-----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, NNkwQk7Sd8Kpgg5ajl+eFoQzcJDSi9yhMY5rLmoI8frLy8vYCrBwJ0+v3qGWm8ms hc2+s77ukmsemaJwzG4WSQ== 0000009892-98-000017.txt : 19980813 0000009892-98-000017.hdr.sgml : 19980813 ACCESSION NUMBER: 0000009892-98-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARD C R INC /NJ/ CENTRAL INDEX KEY: 0000009892 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 221454160 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06926 FILM NUMBER: 98683907 BUSINESS ADDRESS: STREET 1: 730 CENTRAL AVE CITY: MURRAY HILL STATE: NJ ZIP: 07974 BUSINESS PHONE: 9082778000 MAIL ADDRESS: STREET 1: 730 CENTRAL AVENUE CITY: MURRAY HILL STATE: NJ ZIP: 07974 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1998 Commission File Number 1-6926 C. R. BARD, INC. (Exact name of registrant as specified in its charter) New Jersey (State of incorporation) 22-1454160 (I.R.S. Employer Identification No.) 730 Central Avenue, Murray Hill, New Jersey 07974 (Address of principal executive offices) Registrant's telephone number, including area code: (908) 277-8000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 31, 1998 Common Stock - $.25 par value 56,128,147 C. R. BARD, INC. AND SUBSIDIARIES INDEX Page No. PART I - FINANCIAL INFORMATION Condensed Consolidated Balance Sheets - June 30, 1998 and December 31, 1997 1 Condensed Consolidated Statements of Income and Retained Earnings For The Quarter and Six Months Ended June 30, 1998 and 1997 2 Condensed Consolidated Statements of Cash Flows For The Six Months Ended June 30, 1998 and 1997 3 Notes to Condensed Consolidated Financial Statements 4 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION 10 C. R. BARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (thousands of dollars)
June 30, December 31, 1998 1997 (Unaudited) ASSETS Current Assets: Cash and short-term investments $ 71,600 $ 60,700 Accounts receivable, net 236,300 240,600 Inventories 265,100 241,700 Other current assets 23,200 20,500 Total current assets 596,200 563,500 Property, plant and equipment, net 210,300 206,400 Intangible assets, net of amortization 398,700 424,400 Other assets 78,600 85,000 $1,283,800 $1,279,300
LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Short-term borrowings and current maturities of long-term debt $ 139,700 $ 103,000 Accounts payable 59,500 60,400 Accrued expenses 151,200 128,800 Federal and foreign income taxes 14,700 18,400 Total current liabilities 365,100 310,600 Long-term debt 280,200 340,700 Other long-term liabilities 50,200 54,900 Shareholders' Investment: Preferred stock, $1 par value, authorized 5,000,000 shares; none issued --- --- Common stock, $.25 par value, authorized 300,000,000 shares; issued and outstanding 56,321,879 shares in 1998 and 56,784,551 shares in 1997 14,100 14,100 Capital in excess of par value 103,900 101,100 Retained earnings 530,300 506,700 Accumulated other comprehensive income (51,400) (38,500) Unamortized expenses under stock plans (8,600) (10,300) Total shareholders' investment 588,300 573,100 $1,283,800 $1,279,300 The accompanying notes to condensed consolidated financial statements are an integral part of these balance sheets. -1-
C. R. BARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (thousands except per share amounts) (Unaudited)
For Quarter Ended For Six Months Ended June 30, June 30, 1998 1997 1998 1997 Net sales $300,600 $304,000 $596,900 $604,700 Costs and expenses: Cost of goods sold 144,600 143,700 285,500 286,900 Marketing, selling and administrative 97,400 96,600 192,700 190,700 Research & development 20,800 21,500 40,000 42,600 Interest expense 7,100 8,500 15,300 16,700 Other(income)expense, net (31,500) (4,000) (35,100) (7,800) Total costs and expenses 238,400 266,300 498,400 529,100 Income before taxes 62,200 37,700 98,500 75,600 Provision for income taxes 22,000 11,500 33,400 23,300 Net income 40,200 26,200 65,100 52,300 Retained earnings, beginning of period 521,300 522,400 506,700 506,700 Treasury stock repurchases (21,000) (8,000) (21,000) (8,700) Cash dividends (10,200) (9,700) (20,500) (19,400) Retained earnings, end of period $530,300 $530,900 $530,300 $530,900 Basic earnings per share $ .71 $ .46 $ 1.15 $ .92 Diluted earnings per share $ .71 $ .45 $ 1.14 $ .91 Cash dividends per share $ .18 $ .17 $ .36 $ .34 Average common shares outstanding-basic 56,593 57,021 56,683 57,021 Average common shares outstanding-diluted 56,944 57,644 57,010 57,644
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. -2- C. R. BARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands of dollars) (Unaudited)
For The Six Months Ended June 30, 1998 1997 Cash flows from operating activities: Net income $ 65,100 $ 52,300 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 29,700 30,200 Other non-cash items 22,700 200 Changes in assets and liabilities: Current assets (12,300) (11,700) Current liabilities 20,000 (6,900) Other 6,000 900 131,200 65,000 Cash flows from investing activities: Capital expenditures (21,700) (18,200) Other long-term investments, net (13,100) (26,400) (34,800) (44,600) Cash flows from financing activities: Purchase of common stock (21,100) (8,700) Dividends paid (20,500) (19,400) Short-term borrowings and other 39,600 5,600 Long-term borrowings (60,400) (1,500) (62,400) (24,000) Net increase in cash and cash equivalents 34,000 (3,600) Cash and cash equivalents at January 1, 36,400 63,600 Cash and cash equivalents at June 30, $ 70,400 $ 60,000 The accompanying notes to condensed consolidated financial statements are an integral part of these statements. -3- C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The financial statements contained in this filing have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and have not been audited. However, C. R. Bard, Inc. ("Bard" or the "company") believes that it has included all adjustments to the interim financial statements, consisting only of normal recurring adjustments, which are necessary to present fairly the financial condition and results of operations at and for these periods. The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements as filed by the company in the 1997 Annual Report on Form 10-K. Accounting Policies Earnings Per Share The company has adopted Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("FAS 128"). FAS 128 requires the presentation of basic earnings per share and diluted earnings per share. "Basic earnings per share" represents net income divided by the weighted average shares outstanding and is consistent with the company's historical presentation. "Diluted earnings per share" represents net income divided by weighted average shares outstanding adjusted for the incremental dilution of outstanding employee stock options and awards. Comprehensive Income Effective for fiscal years beginning after December 15, 1997 the company is required to adopt Statement of Financial Accounting Standards No. 130 "Reporting Comprehensive Income". For the company, comprehensive income comprises net income adjusted for the change in foreign currency translation adjustments. Historically, these currency translation adjustments were included in "other" as a separate component of equity in the company's consolidated balance sheet. The following table reconciles net income to comprehensive income for the quarter and six months ending June 30, 1998 and 1997 and reconciles accumulated other comprehensive income for the corresponding periods. - 4 - C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) For Quarter Ended For Six Months Ended June 30, June 30, 1998 1997 1998 1997 Net income $ 40,200 $ 26,200 $ 65,100 $ 52,300 Translation adjustments 500 (4,400) (12,900) (28,200) Comprehensive income 40,700 21,800 52,200 24,100 Accumulated other compre- hensive income beginning of period (51,900) (15,900) (38,500) 7,900 Translation adjustments 500 (4,400) (12,900) (28,200) Accumulated other compre- hensive income end of period $(51,400) $(20,300) $(51,400) $(20,300) Derivative Instruments In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. FAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. FAS 133 is effective for fiscal years beginning after June 15, 1999. The company may also implement the Statement as of the beginning of any fiscal quarter after issuance (that is, fiscal quarters beginning June 16, 1998 and thereafter). FAS 133 cannot be applied retroactively. FAS 133 must be applied to (a) derivative instruments and (b) certain derivative instruments embedded in hybrid contracts that were issued, acquired, or substantively modified after December 31, 1997 (and, at the company's election, before January 1, 1998). - 5 - C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) The company has not yet quantified the impacts of adopting FAS 133 on its financial statements and has not determined the timing or method of the adoption of FAS 133. The company enters into foreign exchange options to help reduce the exposure to fluctuations between certain currencies. These off-balance sheet options are accounted for on a mark-to-market basis. The gains and losses associated with these options are recorded on the income statement as "other income and expense" and on the balance sheet as "other current assets" or "accrued expenses". Cash flows associated with the settlement of these options are reflected as operating activities. Reclassifications Certain prior year amounts have been reclassified to conform with the current year presentation. Intellectual Property Settlement On April 6, 1998, the company received a one-time payment of $100,000,000 from Guidant Corporation in connection with the settlement of several infringement claims and the grant of patent licenses. $20,000,000 of this settlement was used for a third-party royalty payment. Subsequent Event The company announced on July 9, 1998 that it has agreed to sell its global coronary cath lab business (angioplasty and angiography) to Arterial Vascular Engineering, Inc. for $600,000,000. The transaction is structured as an acquisition of certain assets and certain liabilities of the company and the acquisition of stock of certain subsidiaries. In connection with the sale, the company will receive $550,000,000 plus 95% of the net book value of certain trade accounts receivable as of the Closing Date in cash, with the balance of the purchase price being working capital retained by the company. The sale of the coronary cath lab business will result in further realignment of Bard's operations particularly those operations located outside the U.S. Separately, the company announced on July 9, 1998 that its Board of Directors authorized purchases from time to time of up to 10,000,000 shares of the company's common stock. - 6 - C. R. BARD, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Consolidated net sales for the second quarter of 1998 of $300,600,000 decreased 1 percent over the second quarter 1997 sales of $304,000,000. Consolidated net sales for the first six months of 1998 of $596,900,000 decreased 1 percent over the $604,700,000 for the same period last year. Sales in the U.S. for the second quarter of 1998 were $194,600,000, a decrease of 2 percent from 1997, while international sales were 106,000,000, up 1 percent against last year. The impact of a strengthening dollar in the second quarter decreased sales outside the U.S. by 5 percent. For the first six months of 1998, U.S. sales totaled $386,500,000, down 3 percent, while international sales increased 1 percent to $210,400,000. Currency translation for the first half of 1998 decreased international sales by approximately 6 percent and decreased worldwide sales by approximately 2 percent. PRODUCT GROUP SUMMARY OF NET SALES (in thousands) Quarter Ended June 30, Six Months Ended June 30, Percent Percent 1998 1997 Change 1998 1997 Change Vascular $ 49,900 $ 49,500 1 $100,500 $ 96,700 4 Urology 85,100 77,100 10 164,600 156,100 5 Oncology 52,300 48,900 7 103,800 97,700 6 Surgery 36,900 33,900 9 72,000 65,800 9 Total Emphasis Products $224,200 209,400 7 $440,900 $416,300 6 Other 76,400 94,600 (19) 156,000 188,400 (17) Net Sales $300,600 $304,000 (1) $596,900 $604,700 (1) Based on the impending sale of its coronary cath lab businesses, (see "Subsequent Event" on page 6), Bard has changed its product group sales reporting. The most significant change is to include sales from those cardiology businesses which Bard intends to sell in the category designated "other". Vascular sales were essentially flat for the quarter with year-to-date growth occurring in electrophysiology, graft and radiology products. Increases in infection control catheters, drainage bags and urological specialties contributed to the 10 percent growth in urology sales for the quarter. Second quarter increases in specialty access products and mesh were primarily responsible for the 7 and 9 percent growth in the oncology and surgery categories, respectively. - 7 - C. R. BARD, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) The gross profit margin for the quarter ended June 30, 1998 decreased to 51.9 percent from 52.7 percent in the prior year period. This decrease was primarily due to unfavorable variances as a result of the company's manufacturing restructuring and price erosion. Other income and expense for the second quarter of 1998 was affected by several nonrecurring, one-time items. These include the gain from the Guidant settlement of $80,000,000 (net of a third-party royalty payment); the writedown of several businesses of $24,100,000 (including Bard's Diagnostic Sciences Division in anticipation of its sale to Polymedco, Inc. which was completed on July 7, 1998); $18,200,000 related to legal settlements and $6,500,000 related to other items. The net after tax favorable impact of these items was $18,700,000 or 33 cents per share on a diluted basis. The second quarter of 1997 had a gain of 2 cents per share on a diluted basis from the sale of an investment. During the first six months of 1998 and 1997, the company acquired 600,000 and 275,000, respectively, of its common shares. The 1998 purchases are being held in treasury and the 1997 purchases were retired. Restructuring Charges As a result of extensive reviews of operations, during the third quarter of 1997, the Board of Directors and management authorized and committed the company to a restructuring of its global manufacturing operations. Five manufacturing facilities will be closed, four additional facilities will be downsized and several European distribution centers will be consolidated. The products manufactured at these locations will be redeployed to other facilities including a new plant. The restructuring plan resulted in a charge of $44,100,000 exclusive of certain period costs which are required to be expensed as incurred. To date, approximately $20,300,000 has been incurred against the $44,100,000 charge. - 8 - C. R. BARD, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Year 2000 Expenditures The company utilizes software and related technologies that will be affected by the date change in the year 2000. For the first six months, the company's marketing, selling and administrative expense includes $2,400,000 for Year 2000 expenditures. Management believes that the company will incur additional expenses of $2,900,000 during 1998 and approximately $1,500,000 in 1999. Cautionary Statement Regarding Forward-Looking Information Certain statements contained herein or in other company documents and certain statements that may be made by management of the company orally, including statements regarding cost savings from manufacturing restructuring, may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because actual results are affected by risks and uncertainties, the company cautions investors that actual results may differ materially from those expressed or implied. Factors which could cause the actual results to differ materially from expected and historical results include, but are not limited to: health care industry consolidation resulting in customer demands for price concessions, competitor's attempts to gain market share through aggressive marketing programs; fewer medical procedures performed in a cost-conscious environment; the lengthy approval time by the FDA or other government authorities to clear medical devices for commercial release; unanticipated product failures; legislative or administrative reforms to the U.S. Medicare and Medicaid systems or other non-U.S. reimbursement systems in a manner that would significantly reduce reimbursements for procedures using the company's medical devices; the acquisition of key patents by competitors that would have the effect of excluding the company from new market segments; the uncertainty of whether increased research and development expenditures will result in increased sales; unpredictability of existing and future litigation including litigation regarding product liability; uncertainty related to tax appeals and litigation; price increases from the company's suppliers of critical components; foreign currency fluctuations; unanticipated business disruptions from Year 2000 issues; the risk that the company may not achieve manufacturing or administrative efficiencies as a result of the company's recent restructuring or in the integration of recently acquired businesses. - 9 - C. R. BARD, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1. Legal Proceedings Davol Inc. has been identified as a Potentially Responsible Party by the Massachusetts Department of Environmental Protection for two net Superfund sites in Dartmouth and Freetown, Massachusetts. The allegations stem from transhipments of waste from the ReSolve hazardous waste reprocessing facility in Dartmouth, Massachusetts to each of the sites associated with the H&M Drum Company. At this time, each of the former ReSolve waste generators has agreed to contribute $1,000 towards a fund to finance a site investigation. Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 12.1 - Computation of Ratio of Earnings to Fixed Charges (b) Exhibit 27 - Financial Data Schedule (c) There were no reports on Form 8-K filed by the company during the quarter ended June 30, 1998. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. C. R. BARD, INC. (Registrant) William C. Bopp /s/ William C. Bopp Executive Vice President and Chief Financial Officer Charles P. Grom /s/ Charles P. Grom Vice President and Controller and Chief Accounting Officer Date: August 12, 1998 - 10 -
EX-12 2 Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges
Six Months Ending 6/30/98 1997 1996 1995 1994 1993 Earnings before taxes $ 98,500 $104,900 $102,700 $123,500 $104,100 $101,400 Add(Deduct) Fixed Charges 17,700 38,200 33,500 31,500 23,200 18,700 Undistributed earnings of less than 50% owned companies carried at equity (400) (500) (700) (800) (400) (200) Interest capitalized 0 0 0 0 (200) 0 Earnings available for fixed charges $115,800 $142,600 $135,500 $154,200 $126,700 $119,900 Fixed charges: Interest, including amounts capitalized 15,300 32,900 26,400 24,200 16,500 12,500 Proportion of rent expense deemed to represent interest factor 2,400 5,300 7,100 7,300 6,700 6,200 Fixed Charges $ 17,700 $ 38,200 $ 33,500 $ 31,500 $ 23,200 $ 18,700 Ratio of earnings to fixed charges 6.54 3.73 4.04 4.89 5.46 6.41
EX-27 3
5 1,000 6-MOS DEC-31-1998 JUN-30-1998 12200 59400 236300 13400 265100 596200 360200 149900 1283800 365100 280200 0 0 14100 634200 1283800 596900 596900 285500 518200 (35100) 0 15300 98500 33400 65100 0 0 0 65100 1.15 1.14
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