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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 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
Commission File Number 1-6926
C. R. BARD, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1454160
(State of incorporation) (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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock - $.25 par value 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 amendments to this Form 10-K. [ ]
The aggregate market value of the voting stock held by
nonaffiliates of the registrant was approximately $1,466,900,000
based on the closing price of stock traded on the New York Stock
Exchange on February 28, 1994. As of February 28, 1994, there were
52,158,171 shares of Common Stock, $.25 par value per share,
outstanding.
The Company's definitive Proxy Statement dated March 10, 1994 has
been incorporated by reference with respect to certain information
contained therein in Part III and Part IV of this Form 10-K.
The exhibit index is located in Part IV, Item 14, Page IV-1.
PART I
Item 1. Business
General Development of Business
The Company was started by Charles Russell Bard in 1907. One of
its first medical products was the silk urethral catheter imported
from France. In 1923, the Company was incorporated as C. R. Bard,
Inc. and distributed an assortment of urological and surgical
products. Bard became a publicly-traded company in 1963 and five
years later was traded on the New York Stock Exchange.
In 1966, Bard acquired its supplier of urological and
cardiovascular specialty products - the United States Catheter &
Instrument Co. In 1980 Bard acquired its major source of the Foley
catheter - Davol Inc. Numerous other acquisitions were made over
the last thirty-three years broadening Bard's product lines.
Today, C. R. Bard, Inc. is a leading multinational developer,
manufacturer and marketer of health care products.
1993 sales of $970.8 million decreased 2% from 1992. Net income
for 1993 totaled $56 million or $1.07 per share, and both decreased
25 percent against 1992.
Product Group Information
Bard is engaged in the design, manufacture, packaging, distribution
and sale of medical, surgical, diagnostic and patient care devices.
Hospitals, physicians and nursing homes purchase approximately 90%
of the Company's products, most of which are used once and
discarded.
The following table sets forth for the last three years ended
December 31, 1993, the approximate percentage contribution to
Bard's consolidated net sales. The figures are on a worldwide
basis.
Years Ended December 31,
1993 1992 1991
Cardiovascular 40% 41% 41%
Urological 26% 25% 25%
Surgical 34% 34% 34%
Total 100% 100% 100%
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Narrative Description of Business
General
Traditionally, Bard has been known for its products in the
urological field, where its Foley catheter is the leading device
for bladder drainage. Today, Bard's largest product group is in
cardiovascular care devices, contributing approximately 40% of
consolidated net sales, with a wide range of products, including
USCI balloon angioplasty catheters used for nonsurgical treatment
of obstructed arteries. Additionally, Bard has important positions
in the area of surgical products.
Bard continually expands its research toward the improvement of
existing products and the development of new ones. It has
pioneered in the development of disposable medical products for
standardized procedures.
Bard's domestic sales may be grouped into three principal product
lines: cardiovascular, urological and surgical. International
sales include most of the same products manufactured and sold by
Bard's domestic operations. Domestic and international sales are
combined for product group sales presentation.
Cardiovascular - Bard's line of cardiovascular products includes
balloon angioplasty catheters, steerable guidewires, guide
catheters and inflation devices; angiography catheters and
accessories; introducer sheaths; electrophysiology products
including cardiac mapping and electrophysiology laboratory systems,
and diagnostic and temporary pacing electrode catheters;
cardiopulmonary support systems; and blood oxygenators and related
products used in open-heart surgery.
Urological - Bard offers a complete line of urological products
including Foley catheters, procedural kits and trays and related
urine monitoring and collection systems; biopsy and other cancer
detection products; ureteral stents; and specialty devices for
incontinence, ureteroscopic procedures and stone removal.
Surgical - Bard's surgical products include specialty access
catheters and ports; implantable blood vessel replacements; fabrics
and meshes for vessel and hernia repair; surgical suction and
irrigation devices; wound and chest drainage systems; devices for
endoscopic, orthopaedic and laparoscopic surgery; blood management
devices; products for wound management and skin care; and
percutaneous feeding devices.
International - Bard markets cardiovascular, urological and
surgical products throughout the world. Principal markets are
Japan, Canada, the United Kingdom and Continental Europe.
Approximately two-thirds of the sales in this segment are of
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products manufactured by Bard in its facilities in the United
Kingdom, Ireland and Malaysia. The balance of the sales are from
products manufactured in the United States, Puerto Rico or Mexico,
for export. Bard's foreign operations are subject to the usual
risks of doing business abroad, including restrictions on currency
transfer, exchange fluctuations and possible adverse government
regulations. See footnote 10 in the Notes to Consolidated
Financial Statements for additional information.
Product Recalls - In February 1990 the Mini-Profile and Probe
balloon angioplasty catheters were withdrawn from the U.S. market
due to claims from the FDA that the Company had failed to follow
appropriate legal and regulatory procedures. In March 1990, the
Company voluntarily withdrew its Sprint and Solo angioplasty
catheters from the U.S. market after an internal investigation
revealed the commercial versions had not received proper regulatory
approval. These withdrawals, accompanied with the withdrawal in
1989 of the New Probe angioplasty catheter, had effectively
withdrawn the Company from the U.S. balloon angioplasty market. In
1991 the Company received approval from the FDA to market the New
Probe, Force and Sprint balloon angioplasty catheters in the U.S.
During the fourth quarter of 1992 the Solo balloon angioplasty
catheter was approved for U.S. marketing. See Item 3. Legal
Proceedings for additional information.
Competition
The Company knows of no published statistics permitting a general
industry classification which would be meaningful as applied to the
Company's variety of products. However, products sold by the
Company are in substantial competition with those of many other
firms, including a number of larger well-established companies.
The Company depends more on its consistently reliable product
quality and dependable service and its ability to develop products
to meet market needs than on patent protection, although some of
its products are patented or are the subject of patent
applications.
Marketing
The Company's products are distributed domestically directly to
hospitals and other institutions as well as through numerous
hospital/surgical supply and other medical specialty distributors
with whom the Company has distributor agreements. In international
markets, products are distributed either directly or through
distributors with the practice varying by country. Sales promotion
is carried on by full-time representatives of the Company in
domestic and international markets.
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In 1993 no commercial customer accounted for more than 8% of the
Company's sales and the five largest commercial customers combined
accounted for approximately 22% of such sales. Combined sales to
federal agencies accounted for less than 2% of sales in 1993.
In order to service its customers, both in the U.S. and outside the
U.S., the Company maintains inventories at distribution facilities
in most of its principal marketing areas. Orders are normally
shipped within a matter of days after receipt of customer orders,
except for items temporarily out of stock, and backlog is normally
not significant in the business of the Company.
Most of the products sold by the Company, whether manufactured by
it or by others, are sold under the BARD trade name or trademark
or other trademarks owned by the Company. Such products
manufactured for the Company by outside suppliers are produced
according to the Company's specifications.
Regulation
The development, manufacture, sale and distribution of the
Company's products are subject to comprehensive government
regulation. Government regulation by various federal, state and
local agencies, which includes detailed inspection of and controls
over research and laboratory procedures, clinical investigations,
manufacturing, marketing, sampling, distribution, recordkeeping,
storage and disposal practices, substantially increases the time,
difficulty, and costs incurred in obtaining and maintaining the
approval to market newly developed and existing products.
Government regulatory actions can result in the seizure or recall
of products, suspension or revocation of the authority necessary
for their production and sale, and other civil or criminal
sanctions.
In the United States comprehensive legislation has been proposed
that would make significant changes to the availability, delivery
and payment for healthcare products and services. It is the intent
of such proposed legislation to provide health and medical
insurance for all United States citizens and to reduce the rate of
increases in United States healthcare expenditures. The Company
believes it is not possible to predict the extent to which the
Company or the healthcare industry in general might be affected by
the enactment of such or similar legislation.
Raw Materials
The Company uses a wide variety of readily available plastic,
textiles, alloys and rubbers for conversion into its devices. Two
large, U.S.-based chemical suppliers have sought to restrict the
sale of certain of their materials to the device industry for use
in implantable products. Although one guiding principle in the
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adoption of this policy is the avoidance of negative economic
effect on the health care industry, a small portion of our product
lines may face a short-term threat to the continuity of their raw
material supply. The companies have indicated that their action is
based on product liability concerns. Bard and the medical device
industry are working to resolve this problem in general and with
these suppliers to assure a continuing supply of necessary raw
materials.
Environment
The Company continues to address current and pending environmental
regulations relating to its use of Ethylene Oxide and CFC's for the
sterilization of some of its products. The Company is complying
with regulations reducing permitted EtO emissions by installing
scrubbing equipment and adjusting its processes. The Company
recognizes the Montreal Protocol Treaty which plans for the
reduction of CFC use worldwide and the Company has established a
goal of reducing its own use of CFC's for sterilization more
rapidly than is required by this treaty. Facilities, processes and
equipment are required to achieve these goals and meet these
regulations. The Company has eliminated over 95% of CFC use for
sterilization. The Company intends to continue to reduce this use
of CFC's faster than treaty goals. Capital expenditures required
will not significantly adversely affect the Company's earnings or
competitive position.
Employees
The Company employs approximately 8,450 persons.
Seasonality
The Company's business is not affected to any material extent by
seasonal factors.
Research and Development
The Company's research and development expenditures amounted to
approximately $66,300,000 in 1993, $60,500,000 in 1992 and
$55,600,000 in 1991.
Item 2. Properties
The executive offices of the Company are located in Murray Hill,
New Jersey in facilities which the Company owns. Domestic
manufacturing and development units are located in California,
Georgia, Kansas, Massachusetts, New Hampshire, New Jersey, New
York, Ohio, Puerto Rico, Rhode Island, South Carolina, Utah,
Washington and Wisconsin. Sales offices and distribution points
are in these locations as well as others.
I-5
Outside the U.S., the Company has plants or offices in Australia,
Belgium, Canada, France, Germany, Hong Kong, Ireland, Italy,
Japan, Malaysia, Mexico, Netherlands, Portugal, Singapore, Spain
and the United Kingdom.
The Company owns approximately 2,267,000 square feet in 21
locations and leases approximately 1,272,000 square feet of space
in 61 locations.
All these facilities are well maintained and suitable for the
operations conducted in them.
Item 3. Legal Proceedings
On October 14, 1993, the Company entered into a Plea Agreement with
the Department of Justice in connection with charges stemming from
violations, primarily during the 1980s by the Company's USCI
division, of the Federal Food, Drug and Cosmetic Act and other
statutes. The Agreement, which is subject to approval by the
court, requires the Company to pay a fine and civil damages
totaling $61 million, senior management approval of all pre-market
applications made by the Company's USCI division to the Food and
Drug Administration (the "FDA") for the next four years, oversight
of the USCI division by an outside consultant and the hiring of an
officer with responsibility for regulatory and medical programs.
The Company has also received notice of suspension by the Defense
Logistics Agency (DLA) relative to any new federal government
contracts. The Company's existing contracts, representing less
than 2% of consolidated revenues, will continue to run until their
expiration dates. Furthermore, the Company will continue
discussions with the DLA to explore a possible resolution of this
matter, but these discussions await approval by the court of the
Plea Agreement. In January 1994 the Company received notification
that the FDA had determined that provisions of the Applications
Integrity Policy should be applied to the Company's USCI division.
Consequently, the FDA suspended its review of pending pre-market
applications that have been submitted by the USCI division. Based
upon regulatory compliance audits to be conducted by the Company,
the FDA will assess the validity of data and information in USCI's
pending pre-market applications. The Company cannot predict how
long the FDA's suspension of the USCI division's pre-market
applications from review will last or the extent of the impact such
suspension could have on USCI's competitive position. The
Company is continuing discussions in certain related areas raised
by the FDA to finally conclude this matter.
As previously discussed, in January 1992 a civil complaint was
filed in federal court regarding the Company's efforts to obtain
FDA approval for and market an atherectomy device. In July 1992
the federal court dismissed certain provisions of the complaint.
In January 1993 the court granted the Company's motion and entered
a stay of the case. The court subsequently dissolved its previous
I-6
order staying the proceedings in this case, and discovery is now
under way. In late 1993 the plaintiffs filed an amended complaint
which claims a breach of contract and realleges claims of fraud.
The Company has answered the amended complaint and seeks to dismiss
the fraud charges.
During 1991 the Company settled all previously disclosed
shareholder litigation brought against the Company and certain
present and former officers and directors in connection with the
withdrawal from the U.S. market of certain of the Company's
angioplasty catheters. All claims were dismissed without any
admission of liability or wrong doing. The settlement involved the
payment of approximately $18 million and had no material impact on
the 1991 earnings of the Company because it had been previously
provided for through established reserves and insurance coverages.
In November 1993, a shareholder moved in the Superior Court of New
Jersey to set aside the settlement as inadequate based upon the
amount which the Company had agreed to pay as a fine and civil
damages in the criminal procedures as set forth above. This
petition was dismissed and a notice of appeal was filed. The
appeal has now been dismissed by the Appellate Division of the
Superior Court and the shareholder has 20 days from March 24 to
appeal to the N.J. Supreme Court.
During 1992 the Company was notified by the United States
Environmental Protection Agency that it had been identified as a
potentially responsible party in connection with an ongoing
investigation of the Solvents Recovery Service of New England site
in Southington, Connecticut. Although the full extent of liability
in this case is unknown, the Company has been identified with less
than one-half percent of the total gallonage of waste materials.
The final resolution of this matter is not expected to have a
material adverse financial impact on the Company.
The Company is also subject to other legal proceedings and claims
which arise in the ordinary course of business.
Item 4. Results of Votes of Security Holders
Not applicable.
I-7
Executive Officers of the Registrant
Set forth below is the name, age, position, five year business
history and other information with respect to each executive
officer of the Company as of February 28, 1994. No family
relationships exist among the officers of the Company.
Name Age Position
William H. Longfield 55 President and
Chief Operating Officer
and Director
Benson F. Smith 46 Executive Vice President -
Operations
William C. Bopp 50 Senior Vice President and
Chief Financial Officer
Timothy M. Ring 36 Group Vice President
Richard J. Thomas 44 Group Vice President
William T. Tumber 59 Group Vice President
Terence C. Brady, Jr. 62 Senior Vice President and
Controller
E. Robert Ernest 53 Vice President - Business
Development
Gerald L. Messerschmidt, M.D. 43 Vice President - Scientific
Affairs
Richard A. Flink 59 Vice President, General
Counsel and Secretary
Earle L. Parker 50 Treasurer
All officers of the Company are elected annually by the Board of
Directors. Mr. Longfield has been delegated the duties and
responsibilities of Chairman and Chief Executive Officer by the
Board of Directors.
I-8
Mr. Longfield joined the Company in 1989 and was elected executive
vice president and chief operating officer. In 1991 he was elected
to his present position. Prior to joining the Company, he was
chief executive officer since 1984 of the Cambridge Group, Inc., a
provider of long term health services for the elderly. Prior to
joining Cambridge, he was employed by Lifemark, Inc., a health care
management company, and for over 20 years with American Hospital
Supply Corporation.
Mr. Smith joined Bard in 1980. Subsequently he was appointed
general manager of Bard Electro Medical Systems, Inc. and in 1986
became vice president and general manager of Bard Home Health
division. In 1987, he was promoted to president of Bard Urological
division. In 1990, he was appointed to the position of group
executive. In 1991, he was elected group vice president. In
December 1993, he was elected to the position of executive vice
president with worldwide responsibility for operations.
Mr. Bopp joined the Company in 1980 as controller of Bard
International, Inc., was promoted to assistant corporate controller
in 1983 and was elected to the position of treasurer later that
year. He was named vice president and treasurer in 1989. In 1992
he was elected to his present position.
Mr. Ring joined the Company in 1992 and was elected vice president-
human resources. Prior to joining the Company he had been with
Abbott Laboratories Inc., a pharmaceutical company, since 1982 and
his last position with their Hospital Products division had been
director of personnel. In December 1993, he was elected to the
position of group vice president.
Mr. Thomas joined Bard in 1984. In 1986 he was promoted to vice
president and general manager of the Bard Cardiovascular Ventures
division. In 1990 he was appointed to the position of group
executive. In October 1991, he was elected to his present
position.
Mr. Tumber joined Bard in 1980. In 1988 he was promoted to vice
president and general manager of Davol Inc. In 1990 he was
promoted to president of Davol Inc. and subsequently appointed to
the position of group executive. In September 1991, he was elected
to his present position.
Mr. Brady joined the Company in 1969, was elected corporate
controller in 1973 and vice president and controller in 1979. He
was elected to his present position in 1987.
Mr. Ernest joined the Company in 1977 and was elected to his
present position in 1979.
I-9
Dr. Messerschmidt joined the Company in January 1994 and was
elected to his present position. Prior to joining the Company he
had been with DNX Corporation, a molecular engineering company,
where he was vice president of medical and regulatory affairs.
Prior to DNX he held various positions with the Pharmaceuticals
Division of Ciba Geigy Corporation, the University of Michigan
Medical Center, Wilford Hall U.S.A.F. Medical Center and the
National Cancer Institute of the National Institutes of Health.
Mr. Flink joined the Company in 1970, was elected vice president
and general counsel in 1973 and was elected to his present position
in 1985.
Mr. Parker joined the Company in 1979. In 1985 he was promoted to
vice president and controller of the USCI division. In December
1990 he was promoted to vice president-operations for the USCI
division and, later that year, was promoted to vice president and
general manager of the USCI Angiography division. In 1992 he was
elected to his present position.
I-10
PART II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters
Market and Market Prices of Common Stock
The Company's common stock is traded on the New York Stock Exchange
using the symbol: BCR. The following table illustrates the high
and low sales prices as traded on the New York Stock Exchange for
each quarter during the last two years.
Quarters
1st 2nd 3rd 4th Year
1993
High 35-1/4 28 27-5/8 26-7/8 35-1/4
Low 22-7/8 21-1/4 20-1/2 21-3/4 20-1/2
1992
High 34 28-5/8 31-1/2 35-7/8 35-7/8
Low 26-1/8 22-1/2 23-3/4 25-1/2 22-1/2
Approximate Number of Equity Security Holders
Approximate Number
of Record Holders
Title of Class as of February 28, 1994
Common Stock - $.25 par value 8,280*
*Included in the number of shareholders of record are shares held
in "nominee" name.
Dividends
The Company paid cash dividends of $28,200,000 or $.54 per share in
1993 and $26,500,000 or $.50 per share in 1992. The following
table illustrates the quarterly rate of dividends paid per share.
Quarters
1st 2nd 3rd 4th Year
1993 $ .13 $ .13 $ .14 $ .14 $ .54
1992 $ .12 $ .12 $ .13 $ .13 $ .50
In January 1994, the first quarter dividend of $.14 per share was
declared, indicating an annual rate of $.56 per share. The first
quarter dividend was paid on February 4, 1994 to shareholders of
record on January 24.
II-1
Item 6. Selected Financial Data
(Thousands of dollars except per share amounts)
For the Years Ended December 31,
1993 1992 1991 1990 1989
INCOME STATEMENT DATA
Net sales $970,800 $990,200 $876,000 $785,300 $777,800
Operating income 128,500 122,400 93,000 66,800 115,900
Net income 56,000 75,000 57,200 40,300 65,400
BALANCE SHEET DATA
Total assets $798,600 $712,500 $657,600 $612,800 $562,600
Working capital 157,200 201,900 184,000 170,600 181,800
Net property, plant
and equipment 168,900 162,800 157,600 147,500 139,600
Long-term debt 68,500 68,600 68,900 69,800 70,300
Total debt 153,000 133,000 128,700 123,200 95,000
Shareholders'
investment 383,100 392,400 365,700 342,200 333,600
COMMON STOCK DATA
Net income
per share $ 1.07 $ 1.42 $ 1.08 $ .76 $ 1.18
Cash dividends
per share .54 .50 .46 .42 .36
Cash dividend
payout ratio 50.4% 35.3% 42.7% 55.6% 30.6%
Shareholders'
investment per
share $ 7.35 $ 7.43 $ 6.90 $ 6.45 $ 6.12
Avg. shares out-
standing (000's) 52,197 52,909 53,063 53,266 55,419
SUPPLEMENTARY DATA
Return on average
shareholders'
investment 14.4% 19.8% 16.2% 11.9% 19.8%
Operating income/
net sales 13.2% 12.4% 10.6% 8.5% 14.9%
Net income/
net sales 5.8% 7.6% 6.5% 5.1% 8.4%
Days-accounts
receivable 61.0 63.0 62.7 65.5 62.3
Days-inventory 131.0 128.1 135.8 142.6 130.0
Current ratio 1.6-1 1.9-1 2.0-1 2.0-1 2.5-1
Total debt/total
capitalization 28.5% 25.3% 26.0% 26.5% 22.2%
Interest expense $ 11,400 $ 12,600 $ 14,100 $ 14,900 $ 10,900
R&D expense $ 66,300 $ 60,500 $ 55,600 $ 44,100 $ 36,200
Number of employees 8,450 8,850 9,100 8,750 8,300
Net sales per
employee $ 114.9 $ 111.9 $ 96.3 $ 89.7 $ 93.7
Net income
per employee $ 6.6 $ 8.5 $ 6.3 $ 4.6 $ 7.9
II-2
Item 7. Management's Discussion and Analysis of Results
of Operations and of Financial Conditions
General
Bard is a leading multinational developer, manufacturer and
marketer of products for the large and growing health care
industry. Worldwide health care expenditures approximated $1.9
trillion in 1993 with about half that amount spent in the United
States. Bard's segment of this industry, itself a multi-billion
dollar market, is primarily specialized products used primarily in
hospitals, in outpatient centers and in physician's offices to meet
the needs of the medical profession in caring for their patients.
The Company seeks to focus and concentrate on selected markets with
cost-effective, innovative products and specialized sales forces to
maximize the opportunities in these markets.
Operating Results
Net sales decreased 2% in 1993, reflecting the sale of the
MedSystems division, the impact of foreign currency translations
and the dramatic changes in the industry. Net income decreased
25%, reflecting several nonrecurring items, primarily the $61
million pretax provision for the settlement with the Justice
Department.
1993 Sales Data
Consolidated net sales totaled $970.8 million in 1993, a decrease
of $19.4 million or 2% for the year. Sales were lowered a total of
4% by the impact of the sale of the Bard MedSystems division in
February 1993 (3%) and the impact of generally lower foreign
currency values (1%). Sales in 1993 were also negatively affected
by a slowdown in U.S. procedural rates, consolidations of health
care providers, limited FDA approvals, increasingly conservative
medical practices fostered by the growth of managed care and weaker
European economies.
Worldwide sales increased 1% in the urological product group. Good
increases in several relatively new specialty devices were
partially offset by declines in other areas. Sales of surgical
products decreased 1% but increased 8% after adjusting for the sale
of the MedSystems division. Specialty access, endoscopic, laparo-
scopic and blood management products contributed significantly to
this increase. Cardiovascular product sales decreased 5% worldwide
with most product areas in this group showing declines.
Sales in the United States decreased 1% in 1993 to $687.9 million,
representing 71% of total sales. Urological product sales
increased while sales of surgical products (due to the sale of
MedSystems) and cardiovascular products decreased.
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Sales outside the U.S. were $282.9 million in 1993, a decline of 3%
from 1992 and represented 29% of total sales. Changes in foreign
currency values in 1993 lowered these sales by nearly 5%. Growth
in sales of surgical products were more than offset by decreases in
urological and cardiovascular sales. Sales increases were good in
Japan and Germany.
The geographic breakdown of sales outside the U.S. for 1993 is:
Europe, Middle East, Africa - 56%; Japan, Asia/Pacific - 37% and
Western Hemisphere, excluding the United States - 7%.
1992 Sales Data
In 1992 consolidated net sales totaled $990.2 million, an increase
of $114.2 million or 13% from the prior year. U.S. sales, which
were 70% of total consolidated sales, increased 13% while sales
outside the U.S. increased 12% for the year. Changes in foreign
currency values in 1992 accounted for approximately 2 percentage
points of the sales growth outside the U.S.
Operating Income
Gross profit margins rose in 1993 for the third straight year. The
rates were 50.9% in 1993, 48.4% in 1992 and 46.6% in 1991.
Productivity gains, cost reductions and a favorable product mix in
many product areas contributed to this improvement in the last
three years. A pretax charge of $2.6 million for severance costs
related to a plant closing is included in 1993 cost of goods sold.
Bard uses the LIFO method of valuing substantially all U.S.
inventories, which results in current costs (higher in a period of
inflation) being charged to cost of goods sold. Bard generally has
been able to recover these costs through its strong product
position in its markets. The Company also strives to offset the
effect of inflation through its cost reduction programs.
Marketing, selling and administrative expenses (which exclude
research and development) increased $2.9 million in 1993, or less
than 1%. R&D expenses increased nearly 10% in 1993 as the Company
works toward new technologies and enhancements for the future.
Operating income of $128.5 million increased 5.0% in 1993,
reflecting the increased gross profit margin and, as a percent of
net sales, was 13.2% compared with 12.4% in 1992. Operating income
in 1992 increased 31.6% from 1991 due primarily to a higher gross
profit margin.
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Other Expense, Net
The 1993 results included a third quarter pretax provision for the
Justice Department settlement of $61 million, a fourth quarter
pretax gain of $32.7 million from the sale of shares of the common
stock of Ventritex, Inc., and a first quarter pretax gain of $10.9
million from the sale of the MedSystems division net of several
nonrecurring charges. The 1992 results included a gain of $5.9
million from the sale of common stock of Ventritex and a comparable
amount for provisions for expenses associated with legal and
regulatory matters.
Income Tax
The effective income tax rate was 37.2% in 1993, 29.9% in 1992 and
25.6% in 1991. The increase in 1993 was primarily due to the $61
million Justice Department settlement, which was not fully
deductible, and a 1% tax rate increase to 35% effective January 1,
1993. The increase in the 1992 rate was primarily due to a
reduction in the portion of Bard's taxable income being generated
outside the United States at lower effective tax rates. The tax
benefit from operations in Puerto Rico and Ireland favorably
affected the tax rate in each year.
As a result of the Omnibus Tax Reconciliation Act of 1993, the
effective tax rate in 1994 will be affected slightly, primarily due
to a reduction in the tax benefit derived from the Company's
manufacturing operations in Puerto Rico.
Income
Net income for 1993 totaled $56 million, or $1.07 per share, which
was 25% lower than in 1992. As a percent of sales, net income was
5.8% in 1993 compared with 7.6% in 1992 and 6.5% in 1991.
Nonrecurring items that affected net income in 1993 were (in
millions):
Gain on sale of Ventritex stock $ 19.4
Gain on sale of MedSystems division and other
one-time charges 6.0
Severance costs related to plant closing (1.8)
Effect of accounting change for postretirement
benefits (6.1)
Provision for the Justice Department settlement
agreement (45.4)
Net income effect of nonrecurring items $(27.9)
After adjusting for these items, net income would have been higher
than reported by $27.9 million, or $.53 per share. In 1992 net
income was $1.42 per share, or $75 million in total, which was 31%
higher than 1991.
II-5
Financial Condition
Bard's financial condition remained strong in 1993. Net cash
provided by operating activities increased to $124 million in 1993
from $103.6 million in 1992. While the Company had cash outlays
totaling $101.4 million for acquisitions of businesses, patents,
trademarks and other long-term investments, total debt increased a
modest $20 million from $133 million to $153 million in 1993. The
ratio of total debt to total capitalization increased from 25.3% to
28.5% with total capitalization increasing $10.7 million to $536.1
million. Long-term debt was essentially unchanged at $68.5 million
at the end of 1993, with $60 million of it at a fixed rate of 8.69%
until scheduled repayment in September 1999.
Bard maintains credit lines with banks for short-term cash needs.
These facilities were used as needed during 1993. The current
unused lines of credit total $141 million. As now structured, the
Company should generate substantially all funds needed for
operations and capital expenditures. The Company believes it could
borrow adequate funds at competitive terms and rates, should it be
necessary, including the payments to the Justice Department
required as a result of the plea agreement reached in October 1993.
Under the terms of the settlement, $30.5 million is payable 30 days
after court approval plus two annual instalments of $15.25 million
each.
As presented in the Consolidated Statements of Cash Flows on page
II-11 of this report, net cash flows from operating activities
totaled $124 million in 1993. Net income, depreciation and
amortization provided a total of $91.5 million, and included the
gain on disposal of assets of $50.4 million. Increases in current
liabilities, excluding debt, provided a total of $27 million,
including $30.5 million of the $61 million payable under the
Justice Department settlement. Other long-term liabilities
increased by $46.2 million, of which $30.5 million is the balance
of the settlement amount and $10 million is the accumulated
postretirement benefit obligation charged to income in the first
quarter of 1993. All other operating activities provided $9.7
million net including a total of $12.9 million provided from
decreases in accounts receivable and inventories.
Investing activities used $67.1 million in 1993. Capital
expenditures totaled $30.7 million and proceeds from the sale of
assets provided $65 million. $101.4 million was used for the
acquisition of businesses, patents, trademarks and other related
items, and long-term investments.
Financing activities in 1993 used a total of $30.4 million. Common
stock purchases used $24.4 million and dividends used $28.2
million. Other financing activities, primarily proceeds from
short-term borrowings, provided $22.2 million net.
II-6
Total cash flows, including a $1.3 million translation adjustment,
resulted in an increase in cash and short-term investments of $25.2
million.
As noted, capital expenditures in 1993 were $30.7 million compared
with $30 million in the prior year. Expenditures for 1994 are
anticipated at $35-$40 million.
Research and development spending was $66.3 million in 1993, up
9.6% from 1992. Planned expenditures for 1994 are about $80
million, a 20% increase.
Purchases of Bard common stock by the Company totaled (in millions)
$24.4, $14.0 and $6.4 in 1993, 1992 and 1991, respectively. In
January 1993 the Board of Directors authorized the purchase from
time to time of up to 2 million shares of which 1 million were
purchased in 1993.
The Board of Directors declared dividends of 13 cents per share for
the first two quarters of 1993 and in July 1993 increased the
dividend to 14 cents per share. At February 1994 the indicated
annual dividend rate is 56 cents per share. Dividends for 1993 of
54 cents per share were up from 50 cents per share paid in 1992.
Legal Proceedings
For a discussion of pending legal proceedings and related matters,
please see Note 5, Commitments and Contingencies, of the Notes to
Consolidated Financial Statements on page II-16.
Acquisitions and Dispositions
In 1993 the Company acquired the operations of Solco Hospital
Products Group, Inc., Pilot Cardiovascular Systems, Inc. and
Bainbridge Sciences, Inc. in separate transactions for a total of
$70 million. The Bard MedSystems division was sold in 1993 with a
pretax gain of $15.9 million. The 1993 acquisitions, and several
other investments and acquisitions in 1993, 1992 and 1991 were not
significant to the Company's operations as a whole.
II-7
Item 8. Financial Statements and Supplementary Data
Report of Independent Public Accountants
To the Shareholders and Board of Directors of C. R. Bard, Inc.:
We have audited the accompanying consolidated balance sheets of
C. R. Bard, Inc. (a New Jersey corporation) and subsidiaries as of
December 31, 1993 and 1992 and the related consolidated statements
of income, retained earnings and cash flows for each of the three
years in the period ended December 31, 1993. These financial
statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements and schedules
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 are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. 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 referred to above present
fairly, in all material respects, the financial position of C. R.
Bard, Inc. and subsidiaries as of December 31, 1993 and 1992, and
the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1993 in conformity
with generally accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements,
effective January 1, 1993 the Company changed its method of
accounting for postretirement benefits other than pensions.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedules listed
in Item 14(a) 2 are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the
basic financial statements. These schedules have been subjected to
the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN & CO.
Roseland, New Jersey
February 9, 1994
II-8
C. R. BARD, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
For the Years Ended December 31,
(Thousands of dollars except per share amounts)
1993 1992 1991
Net sales $970,800 $990,200 $876,000
Costs and expenses:
Cost of goods sold 476,700 510,900 467,500
Marketing, selling and
administrative 299,300 296,400 259,900
Research and development 66,300 60,500 55,600
842,300 867,800 783,000
Operating income 128,500 122,400 93,000
Interest expense 11,400 12,600 14,100
Other expense, net 18,200 2,800 2,000
Income before taxes and effect of
accounting change 98,900 107,000 76,900
Provision for income taxes 36,800 32,000 19,700
Income before effect of
accounting change 62,100 75,000 57,200
Effect of change in accounting
principle, net of taxes (6,100) --- ---
Net income $ 56,000 $ 75,000 $ 57,200
Income per share before effect
of accounting change $ 1.19 $ 1.42 $ 1.08
Net income per share $ 1.07 $ 1.42 $ 1.08
C. R. BARD, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
For the Years Ended December 31,
(Thousands of dollars except per share amounts)
1993 1992 1991
Balance, beginning of year $368,800 $344,300 $322,300
Net income 56,000 75,000 57,200
Cash dividends (per share
1993, $.54; 1992, $.50;
1991, $.46) (28,200) (26,500) (24,400)
Excess of cost over par value
of treasury stock retired
(1993-1,000,000 shares,
1992-500,000 shares and
1991-250,000 shares) (24,200) (13,900) (6,400)
Translation adjustment (16,100) (10,100) (4,400)
Restricted stock award (1,400) --- ---
Balance, end of year $354,900 $368,800 $344,300
The accompanying notes to consolidated financial statements are an
integral part of these statements.
II-9
C. R. BARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(Thousands of dollars) 1993 1992
Assets
Current assets:
Cash $ 4,100 $ 2,800
Short-term investments 70,900 47,000
Accounts receivable, less reserve of
$7,100 and $5,300 167,300 178,800
Inventories 173,500 181,800
Other current assets 5,700 6,500
Total current assets 421,500 416,900
Long-term investments 17,700 13,300
Property, plant and equipment, at cost
Land 8,800 9,000
Buildings and improvements 106,700 106,700
Machinery and equipment 145,400 137,300
260,900 253,000
Less - Accumulated depreciation
and amortization 92,000 90,200
Net property, plant and equipment 168,900 162,800
Intangible assets, net of amortization 149,100 78,500
Other assets 41,400 41,000
$798,600 $712,500
Liabilities and Shareholders' Investment
Current liabilities:
Short-term borrowings and current
maturities of long-term debt $ 84,500 $ 64,400
Accounts payable 39,300 45,600
Accrued expenses 124,500 81,400
Federal and foreign income taxes 16,000 23,600
Total current liabilities 264,300 215,000
Long-term debt 68,500 68,600
Other long-term liabilities 82,700 36,500
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 52,098,124 shares in 1993,
52,838,681 shares in 1992 13,000 13,200
Capital in excess of par value 15,200 10,400
Retained earnings 354,900 368,800
Total shareholders' investment 383,100 392,400
$798,600 $712,500
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
II-10
C. R. BARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Years Ended December 31,
(Thousands of dollars)
1993 1992 1991
Cash flows from operating activities:
Net income $ 56,000 $ 75,000 $ 57,200
Adjustments to reconcile net income
to net cash provided from operating
activities:
Depreciation and amortization 35,500 35,600 29,500
Deferred income taxes (7,100) (1,900) 1,900
Expenses under stock plans 1,200 1,100 900
Gain on disposal of assets, net (50,400) (3,700) (600)
Changes in assets and liabilities
net of acquired businesses:
Accounts receivable 9,900 (21,400) (14,200)
Inventories 3,000 (4,900) (4,800)
Other current and long-term
assets 2,700 200 500
Current liabilities, excluding
debt 27,000 20,200 12,700
Other long-term liabilities 46,200 3,400 3,100
Net cash provided from operating
activities 124,000 103,600 86,200
Cash flows from investing activities:
Capital expenditures (30,700) (30,000) (31,000)
Proceeds from sale of assets 65,000 8,300 1,900
Payments made for purchases of
businesses (70,000) (3,600) (1,400)
Patents, trademarks and other (22,700) (26,700) (15,900)
Long-term investments (8,700) (15,900) (600)
Net cash used in investing
activities (67,100) 67,900) (47,000)
Cash flows from financing activities:
Common stock issued for options and
benefit plans 2,200 1,300 600
Purchase of common stock (1,000,000
shares in 1993, 500,000 shares in
1992 and 250,000 shares in 1991) (24,400) (14,000) (6,400)
Proceeds from long-term borrowings --- 16,000 ---
Principal payments of long-term
borrowings (400) (700) (1,300)
Proceeds from short-term borrowings,
net 20,400 5,000 6,800
Dividends paid (28,200) (26,500) (24,400)
Net cash used in financing
activities (30,400) (18,900) (24,700)
Translation adjustment (1,300) (800) (600)
Increase in cash and short-term
investments $ 25,200 $ 16,000 $ 13,900
The accompanying notes to consolidated financial statements are an
integral part of these statements.
II-11
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Consolidation All subsidiaries are consolidated and intercompany
transactions have been eliminated.
Income Per Share The computations of income per share are based on
the weighted average number of shares outstanding: 52,196,645 in
1993, 52,909,360 in 1992 and 53,062,933 in 1991. The effect of
outstanding stock options and stock awards is not material and has
been excluded from the computations.
Inventories Inventories are stated at the lower of cost or market.
Substantially all domestic inventories are accounted for using the
LIFO method of determining costs. All other inventories are
accounted for using the FIFO method. Inventories valued under the
LIFO method were $127,000,000 in 1993, $127,000,000 in 1992 and
$116,000,000 in 1991; under the FIFO method such inventories would
have been higher by $15,800,000, $13,000,000 and $16,400,000,
respectively. Inventories were approximately 58% and 60% finished
goods at year end 1993 and 1992, 30% and 27% work in process at
year end 1993 and 1992, and 12% and 13% raw materials at year end
1993 and 1992.
Depreciation Property, plant and equipment are depreciated on a
straight-line basis over the useful lives of the various classes of
assets.
Investments Long-term investments include long-term bonds and
equity securities accounted for on the cost basis. The fair value
of such investments, determined primarily by market quotes,
approximated their carrying value at December 31, 1993 and was
approximately $46,000,000 at December 31, 1992. For purposes of
the Consolidated Statements of Cash Flows all short-term
investments which have a maturity of ninety days or less are
considered cash equivalents. Such investments are stated at cost
which approximates their fair value.
Intangible Assets Intangible assets are recorded at cost and are
amortized using the straight-line method over appropriate periods
not exceeding 40 years. As of December 31, 1993 and 1992,
intangible assets include the following:
(Thousands of dollars) 1993 1992
Goodwill net of amortization $ 76,500 $ 51,600
Other intangibles (primarily patents) 72,600 26,900
Intangible assets, net $149,100 $ 78,500
II-12
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Federal Income Taxes The Company has not provided for Federal
income taxes on the undistributed earnings of its foreign
operations (primarily in Ireland) as it is the Company's intention
to permanently reinvest undistributed earnings (approximately
$177,000,000 as of December 31, 1993). Effective January 1, 1993
the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes." This statement did
not have a significant effect on the Company's financial position
or results of operations.
Translation of Foreign Currencies Annual foreign currency
translation adjustments are included in retained earnings. As of
December 31, 1993 the cumulative adjustment has decreased retained
earnings by $11,100,000.
Research and Development Research and development costs are
charged to operations as incurred.
New Accounting Pronouncements Effective January 1, 1994, the
Company is required to adopt SFAS No. 112 "Employers' Accounting
for Postemployment Benefits" and SFAS No. 115 "Accounting for
Certain Investments in Debt and Equity Securities." Adoption of
these statements will not have a significant effect on the
Company's financial position or results of operations.
2. Acquisitions and Dispositions
In 1993, the Company acquired three separate businesses for
approximately $70,000,000 which served to enhance or expand upon
the Company's existing product lines. Assets acquired in these
acquisitions were primarily patents and other intangibles. These
acquisitions together with several other minor investments made
during 1992 and 1991 did not have a significant effect on the
Company's results of operations. The Company sold its MedSystems
division in 1993 resulting in a pretax gain of approximately
$15,900,000 which is recorded in other expense, net, in the
statement of consolidated income.
In the fourth quarter of 1993 and 1992, the Company sold certain
long-term investments resulting in pretax gains of approximately
$32,700,000 and $5,900,000, respectively which are recorded in
other expense, net, in the statements of consolidated income.
II-13
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Income Tax Expense
Income tax expense consists of the following:
(Thousands of dollars)
1993 1992 1991
Currently payable:
Federal $31,900 $20,300 $ 4,100
Foreign 8,100 9,500 11,100
State 3,900 4,100 2,600
43,900 33,900 17,800
Deferred:
Federal (6,600) (1,700) 2,900
Foreign (500) (200) (1,000)
(7,100) (1,900) 1,900
$36,800 $32,000 $19,700
During 1993, the Company adopted SFAS No. 109 "Accounting for
Income Taxes." The cumulative effect of the change was not
significant to the Company's results of operations and the Company
has not restated prior periods. The standard requires a change
from the deferred to the liability method of computing deferred
income taxes. Deferred income taxes are recognized for tax
consequences of "temporary differences" by applying enacted
statutory tax rates, applicable to future years, to differences
between the financial reporting and the tax basis of assets and
liabilities. At December 31, 1993, the Company's net deferred tax
asset amounted to approximately $8,000,000 which is recorded in
other assets. This amount is principally composed of differences
between tax and financial accounting treatment of depreciation
($7,000,000) and employee benefits ($15,000,000).
The following is a reconciliation between the effective tax rates
and the statutory rates:
1993 1992 1991
Tax based on statutory rate 35% 34% 34%
State income taxes net of
Federal income tax benefits 3 2 2
Operations taxed at less than
statutory rate, primarily
Ireland and Puerto Rico (11) (10) (9)
Justice Department settlement 7 -- --
Other, net 3 4 (1)
Effective tax rate 37% 30% 26%
Cash payments for income taxes were $31,400,000, $28,600,000 and
$17,500,000 in 1993, 1992 and 1991, respectively.
II-14
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Short-Term Borrowings and Long-Term Debt
Short-term bank borrowings amounted to $84,400,000 and $64,000,000
at December 31, 1993 and 1992, respectively. The maximum amount
outstanding during 1993 was approximately $110,500,000 with an
average outstanding balance of $80,100,000 and an effective
interest rate of 3.7%. The maximum amount outstanding during 1992
was approximately $84,900,000 with an average outstanding balance
of $75,100,000 and an effective interest rate of 5.1%. The maximum
outstanding during 1991 was approximately $82,000,000 with an
average outstanding balance of $72,300,000 and an effective
interest rate of 7.8%. Unused lines of credit amounted to
$141,000,000 at December 31, 1993.
The following is a summary of long-term debt:
(Thousands of dollars) 1993 1992
8.69% Unsecured Notes due 1999 $ 60,000 $ 60,000
Other, primarily 5.75% to 11.75%
industrial development revenue bonds 8,600 9,000
68,600 69,000
Less: amounts classified as current 100 400
$ 68,500 $ 68,600
Under three deposit loan agreements with a bank, $55,000,000 has
been borrowed at floating rates (4.0% at December 31, 1993) with
maturity dates of September 1996, December 1999 and December 2002.
At maturity, the loans are to be repaid through matured
certificates of deposit held by the Company at the same bank.
Since the Company has the right of offset under these agreements
and it is the Company's intention to present certain certificates
of deposit for repayment of these loans at their maturity, these
borrowings have been offset against these certificates of deposit
in the accompanying consolidated balance sheets at December 31,
1993 and 1992. The related interest income has been offset against
the interest expense.
The Company's long-term debt agreements contain restrictions which,
among other things, require the maintenance of minimum net worth
levels and limitations on the amounts of debt.
The aggregate maturities of long-term debt for the five year period
from 1994 through 1998 are approximately $200,000 in total and from
1999 and thereafter - $68,400,000. The fair value of the Company's
long-term debt is not significantly different from its recorded
value.
II-15
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Commitments and Contingencies
On October 14, 1993, the Company entered into a Plea Agreement with
the Department of Justice in connection with charges stemming from
violations, primarily during the 1980s by the Company's USCI
division, of the Federal Food, Drug and Cosmetic Act and other
statutes. The Agreement, which is subject to approval by the
court, requires the Company to pay a fine and civil damages
totaling $61 million. In accordance with the terms of the
Agreement, a provision has been made for this amount in the quarter
ended September 30, 1993, with one-half of the amount reflected as
a short-term obligation in accrued expenses and the balance
reflected in other long-term liabilities. The Company has also
received notice of suspension by the Defense Logistics Agency (DLA)
relative to any new Federal Government contracts. The Company's
existing contracts, representing less than 2% of consolidated
revenues, will continue to run until their expiration dates.
Furthermore, the Company is continuing discussions with the DLA to
explore a possible resolution of this matter. In January 1994, the
Company received notification that the Food and Drug Administration
(FDA) had determined that provisions of the Applications Integrity
Policy should be applied to the Company's USCI division.
Consequently, the FDA suspended its review of pending pre-market
applications that have been submitted by the USCI division. Based
upon regulatory compliance audits to be conducted by the Company,
the FDA will assess the validity of data and information in USCI's
pending pre-market applications. The Company is continuing
discussions in certain related areas raised by the FDA to finally
conclude this matter.
As previously discussed, in January 1992, a civil complaint was
filed in federal court regarding the Company's efforts to obtain
FDA approval for and market an atherectomy device. In July 1992,
the federal court dismissed certain provisions of the complaint.
In January 1993, the court granted the Company's motion and entered
a stay of the case. The court subsequently dissolved its previous
order staying the proceedings in this case, and discovery is now
under way. In late 1993, the plaintiffs filed an amended complaint
which claims a breach of contract and realleges claims of fraud.
The Company has answered the amended complaint and seeks to dismiss
the fraud charges.
During 1991 the Company settled all previously disclosed
shareholder litigation brought against the Company and certain
present and former officers and directors in connection with the
withdrawal from the U.S. market of certain of the Company's
angioplasty catheters. All claims were dismissed without any
II-16
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Commitments and Contingencies (continued)
admission of liability or wrong doing. The settlement involved the
payment of approximately $18 million and had no material impact on
the 1991 earnings of the Company because it had been previously
provided for through established reserves and insurance coverages.
The Company is also subject to other legal proceedings and claims
which arise in the ordinary course of business.
The Company believes that the pending legal proceedings and other
matters discussed in this Note will likely be disposed of over an
extended period of time and should not have a material adverse
impact on the Company's financial position or results of
operations.
The Company is committed under noncancelable operating leases
involving certain facilities and equipment. The minimum annual
rentals under the terms of these leases are as follows: 1994 -
$18,300,000; 1995 - $12,400,000; 1996 - $8,300,000; 1997 -
$4,100,000; 1998 - $2,800,000; and thereafter - $2,600,000. Total
rental expense for all leases amounted to $26,500,000 in 1993,
$26,600,000 in 1992 and $27,500,000 in 1991.
6. Stock Rights
In 1985 the Board of Directors declared a dividend distribution of
one Common Share Purchase Right for each outstanding share of Bard
common stock. These Rights will expire in October 1995 and trade
with the common stock. They are not presently exercisable and have
no voting power. In the event a person acquires 20% or more, or
makes a tender or exchange offer for 30% or more of the common
stock, the Rights detach from the common stock and become
exercisable and entitle a holder to buy one share of common stock
at $31.25 (adjustable to prevent dilution). If, after the Rights
become exercisable, Bard is acquired or merged, each Right will
entitle its holder to purchase $62.50 market value of the surviving
company's stock for $31.25, based upon the current exercise price
of the Rights. The Company may redeem the Rights, at its option,
at $.025 per Right, prior to a public announcement that any person
has acquired beneficial ownership of at least 20% of the common
stock. These Rights are designed primarily to encourage anyone
interested in acquiring Bard to negotiate with the Board of
Directors.
7. Shareholders' Investment
The Company has stock option, stock award and restricted stock
plans under which certain directors, officers and employees are
participants. At December 31, 1993, 1,938,498 shares were reserved
for future issuance under these plans.
II-17
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Shareholders' Investment (continued)
Under the Company's stock option plans, options have been granted
to certain directors, officers and employees at prices equal to the
market value of the shares at the date of grant, become exercisable
in four annual instalments and expire not more than 10 years after
the date of grant. A summary of option transactions during 1993
follows:
Number Option
Of Price
Shares Per Share*
Options outstanding, January 1 2,291,169 $20.60
Granted 558,822 26.70
Exercised (187,291) 15.98
Canceled (75,508) ---
Options outstanding, December 31 2,587,192 $22.22
(1,442,773 currently exercisable)
* Weighted average price
Under the Company's stock award plans for key employees and
directors, shares are granted at no cost to the recipients and
distributed in three separate instalments. During 1993, awards for
37,860 shares (net of cancelations) were granted and 37,685 shares
were issued. Awards are charged to income over the vesting period.
At December 31, 1993, 43,205 awarded shares (aggregate market price
at date of grant $1,142,000) have not been issued.
Under the Company's restricted stock plan that was established in
1993, common stock may be granted at no cost to certain officers
and key employees. Shares are issued to the participants at the
date of grant entitling the participants to cash dividends and the
right to vote their respective shares. Restrictions limit the sale
or transfer of these shares during a five year period from the
grant date. Upon issuance of stock under the plan, unearned
compensation equivalent to the market value of the stock at the
date of grant is reflected as a reduction in retained earnings and
subsequently amortized to expense over the five year restriction
period. During 1993, 60,720 restricted shares were granted, net of
forfeitures.
Additions to capital in excess of par value of $4,800,000 in 1993
and $2,300,000 in 1992 represents the cost of shares issued under
these plans in excess of the related par value of the shares.
II-18
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Shareholders' Investment (continued)
For shares purchased by the Company, common stock is charged for
the par value of the shares retired and retained earnings is
charged for the excess of the cost over the par value of shares
retired.
8. Postretirement Benefits
The Company has defined benefit pension plans which cover
substantially all domestic and certain foreign employees and its
policy is to fund accrued pension expense for these plans up to the
full funding limitations. These plans provide for benefits based
upon individual participants' compensation and years of service.
The Company also has a supplemental defined contribution plan for
certain officers and key employees. Individual participant
accounts under the supplemental plan are credited annually based
upon a percentage of compensation. The amounts charged to income
for these plans amounted to $7,800,000 in 1993, $5,400,000 in 1992
and $5,000,000 in 1991.
The following table sets forth the funded status of the defined
benefit pension plans as of September 30, 1993 and 1992 and amounts
recognized in the Company's consolidated balance sheets at December
31, 1993 and 1992:
(Thousands of dollars)
1993 1992
Actuarial present value of accumulated
benefit obligation, including vested
benefits of $67,700 in 1993 and
$53,300 in 1992 $ 76,300 $ 60,800
Plan assets at fair value, primarily
investment securities $ 71,900 $ 63,500
Less: Actuarial present value of projected
benefit obligation for service rendered
to date 95,400 71,400
Projected benefit obligation in excess of
plan assets (23,500) (7,900)
Unrecognized (gain) loss 14,400 (500)
Unrecognized prior service cost 7,200 7,700
Unrecognized net asset at transition
amortized over 12 years (6,400) (7,700)
Accrued pension cost included in other
liabilities $ (8,300) $ (8,400)
II-19
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Postretirement Benefits (continued)
Pension costs related to the defined benefit pension plans for the
years ended December 31, 1993, 1992 and 1991 are as follows:
(Thousands of dollars) 1993 1992 1991
Net pension cost includes:
Service cost $ 6,300 $ 5,400 $ 4,600
Interest cost 5,800 4,700 4,400
Actual return on assets -
(gain) loss (8,200) (3,900) (11,200)
Net amortization and deferral 2,100 (2,300) 5,300
Net pension cost $ 6,000 $ 3,900 $ 3,100
The average discount rate used was 7% in 1993 and 8% in 1992. The
decrease in the discount rate used between years is the primary
factor for the increase in the Plans' projected benefit obligation
and the unrecognized loss at December 31, 1993. The rate of
increase in future salary levels ranged from 4% to 7% in
determining the projected benefit obligation. The expected
long-term rate of return on assets used in determining net pension
cost ranged from 8.5% to 9.5%.
The Company also provides postretirement health care benefits and
life insurance coverage to a limited number of employees at a
subsidiary. The health care benefits include cost-sharing features
based on years of service for future retirees.
Effective January 1, 1993, the Company adopted the provisions of
SFAS No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions." SFAS 106 requires the Company to recognize
expense as employees earn postretirement benefits, rather than on
the cash basis as paid. The Company elected to recognize the
accumulated postretirement benefit obligation as a cumulative
catch-up adjustment in the first quarter of 1993. This resulted in
a one-time charge of approximately $10,000,000 pretax or $6,100,000
net of taxes.
Postretirement benefit expense for 1993, exclusive of the
accumulated postretirement benefit obligation, amounted to $850,000
which is composed of $100,000 of service cost and $750,000 of
interest cost.
II-20
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Postretirement Benefits (continued)
Actuarial assumptions included a discount rate of 7%. Health care
cost trends have been projected at annual rates beginning at 13%
for 1994 decreasing gradually down to 6% in 2001 and later years.
The effect of a 1% annual increase in these assumed cost trend
rates would increase the accumulated postretirement benefit
obligation at December 31, 1993 by $1,000,000 and postretirement
benefit cost by $100,000.
9. Supplementary Income Statement Information
Royalty expense amounted to $8,600,000 in 1993, $10,200,000 in 1992
and $7,500,000 in 1991. Interest income amounted to $4,600,000 in
1993, $3,900,000 in 1992 and $3,300,000 in 1991.
II-21
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Segment Information
The Company is engaged in the design, manufacture, packaging,
distribution and sale of medical, surgical, diagnostic and patient
care devices. Hospitals, physicians and nursing homes purchase
approximately 90% of the Company's products, most of which are used
once and discarded. Information pertaining to domestic and foreign
operations as of December 31, 1993, 1992 and 1991 and for the years
then ended is given below.
(Thousands of dollars)
United Elimi- Consoli-
States Foreign nation dation
1993
Sales:
Trade $687,900 $259,600 $ --- $947,500
Export 23,300 --- --- 23,300
Intersegment 75,700 1,600 (77,300) ---
Total $786,900 $261,200 $(77,300) $970,800
Operating income $ 83,400 $ 55,200 $(10,100) $128,500
Identifiable assets:
December 31, 1993 $600,200 $198,400 $ --- $798,600
1992
Sales:
Trade $697,200 $265,700 $ --- $962,900
Export 27,300 --- --- 27,300
Intersegment 56,700 600 (57,300) ---
Total $781,200 $266,300 $(57,300) $990,200
Operating income $ 80,900 $ 51,200 $ (9,700) $122,400
Identifiable assets:
December 31, 1992 $526,300 $186,200 $ --- $712,500
1991
Sales:
Trade $615,400 $236,800 $ --- $852,200
Export 23,800 --- --- 23,800
Intersegment 45,100 800 (45,900) ---
Total $684,300 $237,600 $(45,900) $876,000
Operating income $ 54,100 $ 48,800 $ (9,900) $ 93,000
Identifiable assets:
December 31, 1991 $485,700 $171,900 $ --- $657,600
The majority of the elimination of operating income is related to
the foreign operations.
II-22
C. R. BARD, INC. AND SUBSIDIARIES
Supplementary Financial Data
(thousands of dollars except per share amounts)
QUARTERLY FINANCIAL DATA
1993
1st 2nd 3rd 4th Year
(Thousands of dollars
except per share amounts)
Net sales $236,400 $243,900 $243,500 $247,000 $970,800
Operating income 29,900 32,700 33,800 32,100 128,500
Income(loss)
before taxes 39,500 29,000 (32,100) 62,500 98,900
Income(loss)
before effect
of accounting
change 26,900 20,300 (25,200) 40,100 62,100
Net income(loss) $ 20,800 $ 20,300 $(25,200) $ 40,100 $ 56,000
Per share information:
Income(loss)
before effect of
accounting change $ .51 $ .39 $ (.48) $ .77 $ 1.19
Net income(loss) .39 .39 (.48) .77 1.07
Dividends $ .13 $ .13 $ .14 $ .14 $ .54
1992
1st 2nd 3rd 4th Year
Net sales $237,500 $245,000 $252,200 $255,500 $990,200
Operating income 27,600 30,300 31,800 32,700 122,400
Income before
taxes 24,000 25,700 27,200 30,100 107,000
Net income $ 16,800 $ 18,000 $ 19,100 $ 21,100 $ 75,000
Per share information:
Net income $ .32 $ .34 $ .36 $ .40 $ 1.42
Dividends $ .12 $ .12 $ .13 $ .13 $ .50
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
II-23
C. R. BARD, INC. AND SUBSIDIARIES
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors of the Registrant
Information with respect to Directors of the Company is
incorporated herein by reference to the material contained under
the heading "Proposal No. 1 - Election of Directors" appearing on
pages 1 through 3 of the Company's definitive Proxy Statement dated
March 10, 1994.
Executive Officers of the Registrant
Information with respect to Executive Officers of the Registrant
are on pages I-8 through I-10 of this filing.
Item 11. Executive Compensation
The information contained under the caption "Executive
Compensation" appearing on Pages 5 through 14 of the Company's
definitive Proxy Statement dated March 10, 1994 is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information contained under the caption "Securities Ownership
of Management" on pages 3 and 4 of the Company's definitive Proxy
Statement dated March 10, 1994 is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information contained under the caption "Compensation Committee
Interlocks and Insider Participation" on page 11 of the Company's
definitive Proxy Statement dated March 10, 1994 is incorporated
herein by reference.
III-1
C. R. BARD, INC. AND SUBSIDIARIES
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) l. Financial Statements and Supplementary Data
Included in Part II Item 8 of this report:
Page
II- 8 Report of Independent Public Accountants.
II- 9 Statements of Consolidated Income and Statements of
Consolidated Retained Earnings for the three years
ended December 31, 1993.
II-10 Consolidated Balance Sheets at December 31, 1993 and
1992.
II-11 Consolidated Statements of Cash Flows for the three
years ended December 31, 1993.
II-12 Notes to Consolidated Financial Statements.
II-23 Quarterly Financial Data.
2. Financial Statement Schedules
Included in Part IV of this report:
Page
IV-5 Schedule I - Marketable Securities
IV-6 Schedule V - Property, Plant and Equipment
IV-7 Schedule VI - Accumulated Depreciation and
Amortization - Property, Plant and Equipment
IV-8 Schedule VIII - Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because
they are not applicable or are not required or the
information required is included in the financial statements
or notes thereto.
3. Exhibits, No.
3a Registrant's Restated Certificate of Incorporation, as
amended, as of April 19, 1989. (p. IV-11).
IV-1
C. R. BARD, INC. AND SUBSIDIARIES
3. Exhibits, No. (Continued)
3b Registrant's Bylaws revised as of April 18, 1990.
(p. IV-23).
4 Rights Agreement dated as of October 9, 1985 between
C. R. Bard, Inc. and Morgan Guaranty Trust Company of
New York as Rights Agent. (p. IV-48)
10 Plea Agreement with attachments and Civil Settlement
Agreement between United States of America and C. R.
Bard, Inc. dated October 14, 1993, filed as Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993, File No. 1-6926 is
incorporated herein by reference.
10a* George T. Maloney Severance Agreement dated as of
August 18, 1981. (p. IV-105)
10b* William H. Longfield Severance Agreement dated as of
July 12, 1989. (p. IV-112)
10c* William C. Bopp Severance Agreement dated as of
January 14, 1991. (p. IV-139)
10d* Terence C. Brady, Jr. Severance Agreement dated as of
February 22, 1988. (p. IV-166)
10e* Richard A. Flink Severance Agreement dated as of
February 22, 1988. (p. IV-193)
10f* E. Robert Ernest Severance Agreement dated as of
January 21, 1991. (p. IV-220)
10g* William H. Longfield Supplemental Executive Retirement
Agreement dated as of January 12, 1994. (p. IV-258)
10h* 1990 Stock Option Plan. (p. IV-258)
10i* 1989 Employee Stock Appreciation Rights Plan.
(p. IV-265)
10j* C. R. Bard, Inc. Agreement and Plans Trust.
(p. IV-272)
IV-2
C. R. BARD, INC. AND SUBSIDIARIES
3. Exhibits, No. (Continued)
10k* Supplemental Insurance/Retirement Plan, Plan I - For
new corporate officer when previous agreement as non-
officer exists, Plan II - For new corporate officer
when no previous agreement exists. (p. IV-290)
10l* Retirement Plan for Outside Directors of C. R. Bard,
Inc. (p. IV-309)
10m* Deferred Compensation Contract Deferral of Directors'
Fees, as amended entered into with directors William
T. Butler, M.D., Regina E. Herzlinger, and Robert P.
Luciano. (p. IV-319)
10n* 1988 Directors Stock Award Plan, as amended in October
1991. (p. IV-361)
10o* Excess Benefit Plan. (p. IV-364)
10p* Supplemental Executive Retirement Plan. (p. IV-370)
10q* 1993 Executive Bonus Plan. (p. IV-380)
10r* Long Term Performance Incentive Plan. (p. IV-383)
10s* Deferred Compensation Contract Deferral of
Discretionary Bonus. (p. IV-389).
10t* Deferred Compensation Contract Deferral of Salary. (p.
IV-396)
10u* 1993 Long Term Incentive Plan. (p. IV-403)
21 Parents and subsidiaries of registrant. (p. IV-415)
23 Arthur Andersen & Co. consent to the incorporation by
reference of their report on Form 10-K as amended into
previously filed Forms S-8. (p. IV-416)
99 Indemnity agreement between the Company and each of
its directors and officers. (p. IV-417)
* Each of these exhibits listed under the number 10 constitutes
a management contract or a compensatory plan or arrangement.
All other exhibits are not applicable.
IV-3
C. R. BARD, INC. AND SUBSIDIARIES
(b) Reports on Form 8-K
Registrant filed a Current Report on Form 8-K dated October 8,
1993 with respect to confirming Company discussions with the
Department of Justice concerning a possible disposition of the
subject matter of the Boston Federal grand jury investigation
into its angioplasty operations.
Registrant filed a Current Report on Form 8-K dated October 15,
1993 announcing it had entered into a plea agreement in
connection with charges stemming from violations of the Federal
Food, Drug and Cosmetic Act.
Registrant filed a Current Report on Form 8-K dated October 18,
1993 disclosing the financial impact of the Justice Department
settlement on the third quarter earnings.
Registrant filed a Current Report on Form 8-K dated November 15,
1993 announcing the Company's decision to close its Fitzwilliam,
New Hampshire facility.
IV-4
SCHEDULE I
C. R. BARD, INC. AND SUBSIDIARIES
MARKETABLE SECURITIES
DECEMBER 31, 1993
(Thousands of Dollars)
Obligations of the Republic
of Ireland Government $ 38,600
European bank deposits 14,500
Other foreign bank deposits 5,200
Puerto Rico bank deposits and
government obligations 12,600
$ 70,900
The original cost of these marketable securities is equal to their
fair market value. These securities mature within six months of
December 31, 1993 and have a weighted average interest rate of
4.1%.
IV - 5
SCHEDULE V
C. R. BARD, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Thousands of Dollars)
Column A Col. B Col. C Col. D Col. E Col. F
Balance Retire- Other
at ments Currency Balance
Beginning Additions Sales or Transla- at End
of Year at Cost Transfers tion of Year
Year Ended December 31, 1993
Land $ 9,000 $ --- $ (200) $ --- $ 8,800
Build.&imp. 106,700 4,500 (3,500) (1,000) 106,700
Mach.&equip. 137,300 26,800 (16,500) (2,200) 145,400
(a) (c)
Total $253,000 $31,300 $(20,200) $(3,200) $260,900
Year Ended December 31, 1992
Land $ 9,000 $ --- $ --- $ --- $ 9,000
Build.&imp. 102,700 9,800 (4,600) (1,200) 106,700
Mach.&equip. 132,700 20,500 (14,300) (1,600) 137,300
(b)
Total $244,400 $30,300 $(18,900) $(2,800) $253,000
Year Ended December 31, 1991
Land $ 8,900 $ 100 $ --- $ --- $ 9,000
Build.&imp. 98,400 7,500 (2,500) (700) 102,700
Mach.&equip. 123,200 23,400 (13,200) (700) 132,700
Total $230,500 $31,000 $(15,700) $(1,400) $244,400
(a) Includes $600 of property, plant and equipment of acquired
companies.
(b) Includes $300 of property, plant and equipment of acquired
companies.
(c) Includes $3,400 of property, plant and equipment disposed of
with the sale of the Bard MedSystems division.
IV-6
SCHEDULE VI
C. R. BARD, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Thousands of Dollars)
Column A Col. B Col. C Col. D Col. E Col. F
Balance Retire- Other
at Additions ments Currency Balance
Beginning Charged Sales or Transla- at End
of Year to Cost Transfers tion of Year
Year Ended December 31, 1993
Build.&imp. $ 28,600 $ 5,000 $ (3,100) $ (300) $ 30,200
Mach.&equip. 61,600 15,400 (14,000) (1,200) 61,800
(a)
Total $ 90,200 $ 20,400 $(17,100) $ (1,500) $ 92,000
Year Ended December 31, 1992
Build.&imp. $ 26,400 $ 6,100 $ (3,600) $ (300) $ 28,600
Mach.&equip. 60,400 15,100 (12,900) (1,000) 61,600
Total $ 86,800 $ 21,200 $(16,500) $ (1,300) $ 90,200
Year Ended December 31, 1991
Build.&imp. $ 23,500 $ 5,100 $ (2,100) $ (100) $ 26,400
Mach.&equip. 59,500 13,700 (12,400) (400) 60,400
Total $ 83,000 $ 18,800 $(14,500) $ (500) $ 86,800
(a) Includes $2,200 of accumulated depreciation for property, plant
and equipment sold with the Bard MedSystems division.
IV-7
SCHEDULE VIII
C. R. BARD, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(Thousands of Dollars)
Column A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
Balance Charged Charged Write-Off
at to Costs to Uncol- Balance
Beginning and Other lectable at End
of Year Expenses Accounts Accounts of Year
Year Ended December 31, 1993
Reserve for doubtful
accounts $ 5,300 $ 2,400 $ (300) $ (300) $ 7,100
Year Ended December 31, 1992
Reserve for doubtful
accounts $ 5,000 $ 2,200 $ (200) $(1,700) $ 5,300
Year Ended December 31, 1991
Reserve for doubtful
accounts $ 4,600 $ 1,600 $ (200) $(1,000) $ 5,000
IV-8
C. R. BARD, INC. AND SUBSIDIARIES
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.
C. R. BARD, INC.
(Registrant)
By: William C. Bopp /s/
William C. Bopp
Senior Vice President and
Chief Financial Officer
Date: March 28, 1994
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
Signatures Title Date
William H. Longfield /s/ President and March 28, 1994
William H. Longfield Chief Operating Officer
and Director
(Principal Executive
Officer)
William C. Bopp /s/ Senior Vice President March 28, 1994
William C. Bopp and Chief Financial
Officer
(Principal Financial
Officer)
Terence C. Brady, Jr. /s/ Senior Vice President March 28, 1994
Terence C. Brady, Jr. and Controller
(Principal Accounting
Officer)
IV-9
C. R. BARD, INC. AND SUBSIDIARIES
Signatures Title Date
Joseph F. Abely, Jr. /s/ Director March 28, 1994
Joseph F. Abely, Jr.
William T. Butler, M.D. /s/ Director March 28, 1994
William T. Butler, M.D.
Raymond B. Carey, Jr. /s/ Director March 28, 1994
Raymond B. Carey, Jr.
Daniel A. Cronin, Jr. /s/ Director March 17, 1994
Daniel A. Cronin, Jr.
Regina E. Herzlinger /s/ Director March 28, 1994
Regina E. Herzlinger
Robert P. Luciano /s/ Director March 18, 1994
Robert P. Luciano
Robert H. McCaffrey /s/ Director March 28, 1994
Robert H. McCaffrey
Ralph H. O'Brien /s/ Director March 28, 1994
Ralph H. O'Brien
IV-10