tax rate was 23.3% compared with 4.5% in 1993. The lower tax rate in 1993 resulted principally from adjustments relating to the conclusion of tax examinations in various jurisdictions and the tax benefits associated with specific transactions consummated in certain international locations. Income before cumulative effect of accounting changes was $227 million, or $3.05 per share, an increase of 13% compared with $2.71 per share in 1993. Foreign currency translation had an estimated $.07 unfavorable impact on earnings per share in 1994. In 1993, the Company adopted SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions; SFAS No. 112, Employers' Accounting for Postemployment Benefits; and SFAS No. 109, Accounting for Income Taxes, all retroactive to October 1, 1992. SFAS Nos. 106 and 112 require the use of the accrual method of accounting for related costs, as compared with the former cash basis. The cumulative effect of these accounting changes on fiscal years prior to 1993 was recorded as a one-time charge, net of related income tax benefits, of $119 million, or $1.55 per share, for SFAS No. 106, and $30 million, or $.38 per share, for SFAS No. 112. The Company also changed its method of accounting for income taxes in accordance with SFAS No. 109, which changes the criteria for the recognition and measurement of deferred tax assets and liabilities. The cumulative effect of this accounting change on fiscal years prior to 1993 was recorded as a one-time credit of $8 million, or $.10 per share. Net income was $72 million, or $.88 per share, after reflecting the one-time after-tax charge of $1.83 per share for the cumulative effect of these accounting changes. Cash provided by operations was the Company's primary source of funds to finance operating needs and capital expenditures in 1994. Capital expenditures were $123 million, compared with $184 million in 1993. This decline reflects lower spending as productivity programs were completed at several plant locations. Medical and Diagnostic segment capital spending totaled $66 million and $55 million, respectively, in 1994. During 1994, total debt decreased $45 million. The Company repurchased 5.4 million of its common shares on the open market at an average cost of $39.24 per share, totaling $210 million. Short-term debt was 21% of total debt at year end, compared with 23% in 1993. The decrease is principally attributable to repayments of short-term debt. Return on equity was 15.5% in 1994 compared with 4.7% in 1993. The 1993 ratio would have been 13.3% excluding the cumulative effect of 1993 accounting changes. 27 Six Year Summary of Selected Financial Data
Becton, Dickinson and Company Years Ended September 30 Thousands of dollars, except per share amounts 1995 ---------- Operations Revenues $2,712,525 Gross Profit Margin 47.0% Operating Income 396,650 Interest Expense, Net 42,833 Income Before Income Taxes and Cumulative Effect of Accounting Changes 349,578 Income Tax Provision 97,882 Income Before Cumulative Effect of Accounting Changes 251,696 Net Income 251,696 Earnings Per Share: - Before Cumulative Effect of Accounting Changes 3.59 - Net Income 3.59 Dividends Per Common Share .82 Average Common and Common Equivalent Shares Outstanding 69,201 Financial Current Assets $1,327,518 Position Current Liabilities 720,035 Current Ratio 1.8 Property, Plant and Equipment, Net 1,281,031 Total Assets 2,999,505 Long-Term Debt 557,594 Shareholders' Equity 1,398,385 Book Value Per Common Share 21.49 Financial Income Before Income Taxes and Cumulative Relationships Effect of Accounting Changes as a Percent of Revenues 12.9% Return on Total Assets (B) 13.3% Return on Equity 17.5% Debt to Capitalization (D) 35.2% Additional Depreciation and Amortization $ 207,756 Data Capital Expenditures 123,760 Research and Development Expense 144,201 Number of Employees 18,100 Number of Shareholders 7,712
(A) Includes after-tax charge of $141,057, or $1.83 per share, for the cumulative effect of accounting changes. (B) Net income before interest expense and taxes as a percent of average total assets. (C) Excludes the cumulative effect of accounting changes. (D) Total debt as a percent of the sum of total debt, shareholders' equity and net non-current deferred income tax liabilities. 28
1994 1993 1992 1991 1990 - ---------- ---------- ---------- ---------- ---------- $2,559,461 $2,465,405 $2,365,317 $2,172,168 $2,012,654 45.3% 44.5% 45.0% 46.0% 45.8% 325,038 270,425 328,592 313,746 305,476 47,624 53,412 49,116 50,051 40,235 296,159 222,894 269,457 267,303 274,107 68,985 10,054 68,704 77,514 91,850 227,174 212,840 200,753 189,789 182,257 227,174 71,783(A) 200,753 189,789 182,257 3.05 2.71 2.57 2.43 2.33 3.05 .88(A) 2.57 2.43 2.33 .74 .66 .60 .58 .54 73,333 76,930 77,028 77,096 77,320 $1,326,551 $1,150,742 $1,221,209 $1,031,581 $ 961,874 678,321 636,062 713,335 531,277 573,801 2.0 1.8 1.7 1.9 1.7 1,376,349 1,403,070 1,429,519 1,351,387 1,276,113 3,159,533 3,087,565 3,177,675 2,779,975 2,593,513 669,157 680,581 685,081 739,076 649,287 1,481,694 1,456,953 1,594,926 1,363,786 1,233,555 21.08 19.50 21.00 18.07 16.39 11.6% 9.0% 11.4% 12.3% 13.6% 11.5% 9.2%(C) 11.1% 12.3% 13.6% 15.5% 13.3%(C) 13.6% 14.6% 15.8% 36.1% 37.8% 36.1% 37.5% 38.2% $ 203,705 $ 189,756 $ 169,638 $ 149,897 $ 135,723 123,017 184,168 185,559 211,136 263,579 144,227 139,141 125,207 113,045 102,826 18,600 19,000 19,100 18,600 18,500 7,489 7,463 7,086 7,007 6,854
29 Summary by Business Segment
(See Note 13 to Financial Statements) Thousands of dollars 1995 1994 1993 ---------- ---------- ---------- Revenues Medical Supplies and Devices $1,500,075 $1,421,435 $1,359,533 Diagnostic Systems 1,212,450 1,138,026 1,105,872 ---------- ---------- ---------- Total Segments $2,712,525 $2,559,461 $2,465,405 ========== ========== ========== Segment Medical Supplies and Devices (A) $ 330,368 $ 274,498 $ 228,337 Operating Diagnostic Systems (B) 157,673 110,989 111,460 Income ---------- ---------- ---------- Total Segments 488,041 385,487 339,797 Unallocated Expenses (138,463) (89,328)(C) (116,903) ---------- ---------- ---------- Income Before Income Taxes and Cumulative Effect of Accounting Changes $ 349,578 $ 296,159 $ 222,894 ========== ========== ========== Identifiable Medical Supplies and Devices $1,348,860 $1,433,145 $1,422,147 Assets Diagnostic Systems 1,210,888 1,267,331 1,270,037 ---------- ---------- ---------- Total Segments 2,559,748 2,700,476 2,692,184 Corporate (D) 439,757 459,057 395,381 ---------- ---------- ---------- Total $2,999,505 $3,159,533 $3,087,565 ========== ========== ========== Capital Medical Supplies and Devices $ 77,062 $ 66,181 $ 105,632 Expenditures Diagnostic Systems 43,776 55,024 74,780 ---------- ---------- ---------- Total Segments 120,838 121,205 180,412 Corporate 2,922 1,812 3,756 ---------- ---------- ---------- Total $ 123,760 $ 123,017 $ 184,168 ========== ========== ========== Depreciation Medical Supplies and Devices $ 96,517 $ 99,420 $ 97,516 and Diagnostic Systems 102,540 96,407 85,595 Amortization ---------- ---------- ---------- Total Segments 199,057 195,827 183,111 Corporate 8,699 7,878 6,645 ---------- ---------- ---------- Total $ 207,756 $ 203,705 $ 189,756 ========== ========== ==========
(A) Includes $8,016 and $14,592 of the special charges discussed in Note 4 in 1994 and 1993, respectively, as well as an incremental charge in 1993 of $8,260 in connection with the adoption of SFAS No. 106 and No. 112. (B) Includes $20,598 and $3,892 of the special charges discussed in Note 4 in 1994 and 1993, respectively, as well as an incremental charge in 1993 of $7,357 in connection with the adoption of SFAS No. 106 and No. 112. (C) Net of a gain of $35,868 from the disposition of a corporate investment. (D) Consists principally of short-term and long-term investments in marketable securities, buildings and equipment, and investments in non-affiliated companies. 30 Summary by Geographic Area
(See Note 13 to Financial Statements) Thousands of dollars 1995 1994 1993 ---------- ---------- ---------- Revenues United States $1,438,459 $1,423,060 $1,371,607 Europe 792,908 704,116 699,839 Other 481,158 432,285 393,959 ---------- ---------- ---------- Total (A) $2,712,525 $2,559,461 $2,465,405 ========== ========== ========== Area United States (B) $ 341,277 $ 264,117 $ 232,727 Operating Europe (C) 116,229 82,040 79,453 Income Other (D) 30,535 39,330 27,617 ---------- ---------- ---------- Total 488,041 385,487 339,797 Unallocated Expenses (138,463) (89,328)(E) (116,903) ---------- ---------- ---------- Income Before Income Taxes and Cumulative Effect of Accounting Changes $ 349,578 $ 296,159 $ 222,894 ========== ========== ========== Identifiable United States $1,466,376 $1,601,569 $1,613,985 Assets Europe 673,546 667,467 665,799 Other 419,826 431,440 412,400 ---------- ---------- ---------- Total 2,559,748 2,700,476 2,692,184 Corporate (F) 439,757 459,057 395,381 ---------- ---------- ---------- Total $2,999,505 $3,159,533 $3,087,565 ========== ========== ==========
(A) Interarea revenues to affiliates amounted to $346,905 in 1995, $350,207 in 1994 and $383,428 in 1993. These revenues, which are principally from the United States, are eliminated in consolidation. Intersegment revenues are not material. (B) Includes $26,186 and $15,187 of the special charges as discussed in Note 4 in 1994 and 1993, respectively, as well as an incremental charge in 1993 of $17,574 in connection with the Company's adoption of SFAS No. 106 and No. 112. (C) Includes $2,188 and $250 of the special charges as discussed in Note 4 in 1994 and 1993, respectively, as well as an incremental benefit in 1993 of $1,563 in connection with the Company's adoption of SFAS No. 112. (D) Includes $240 and $3,047 of the special charges as discussed in Note 4 in 1994 and 1993, respectively, as well as an incremental benefit in 1993 of $394 in connection with the Company's adoption of SFAS No. 112. (E) Net of a gain of $35,868 from the disposition of a corporate investment. (F) Consists principally of short-term and long-term investments in marketable securities, buildings and equipment, and investments in non-affiliated companies. 31 Consolidated Statements of Income
Becton, Dickinson and Company Years Ended September 30 Thousands of dollars, except per share amounts 1995 1994 1993 ---------- ---------- ---------- Operations Revenues $2,712,525 $2,559,461 $2,465,405 Cost of products sold 1,436,358 1,399,634 1,368,402 Selling and administrative expense 735,316 660,072 660,508 Research and development expense 144,201 144,227 139,141 Special charges - 30,490 26,929 ---------- ---------- ---------- Total Operating Costs and Expenses 2,315,875 2,234,423 2,194,980 ---------- ---------- ---------- Operating Income 396,650 325,038 270,425 Interest expense, net (42,833) (47,624) (53,412) Other (expense) income, net (4,239) 18,745 5,881 ---------- ---------- ---------- Income Before Income Taxes and Cumulative Effect of Accounting Changes 349,578 296,159 222,894 Income tax provision 97,882 68,985 10,054 ---------- ---------- ---------- Income Before Cumulative Effect of Accounting Changes 251,696 227,174 212,840 Cumulative effect of accounting changes, net of taxes - - (141,057) ---------- ---------- ---------- Net Income $ 251,696 $ 227,174 $ 71,783 ========== ========== ========== Earnings Income Before Cumulative Effect of Per Share Accounting Changes $ 3.59 $ 3.05 $ 2.71 Cumulative effect of accounting changes, net of taxes - - (1.83) ---------- ---------- ---------- Net Income $ 3.59 $ 3.05 $ .88 ========== ========== ==========
See notes to consolidated financial statements 34 Consolidated Balance Sheets
Becton, Dickinson and Company September 30 Thousands of dollars, except per share amounts 1995 1994 ---------- ---------- Assets Current Assets Cash and equivalents $ 198,506 $ 94,913 Short-term investments 41,495 83,854 Trade receivables, net 573,093 589,918 Inventories 408,635 420,001 Prepaid expenses, deferred taxes and other 105,789 137,865 ---------- ---------- Total Current Assets 1,327,518 1,326,551 Investments in Marketable Securities 44,400 71,527 Property, Plant and Equipment, Net 1,281,031 1,376,349 Intangibles, Net 181,501 217,725 Other 165,055 167,381 ---------- ---------- Total Assets $2,999,505 $3,159,533 ========== ========== Liabilities Current Liabilities Short-term debt $ 205,799 $ 173,228 Accounts payable 124,155 118,146 Accrued expenses 189,354 173,284 Income taxes 64,337 93,691 Salaries, wages and related items 136,390 119,972 ---------- ---------- Total Current Liabilities 720,035 678,321 Long-Term Debt 557,594 669,157 Long-Term Employee Benefit Obligations 289,711 297,644 Deferred Income Taxes and Other 33,780 32,717 Commitments and Contingencies - - Shareholders' ESOP convertible preferred stock - Equity $1 par value: authorized - 1,016,949 shares; issued and outstanding - 927,338 shares in 1995 and 954,764 shares in 1994 54,713 56,331 Common stock - $1 par value: authorized - 160,000,000 shares; issued - 85,349,046 shares 85,349 85,349 Capital in excess of par value 118,201 111,600 Cumulative currency translation adjustments 6,767 8,573 Retained earnings 1,946,636 1,752,360 Unearned ESOP compensation (36,941) (41,096) Common shares in treasury - at cost - 20,273,690 shares in 1995 and 15,071,131 shares in 1994 (776,340) (491,423) ---------- ---------- Total Shareholders' Equity 1,398,385 1,481,694 ---------- ---------- Total Liabilities and Shareholders' Equity $2,999,505 $3,159,533 ========== ==========
See notes to consolidated financial statements 35 Consolidated Statements of Cash Flows
Becton, Dickinson and Company Years Ended September 30 Thousands of dollars 1995 1994 1993 --------- --------- --------- Operating Net income $ 251,696 $ 227,174 $ 71,783 Activities Adjustments to net income to derive net cash provided by operating activities: Depreciation and amortization 207,756 203,705 189,756 Cumulative effect of accounting changes, net of taxes - - 141,057 Special charges - 30,490 26,929 Gains on sales of equity investments - (35,868) (10,650) Deferred income taxes (13,540) (31,418) (21,509) Change in: Trade receivables 21,930 (20,720) (24,715) Inventories (7,866) 30,988 (31,205) Prepaid expenses, deferred taxes and other (6,218) 9,394 (2,930) Accounts payable, income taxes and other liabilities (2,609) 55,756 (232) Other, net 21,049 10,048 (18,444) --------- --------- --------- Net cash provided by operating activities 472,198 479,549 319,840 --------- --------- --------- Investing Capital expenditures (123,760) (123,017) (184,168) Activities Proceeds from sales of equity investments 47,805 22,159 59,470 Acquisitions of businesses (3,839) (12,750) - Proceeds from dispositions of businesses 79,479 - - Proceeds (purchases) of short-term investments, net 69,577 (6,031) 18,077 Proceeds from sales of long-term investments 6,926 8 384 Purchases of long-term investments - - (28,800) Other, net (20,240) (12,809) (38,083) --------- --------- --------- Net cash provided by (used for) investing activities 55,948 (132,440) (173,120) --------- --------- --------- Financing Change in short-term debt (12,680) (51,063) 206 Activities Proceeds of long-term debt 107,278 39,606 42,062 Payment of long-term debt (177,226) (43,606) (100,067) Issuance of common stock 19,789 30,865 12,974 Repurchase of common stock (299,723) (210,285) (64,112) Dividends paid (58,347) (57,034) (53,825) --------- --------- --------- Net cash used for financing activities (420,909) (291,517) (162,762) --------- --------- --------- Effect of exchange rate changes on cash and equivalents (3,644) 195 (1,463) --------- --------- --------- Net increase (decrease) in cash and equivalents 103,593 55,787 (17,505) --------- --------- --------- Opening Cash and Equivalents 94,913 39,126 56,631 --------- --------- --------- Closing Cash and Equivalents $ 198,506 $ 94,913 $ 39,126 ========= ========= =========
See notes to consolidated financial statements 36 Notes to Consolidated Financial Statements Becton, Dickinson and Company Thousands of dollars, except per share amounts Index Note Subject Page 1 Summary of Significant Accounting Policies 37 2 Employee Stock Ownership Plan (ESOP)/Savings Plan 38 3 Benefit Plans 38 4 Special Charges 40 5 Other (Expense) Income, Net 40 6 Income Taxes 40 7 Supplemental Balance Sheet Information 41 8 Debt 42 9 Financial Instruments 43 10 Shareholders' Equity 45 11 Commitments and Contingencies 46 12 Stock Plans 46 13 Business Segment Data 47 Note 1 - Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Becton, Dickinson and Company and its wholly owned subsidiaries after the elimination of intercompany transactions. Investments in other entities in which the Company has significant management influence are accounted for using the equity method of accounting. These investments are included in Other assets at cost plus the Company's equity in undistributed earnings since the date of acquisition. The proportionate share of income (loss) from equity investments is included in Other (expense) income, net. Cash Equivalents Cash equivalents are stated at cost plus accrued interest, which approximates market. The Company considers all highly liquid investments with a maturity of 90 days or less when purchased to be cash equivalents. Inventories Inventories are stated at the lower of cost or market. The Company uses the last-in, first-out (LIFO) method of determining cost for substantially all inventories in the United States. All other inventories are accounted for using the first-in, first-out (FIFO) method. Property, Plant and Equipment Property, plant and equipment are stated at cost, less accumulated depreciation and amortization. The cost of additions, improvements and interest on construction are capitalized, while maintenance and repairs are charged to expense when incurred. Depreciation and amortization are provided on the straight-line basis over estimated useful lives. Intangibles Intangibles include goodwill, which represents costs in excess of net assets of businesses acquired, and patents. Goodwill and patents are being amortized over periods ranging from five to forty years, using the straight-line method. The Company continually reviews goodwill and other intangibles to assess recoverability from estimated future results of operations and cash flows at the aggregate business unit level. As a result of this review and a change in the strategic direction for the cellular imaging business, the Company recorded a provision in the amount of $12,275 in 1995 primarily to write off goodwill associated with that business. Revenue Recognition Substantially all revenue is recognized when products are shipped to customers. Warranty Estimated future warranty obligations related to certain products are provided by charges to operations in the period in which the related revenue is recognized. Income Taxes United States income taxes are not provided on substantially all undistributed earnings of foreign and Puerto Rican subsidiaries since the subsidiaries reinvest such earnings or remit them to the Company without tax consequence. Income taxes have been provided and tax credits have been recognized based on tax laws in effect at the dates of the financial statements. Earnings Per Share Earnings per share are computed using the weighted average number of common and common equivalent shares outstanding during the year, and related income amounts after adjustment for dividends on preferred shares. The weighted average number of shares used in the computations was 69,201,000 in 1995, 73,333,000 in 1994 and 76,930,000 in 1993. Common equivalent shares relate to employee stock plans. 37 Accounting Changes Effective October 1, 1992, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, Employers' Accounting For Postretirement Benefits Other Than Pensions; SFAS No. 112, Employers' Accounting For Postemployment Benefits; and SFAS No. 109, Accounting For Income Taxes. The cumulative effect on prior years and the net incremental charges attributable to these adoptions were included in the determination of net income in 1993, as detailed below:
Cumulative Effect --------------------------------- Pre-tax After-tax Per Share ---------- ---------- --------- SFAS No. 106 $(189,150) $(119,130) $(1.55) SFAS No. 112 (46,155) (29,765) (.38) SFAS No. 109 - 7,838 .10
1993 Incremental Effect --------------------------------- Pre-tax After-tax Per Share ---------- ---------- --------- SFAS No. 106 $ (19,600) $ (12,420) $ (.17) SFAS No. 112 3,632 2,325 .03 SFAS No. 109 - 3,725 .03
Note 2 - Employee Stock Ownership Plan (ESOP)/Savings Plan The Company has an Employee Stock Ownership Plan (ESOP) as part of its voluntary defined contribution plan (savings plan) covering most domestic employees. The ESOP is intended to satisfy all or part of the Company's obligation to match 50% of employees' contributions, up to a maximum of 3% of each participant's salary. To accomplish this, in 1990, the ESOP borrowed $60,000 in a private debt offering and used the proceeds to buy the Company's ESOP convertible preferred stock. Each share of preferred stock has a guaranteed liquidation value of $59 per share and is convertible into 1.6 shares of the Company's common stock. The preferred stock pays an annual dividend of $3.835 per share, a portion of which is used by the ESOP, together with the Company's contributions, to repay the ESOP debt. Since the ESOP debt is guaranteed by the Company, it is reflected on the consolidated balance sheet as short-term and long-term debt with a related amount shown in the shareholders' equity section as unearned ESOP compensation. The amount of ESOP expense recognized is equal to the cost of the preferred shares allocated to plan participants and the ESOP interest expense for the year, reduced by the amount of dividends paid on the preferred stock. Selected financial data pertaining to the ESOP/Savings Plan follow:
1995 1994 1993 -------- -------- -------- Total expense of the savings plan $ 7,659 $ 9,347 $ 9,201 Compensation expense (included in total expense above) $ 5,080 $ 6,543 $ 6,194 Dividends on ESOP shares used for debt service $ 3,596 $ 3,711 $ 3,800 Number of preferred shares allocated at September 30 288,785 248,766 211,465
The Company guarantees employees' contributions to the fixed income fund of the Savings Plan. The amount guaranteed was $93,693 at September 30, 1995. Note 3 - Benefit Plans The Company and certain of its subsidiaries have defined benefit pension plans which cover a substantial number of its employees. The largest plan, covering most of the Company's domestic employees, is a "final average pay" plan. A summary of the costs of the domestic defined benefit pension plans follows:
1995 1994 1993 -------- -------- -------- Service cost: benefits earned during the year $ 16,884 $ 20,040 $ 18,497 Interest cost on projected benefit obligation 27,312 28,641 27,991 Return on assets: Actual gain (71,964) (1,280) (58,371) Deferred portion 42,790 (34,986) 25,990 -------- -------- -------- Expected return (29,174) (36,266) (32,381) Special termination benefits - 3,498 - -------- -------- -------- Net pension cost $ 15,022 $ 15,913 $ 14,107 ======== ======== ========
Rate assumptions used in accounting for the defined benefit plans were:
1995 1994 1993 -------- -------- -------- Discount rate: End of year 7.50% 8.00% 7.25% Beginning of year 8.00 7.25 7.75 Rate of increase in compensation 5.25 5.25 5.25 Expected long-term rate of return on assets 10.00 10.00 10.00
38 The following table sets forth the funded status and amounts recognized in the consolidated balance sheet at September 30, 1995 and 1994 for the Company's domestic defined benefit pension plans:
1995 1994 -------- -------- Actuarial present value of benefit obligations: Vested benefit obligation $287,637 $253,995 ======== ======== Accumulated benefit obligation $301,700 $274,319 ======== ======== Projected benefit obligation $406,888 $361,418 Plan assets at fair value 352,510 306,437 -------- -------- Plan assets under projected benefit obligation (54,378) (54,981) Unrecognized net (gain) loss (3,576) 10,555 Unrecognized net asset at October 1, 1985, net of amortization (3,033) (3,640) -------- -------- Net pension liability recognized in the consolidated balance sheet $(60,987) $(48,066) ======== ========
Plan assets are composed primarily of investments in publicly traded securities. The Company's funding policy is to contribute amounts to the plans sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, as amended, plus such additional amounts as the Company may determine to be appropriate from time to time. Employees in foreign countries are covered by various postretirement benefit arrangements, some of which are considered to be defined benefit plans for accounting purposes. Such plans are immaterial to the Company's consolidated financial position and results of operations. In addition to providing pension benefits, the Company and its domestic subsidiaries provide certain health care and life insurance benefits for retired employees. Substantially all of the Company's domestic employees may become eligible for these benefits upon retirement from the Company. The Company's cost of benefits for foreign retirees is minimal as health care and life insurance coverage is generally provided through government plans. Postretirement benefit costs include the following components:
1995 1994 1993 ------- ------- ------- Service cost: benefits earned during the year $ 2,108 $ 2,537 $ 9,645 Interest cost on projected benefit obligation 10,860 9,671 15,830 Amortization of gain from plan amendments (6,499) (6,312) - ------- ------- ------- Postretirement benefit cost $ 6,469 $ 5,896 $25,475 ======= ======= =======
The postretirement benefit plans other than pensions are not funded. The present value of the Company's obligation included in the consolidated balance sheet at September 30, 1995 and 1994 was as follows:
1995 1994 -------- -------- Accumulated postretirement benefit obligation: Retirees $112,649 $103,326 Fully eligible active participants 12,452 13,136 Other active participants 26,063 24,262 -------- -------- Total 151,164 140,724 Unrecognized gain from plan amendments 82,056 88,368 Unrecognized actuarial loss (11,489) (4,545) -------- -------- Accrued postretirement benefit liability $221,731 $224,547 ======== ========
At September 30, 1995 and 1994, health care cost trends of 13% and 14%, respectively, pre-age 65 and 10% and 11%, respectively, post-age 65 were assumed. These rates were assumed to decrease gradually to an ultimate rate of 5.75% beginning in 2003 for pre-age 65 and 2000 for post-age 65. The effect of a 1% annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation at September 30, 1995 by $6,183 and the postretirement cost for 1995 by $464. The discount rate used to estimate the postretirement benefit cost was 8.0% and 7.25%, in 1995 and 1994, respectively. The discount rate used to estimate the accumulated postretirement benefit obligation at September 30, 1995 and 1994 was 7.5% and 8.0%, respectively. In 1994, the Company made significant modifications to its U.S. postretirement benefit plans. These plan changes, which were effective for retirements after January 1, 1995, consisted primarily of retiree contributions and an inflation cap. The accumulated postretirement 39 benefit obligation was reduced as a result of these changes. In accordance with SFAS No. 106, this reduction in the obligation is being amortized as a component of the postretirement benefit cost. The Company utilizes a service-based approach in applying the provisions of SFAS No. 112 for most of its postemployment benefits. Such an approach recognizes that actuarial gains and losses may result from experience that differs from baseline assumptions. Such actuarial gains and losses, if material, are amortized over future service periods.
1995 1994 1993 ------- ------- ------- Postemployment benefit costs were: $10,300 $7,100 $6,000
Note 4 - Special Charges In 1994, the Company recorded special charges of $30,490, primarily related to write-offs of property, plant and equipment, inventories and other assets associated with decisions made to exit specific product lines and refocus certain businesses. In 1993, the Company recorded special charges of $26,929, consisting principally of a provision to adjust the carrying values of idle and underperforming assets to estimated net realizable values. The provision was based on a periodic review of worldwide assets to determine whether there had been a permanent decline in the value of any assets due to manufacturing productivity improvements, refinements in strategic direction or declines in general real estate or market values. Note 5 - Other (Expense) Income, Net Other (expense), net in 1995 includes a net cash settlement of $10,995 received in connection with a favorable arbitration ruling relating to one of the Company's patents. Also included is a loss of $6,301 from the sale of the medical glove business. Other income, net in 1994 includes a gain of $35,868 from the disposition of a foreign investment previously accounted for using the equity method. Proceeds from the disposition were received in three installments, the first of which was received in September 1994. The balance of the proceeds was received in 1995. Other income, net in 1993 includes a gain of $10,650 from the disposition of an investment previously accounted for using the equity method. Foreign exchange losses of $12,074, $10,608 and $11,626 are included in Other (expense) income, net in 1995, 1994 and 1993, respectively. Note 6 - Income Taxes The provision for income taxes is composed of the following charges (benefits):
1995 1994 1993 -------- ------- -------- Current: Domestic: Federal $ 53,388 $ 42,514 $ (7,116) State and local, including Puerto Rico 28,212 20,148 11,439 Foreign 29,822 37,741 27,240 -------- -------- -------- 111,422 100,403 31,563 -------- -------- -------- Deferred: Domestic (7,070) (21,728) (11,448) Foreign (6,470) (9,690) (10,061) -------- -------- -------- (13,540) (31,418) (21,509) -------- -------- -------- $ 97,882 $ 68,985 $ 10,054 ======== ======== ========
In accordance with SFAS No. 109, deferred tax assets and liabilities are netted on the balance sheet by separate tax jurisdictions. At September 30, 1995 and 1994, net current deferred tax assets of $37,438 and $35,725, respectively, were included in Prepaid expenses, deferred taxes and other. Net non-current deferred tax assets of $32,735 and $28,961, respectively, were included in Other non-current assets. Net non-current deferred tax liabilities of $8,761 and $11,866, respectively, were included in Deferred income taxes and other. Deferred taxes are not provided on substantially all undistributed earnings of foreign and Puerto Rican subsidiaries. At September 30, 1995, the cumulative amount of such undistributed earnings approximated $966,000 against which United States tax-free liquidation provisions or substantial tax credits are available. Determining the tax liability that would arise if these earnings were remitted is not practicable. 40 Deferred income taxes at September 30 consisted of:
September 30, 1995 September 30, 1994 September 30, 1993 --------------------- --------------------- --------------------- Assets Liabilities Assets Liabilities Assets Liabilities -------- ----------- -------- ----------- -------- ----------- Compensation and benefits $128,676 $ - $130,962 $ - $129,518 $ - Property and equipment - 117,748 - 126,539 - 126,708 Other 79,858 19,899 68,890 13,393 45,175 17,271 -------- -------- -------- -------- -------- -------- 208,534 137,647 199,852 139,932 174,693 143,979 Valuation allowance (9,475) - (7,100) - (7,937) - -------- -------- -------- -------- -------- -------- $199,059 $137,647 $192,752 $139,932 $166,756 $143,979 ======== ======== ======== ======== ======== ========
A reconciliation of the federal statutory tax rate to the Company's effective tax rate follows:
1995 1994 1993 ----- ----- ----- Federal statutory tax rate 35.0% 35.0% 34.8% State and local income taxes, net of Federal tax benefit 1.5 .7 .3 Effect of foreign and Puerto Rican income (6.0) (8.4) (13.3) Adjustments to estimated liability for prior years' taxes - - (8.3) Foreign tax credits (1.9) (2.3) (5.4) Research tax credit (.2) (.5) (1.4) Other, net (.4) (1.2) (2.2) ----- ----- ----- 28.0% 23.3% 4.5% ===== ===== =====
The approximate dollar and per share amounts of tax reductions related to tax holidays in various countries in which the Company does business were: 1995 - $18,400 and $.27; 1994 - $23,300 and $.32; and 1993 - $24,100 and $.31. The tax holidays expire at various dates through 2010. The Company made income tax payments, net of refunds, of $132,650 in 1995, $65,481 in 1994 and $61,449 in 1993. The components of income before income taxes and cumulative effect of accounting changes follow:
1995 1994 1993 -------- -------- -------- Domestic, including Puerto Rico $218,695 $166,563 $141,913 Foreign 130,883 129,596 80,981 -------- -------- -------- $349,578 $296,159 $222,894 ======== ======== ========
Note 7 - Supplemental Balance Sheet Information Trade Receivables Allowances for doubtful accounts and cash discounts netted against trade receivables were $25,046 and $22,158 at September 30, 1995 and 1994, respectively.
1995 1994 -------- -------- Materials $ 87,116 $ 85,303 Work in process 71,316 69,696 Finished products 250,203 265,002 -------- -------- $408,635 $420,001 ======== ========
Inventories valued under the LIFO method were $205,608 in 1995 and $240,965 in 1994. Inventories valued under the LIFO method would have been higher by approximately $37,000 in 1995 and $36,500 in 1994, if valued on a current cost basis. 41
Property, Plant and Equipment 1995 1994 ---------- ---------- Land $ 53,921 $ 54,410 Buildings 890,393 907,832 Machinery, equipment and fixtures 1,449,639 1,483,334 Leasehold improvements 29,127 34,360 ---------- ---------- 2,423,080 2,479,936 Less allowances for depreciation and amortization 1,142,049 1,103,587 ---------- ---------- $1,281,031 $1,376,349 ========== ========== Intangibles 1995 1994 ---------- ---------- Patents and other $ 197,761 $ 220,927 Goodwill 134,736 147,600 ---------- ---------- 332,497 368,527 Less accumulated amortization 150,996 150,802 ---------- ---------- $ 181,501 $ 217,725 ========== ==========
Note 8 - Debt The components of short-term debt follow:
1995 1994 ---------- ---------- Loans payable: Domestic $ 31,400 $ 35,941 Foreign 107,064 110,883 Current portion of long-term debt 67,335 26,404 ---------- ---------- $ 205,799 $ 173,228 ========== ==========
Domestic loans payable consist of commercial paper. Foreign loans payable consist of short-term borrowings from financial institutions. The weighted average interest rates for loans payable were 3.7% and 4.2% at September 30, 1995 and 1994, respectively. At September 30, 1995 and 1994, the Company had domestic unused committed short-term lines of credit of $225,000 and $240,000, respectively, and unused committed long-term lines of credit of $145,000 and $150,000, respectively. In addition, the Company had unused foreign lines of credit pursuant to informal arrangements of approximately $223,000 and $209,000 at September 30, 1995 and 1994, respectively. The components of long-term debt follow:
1995 1994 -------- -------- Domestic notes due through 2013 (average year-end interest rate: 5.4%-1995; 4.9%-1994) $ 9,188 $162,788 Foreign notes due through 2004 (average year-end interest rate: 6.4%-1995; 6.7%-1994) 25,219 29,522 8.375% Notes due June 1, 1996 - 50,000 7.875% Notes due December 15, 1996 100,000 100,000 9.95% Notes due March 15, 1999 100,000 100,000 8.80% Notes due March 1, 2001 100,000 100,000 9.45% Guaranteed ESOP Notes due through July 1, 2004 41,787 45,447 9.25% Sinking fund debentures due through June 1, 2016 81,400 81,400 8.70% Debentures due January 15, 2025 100,000 - -------- -------- $557,594 $669,157 ======== ========
At September 30, 1994, domestic notes included $150,000 of commercial paper which were supported by long-term credit agreements with leading banks. The aggregate annual maturities of long-term debt during the fiscal years ending September 30, 1997 to 2000 are as follows: 1997 - $107,125; 1998 - $7,703; 1999- $106,121; 2000 - $6,449. The Company capitalizes interest costs as a component of the cost of construction in progress. The following is a summary of interest costs:
1995 1994 1993 ------- ------- ------- Charged to operations $60,628 $62,472 $66,716 Capitalized 4,064 5,946 8,181 ------- ------- ------- $64,692 $68,418 $74,897 ======= ======= =======
Interest paid, net of amounts capitalized, was $58,726 in 1995, $63,670 in 1994 and $67,308 in 1993. 42 Note 9 - Financial Instruments Fair Value Of Financial Instruments The carrying values of cash equivalents, short-term investments, other long-term investments and short-term debt approximate fair values. Fair values were estimated based on market prices, where available, or dealer quotes. The fair value of certain long-term debt is based on redemption value. Investments in marketable securities were primarily composed of Puerto Rico government bonds. The estimated fair values of the Company's financial instruments at September 30, 1995 and 1994 were as follows:
1995 1994 ------------------ ------------------- Carrying Fair Carrying Fair Value Value Value Value -------- -------- -------- -------- Assets: Investments in marketable securities (non-current) (A) $ 44,400 $ 43,509 $ 71,527 $ 70,093 Forward exchange contracts (B) 3,969 3,084 (630) (473) Purchased currency option (B) 360 311 112 112 Interest rate cap - 13 - - Liabilities: Long-term debt $557,595 $604,537 $669,157 $689,181 Interest rate swaps 55 1,155 68 (524) Interest rate collars - - 32 49
(A) Included in Other assets. (B) Included in Prepaid expenses, deferred taxes and other. Off-Balance-Sheet Risk The Company has certain receivables, payables and short-term borrowings denominated in currencies other than the functional currency of the Company and its subsidiaries. During the year, the Company hedged substantially all of these exposures by entering into forward exchange contracts and purchased currency options for the future purchase and sale of foreign currencies. Gains or losses related to these hedges are recognized in income as part of, and concurrent with, the hedged transaction. In addition, the Company hedged a portion of its investment in a foreign subsidiary by entering into forward exchange contracts with a net notional amount of $21,037 at September 30, 1995 to sell French francs and buy U.S. dollars forward. The Company does not use derivative financial instruments for trading or speculative purposes. At September 30, the stated or notional amounts of the Company's outstanding forward exchange contracts and purchased currency options were as follows:
1995 1994 -------- -------- Forward exchange contracts $738,541 $665,945 Purchased currency options: German mark put, U.S. dollar call $ 5,000 $ 9,416 Brazilian real put, U.S. dollar call 7,000 - Italian lira put, German mark call 11,021 -
At September 30, 1995, $425,367 of the forward exchange contracts mature within 90 days and $313,174 at various other dates in fiscal 1996. The purchased currency options at September 30, 1995 expire within 120 days. Significant forward exchange contracts and the purchased currency options which represent hedges of currency transaction exposures at September 30, 1995 were as follows:
U.S. Dollar Equivalents ------------------------------------------- September 30, 1995 ----------------------------- Currency Average Transaction Contracts Notional Exposure - Asset During Amount (Liability) Fiscal 1995 -------- ---------------- ----------- Commitments to sell foreign currencies: French francs $ 78,809 $ 80,214 $ 81,256 Italian lira 58,386 59,073 56,253 Belgian francs 22,653 22,653 44,996 Spanish pesetas 46,952 46,952 45,245 British pounds 17,035 17,035 21,579 Japanese yen 43,704 43,733 14,427 German marks 20,073 20,375 9,223 Commitments to purchase foreign currencies: Irish pounds $219,361 $(221,428) $195,862 Singapore dollars 72,881 (72,881) 56,911 Japanese yen 18,669 (18,669) 8,443 Belgian francs 10,811 (11,986) 19,555 German marks 34,914 (34,914) 19,554 Canadian dollars 14,859 (15,535) 5,418
43 Significant forward exchange contracts which represented hedges of currency transaction exposures at September 30, 1994 were as follows:
U.S. Dollar Equivalents ------------------------------------------- September 30, 1994 ----------------------------- Currency Average Transaction Contracts Notional Exposure - Asset During Amount (Liability) Fiscal 1994 -------- ---------------- ----------- Commitments to sell foreign currencies: French francs $ 73,485 $ 73,485 $ 69,576 Italian lira 57,888 57,888 51,781 Belgian francs 46,202 46,202 45,582 Spanish pesetas 45,141 45,141 43,801 British pounds 26,041 26,041 11,145 Japanese yen 6,417 6,417 7,627 Commitments to purchase foreign currencies: Irish pounds $182,290 $(182,485) $156,207 Singapore dollars 46,798 (46,798) 45,697 Japanese yen 17,287 (17,287) 8,218 Belgian francs 14,058 (25,413) 14,702 British pounds 11,243 (11,497) 14,367 German marks 11,319 (11,319) 7,017
The Company's foreign exchange hedging activities do not generally create exchange rate risk since gains and losses on these contracts generally offset losses and gains on the related non-functional currency denominated receivables, payables and short-term borrowings. The Company enters into interest rate swap and interest rate cap agreements in order to reduce the impact of fluctuating interest rates on its foreign currency short-term floating rate debt outside the U.S. At September 30, 1995 and 1994, the Company had foreign interest rate swap agreements, with maturities at various dates through 1998. Under these agreements the Company agrees with other parties to pay, at specified intervals, fixed rate payments in exchange for variable rate payments, calculated on an agreed-upon notional amount.
Notional Amount Average U.S. Dollar Fixed Variable Equivalent Rate Rate --------------- ------ -------- Interest Rate Swaps: September 30, 1995 French francs $20,312 5.00% 6.39% Japanese yen 8,521 2.48 1.11 Japanese yen 5,013 2.61 1.83 Japanese yen 10,025 2.61 1.84 Japanese yen 4,010 1.87 1.23 Japanese yen 9,023 1.74 1.05 Japanese yen 8,521 2.44 1.19 September 30, 1994 French francs $18,886 8.16% 6.41% French francs 18,886 5.00 6.80 British pounds 15,795 5.85 5.40 Japanese yen 5,041 2.61 2.23 Japanese yen 10,082 2.61 2.25
At September 30, 1995, the Company had a foreign interest rate cap agreement with a notional amount of $9,023 which limits the potential interest rate fluctuations on a portion of the Company's Japanese yen denominated short-term debt. It effectively entitles the Company to receive from a bank the amount, if any, by which the Company's interest payments on $9,023 of its floating rate short-term debt exceed 2%. The cap expires in May 1997. At September 30, 1994, the Company had a foreign interest rate collar agreement with a notional amount of $15,800 which limited the potential interest rate fluctuations on a portion of the Company's British pound denominated short- term debt to a range of 6.5%-8.0%. The premium paid on the collar agreement was amortized to interest expense over the term of the agreement. The collar agreement expired in October 1994. Concentration Of Credit Risk Substantially all of the Company's trade receivables are due from entities in the health care industry. Due to the large number of these entities and diversity of the Company's customer base, concentrations of credit risk with respect to trade receivables are limited. The Company does not normally require collateral. The Company is exposed to credit loss in the event of non- performance by financial institutions with which it conducts business. However, the Company minimizes exposure to such risk by dealing only with major international banks and financial institutions. 44 Note 10 - Shareholders' Equity
Series B, ESOP Preferred Common Capital in Unearned Treasury Stock Stock Stock Excess of Retained ESOP ------------------------ Issued Issued Par Value Earnings Compensation Shares Amount --------- ------- ---------- ---------- ------------ ------------ --------- Balance at October 1, 1992 $ 59,027 $85,349 $105,666 $1,562,176 $(49,661) (9,388,646) $(254,931) Net income 71,783 Cash dividends: Common ($.66 per share) (50,014) Preferred ($3.835 per share), net of tax benefits (2,749) Issuance of common stock for employee stock plans, net (825) 545,964 13,284 Repurchase of common stock (1,793,650) (64,112) Reduction in unearned ESOP compensation for the year 4,412 Adjustment for redemption provisions and other (919) 113 13,902 402 -------- ------- -------- ---------- -------- ----------- --------- Balance at September 30, 1993 58,108 85,349 104,954 1,581,196 (45,249) (10,622,430) (305,357) Net income 227,174 Cash dividends: Common ($.74 per share) (53,292) Preferred ($3.835 per share), net of tax benefits (2,718) Issuance of common stock for employee stock plans, net 6,355 874,309 23,160 Repurchase of common stock (5,359,600) (210,285) Reduction in unearned ESOP compensation for the year 4,153 Adjustment for redemption provisions and other (1,777) 291 36,590 1,059 -------- ------- -------- ---------- -------- ----------- --------- Balance at September 30, 1994 56,331 85,349 111,600 1,752,360 (41,096) (15,071,131) (491,423) Net income 251,696 Cash dividends: Common ($.82 per share) (54,725) Preferred ($3.835 per share), net of tax benefits (2,695) Issuance of common stock for employee stock plans, net 6,251 523,968 13,538 Repurchase of common stock (5,770,400) (299,723) Reduction in unearned ESOP compensation for the year 4,155 Adjustment for redemption provisions and other (1,618) 350 43,873 1,268 -------- ------- -------- ---------- -------- ----------- --------- Balance at September 30, 1995 $ 54,713 $85,349 $118,201 $1,946,636 $(36,941) (20,273,690) $(776,340) ======== ======= ======== ========== ======== =========== =========
45 Cumulative Currency Translation Adjustments Generally, the net assets of foreign operations are translated into U.S. dollars using current exchange rates. The U.S. dollar results that arise from such translation, as well as exchange gains and losses on intercompany balances of a long-term investment nature (net of allocated income taxes), are included in the cumulative currency translation adjustment account in Shareholders' Equity. The following is an analysis of the account:
1995 1994 1993 ------- -------- --------- Balance at October 1 $ 8,573 $(22,048) $ 87,300 Translation adjustment (1,587) 37,900 (109,408) Disposition of foreign investment - (6,348) - Allocated income taxes (219) (931) 60 ------- -------- --------- Balance at September 30 $ 6,767 $ 8,573 $ (22,048) ======= ======== =========
Preferred Stock Purchase Rights In 1986, the Board of Directors declared a distribution of one Preferred Stock Purchase Right (Right) for each outstanding share of the Company's common stock. Each Right will entitle a shareholder to buy one one-hundredth of a share of Series A preferred stock at an exercise price of $88. The Rights will be exercisable only if a third party acquires 20% or more of the Company's common stock or commences a tender or exchange offer for 30% or more of the common stock. After the Rights become exercisable and in the event of certain transactions, principally involving significant changes in control of the Company, each holder of a Right will be entitled to receive, upon exercise, a number of shares of the surviving company's common stock which would have a market value of twice the exercise price. The Company will be entitled to redeem the Rights for $.01 per Right at any time until ten days after a 20% or more position has been acquired. The Rights will expire April 25, 1996. There are 500,000 shares of preferred stock designated Series A, none of which have been issued. Note 11 - Commitments and Contingencies Commitments Rental expense for all operating leases amounted to $53,000 in 1995, $49,900 in 1994 and $51,500 in 1993. Future minimum rental commitments on noncancelable leases are as follows: 1996 - $34,500; 1997 - $27,300; 1998 - $21,000; 1999 - $15,600; 2000 - $13,600 and an aggregate of $43,500 thereafter. As of September 30, 1995, the Company had entered into certain commitments for future capital expenditures, mostly in China, aggregating approximately $34,000 which will be expended over the next several years. Contingencies The Company believes that its operations comply in all material respects with applicable laws and regulations. The Company is a party to a number of federal proceedings in the United States brought under the Comprehensive Environmental Response, Compensation and Liability Act, also known as Superfund, and similar state laws. The Company is also involved in other legal proceedings and claims which arise in the ordinary course of business, both as a plaintiff and a defendant. The results of these matters, individually and in the aggregate, are not expected to have a material effect on the results of operations, financial condition or cash flows of the Company. Note 12 - Stock Plans Stock Option Plans The Company has stock option plans under which key employees have been granted options to purchase shares of the Company's common stock at the fair market value at the time of the grant. The 1990 Stock Option Plan, adopted in 1991, made available 4,000,000 shares of the Company's common stock for the granting of options, almost all of which have been granted. The 1995 Stock Option Plan, adopted in the current year, makes available an additional 6,000,000 shares of the Company's common stock for the granting of options. Both the 1995 and 1990 Plans have a provision whereby unqualified options may be granted at, below, or above market value of the Company's stock. If the option price is less than the market value of the Company's stock on the date of grant, the discount is recorded as compensation expense over the service period. In 1995, such compensation expense amounted to $1,961. There was no such compensation expense in 1994 or 1993. Under certain circumstances, the stock option plans permit the optionee the right to receive cash and/or stock at the Company's discretion equal to the difference between the market value on the date of election and the option price. This difference would be recorded as compensation expense over the vesting period. 46 A summary of changes in outstanding options is as follows:
1995 1994 1993 ----------------------------- ----------------------------- ----------------------------- Shares Price Range Shares Price Range Shares Price Range --------- --------------- --------- --------------- --------- --------------- Balance at October 1 5,080,959 $12.67 - $40.10 4,672,044 $ 8.41 - $39.50 4,161,988 $ 8.41 - $38.78 Granted 1,408,818 46.61 - 50.19 1,258,370 34.56 - 40.10 1,054,764 37.25 - 39.50 Exercised (488,371) 12.67 - 50.19 (756,350) 8.41 - 40.10 (498,979) 8.41 - 38.78 Canceled (86,360) 12.67 - 50.19 (93,105) 8.41 - 38.78 (45,729) 10.05 - 38.78 --------- --------------- --------- --------------- --------- --------------- Balance at September 30 5,915,046 $26.10 - $50.19 5,080,959 $12.67 - $40.10 4,672,044 $ 8.41 - $39.50 ========= =============== ========= =============== ========= =============== Exercisable at September 30 4,389,058 3,550,467 3,380,615 ========= ========= ========= Available for grant at: October 1, 1994 1,046,921 September 30, 1995 5,711,488 =========
Options outstanding as of September 30, 1995 expire at various times from June 1996 through May 2005. Other Stock Plans The Company has a compensatory Stock Award Plan which provides for grants of common shares to certain key employees. Distribution of 25% or more of each award, as elected by the grantee, is deferred until after retirement or involuntary termination. Commencing on the first anniversary of a grant, the remainder is distributable in five equal annual installments. During 1995, 46,948 shares were distributed. No awards were granted in 1995. Awards for 58,585 and 47,590 shares (net of cancellations) were granted in 1994 and 1993, respectively. At September 30, 1995, 769,636 shares were reserved for future issuance, of which awards for 244,289 shares have been granted. The Company has a compensatory Restricted Stock Plan for Non-Employee Directors which reserves for issuance 75,000 shares of the Company's common stock. Restricted shares of 3,775 and 15,229 were issued in 1995 and 1994, respectively, in accordance with the provisions of the plan. Note 13 - Business Segment Data The Company's operations are composed of two business segments, Medical Supplies and Devices and Diagnostic Systems. Medical Supplies and Devices The major products in this segment are hypodermic products, specially designed devices for diabetes care, prefillable drug delivery systems, vascular access products and surgical devices (including disposable scrubs, surgical gloves, specialty and surgical blades and pre-surgery patient prep kits). The Medical Supplies and Devices segment also includes specialty needles, drug infusion systems, elastic support products, thermometers, examination gloves and contract packaging services. Distribution of these products is both through distributors and directly to hospitals, laboratories and other end users. Diagnostic Systems The major products in this segment are classical and instrumented microbiology products, blood collection products, instrumentation systems for cellular analysis, including flow cytometry and cellular imaging products, tissue culture labware, hematology instruments and other diagnostic systems, including immunodiagnostic test kits. Distribution of these products is both through distributors and directly to hospitals, laboratories and other end users. Sales to a distributor which supplies the Company's products to many end users accounted for approximately 13% of revenues in 1995 and 12% of revenues in both 1994 and 1993, and were from both the Diagnostic Systems and Medical Supplies and Devices segments. No other customer accounted for 10% or more of revenues in each of the three years presented. 47 The countries in which the Company has local revenue-generating operations have been combined into the following geographic areas: the United States, including Puerto Rico; Europe; and Other, which is composed of Canada, Latin America, Japan and Asia Pacific. Segment and geographic area operating income represent revenues reduced by product costs and operating expenses. Unallocated expenses include costs related to management of corporate assets, foreign exchange, the results of investments accounted for by the equity method and interest expense, net. Financial information with respect to business segment and geographic data for the years ended September 30, 1995, 1994 and 1993 is on pages 30 and 31 and is considered to be an integral part of the notes to the consolidated financial statements. Quarterly Data (Unaudited) Thousands of dollars, except per share amounts
1995 1st 2nd 3rd 4th Year -------- -------- -------- -------- ---------- Revenues $593,476 $692,839 $704,096 $722,114 $2,712,525 Gross Profit 266,411 322,602 325,677 361,477 1,276,167 Net Income 33,544 64,929 66,650 86,573 251,696 Earnings Per Share .46 .92 .95 1.26 3.59 -------- -------- -------- -------- ---------- 1994 1st 2nd 3rd 4th Year -------- -------- -------- -------- ---------- Revenues $554,080 $634,814 $652,988 $717,579 $2,559,461 Gross Profit 241,198 291,732 295,131 331,766 1,159,827 Net Income 25,696 57,093 58,074 86,311 227,174 Earnings Per Share .33 .76 .78 1.18 3.05 -------- -------- -------- -------- ----------
48 Worldwide Locations Corporate Headquarters Becton Dickinson and Company 1 Becton Drive Franklin Lakes, NJ 07417-1880 Phone: 201-847-6800 U.S. Division Headquarters Becton Dickinson Cellular Imaging Systems 2350 Qume Drive San Jose, CA 95131 Becton Dickinson Consumer Products 1 Becton Drive Franklin Lakes, NJ 07417 Becton Dickinson Division 1 Becton Drive Franklin Lakes, NJ 07417 Becton Dickinson Healthcare Systems 1 Becton Drive Franklin Lakes, NJ 07417 Becton Dickinson Immunocytometry Systems 2350 Qume Drive San Jose, CA 95131 Ivers-Lee 147 Clinton Road West Caldwell, NJ 07006 Becton Dickinson Labware 1 Becton Drive Franklin Lakes, NJ 07417 Becton Dickinson Microbiology Systems 7 Loveton Circle Sparks, MD 21152 Becton Dickinson Pharmaceutical Systems 1 Becton Drive Franklin Lakes, NJ 07417 Becton Dickinson Primary Care Diagnostics 7 Loveton Circle Sparks, MD 21152 Becton Dickinson Supply Chain Services 1 Becton Drive Franklin Lakes, NJ 07417 Becton Dickinson Vacutainer Systems 1 Becton Drive Franklin Lakes, NJ 07417 Becton Dickinson Vascular Access 9450 South State Street Sandy, UT 84070 Regional Headquarters Asia/Pacific Becton Dickinson Singapore Branch 30 Tuas Avenue 2 Singapore 639461 Brazil/Southern Latin America Becton Dickinson Industrias Cirurgicas Rua Alexandre Dumas, 1976 04717-004 Sao Paulo, SP Brazil Canada Becton Dickinson Canada 2464 South Sheridan Way Mississauga, Ontario L5J2M8, Canada Europe/Middle East/Africa Becton Dickinson European Divisions 5 Chemin des Sources BP 37 38241 Meylan, France Becton Dickinson Pharmaceutical Systems 11 Rue Aristide Berges BP 4 38800 Pont de Claix, France Japan Nippon Becton Dickinson Co., Ltd. Akasaka DS Building 5-26 Akasaka 8-chome, Minato-ku Tokyo, 107 Japan Mexico/Northern Latin America Becton Dickinson Mexico Monte Pelvoux 111 11000 Mexico, D.F. 49 Board of Directors Clateo Castellini /1,2,7/ Chairman of the Board, President and Chief Executive Officer John W. Galiardo /1,3,7/ Vice Chairman of the Board and General Counsel Harry N. Beaty, M.D. /2,4,7/ Professor of Medicine and Dean - Northwestern University Medical School Henry P. Becton, Jr. /4,5,6,7/ President and General Manager - WGBH Educational Foundation Gerald M. Edelman, M.D., Ph.D. /1,4,6,7/ Director - The Neurosciences Institute; Member - The Scripps Research Institute Edmund B. Fitzgerald /2,3,4,5/ Former Chairman of the Board and Chief Executive Officer - Northern Telecom Limited Richard W. Hanselman /1,3,5,6/ Corporate Director Thomas A. Holmes /3,5,6/ Former Chairman of the Board, President and Chief Executive Officer - Ingersoll-Rand Company Frank A. Olson /1,2,5,6/ Chairman of the Board and Chief Executive Officer - The Hertz Corporation James E. Perrella /3,5,6/ Chairman of the Board, President and Chief Executive Officer - Ingersoll-Rand Company Gloria M. Shatto /1,2,4,7/ President - Berry College, Mount Berry, Georgia Raymond S. Troubh /2,3,4,5/ Financial Consultant Committees Appointed by the Board of Directors 1 - Executive Committee 2 - Finance Committee 3 - Investment Committee 4 - Audit Committee 5 - Compensation and Benefits Committee 6 - Committee on Directors 7 - Corporate Responsibility Committee Officers Executive Officers Clateo Castellini Chairman of the Board, President and Chief Executive Officer John W. Galiardo Vice Chairman of the Board and General Counsel Vincent L. De Caprio Senior Vice President - Planning and Technology Edward J. Ludwig Senior Vice President - Finance and Chief Financial Officer Walter M. Miller Senior Vice President Mark C. Throdahl Senior Vice President Kenneth R. Weisshaar Senior Vice President Corporate Officers Alfred J. Battaglia Group President E. Ralph Biggadike Vice President - Strategic Management Mark H. Borofsky Vice President - Taxes Geoffrey D. Cheatham Vice President and Treasurer Donald S. Hetzel Vice President - Research and Development William L. Nichols Vice President and Controller Raymond P. Ohlmuller Vice President and Secretary Thomas A. Reichert, M.D. Vice President - Medical Affairs Robert D. Wurzel Vice President - Regulatory and Quality Affairs 50 Common Stock Prices and Dividends
1995 By Quarter High Low Dividends - --------------- ------- ------- --------- First $49 7/8 $45 1/8 $.205 Second 57 1/8 48 .205 Third 59 5/8 54 .205 Fourth 63 1/2 55 5/8 .205 1994 By Quarter High Low Dividends - --------------- ------- ------- --------- First $39 $34 $.185 Second 40 3/4 34 .185 Third 41 1/2 35 3/8 .185 Fourth 48 1/4 40 1/8 .185
Corporate Data Annual Meeting 2:30 p.m. Tuesday, February 13, 1996 1 Becton Drive Franklin Lakes, NJ 07417-1880 Dividend Reinvestment The Becton Dickinson Dividend Reinvestment Plan offers sharehold- ers an opportunity to purchase additional shares, commission-free, through automatic dividend rein- vestment and/or optional cash investments. Additional information may be obtained by writing to First Chicago Trust Company of New York, Dividend Reinvestment Plan, Becton Dickinson, P.O. Box 2598, Jersey City, NJ 07303-2598. Independent Auditors Ernst & Young LLP 433 Hackensack Avenue Hackensack, NJ 07601-6371 Phone: 201-343-4095 Transfer Agent and Registrar First Chicago Trust Company of New York P.O. Box 2500 Jersey City, NJ 07303-2500 Phone: 1-800-519-3111 NYSE Symbol BDX Shareholder Information Shareholders may receive, without charge, copies of the company's 1995 Annual Report to the Securities and Exchange Commission on Form 10-K (including the financial statements and financial statement schedules) by contacting: Investor Relations Becton Dickinson and Company 1 Becton Drive Franklin Lakes, NJ 07417-1880 Phone: 1-800-284-6845 The trademarks indicated by CAPITAL LETTERS are the property of, licensed to, promoted or distributed by Becton Dickinson and Company, its subsidiaries or related companies. 51 EX-21 4 SUBSIDIARIES OF BECTON, DICKINSON tin EXHIBIT 21 ---------- SUBSIDIARIES OF BECTON, DICKINSON AND COMPANY --------------------------------------------- State or Percentage Jurisdiction of Voting of Securities Name of Subsidiary Incorporation Owned - ------------------ ------------- ---------- Alchem, Inc. Massachusetts 100%(1) Bauer & Black, Inc. Delaware 100% BBL Realty, Inc. Maryland 100%(1) B D Finance B.V. Netherlands 100%(1) B D Polska, Ltd. Poland 100% B-D (Cambridge, U.K.) Ltd. United Kingdom 100%(1) B-D U.K. Holdings Limited United Kingdom 100%(1) Becton Dickinson AcuteCare Holdings, Inc. Delaware 100% Becton Dickinson AcuteCare, Inc. Massachusetts 100%(1) Becton, Dickinson A.G. Switzerland 100%(1) Becton, Dickinson Aktiebolag Sweden 100%(1) Becton Dickinson Asia Limited Singapore 100%(1) Becton Dickinson (Braunschweig) GmbH Germany 100%(1) Becton, Dickinson and Company, Ltd. Ireland 100% Becton Dickinson Benelux N.V. Belgium 100%(1) Becton, Dickinson B.V. Netherlands 100% Becton Dickinson Canada Inc. Canada 100%(1) Becton Dickinson de Columbia Ltda. Columbia 100%(1) Becton, Dickinson de Mexico, S.A. de C.V. Mexico 100%(1) Becton Dickinson Diagnostics Inc. Delaware 100% Becton Dickinson Distribution Center N.V. Belgium 100% Becton Dickinson Enterprises Incorporated New Jersey 100%(1) Becton Dickinson LOS Turkey 100%(1) Becton, Dickinson - France, S.A. France 100% Becton Dickinson GESBMSH Austria 100%(1) Becton, Dickinson GmbH Germany 100%(1) Becton Dickinson Hellas S.A. Greece 100% Becton Dickinson Image Cytometry B.V. Netherlands 100%(1) Becton, Dickinson Industrias Cirurgicas Ltda. Brazil 100%(1) Becton Dickinson Insulin Syringe, Ltd. British W. Indies 100%(1) Becton Dickinson India Pvt. Ltd. India 100%(1) Becton, Dickinson - Italia S.p.A. Italy 100%(1) Becton Dickinson Korea, Inc. Korea 100%(1) Becton Dickinson Medical Products PTE LTD Singapore 100%(1) Becton Dickinson Monoclonal Center, Inc. Delaware 100%(1) -1- State or Percentage Jurisdiction of Voting of Securities Name of Subsidiary Incorporation Owned - ------------------ ------------- ---------- Becton Dickinson Overseas Services Ltd. Nevada 100% Becton Dickinson O.Y. Finland 100% Becton Dickinson Pen Limited Ireland 100% Becton Dickinson Penel Limited British W. Indies 100%(1) Becton Dickinson Philippines, Inc. Philippines 100%(1) Becton Dickinson Pty. Ltd. Australia 100% Becton Dickinson Research Corporation Nevada 100% Becton Dickinson (Roysten) Ltd. United Kingdom 100%(1) Becton Dickinson, S.A. Spain 100%(1) Becton Dickinson Sdn. Bhd. Malaysia 100%(1) Becton Dickinson (Thailand) Limited Thailand 100%(1) Becton, Dickinson U.K. Limited United Kingdom 100%(1) Becton Dickinson Vacular Access Inc. Delaware 100% Becton Dickinson Vascular Access, S.A. de C.V. Mexico 100%(1) Becton Dickinson Venezuela, C.A. Venezuela 100%(1) Becton Dickinson Worldwide, Inc. Delaware 100% Bedins Ltd. Bermuda 100%(1) Belvedere, Inc. New Hampshire 100%(1) Benex Ltd. Ireland 100% BMS Realty, Inc. Maryland 100%(1) Cascade Medical Leasing, Inc. Oregon 100%(1) Cell Analysis Systems, Inc. Illinois 100% Collaborative Biomedical Products, Inc. Delaware 100% DWS, Inc. Oregon 100% JLI Leasing, Inc. Maryland 100% Johnston Ferguson Vestal, Inc. Maryland 100%(1) Johnston Laboratories, Inc. Maryland 100% MICROPETTE, Inc. Delaware 100% Nippon Becton Dickinson Company, Ltd. Japan 100%(1) Phase Medical, Inc. California 100%(1) Promedicor de Mexico, S.A. de C.V. Mexico 100%(1) Rudolph Beaver FSC, Inc. Virgin Islands 100%(1) 228 Coshocton, Inc. Nevada 100%(1) (1) Owned 100% by a subsidiary of Becton, Dickinson and Company. -2- EX-23 5 CONSENT OF INDEPENDENT AUDITORS EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in Registration Statement Nos. 2-84788, 33-22871, 33-23055, 33-33791, 33-40787, 33-53375, 33-58367 and 33- 64115 on Form S-8 and Registration Statement No. 33-47957 on Form S-3 of Becton, Dickinson and Company and the related Prospectuses of our report dated November 7, 1995, with respect to the consolidated financial statements and schedule of Becton, Dickinson and Company included in this Annual Report (Form 10-K) for the year ended September 30, 1995. /s/ ERNST & YOUNG LLP ------------------------------ ERNST & YOUNG LLP Hackensack, New Jersey December 21, 1995 EX-27 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Company's Consolidated Financial Statements for the twelve months ended September 30, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 12-MOS SEP-30-1995 SEP-30-1995 198,506 41,495 598,139 25,046 408,635 1,327,518 2,423,080 1,142,049 2,999,505 720,035 557,594 85,349 0 54,713 1,258,323 2,999,505 2,712,525 2,712,525 1,436,358 1,436,358 0 4,943 60,628 349,578 97,882 251,696 0 0 0 251,696 3.59 3.51
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