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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, 1997
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:
Name of each exchange on
Title of each class 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. [ X ]
The aggregate market value of the voting stock held by
nonaffiliates of the registrant was approximately $1,982,230,016
based on the closing price of stock traded on the New York Stock
Exchange on February 27, 1998. As of February 27, 1998, there were
56,829,989 shares of Common Stock, $.25 par value per share,
outstanding.
The company's definitive Proxy Statement dated March 6, 1998 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-five years broadening Bard's product
lines. Today, C. R. Bard, Inc. is a leading multinational
developer, manufacturer and marketer of health care products.
1997 sales of $1.214 billion increased 2% from 1996. Net income
for 1997 totaled $72.3 million compared with $92.5 million in 1996.
Basic and diluted earnings per share were $1.27 and $1.26,
respectively, in 1997. Basic and diluted earnings per share were
$1.62 and $1.61, respectively in 1996.
Acquisitions and Dispositions
The first quarter of 1997 included a sale of a product line which
resulted in a pretax gain of $4.9 million ($.05 basic and diluted
per share). The third quarter of 1997 included the sale of the
surgical suction product line which resulted in a pretax gain of
$17.8 million ($.19 basic and diluted per share).
In September of 1996 Bard completed the acquisition of IMPRA, Inc.
("IMPRA"), a company that develops, manufactures and markets
vascular grafts used for blood vessel replacement surgery. The
purchase and acquisition costs which approximated $155.4 million
were financed with commercial paper. In addition, during 1996, the
company acquired St. Jude Medical's Cardiac Assist Division
and X-Trode S.r.l. These acquisitions enhance and expand the
company's existing product lines and further develop international
markets. The cost of these acquisitions amounted to approximately
$44.0 million and were financed through internally generated cash
and available credit lines.
In September 1995, the company completed a merger with MedChem
Products, Inc. ("MedChem") issuing 3,192,345 shares of its common
stock in exchange for all outstanding common stock of MedChem. In
October 1995, the company completed a merger with American Hydro-Surgical
Instruments, Inc. ("AHS") issuing 1,338,446 shares of its
common stock in exchange for all outstanding common stock of AHS.
These mergers have been accounted for as poolings of interests.
I-1
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 company now reports its sales using five new product group
categories. Designed around the concept of disease state
management, three of Bard's new product group categories are:
vascular diagnosis and intervention, urological diagnosis and
intervention, and oncological diagnosis and intervention. In
addition the company maintains and grows a fourth product group of
surgical specialties which does not fit conveniently into this
disease-state focus. The other category contains de-emphasized
products and discontinued product lines.
The following table sets forth for the last three years ended
December 31, 1997, the approximate percentage contribution by
product line to Bard's consolidated net sales. The figures are on
a worldwide basis.
Years Ended December 31,
1997 1996 1995
Vascular 38% 36% 36%
Urology 26% 25% 26%
Oncology 18% 18% 18%
Surgery 11% 10% 10%
Other 7% 11% 10%
Total 100% 100% 100%
Narrative Description of Business
General
Historically, 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
vascular diagnosis and intervention, contributing approximately 38%
of consolidated net sales.
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 four principal product
lines: vascular diagnosis and intervention, urological diagnosis
and intervention, oncological diagnosis and intervention, and
surgical specialties. 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.
I-2
Vascular Diagnosis and Intervention - Bard's line of vascular
diagnosis and intervention 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; coronary stents; fabrics and meshes for
vessel repair; implantable blood vessel replacements;
cardiopulmonary support systems; and blood oxygenators and related
products used in open-heart surgery. See the first paragraph of
Item 3. Legal Proceedings on Page I-6 for additional information.
Urological Diagnosis and Intervention - Bard offers a complete line
of urological diagnosis and intervention products including Foley
catheters, procedural kits and trays and related urine monitoring
and collection systems; ureteral stents; and specialty devices for
incontinence, endoscopic procedures and stone removal.
Oncological Diagnosis and Intervention - Bard's line of oncological
diagnosis and intervention products include biopsy and other cancer
detection products; specialty access catheters and ports; and
gastroenterological products.
Surgical Specialties - Bard's surgical specialties products include
meshes for hernia repair; irrigation devices for orthopaedic and
laparoscopic procedures; laparoscopic accessories; and topical
hemostasis.
International - Bard markets vascular, urological, oncological and
surgical specialties products throughout the world. Principal
markets are Japan, Canada, the United Kingdom and continental
Europe. Approximately 55% of the sales outside the United States
are of products manufactured by Bard in its facilities in Canada,
France, Germany, Ireland, Malaysia and the United Kingdom. The
balance of the sales are from products manufactured in the
continental 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 p. II-28 Note 10 in the Notes to Consolidated Financial
Statements 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, 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.
I-3
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.
Sales to a distributor, which supplies the company's products to
many end-users, accounted for approximately 10% of the company's
sales and the five largest distributors combined accounted for
approximately 23% of such sales.
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, record keeping,
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.
I-4
Raw Materials
The company uses a wide variety of readily available plastics,
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
adoption of this policy is the avoidance of negative economic
effect on the health care industry, a small portion of the
company's product lines may face a short-term threat to the
continuity of their raw material supply. Such suppliers 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. Bard is working to maintain a
supply of qualified materials by developing new suppliers and
increasing inventories of important stocks.
Environment
The company continues to address current and pending environmental
regulations relating to its use of Ethylene Oxide 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
believes that continuing costs for environmental activities will
not significantly affect earnings or competitive position.
Employees
The company employs approximately 9,550 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 $85,800,000 in 1997, $77,300,000 in 1996 and
$75,600,000 in 1995.
I-5
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 Arizona,
Georgia, Kansas, Massachusetts, Michigan, New Jersey, New York,
Ohio, Puerto Rico, South Carolina, Texas, Utah and Washington.
Sales offices and distribution points are in these locations as
well as others.
Outside the U.S., the company has plants or offices in Australia,
Austria, Belgium, Canada, China, France, Germany, Hong Kong, India,
Ireland, Italy, Japan, Korea, Malaysia, Mexico, the Netherlands,
Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the
United Kingdom.
The company owns approximately 2,286,000 square feet in 23
locations and leases approximately 1,361,000 square feet of space
in 66 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 commitments agreed to in the plea agreement expired
on October 14, 1997.
On October 6, 1995, Trimedyne, Inc. filed a complaint in State
Court in California alleging breach of contract, fraud and
negligent misrepresentation by the company in connection with its
performance under a Development, Supply and License Agreement dated
June 28, 1991, concerning side-firing laser products (Urolase ).
In addition, the complaint alleges that the company has failed to
pay for product purchased, along with certain other charges.
Trimedyne, Inc. seeks damages totaling $72 million plus punitive
damages. The case has been removed to the Federal District Court
and transferred to the District of New Jersey. The company
believes it has some liability to the plaintiff for certain goods
ordered; however, the amount is in dispute. Except as to this
claim, the company believes that it has meritorious defenses to
this action.
I-6
Item 3. Legal Proceedings (continued)
During 1993, the United States Environmental Protection Agency (the
"EPA") notified the company's Urological division that it may be a
potentially responsible party relative to clean-up of the Frontier
Chemical site in Niagara Falls, New York. In September, 1993, the
company entered into a consent order concerning the first phase of
the clean-up, which was a drum removal action. The company's
liability for the first phase was $119,000. A second phase of
remedial action involves removal of waste in several large tanks.
The company's liability for this phase was assessed at less than
$15,000. The third phase of remedial action involves soil and
groundwater contamination. The company's responsibility, if any,
for clean up of this phase is unknown at this time, but it is
believed that the final resolution of this matter is not expected
to have a material adverse financial impact on the company.
During 1992, the EPA notified the company 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. In June of 1995, together with several hundred
other parties, the company entered into two consent orders to
perform the remedial investigation and feasibility study and two
removal actions with respect to groundwater contamination. 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 March 1, 1998. No family
relationships exist among the officers of the company.
Name Age Position
William H. Longfield 59 Chairman and
Chief Executive Officer
and Director
Benson F. Smith 50 President and
Chief Operating Officer
and Director
William C. Bopp 54 Executive Vice President
and Chief Financial
Officer and Director
Guy J. Jordan 49 Group President
Timothy M. Ring 40 Group President
William T. Tumber 63 Senior Vice President
John H. Weiland 42 Group President
James R. Adwers, M.D. 54 Vice President - Medical
Affairs
E. Robert Ernest 57 Vice President - Planning
and Development
Richard A. Flink 63 Vice President, General
Counsel and Secretary
Christopher D. Ganser 45 Vice President - Quality
Assurance
I-8
Executive Officers of the Registrant (continued)
Hope Greenfield 46 Vice President - Human
Resources
Charles P. Grom 50 Vice President and
Controller
Richard D. Manthei 62 Vice President-Scientific
Affairs
Earle L. Parker 54 Vice President and
Treasurer
All officers of the company are elected annually by the Board of
Directors.
I-9
Executive Officers of the Registrant (continued)
William H. Longfield joined Bard in 1989 as executive vice
president and chief operating officer. Prior to joining the
company was president and chief executive officer of Cambridge
Group, Inc. Previously was executive vice president-operations of
Lifemark, Inc. and, prior thereto, was employed by American
Hospital Supply Corporation where he held a number of positions
including president of the Convertors division. Elected president
and chief operating officer in 1991, elected president and chief
executive officer in 1994 and to present position in 1995. Elected
to Board of Directors in 1990.
Benson F. Smith joined Bard in 1980, having been national sales
manager at Davol Inc. Promoted to general manager of Bard Electro
Medical Systems in 1983, to vice president and general manager of
Bard Home Health division in 1986 and to president of Bard
Urological division in 1987. Promoted to group executive in 1990
and to group vice president in 1991. Elected executive vice
president-operations in 1993, executive vice president and chief
operating officer in 1994, and to present position in 1995.
Elected to Board of Directors in 1994.
William C. Bopp joined Bard in 1980 as controller for Bard
International, Inc. Prior to joining Bard was with Allied
Corporation since 1968 in various corporate and division financial
positions. Promoted to assistant corporate controller in January
1983. Elected treasurer in July 1983, vice president and treasurer
in 1988, senior vice president and chief financial officer in 1992
and to present position in 1995. Elected to Board of Directors in
1995.
Guy J. Jordan joined Bard in 1986 as director of research and
development for USCI. Promoted to vice president for specialty
access products in 1990 for Davol. In 1991 promoted to vice
president and general manager of Bard Access Systems and became
president of the division in 1993. Elected to group vice president
in October 1996 and to present position in April 1997. Prior to
joining Bard, he was with American Cyanamid Corporation.
Timothy M. Ring joined Bard as vice president-human resources in
June 1992. Prior to joining the company was with Abbott
Laboratories, Inc. for ten years, most recently with their Hospital
Products division as director of personnel. Elected to group vice
president in 1993 and to present position in 1997.
William T. Tumber joined Bard in 1980, through the acquisition of
Davol Inc. where he was director of employee relations. Promoted
to vice president-manufacturing of Davol in 1980, vice president
and general manager in 1988 and to president in 1990. Promoted to
group executive in 1990, to group vice president in 1991 and
appointed to present position in 1996.
I-10
Executive Officers of the Registrant (continued)
John H. Weiland joined Bard in 1996 as group vice president. Prior
to joining the company, was senior vice president, at Dentsply
International. Previously served as president and chief executive
officer of Pharmacia Diagnostics, Inc. and was with American
Hospital Supply and Baxter Healthcare. Served one year as a White
House Fellow in the role of Special Assistant in the Office of
Management and Budget. Elected to present position in 1997.
James R. Adwers, M.D. joined Bard in 1995 as regional vice
president, surgical group, corporate medical affairs. Promoted to
staff vice president of the corporate medical affairs group in
1996. Prior to joining the company, he held medical affairs
positions with Becton, Dickinson and Company and Technomed
International. Promoted to present position in 1997.
E. Robert Ernest joined Bard as director of market research and
business development in 1977. Prior to joining Bard he was with
Abbott Laboratories for ten years. Promoted to vice president-business
development in 1979 and named to present position in
1994.
Richard A. Flink joined Bard as associate general counsel in 1970,
named general counsel in 1971, vice president and general counsel
in 1973 and elected to the additional position of secretary in
1985. Prior to joining Bard was with the law department of Becton,
Dickinson and Company.
Christopher D. Ganser joined Bard in 1989 as manager-quality
assurance in the Moncks Corner facility. Promoted to division
manager-quality control operations in 1991 and to director of
quality assurance of Bard Urological division in 1992. Promoted to
present position in 1994. Prior to joining Bard, he held several
quality assurance positions with Kendall McGaw.
Hope Greenfield joined Bard in 1995 in her present position. Prior
to joining the company, she was with Digital Equipment Corporation
for sixteen years where she served as human resources director and
vice president for various divisions.
Charles P. Grom joined Bard in 1977 as corporate accounting manager
and promoted to corporate cost and budget manager in 1980. Served
as division controller for various Bard Divisions between 1981 and
1988 when he was promoted to assistant corporate controller.
Elected controller in 1994 and to his present position in 1995.
I-11
Executive Officers of the Registrant (continued)
Richard D. Manthei joined Bard in 1996 in his current position.
Prior to joining the company, he was a partner in the law firm of
McKenna and Cuneo in Washington, D.C., where he chaired the Food,
Drug, Cosmetic, and Medical Device Department. He previously
served as managing partner at Burditt, Bowles and Radzius. He held
prior positions with American Hospital Supply Corporation and
Baxter International, Inc.
Earle L. Parker joined Bard in 1979 as corporate cost and budget
manager. Promoted to assistant controller of Bard Urological
division in 1980, to controller of USCI division in 1981 and to
vice president and controller in 1985. Promoted to vice president-operations
of USCI division in 1990, to vice president and general
manager of USCI Angiography division in 1991, to treasurer in 1992
and to present position in 1994.
I-12
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
1997
High 28-3/4 36-3/4 39 34-7/8 39
Low 26-3/8 27-7/8 32-11/16 26-1/2 26-3/8
Close 28-1/2 36-5/16 34 31-5/16 31-5/16
1996
High 37-3/8 37 34-3/8 32-3/4 37-3/8
Low 29-1/2 31-7/8 28-3/4 25-7/8 25-7/8
Close 35-5/8 34-1/8 31-1/8 28 28
Approximate Number of Equity Security Holders
Approximate Number
of Record Holders
Title of Class as of February 27, 1998
Common Stock - $.25 par value 6,973*
*Included in the number of shareholders of record are shares held
in "nominee" name.
Dividends
The company paid cash dividends of $40,000,000 or $.70 per share in
1997 and $37,700,000 or $.66 per share in 1996. The following
table illustrates the quarterly rate of dividends paid per share.
Quarters
1st 2nd 3rd 4th Year
1997 $ .17 $ .17 $ .18 $ .18 $ .70
1996 $ .16 $ .16 $ .17 $ .17 $ .66
In December 1997, the first quarter dividend of $.18 per share was
declared, indicating an annual rate of $.72 per share. The first
quarter dividend was paid on February 6, 1998 to shareholders of
record on January 26.
II-1
Item 6. Selected Financial Data
(Thousands of dollars except per share amounts)
1997 1996 1995 1994 1993
INCOME STATEMENT DATA
Net sales $1,213,500 $1,194,400 $1,137,800 $1,064,600 $1,008,800
Net income 72,300 92,500 86,800 75,600 57,800
BALANCE SHEET DATA
Total assets$1,279,300 $1,332,500 $1,091,000 $1,043,100 $ 881,400
Working
capital 252,900 240,700 230,600 72,300 165,200
Long-term
debt 340,700 342,800 198,400 93,400 82,100
Total debt 443,700 491,000 265,300 294,000 171,000
Shareholders'
investment 573,100 601,500 564,600 495,400 439,900
COMMON STOCK DATA
Basic earnings
per share $ 1.27 $ 1.62 $ 1.53 $ 1.34 $ 1.02
Diluted earnings
per share $ 1.26 $ 1.61 $ 1.52 $ 1.33 $ 1.01
Cash dividends
per share .70 .66 .62 .58 .54
Shareholders'
investment
per share $ 10.09 $ 10.56 $ 9.89 $ 8.77 $ 7.77
Average shares
outstanding
(000's) 56,971 57,090 56,731 56,461 56,692
SUPPLEMENTARY DATA
Return on average
shareholders'
investment 12.3% 15.9% 16.4% 16.2% 13.1%
Net income/net
sales 6.0% 7.7% 7.6% 7.1% 5.7%
Days-accts
rec. 69.6 70.3 66.7 62.3 60.7
Days-
inventory 151.9 151.7 149.4 143.6 135.9
Total debt/
total
capitaliza-
tion 43.6% 44.9% 32.0% 37.2% 28.0%
Interest
expense $ 32,900 $ 26,400 $ 24,200 $ 16,300 $ 12,500
R&D expense 85,800 77,300 $ 75,600 $ 71,600 $ 67,500
# of emp. 9,550 9,800 9,400 8,900 8,650
Net sales per
employee $ 127.1 $ 121.9 $ 121.0 $ 119.6 $ 116.6
Net income per
employee $ 7.6 $ 9.4 $ 9.2 $ 8.5 $ 6.7
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 $2.4
trillion in 1997 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 mainly 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 diseases
with cost-effective, innovative products and specialized sales
forces to maximize Bard's opportunities in managing these diseases.
Summary Results
Consolidated net sales increased 2% in 1997. Growth was negatively
affected by divested and de-emphasized product lines, sales
denominated in foreign currencies that weakened against the U.S.
dollar and a continued reduction in average selling prices. Net
income and basic earnings per share in 1997 and 1996 were both
affected by one-time items. In 1997 the major one-time item was a
$44.1 million ($30.1 million after-tax) charge for the company's
manufacturing restructuring plan. The plan relates to activities
which will be implemented during the next twenty-one months and
when completed are estimated to result in pretax cost savings of
approximately $43 million annually. The company's current
estimates show a savings of approximately 21 cents per share in
1999 and approximately 40 cents per share in the year 2000 and
beyond. Please refer to page II-5 of this financial review for a
summary of one-time items affecting income in the last three years.
Results of Operations - 1997 vs. 1996
Net sales rose 2% to $1.214 billion. Divested and de-emphasized
product lines reduced the growth in 1997 sales by 4%. Price
reductions totaled about 1.5% and the stronger dollar reduced
reported sales by 2%. Excluding these items, sales would have
grown approximately 9%.
Sales of vascular products rose 5% in 1997. Radiology devices
showed strong growth, primarily in U.S. markets. A full year of
sales of graft products from the acquisition of IMPRA, Inc. in
September 1996 added significantly to the growth rate of vascular
products.
Urology product sales grew 5% in 1997. The Infection Control Foley
catheter and the Contigen Bard collagen implant provided the growth
in this area.
II-3
Results of Operations - 1997 vs. 1996 (continued)
Sales of oncology products increased 5% in 1997. Specialty venous
access devices showed good growth, particularly in international
markets. Biopsy products had good growth in U.S. markets.
Sales of surgical specialty products grew 11% in 1997, propelled by
high growth worldwide of mesh products used primarily for hernia
repair.
The four product areas discussed above are Bard's emphasis products
which accounted for over 93% of total sales in 1997. The combined
growth of emphasis products was 6% in 1997 and would have grown 8%
without the negative impact of foreign currencies.
Other product group sales declined 34% in 1997, primarily as a
result of the sale and discontinuance of several product lines.
Net sales by product group for the last three years (in millions)
are:
1997 1996 1995
Vascular $ 457.6 $ 434.7 $ 410.2
Urology 319.1 304.1 286.5
Oncology 224.5 214.2 197.6
Surgery 129.2 116.4 105.9
Total emphasis products 1,130.4 1,069.4 1,000.2
Other 83.1 125.0 137.6
Net sales $1,213.5 $1,194.4 $1,137.8
Sales in the United States rose 1% in 1997 to $793.2 million,
representing 65% of worldwide sales. Sales of emphasis products
rose 8% while the decline in de-emphasized product resulted in the
small overall increase in U.S. sales. Vascular and surgical
specialty product areas provided the best growth in the U.S.
Sales outside the U.S. increased 2% in 1997 and would have grown 9%
without the effect of a 7% reduction in foreign currency
translation. In local currency values, Bard experienced solid
sales gains in vascular grafts (helped by the acquisition of IMPRA
in 1996), specialty access devices, mesh products and basic
urological drainage devices. The geographic breakdown of sales
outside the U.S. for the last three years is:
1997 1996 1995
Europe, Middle East,
Africa 61% 62% 62%
Asia/Pacific area and
Western hemisphere,
excluding U.S. 39% 38% 38%
100% 100% 100%
II-4
Results of Operations - 1997 vs. 1996 (continued)
Bard's cost of goods sold showed good improvement to 47.2% of sales
compared with 48.7% in 1996. Bard's efforts to reduce
manufacturing costs and the acquisition of IMPRA resulted in this
improvement.
Marketing, selling and administrative expenses increased almost 7%
in 1997 primarily due to a full year of spending associated with
the IMPRA acquisition and the costs associated with programming
changes for the year 2000. These expenses grew faster than sales
and were at a level of 32.2% of sales in 1997 compared with 30.6%
in 1996.
Spending for research and development increased 11% in 1997 to 7%
of sales from 6.5% of sales in 1996. This increase in spending
will help ensure that the company has the new products that are
essential to Bard's growth.
Additional interest expense for the full year of 1997 related to
acquisitions in 1996 (primarily IMPRA in September) and resulted in
the increase in total interest expense for the year.
Costs of $9.0 million in 1996 to combine the operations of
acquisitions affected income in that year. There were no such
costs in 1997.
Please refer to Note 9, Other (Income) Expense, Net of the Notes of
Consolidated Financial Statements in this report for a summary of
items in this category in the last three years. Included in this
category in 1997 are charges of $44.1 million for a manufacturing
restructuring plan and $10.5 million associated with the impairment
of investments and intangible assets, and a legal settlement.
These charges were partially offset by gains of $17.8 million on
the sale of the surgical suction and irrigation product line and
$6.7 million from the sales of other product lines and assets.
Income Tax
The effective tax rate was 31.1% in 1997, 10% in 1996 and 29.7% in
1995. The lower tax rate in 1996 was primarily due to the
increased tax benefit in the U.S. related to one-time charges and
the reversals of approximately $15 million in tax reserves no
longer required. The tax benefit from operations in Ireland and
Puerto Rico favorably affected the tax rate in each year.
Net Income
Net income decreased to $72.3 million in 1997 from $92.5 million in
1996. This was due in large part to the $44.1 million charge
($30.1 million after-tax) for a manufacturing restructuring plan.
The following chart shows the effect on net income and on basic and
diluted earnings per share of one-time items during the last three
years.
II-5
Net Income (continued)
1997
Manufacturing restructuring plan $(30.1)
Impairment of investments, intangible
assets and legal settlement (6.3)
Year 2000 costs (1.7)
Sales of product lines and other assets 14.7
Total 1997 $(23.4)
Equivalent per share - basic $ (.41)
- diluted $ (.40)
1996
Reorganization, asset writedown
and costs to combine operations $(29.8)
Reversal of tax reserves 15.0
Prior period royalty payments,
legal settlement and other 3.6
Total 1996 $(11.2)
Equivalent per share - basic $ (.20)
- diluted $ (.19)
1995
Costs to combine operations $(13.5)
Equivalent per share - basic $ (.24)
- diluted $ (.24)
After adjusting for the items shown above, net income and earnings
per share (EPS) would have been:
Net Income Basic Diluted
(millions) EPS EPS
1997 $ 95.7 $1.68 $1.67
1996 $103.7 $1.82 $1.80
1995 $100.3 $1.77 $1.75
For information on the calculation of basic and diluted earnings
per share, please refer to Note 1 of the Notes to Consolidated
Financial Statements on page II-16.
Results of Operations - 1996 vs. 1995
Net sales totaled $1.194 billion in 1996, a 5% increase over 1995.
Price reductions totaled about 2% worldwide while a stronger dollar
reduced reported sales by 1%.
Sales of vascular products rose 6% in 1996 to $434.7 million.
Radiology devices showed strong growth. Sales of grafts increased
sharply as a result of the September 1996 acquisition of IMPRA and
sales of cardiac assist devices acquired from St. Jude Medical in
January 1996 also added to the vascular growth rate.
II-6
Results of Operations - 1996 vs. 1995 (continued)
Urological product sales totaled $304.1 million in 1996, a 6%
increase over 1995. Basic drainage products and specialty devices
contributed to this growth. The company's growth in urological
products was significantly higher in the U.S. than in international
markets.
Sales of oncological products grew 8% to $214.2 million in 1996,
primarily from a strong increase in the specialty venous access
area.
Surgical specialty products were up 10% in 1996 to $116.4 in sales.
Mesh products, which are used primarily in hernia repair, showed a
substantial gain in sales.
Worldwide sales of the emphasis products described above grew 7% in
1996 to $1.069 billion and represented 90% of Bard's total sales.
Other products are de-emphasized and sales in this area declined by
9% in 1996 to $125.0 million.
Sales in the United States grew 4% in 1996 to $782.0 million,
representing 65% of worldwide sales. Surgical specialties turned
in the highest growth rate of the four emphasis product groups, but
the urological area continues to generate the most revenue and also
showed good growth. The good increase in sales of oncological
products came primarily from growth in specialty access and biopsy
devices. Vascular sales showed improvement primarily as a result
of the 1996 acquisition of IMPRA. Sales of other, de-emphasized
products declined.
Sales outside the U.S. grew 6% in 1996 to $412.4 million,
representing 35% of worldwide sales, compared with 34% in 1995.
Growth was highest in the oncological and surgical specialties
areas. Sales of vascular products showed good increases from
grafts and radiology devices, and were helped by strong balloon
angioplasty sales in Europe. Sales of urological products showed
a small increase with gains primarily in basic drainage and
continence products. The effect of currency translation was to
lower international sales by almost 3% for the year. Excluding
this effect, reported international sales would have increased 9%
over the prior year.
The cost of goods sold as a percent of sales was 48.7% in 1996 and
48.3% in the prior year as market price reductions exceeded the
company's gains in manufacturing efficiencies and efforts to shift
the mix to higher margin products.
Marketing, selling and administrative expenses increased just over
3% in 1996, lower than the rate of growth in sales, as efforts were
increased to lower expenses to help offset some of the effects of
price declines. Also, Bard realized synergies from the two mergers
completed late in 1995. As a percent to total sales, these
expenses represented 30.6% in 1996 compared with 31.2% in 1995.
II-7
Results of Operations - 1996 vs. 1995 (continued)
Research and development spending increased over 2% in 1996,
representing 6.5% of sales, slightly less than the ratio to sales
in 1995. In an effort to reduce costs, the company eliminated
certain planned spending while continuing sufficient work on the
programs needed for Bard's future success.
Additional interest expense related to acquisitions in 1996
resulted in an increase in total interest expense for the year.
Costs to combine the operations of acquisitions of $9.0 million in
1996 and $17.7 million in 1995 affected income in both years.
Other (income) expense, net, in 1996 included charges of $31.0
million for the write down of assets related to guidewire
technology, $10.0 million for the closing of certain manufacturing
operations and a net amount of $3.5 million for certain legal fees
and settlements. Also included are nonrecurring royalty payments
of $9.2 million received in 1996 for prior periods. No
nonrecurring items were recorded in this category in 1995.
The effective income tax rate was 10% in 1996. Excluding the
impact of the first quarter reversal of approximately $15 million
in tax reserves no longer required and the increased tax benefit in
the U.S. related to the one-time charges discussed previously, the
effective tax rate would have been 29.5% compared with 29.7% in
1995.
Net income increased 7% in 1996 and 15% in 1995. Each year was
affected by one-time items as described earlier in this financial
review.
Year 2000 Expenditures
The company utilizes software and related technologies that will be
affected by the date change in the year 2000. Marketing, selling
and administrative expense in 1997 includes $2.8 million for Year
2000 expenditures. The company estimates the need for additional
expenditures of $5.3 million in 1998, $1.5 million in 1999 and $0.3
million in 2000.
Financial Condition and Liquidity
Bard's financial condition remains strong. Total debt was reduced
by $47.3 million to $443.7 at the end of 1997 and the ratio of
total debt to total capitalization declined to 43.6% from 44.9%.
Long-term debt was $340.7 million at December 31, 1997, including
$120 million of commercial paper borrowing that remains classified
as long-term with the backing of Bard's committed credit facility.
The company has a $300 million syndicated, committed credit
facility with a group of 11 banks. The facility expires in June
2000.
II-8
Financial Condition and Liquidity
The credit agreement supports a commercial paper program which
started in September 1996 with a maximum amount of $350 million,
reduced to $300 million effective January 1, 1997. The company
borrows actively under this program.
In addition to the $300 million committed credit agreement, Bard
maintains uncommitted credit lines with banks for short-term cash
needs and these lines were used as needed during the last three
years. At December 31, 1997, the unused uncommitted lines of
credit totaled $254 million.
As now structured, the company expects cash flow from operating
activities to exceed capital expenditures and dividend payments.
The company believes it could borrow adequate funds at competitive
terms and rates, should it be necessary. This overall financial
strength gives Bard sufficient financing flexibility.
Total cash outlays made for purchases of businesses, patents,
trademarks and other related items were approximately $23 million
in 1997, $237 million in 1996 and $19 million in 1995 for a total
over the last three years of $279 million. The majority of these
investments were for intangible assets, reflecting the premium over
book value for these purchases. The cash outlays exclude common
stock valued at $135 million issued in 1995 for the acquisitions of
MedChem Products and American Hydro-Surgical. The majority of the
cash outlays were financed with additional debt (which increased a
total of $150 million during the three-year period) with the
balance coming from cash from operations.
Periodically, the company purchases its common stock in the open
market. Total shares purchased were 955,200 in 1997; 813,700 in
1996 and 75,000 in 1995. In September 1997 the Board of Directors
authorized the purchase from time to time of up to 2 million shares
of which 200,000 had been purchased as of December 31, 1997.
Foreign Currency Risk
The company periodically enters into foreign exchange contracts to
reduce its exposure to fluctuations in currency values. Contracts
have been for the forward purchase of, and options in, currencies
in which the company has known or anticipated payments. These are
primarily for intercompany transactions, resulting in a high degree
of confidence that the anticipated transactions will take place.
Monetary assets of the company held in foreign currencies have
relatively short maturities and are denominated in currencies that
have not experienced wide short-term fluctuations in their
equivalent U.S. dollar values. Please refer to Note 4 of the Notes
to Consolidated Financial Statements on page II-20 of this report
for current details of the company's foreign exchange contracts.
II-9
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-22.
Acquisitions and Dispositions
For information on the company's acquisitions and dispositions of
businesses, please see Note 2 of the Notes to Consolidated
Financial Statements on page II-18.
Recently Issued Accounting Standards
In the fourth quarter of 1997, the company adopted Financial
Accounting Standard (FAS) 128 which requires the presentation of
both basic and diluted earnings per share. Basic earnings per
share as calculated in accordance with FAS 128 does not differ from
earnings per share reported in prior periods and diluted earnings
per share is not materially different from basic earnings per
share.
In June 1997, the Financial Accounting Standards Board issued
Statement No. 130, Reporting Comprehensive Income, which
establishes standards for reporting comprehensive income and its
components, and Statement No. 131, Disclosures about Segments of an
Enterprise and Related Information, which establishes revised
reporting and disclosure requirement for operating segments. The
company will adopt Statement Nos. 130 and 131 by year-end 1998.
These Statements increase disclosure only and will have no effect
on the company's financial position or results of operations.
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
II-10
Cautionary Statement Regarding Forward-Looking Information
(continued)
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.
II-11
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, 1997 and 1996 and the related consolidated
statements of income, retained earnings and cash flows for each of
the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these
financial statements 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, 1997 and 1996,
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Roseland, New Jersey
January 27, 1998
II-12
C. R. BARD, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(Thousands of dollars except For the Years Ended December 31,
per share amounts) 1997 1996 1995
Net sales $1,213,500 $1,194,400 $1,137,800
Costs and expenses:
Cost of goods sold 572,800 581,300 550,000
Marketing, selling
and administrative 390,500 365,800 354,600
Research and development 85,800 77,300 75,600
Interest expense 32,900 26,400 24,200
Costs to combine
operations 0 9,000 17,700
Other(income)expense, net 26,600 31,900 (7,800)
Total costs & expenses 1,108,600 1,091,700 1,014,300
Income before taxes 104,900 102,700 123,500
Income tax provision 32,600 10,200 36,700
Net income $ 72,300 $ 92,500 $ 86,800
Basic earnings per share $ 1.27 $ 1.62 $ 1.53
Diluted earnings per share $ 1.26 $ 1.61 $ 1.52
C. R. BARD, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS
For the Years Ended December 31,
(Thousands of dollars except
per share amounts)
1997 1996 1995
Balance, beginning of year $ 506,700 $ 478,900 $ 427,300
Net income 72,300 92,500 86,800
Cash dividends (per share
1997, $.70; 1996, $.66;
1995, $.62) (40,000) (37,700) (33,100)
Excess of cost over par value
of treasury stock retired
(1997-955,200 shares,
1996-813,700 shares and
1995-75,000 shares) (32,300) (27,000) (2,100)
Balance, end of year $ 506,700 $ 506,700 $ 478,900
The accompanying notes to consolidated financial statements are an
integral part of these statements.
II-13
C. R. BARD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
(Thousands of dollars) 1997 1996
Assets
Current assets:
Cash $ 8,000 $ 11,300
Short-term investments 52,700 66,700
Accounts receivable, less reserve of
$14,000 and $10,200 240,600 245,400
Inventories 241,700 245,000
Other current assets 20,500 8,500
Total current assets 563,500 576,900
Property, plant and equipment, at cost
Land 11,000 11,700
Buildings and improvements 144,100 158,700
Machinery and equipment 186,800 194,200
341,900 364,600
Less - Accumulated depreciation and
amortization 135,500 138,500
Net property, plant and equipment 206,400 226,100
Intangible assets, net of amortization 424,400 447,200
Other assets 85,000 82,300
$1,279,300 $1,332,500
Liabilities and shareholders' investment
Current liabilities:
Short-term borrowings and current
maturities of long-term debt $ 103,000 $ 148,200
Accounts payable 60,400 59,200
Accrued compensation and benefits 37,900 40,300
Accrued expenses 90,900 81,200
Federal and foreign income taxes 18,400 7,300
Total current liabilities 310,600 336,200
Long-term debt 340,700 342,800
Other long-term liabilities 54,900 52,000
Commitments and contingencies --- ---
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 56,784,551 shares
in 1997, 56,985,983 shares in 1996 14,100 14,300
Capital in excess of par value 101,100 77,500
Retained earnings 506,700 506,700
Other (48,800) 3,000
Total shareholders' investment 573,100 601,500
$1,279,300 $1,332,500
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets.
II-14
C. R. BARD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars) For the Years Ended December 31,
1997 1996 1995
Cash flows from operating activities:
Net income $ 72,300 $ 92,500 $ 86,800
Adjustments to reconcile net
income to net cash provided
from operating activities:
Depreciation and amortization 57,300 57,400 50,600
Gain on sales of product lines (22,700) 0 0
Deferred income taxes (15,900) 7,300 (1,600)
Expenses under stock plans 2,800 2,300 2,000
Other noncash items 38,200 15,400 0
Changes in assets and
liabilities net of acquired
businesses:
Accounts receivable (7,000) (21,500) (21,600)
Inventories (16,100) (9,800) (15,800)
Other assets (18,300) 6,000 8,900
Current liabilities, excluding
debt 4,700 (24,400) 29,100
Other long-term liabilities 3,200 (2,700) (21,700)
Net cash provided from operating
activities 98,500 122,500 116,700
Cash flows from investing activities:
Capital expenditures (32,800) (41,600) (39,600)
Proceeds from sales of product
lines 29,700 0 0
Payments made for purchases of
businesses (7,200) (199,400) (300)
Patents, trademarks and other (15,300) (37,700) (18,600)
Net cash used in investing
activities (25,600) (278,700) (58,500)
Cash flows from financing activities:
Common stock issued for options and
benefit plans 15,500 11,500 9,500
Purchase of common stock (32,500) (27,200) (2,100)
Proceeds from long-term
borrowings 0 166,400 126,300
Debt issuance costs 0 (6,800) 0
Proceeds from sale leaseback 5,600 0 0
Principal payments of long-term
borrowings (1,000) (3,100) (22,000)
Proceeds from(repayments of)
short-term borrowings, net (44,900) 79,700 (133,700)
Dividends paid (40,000) (37,700) (33,100)
Net cash provided by (used in)
financing activities (97,300) 182,800 (55,100)
Translation adjustment (2,800) (400) (200)
Cash and cash equivalents:
Increase(decrease) during the
year (27,200) 26,200 2,900
Balance at January 1, 63,600 37,400 34,500
Balance at December 31, $ 36,400 $ 63,600 $ 37,400
The accompanying notes to consolidated financial statements are an
integral part of these statements.
II-15
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
C. R. Bard, Inc. ("the company" or "Bard") is a leading
multinational developer, manufacturer and marketer of health care
products. The company markets its products worldwide to hospitals,
individual health care professionals, extended care facilities and
alternate site facilities. Bard holds strong positions in products
used for vascular, urological and oncological diagnosis and
intervention. Bard also has a surgical specialties product group.
1. Significant Accounting Policies
Consolidation The consolidated financial statements include the
accounts of the company and its majority-owned subsidiaries. All
significant intercompany accounts and transactions are eliminated
in consolidation.
Earnings Per Share The company has adopted Statement of Financial
Accounting Standard 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.
A reconciliation of weighted average common shares outstanding to
weighted average common shares outstanding assuming dilution
follows:
1997 1996 1995
Average common shares
outstanding 56,970,849 57,090,130 56,730,542
Incremental common shares
issuable: Stock option
and incentive plans 302,151 458,870 504,291
Average common shares
outstanding assuming dilution 57,273,000 57,549,000 57,234,833
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 $136,800,000 in 1997, $151,000,000 in 1996 and
$140,000,000 in 1995; under the FIFO method such inventories would
have been higher by $14,500,000, $15,800,000 and $15,700,000,
respectively. The following is a summary of inventories at
December 31:
II-16
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Significant Accounting Policies (continued)
(Thousands of dollars)
1997 1996
Finished goods $144,000 $148,300
Work in process 62,700 59,500
Raw materials 35,000 37,200
$241,700 $245,000
Depreciation Property, plant and equipment are depreciated on a
straight-line basis over the useful lives (ranging from 3-40 years)
of the various classes of assets.
Short-term Investments Short-term investments which have a maturity
of ninety days or less are considered cash equivalents and amounted
to $28,400,000 and $52,300,000 as of December 31, 1997 and 1996.
Short-term investments are stated at cost which approximates their
market value.
Intangible Assets Goodwill is amortized using the straight-line
method over periods of 15-40 years as appropriate. Other
intangible assets are amortized over their useful lives. The
company periodically evaluates its intangibles to assess
recoverability from future operations using undiscounted cash
flows. Impairment would be recognized in operating results if a
permanent diminution in value occurred.
As of December 31, 1997 and 1996, intangible assets include the
following:
(Thousands of dollars) 1997 1996
Goodwill $390,800 $392,300
Other intangibles (primarily 168,200 162,900
patents)
Less accumulated amortization (134,600) (108,000)
Intangible assets, net $424,400 $447,200
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
$312,200,000 as of December 31, 1997).
Concentrations of Credit Risk Financial instruments, which
potentially subject the company to significant concentrations of
credit risk, consist principally of cash investments, foreign
currency exchange contracts, and trade accounts receivable.
II-17
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Significant Accounting Policies (continued)
The company maintains cash and cash equivalents, investments, and
certain other financial instruments with various major financial
institutions. The company performs periodic evaluations of the
relative credit standing of these financial institutions and limits
the amount of credit exposure with any institution.
Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number of customers and
their dispersion across many geographic areas. However, a
significant amount of trade receivables are with national health
care systems in several countries. Although the company does not
currently foresee a credit risk associated with these receivables,
repayment is dependent upon the financial stability of those
countries' national economies.
Use of Estimates The financial statements and related disclosures
have been prepared in conformity with generally accepted accounting
principles and, accordingly, include amounts based on estimates and
judgments of management with consideration given to materiality.
Actual results could differ from those estimates.
2. Acquisitions and Dispositions
The first quarter of 1997 included a sale of a product line which
resulted in a pretax gain of $4,900,000 ($.05 basic and diluted per
share).
The third quarter of 1997 included the sale of the surgical suction
product line which resulted in a pretax gain of $17,800,000 ($.19
and $.18 basic and diluted per share respectively).
In September of 1996 Bard completed the acquisition of IMPRA, Inc.
("IMPRA"), a company that develops, manufactures and markets
vascular grafts used for blood vessel replacement surgery. The
purchase and acquisition costs, which approximated $155,400,000,
were financed with commercial paper. This acquisition has been
accounted for under the purchase method of accounting and,
accordingly, IMPRA's assets and liabilities have been recorded at
their estimated fair market values and the excess purchase price
of $140,900,000 has been assigned to goodwill. This acquisition
did not have a significant effect on the company's results of
operations. The 1996 costs to combine operations related to the
acquisition were $9,000,000.
II-18
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Acquisitions (continued)
During 1996, the company acquired St. Jude Medical's Cardiac Assist
Division and X-Trode S.r.l. These acquisitions have been accounted
for under the purchase method of accounting and enhance or expand
the company's existing product lines and further develop
international markets. The cost of these acquisitions amounted to
$44,000,000 and were financed through internally generated cash and
available credit lines. These acquisitions did not have a
significant effect on the company's results of operations.
In September 1995, the company completed a merger with MedChem
Products, Inc. ("MedChem") issuing 3,192,345 shares of its common
stock in exchange for all outstanding common stock of MedChem. In
October 1995, the company completed a merger with American Hydro-Surgical
Instruments, Inc. (AHS) issuing 1,338,446 shares of its common stock in
exchange for all outstanding common stock of AHS.
These mergers were accounted for as poolings of interests and,
accordingly, the company's consolidated financial statements for
prior periods were restated in 1995. In connection with these
mergers, $17,700,000 of merger related costs and expenses
($13,500,000 after-tax) were incurred and have been charged to
expense in 1995. These one-time charges include expenses primarily
related to investment bankers and professional fees, and key
personnel and severance related costs.
3. Income Tax Expense
Income tax expense consists of the following:
(Thousands of dollars) 1997 1996 1995
Currently payable:
Federal $ 36,300 $ (6,300) $ 23,600
Foreign 6,600 7,500 8,900
State 5,600 1,700 5,800
48,500 2,900 38,300
Deferred:
Federal (15,200) 7,600 (1,700)
Foreign 1,000 (300) 100
State (1,700) --- ---
(15,900) 7,300 (1,600)
$ 32,600 $ 10,200 $36,700
II-19
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. Income Tax Expense (continued)
Deferred income taxes are recognized for the 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, 1997, the company's net deferred tax assets amounted
to approximately $33,800,000 which are recorded in other current
assets and other assets. This amount principally comprises of the
tax effects of the differences between tax and financial accounting
treatment of employee benefits of $12,100,000, accrued expenses of
$27,600,000 and other temporary differences, offset by the effect
of accelerated depreciation of ($7,600,000).
The following is a reconciliation between the effective tax rates
and the statutory rates:
1997 1996 1995
U.S. federal statutory rate 35% 35% 35%
State income taxes net of
federal income tax benefits 3 3 3
Foreign operations taxed at
less than the U.S. statutory
rate, primarily Ireland and
Puerto Rico (10) (13) (11)
Reversal of tax reserve --- (15) ---
Other, net 3 --- 3
Effective tax rate 31% 10% 30%
During 1996, the company reversed certain tax reserves
approximating $15,000,000 that were no longer deemed necessary.
Cash payments for income taxes were $29,400,000, $27,100,000 and
$34,100,000 in 1997, 1996 and 1995, respectively.
During the third quarter of 1997, the company filed a protest at
the IRS appeals level related to tax years 1990-1992. Management
believes that the outcome of these matters will not have a material
impact on the company's consolidated financial position or results
of operations.
4. Short-Term Borrowings and Long-Term Debt
The company maintains uncommitted lines of credit, a commercial
paper program and a committed credit facility which supports the
commercial paper program. Total short-term borrowings amounted to
$101,900,000 and $146,300,000 at December 31, 1997 and 1996,
respectively. The maximum amount of short-term borrowings
outstanding during 1997 was approximately $160,300,000 with an
average outstanding balance of $128,500,000 and an effective rate
of 5.12%.
II-20
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Short-Term Borrowings and Long-Term Debt (continued)
Short-term borrowings under uncommitted lines of credit amounted to
$60,100,000 at December 31, 1997. Unused uncommitted lines of
credit available to the company amounted to $253,900,000 at
December 31, 1997. Effective January 1, 1997, the company amended
its commercial paper program and committed line of credit from
$350,000,000 to $300,000,000. $161,800,000 in commercial paper was
outstanding at December 31, 1997. Borrowings of $120,000,000 have
been classified as long-term debt since the company has both the
intention and ability through its committed credit lines to
refinance these amounts on a long-term basis. The committed line
of credit is a facility with 11 banks through which the company can
borrow at rates slightly above LIBOR through June 2000. The
company had no borrowings under the committed lines of credit at
December 31, 1997.
The following is a summary of long-term debt:
(Thousands of dollars) 1997 1996
8.69% notes due 1999 $ 60,000 $ 60,000
7.8% mortgage loan 5,600 9,500
Commercial paper and bank borrowings 120,000 120,000
6.70% notes due 2026 149,900 150,000
Other 6,300 5,200
341,800 344,700
Less: amounts classified as current: 1,100 1,900
$340,700 $342,800
The 6.70% notes due 2026 may be redeemed at the option of the note
holder on December 1, 2006, at a redemption price equal to the
principal amount.
Under five deposit loan agreements with a bank, $67,400,000 has
been borrowed at floating rates (4.62% at December 31, 1997) with
various maturity dates from September 1998 through June 2005. At
maturity, the loans are to be repaid through matured certificates
of deposits 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 these certificates of deposit
for repayment of these loans at their maturity, the borrowings have
been offset against these certificates of deposit in the
accompanying consolidated balance sheet at December 31, 1997. The
related interest income has been offset against the interest
expense.
As of December 31, 1997, the aggregate maturities of long-term debt
were as follows: 1998 - $1,100,000; 1999 - $61,000,000; 2000 -
$121,000,000; 2001 - $1,000,000; 2002 - $1,000,000; 2003 and
thereafter - $156,700,000. The fair value of the company's long-term
debt is not significantly different from its recorded value.
II-21
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Short-Term Borrowings and Long-Term Debt (continued)
Interest expense in 1997, 1996 and 1995 approximated the cash
outlay in each year.
Certain of the company's debt agreements contain restrictions
which, among other things, require the maintenance of minimum net
worth and operating cash flow levels, limit the amount of debt and
contain a material adverse change clause.
The company enters into foreign exchange forward contracts and
options to help reduce the exposure to fluctuations between certain
currencies. There were no forward contracts or options outstanding
at the end of 1996. In 1997, the company entered into option and
forward contracts primarily related to anticipated normal
intercompany purchases and their related monthly cash flows. At
December 31, 1997, there were options and contracts outstanding in
the equivalent of $18,400,000. The 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.
5. Commitments and Contingencies
The company is involved in one lawsuit which alleges breach of
agreement where substantial amounts have been claimed. The company
is also subject to other legal proceedings and claims involving
product liability and disputes on agreements which arise in the
ordinary course of business. The company believes that these legal
matters will likely be disposed of over an extended period of time
and should not have a material adverse impact on the company's
consolidated 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: 1998 -
$19,200,000; 1999 - $15,200,000; 2000 - $8,900,000; 2001 -
$5,600,000; 2002 - $4,800,000; and thereafter - $4,900,000. Total
rental expense for all leases approximated $21,000,000 in 1997,
$28,400,000 in 1996 and $29,300,000 in 1995.
II-22
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Stock Rights
In October 1995 the company's 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 2005 and trade with the company's common stock. Such
Rights 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 Bard's common stock, the Rights
detach from the common stock and become exercisable and entitle a
holder to buy one share of common stock at $120.00 (adjustable to
prevent dilution).
If, after the Rights become exercisable, Bard is acquired or
merged, each Right will entitle its holder to purchase $240 market
value of the surviving company's stock for $120, based upon the
current exercise price of the Rights. The company may redeem the
Rights, at its option, at $.05 per Right, prior to a public
announcement that any person has acquired beneficial ownership of
at least 20% of Bard's common stock. These Rights are designed
primarily to encourage anyone interested in acquiring Bard to
negotiate with the Board of Directors. There are 60 million shares
of common stock reserved for the rights.
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, 1997, approximately 165,000 shares
were reserved for issuance under all company plans.
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 installments and expire not more than 10 years after
the date of grant. During 1997 the company awarded 600,000
performance-based stock options at a price equal to the market
value of the shares at the date of grant. These performance-based
stock options become exercisable on their ninth anniversary after
date of grant or on an accelerated basis when the stock reaches
certain market prices.
II-23
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Shareholders' Investment (continued)
The following tables summarize information about stock option
activity and amounts:
Weighted Weighted
Number Average Average
Of Exercise Fair
Shares Price Value
Options outstanding,
December 31, 1994 3,637,580 $22.38
(1,881,918 exercisable)
Granted 853,075 $34.42 $ 7.94
Exercised (563,444) $18.37
Canceled (235,272) $50.55
Options outstanding,
December 31, 1995 3,691,939 $23.98
(2,038,844 exercisable)
Granted 703,940 $32.89 $ 9.61
Exercised (688,708) $20.47
Canceled (202,116) $26.91
Options outstanding,
December 31, 1996 3,505,055 $26.31
(1,905,876 exercisable)
Granted 1,024,948 $37.04 $11.75
Exercised (714,097) $22.80
Canceled (155,564) $29.70
Options outstanding,
December 31, 1997 3,660,342 $29.83
(1,769,062 exercisable)
Weighted Weighted Weighted
Range of Number Average Average Number Average
Exercise Outstanding Remaining Exercise Exercisable Exercise
Prices at 12/31/97 Life Price at 12/31/97 Price
$10 to 21 241,849 3.2 $16.64 221,965 $16.58
$21 to 24 557,783 5.7 $22.53 419,377 $22.52
$24 to 27 630,491 4.5 $26.44 628,591 $26.44
$27 to 30 556,922 7.2 $29.63 280,421 $29.62
$30 to 41 1,673,297 8.9 $35.52 218,708 $33.61
10 to 41 3,660,342 7.0 $29.83 1,769,062 $25.66
In accordance with Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS
123"), the fair value of option grants is estimated on the date of
grant using the Black-Scholes option-pricing model for pro forma
footnote purposes.
II-24
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Shareholders' Investment (continued)
In 1995 the dividend yield was assumed to be 2%, the risk-free
interest rate was 6.67%, the expected option life was 4.4 years and
the expected volatility was 33%. In 1996 the dividend yield was
assumed to be 2%, the risk-free interest rate was 6.67%, the
expected option life was 4.4 years and the expected volatility was
29%. In 1997 the dividend yield was assumed to be 2%, the risk-free
interest rate was 6.2%, the expected option life was 6 years
and the volatility was 26%.
As permitted by FAS 123, the company has chosen to continue
accounting for stock options at their intrinsic value. Accordingly
no compensation expense has been recognized for its stock option
compensation plans. Had the fair value method of accounting been
applied to the company's stock option plans, the tax-effected
impact would be as follows:
1997 1996 1995
Net income as reported $72,300 $92,500 $86,800
Estimated fair value of the
year's option grants,
net of tax (3,200) (1,700) (600)
Net income adjusted $69,100 $90,800 $86,200
Adjusted basic earnings per share $ 1.21 $ 1.59 $ 1.52
Adjusted diluted earnings per share $ 1.21 $ 1.58 $ 1.51
This proforma impact only takes into account options granted since
January 1, 1995 and is likely to increase in future years as
additional options are granted and amortized ratably over the
vesting period.
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 installments. During 1997 awards for
33,448 shares (net of cancellations) were granted and 27,391 shares
were issued. Awards are charged to income over the vesting period.
At December 31, 1997, 29,708 awarded shares (aggregate market price
at date of grant $1,065,805) have not been issued.
Under the company's restricted stock plan, which 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. During 1997, a total of 33,050 shares were granted,
net of forfeitures. In addition during 1997 the company awarded
130,000 performance-based restricted shares. These performance-
II-25
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Shareholders' Investment (continued)
based restricted shares are vested five years after the company's
stock reaches certain market prices. These shares will be
forfeited if the targeted market prices are not met within certain
time periods. Upon issuance of both the restricted and
performance-based stock, unearned compensation ($10,300,000 at
December 31, 1997) equivalent to the market value of the stock at
the date of grant is reflected in shareholders' investment and
subsequently amortized to expense over the relevant restriction
periods.
Additions to capital in excess of par value of $23,600,000 in 1997
and $14,200,000 in 1996 relate to shares issued under these plans
in excess of the related par value of the shares.
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.
Cumulative foreign currency translation adjustments included in
other shareholders' investment amounted to ($38,500,000) at
December 31, 1997, and decreased by $46,500,000 during the year due
to the strengthening of the U.S. dollar against foreign currency
denominated assets and liabilities.
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 $14,100,000 in 1997, $13,800,000 in
1996 and $12,800,000 in 1995.
The following table sets forth the funded status of the defined
benefit pension plans as of September 30, 1997 and 1996 and amounts
recognized in the company's consolidated balance sheets at
December 31, 1997 and 1996:
II-26
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Postretirement Benefits (continued)
(Thousands of dollars) 1997 1996
Actuarial present value of accumulated
benefit obligation, including vested
benefits of $95,700 in 1997 and $75,000
in 1996 $105,300 $ 84,400
Plan assets at fair value, primarily
investment securities $123,200 $ 97,000
Less: Actuarial present value of
projected benefit obligation for
service rendered to date 127,100 102,400
Projected benefit obligation in excess
of plan assets (3,900) (5,400)
Unrecognized (income) loss (3,500) (600)
Unrecognized prior service cost 5,100 6,700
Unrecognized net asset at transition
amortized over 12 years (1,600) (2,500)
Accrued pension cost included in other
liabilities $ (3,900) $ (1,800)
Pension costs related to the defined benefit pension plans for
the years ended December 31, 1997, 1996 and 1995 are as follows:
(Thousands of dollars) 1997 1996 1995
Net pension cost includes:
Service cost $ 8,000 $ 7,000 $ 6,800
Interest cost 8,100 7,000 6,700
Actual return on plan
assets (25,700) (12,000) (12,800)
Net amortization and deferral 18,200 5,400 6,000
Net pension cost $ 8,600 $ 7,400 $ 6,700
The range of assumed discount rates used was 3.50% to 7.50% with
the rate on domestic plans at 7.50% in 1997 and 8.00% in 1996. The
rate of increase in future salary levels ranged from 1.50% to 5.25%
in determining the projected benefit obligation. The expected
long-term rate of return on assets used in determining net pension
cost ranged from 8.50% to 9.00%.
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. The company
recognizes expense as employees earn postretirement benefits. The
amounts charged to income for this plan were approximately $550,000
in 1997 ($10,000 of service cost and $540,000 of interest cost),
$600,000 in 1996 and $800,000 in 1995.
II-27
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Postretirement Benefits (continued)
Actuarial assumptions included a discount rate of 7.00%. Health
care cost trends have been projected at annual rates beginning at
10% for 1997 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, 1997, by $600,000 and postretirement
benefit cost by $50,000.
9. Other (Income) Expense, Net
In addition to recurring items such as interest income and foreign
exchange, other income and expense includes several one-time items.
As a result of the company's continuing extensive review of
operations, during the third quarter of 1997, management and the
Board of Directors 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.
These restructuring activities are in process and will be completed
over the next 21 months. The restructuring plan resulted in a
charge of $44,100,000 ($30,100,000 net of tax) exclusive of certain
period costs which are required to be expensed as incurred over the
next two years.
Other income and expense includes the gain on the sale of the
surgical suction product line and other lines. Also included is a
charge for the impairment of certain investments and intangible
assets and the settlement of a legal claim.
During 1996, the company reorganized its global cardiology business
and recorded a $31,000,000 ($16,800,000 net of tax) writedown of
assets related to its guidewire technology in accordance with the
requirements of SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of". In
addition, the company recorded a one-time charge of $10,000,000
($6,200,000 net of tax) related to the reorganization of certain
existing manufacturing operations and $9,200,000 in income
($5,500,000 net of tax) related to royalty payments received on
sales of certain licensed angioplasty products for prior periods.
Other (income) expense, net in the Statements of Consolidated
Income is summarized as follows:
II-28
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Other (Income) Expense, Net (continued)
(Thousands of dollars) 1997 1996 1995
Interest Income $ (3,500) $ (3,800) $ (3,400)
Foreign exchange (gains)losses --- 400 (3,300)
Asset writedown 8,500 31,000 ---
Restructuring 44,100 10,000 ---
Gains from sale of product lines
and other (24,500) --- ---
Prior period royalties --- (9,200) ---
Legal fees and settlements, net 2,000 3,500 ---
Other, net --- --- (1,100)
Total $ 26,600 $ 31,900 $ (7,800)
II-29
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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, 1997, 1996 and 1995 and for the years
then ended is given below.
(Thousands United Elimi- Consoli-
(of dollars) States Foreign nations dated
1997
Sales:
Trade $793,200 $379,200 $ --- $1,172,400
Export 41,100 --- --- 41,100
Intersegment 133,300 12,900 (146,200) ---
Total $967,600 $392,100 $(146,200) $1,213,500
Operating income $154,900 $ 41,600 $ (32,100) $ 164,400
Identifiable assets:
December 31, 1997$899,400 $379,900 $ --- $1,279,300
1996
Sales:
Trade $782,000 $375,100 $ --- $1,157,100
Export 37,300 --- --- 37,300
Intersegment 115,100 21,300 (136,400) ---
Total $934,400 $396,400 $(136,400) $1,194,400
Operating income $125,800 $ 68,500 $ (33,300)(a) $ 161,000
Identifiable assets:
December 31, 1996$940,600 $391,900 $ --- $1,332,500
1995
Sales:
Trade $749,000 $353,500 $ --- $1,102,500
Export 35,300 --- --- 35,300
Intersegment 95,800 10,400 (106,200) ---
Total $880,100 $363,900 $(106,200) $1,137,800
Operating income $102,800 $ 66,600 $ (29,500)(a) $ 139,900
Identifiable assets:
December 31, 1995$747,000 $344,000 $ --- $1,091,000
(a) Includes nonrecurring acquisition costs of $9,000 and $17,700
in 1996 and 1995, respectively
II-30
QUARTERLY FINANCIAL DATA
C. R. BARD, INC. AND SUBSIDIARIES
1997
1st 2nd 3rd 4th Year
(Thousands of dollars
except per share amounts)
Net sales $300,700 $304,000 $297,500 $311,300 $1,213,500
Cost of goods sold 143,200 143,700 139,300 146,600 572,800
Income before taxes 37,900 37,700 (5,000) 34,300 104,900
Net income 26,100 26,200 (3,800) 23,800 72,300
Per share information:
Basic earnings per
share $ .46 $ .46 $ (.07) $ .42 $ 1.27
Diluted earnings per
share $ .45 $ .45 $ (.07) $ .42 $ 1.26
Note: The first quarter included a gain of $4,900 (5 cents basic and diluted
per share) for the sale of a product line. The second quarter included a
gain of $1,800 (2 cents basic and diluted per share) for the sale of an
investment. The third quarter included a $44,100 charge (53 cents and 52
cents basic and diluted per share, respectively) for manufacturing
restructuring. In addition, third quarter included a charge primarily for
the impairment of certain investments and intangible assets and the
settlement of a legal claim as well as a gain from the sale of the surgical
suction product line totaling $6,500 (7 cents basic and diluted per share).
The fourth quarter included a charge of $2,100 (2 cents basic and diluted
per share) for miscellaneous items including the settlement of a legal
claim. (Figures in this Note are pretax except per
share amounts.)
1996
1st 2nd 3rd 4th Year
(Thousands of dollars
except per share amounts)
Net sales $289,200 $295,200 $295,800 $314,200 $1,194,400
Cost of goods sold 140,600 143,300 146,600 150,800 581,300
Income before taxes 10,600 39,000 15,200 37,900 102,700
Net income 27,100 27,500 11,400 26,500 92,500
Per share information:
Basic earnings per
share $ .48 $ .48 $ .20 $ .46 $ 1.62
Diluted earnings per
share $ .47 $ .47 $ .19 $ .46 $ 1.61
Note: The first quarter included nonrecurring items related to an asset
writedown, the receipt of revenues related to prior year royalties,
miscellaneous charges and tax reserve reversals reducing income by $27,100
with a positive after-tax impact of approximately 1 cent basic and diluted
per share. The second quarter included a one-time credit of $2,500 related
to the elimination of a contractual arrangement which, if excluded, would
have had a negative after-tax impact of approximately 2 cents basic and
diluted per share. Reflected in the third quarter results are one-time
charges of $10,000 related to the reorganization of certain existing
manufacturing operations and $9,000 of expenses as a result of the IMPRA
acquisition with a combined negative after-tax impact of approximately 23
cents and 22 cents basic and diluted per share, respectively. (Figures in
the Note are pretax except per share amounts.)
II-31
C. R. BARD, INC. AND SUBSIDIARIES
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
II-32
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 4 of the company's definitive Proxy Statement dated
March 6, 1998.
Executive Officers of the Registrant
Information with respect to Executive Officers of the Registrant
are on pages I-8 through I-12 of this filing.
Item 11. Executive Compensation
The information contained under the caption "Executive
Compensation" appearing on Pages 6 through 9 of the company's
definitive Proxy Statement dated March 6, 1998 is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information contained under the captions "Securities Ownership
of Certain Beneficial Owners" and "Securities Ownership of
Management" on pages 4 and 5 of the company's definitive Proxy
Statement dated March 6, 1998 is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information contained under the caption "Compensation of
Outside Directors - Related Transactions" on page 14 of the
company's definitive Proxy Statement dated March 6, 1998 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-12 Report of Independent Public Accountants.
II-13 Statements of Consolidated Income and Statements of
Consolidated Retained Earnings for the three years
ended December 31, 1997.
II-14 Consolidated Balance Sheets at December 31, 1997 and
1996.
II-15 Consolidated Statements of Cash Flows for the three
years ended December 31, 1997.
II-16 Notes to Consolidated Financial Statements.
II-31 Quarterly Financial Data.
2. Financial Statement Schedules
Schedules are omitted because they are not applicable, 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 17, 1996, filed as Exhibit 3 to
the company's September 30, 1996 Form 10-Q is
incorporated herein by reference.
3b Registrant's Bylaws revised as of September 11, 1996,
filed as Exhibit 3a to the company's 1996 Annual
Report on Form 10-K is incorporated herein by
reference.
4a Rights Agreement dated as of October 11, 1995 between
C. R. Bard, Inc. and First Chicago Trust Company of
New York as Rights Agent, filed as Exhibit 1
to the company's Registration Statement on Form 8-A
filed with the Securities and Exchange Commission on
October 12, 1995 is incorporated herein by reference.
4b Indenture, dated as of December 1, 1996 between
C. R. Bard, Inc. and The Chase Manhattan Bank, as
trustee, filed as Exhibit 4.1 to the company's
Registration Statement on Form S-3, File No. 333-05997
is incorporated herein by reference.
IV-1
C. R. BARD, INC. AND SUBSIDIARIES
3. Exhibits, No. (Continued)
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* Benson F. Smith Change of Control Agreement dated
as of June 29, 1994, filed as Exhibit 10a to the
company's 1994 Annual Report on Form 10-K is
incorporated herein by reference.
10b* William H. Longfield Change of Control Agreement as
amended dated as of July 13, 1994, filed as Exhibit
10b to the company's 1994 Annual Report on Form 10-K
is incorporated herein by reference.
10c* William C. Bopp Change of Control Agreement as amended
dated as of August 31, 1994, filed as Exhibit 10c to
the company's 1994 Annual Report on Form 10-K is
incorporated herein by reference.
10d* Hope Greenfield Change of Control Agreement dated as
of March 6, 1996, filed as Exhibit 10d to the
company's 1995 Annual Report on Form 10-K is
incorporated herein by reference.
10e* Richard A. Flink Change of Control Agreement as
amended dated as of July 22, 1994, filed as Exhibit
10e to the company's 1994 Annual Report on Form 10-K
is incorporated herein by reference.
10f* E. Robert Ernest Change of Control Agreement as
amended dated as of July 19, 1994, filed as Exhibit
10f to the company's 1994 Annual Report on Form 10-K
is incorporated herein by reference.
10g* William H. Longfield Supplemental Executive Retirement
Agreement dated as of January 12, 1994, filed as
Exhibit 10g to the company's 1993 Annual Report on
Form 10-K is incorporated herein by reference.
10h* 1990 Stock Option Plan, filed as Exhibit 10h to the
company's 1993 Annual Report on Form 10-K is
incorporated herein by reference.
10i* 1989 Employee Stock Appreciation Rights Plan, filed as
Exhibit 10i to the company's 1993 Annual Report on
Form 10-K is incorporated herein by reference.
IV-2
C. R. BARD, INC. AND SUBSIDIARIES
3. Exhibits, No. (Continued)
10j* C. R. Bard, Inc. Agreement and Plans Trust, filed as
Exhibit 10j to the company's 1993 Annual Report on
Form 10-K is incorporated herein by reference.
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, filed as Exhibit
10k to the company's 1993 Annual Report on Form 10-K
is incorporated herein by reference.
10l* Retirement Plan for Outside Directors of C. R. Bard,
Inc., filed as Exhibit 10l to the company's 1993
Annual Report on Form 10-K is incorporated herein by
reference.
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, filed as Exhibit 10m to the company's 1993
Annual Report on Form 10-K is incorporated herein by
reference.
10n* 1988 Directors Stock Award Plan, as amended in October
1991, filed as Exhibit 10n to the company's 1993
Annual Report on Form 10-K is incorporated herein by
reference.
10o* Excess Benefit Plan, filed as Exhibit 10o to the
company's 1993 Annual Report on Form 10-K is
incorporated herein by reference.
10p* Supplemental Executive Retirement Plan, filed as
Exhibit 10p to the company's 1993 Annual Report on
Form 10-K is incorporated herein by reference.
10q* 1994 Executive Bonus Plan, filed as Exhibit 10 to the
company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994, File No. 1-6926 is
incorporated herein by reference.
10r* Long Term Performance Incentive Plan, filed as Exhibit
10r to the company's 1993 Annual Report on Form 10-K
is incorporated herein by reference.
10s* Deferred Compensation Contract Deferral of
Discretionary Bonus, filed as Exhibit 10s to the
company's 1993 Annual Report on Form 10-K is
incorporated herein by reference.
IV-3
C. R. BARD, INC. AND SUBSIDIARIES
3. Exhibits, No. (Continued)
10t* Deferred Compensation Contract Deferral of Salary,
filed as Exhibit 10t to the company's 1993 Annual
Report on Form 10-K is incorporated herein by
reference.
10u* 1993 Long Term Incentive Plan, filed as Exhibit 10u to
the company's 1993 Annual Report on Form 10-K is
incorporated herein by reference.
10v* Earle L. Parker Change of Control Agreement dated
as of June 29, 1994 filed as Exhibit 10v to the
company's 1994 Annual Report on Form 10-K is
incorporated herein by reference.
10w* John H. Weiland Change of Control Agreement dated
as of March 11, 1996 filed as Exhibit 10w to the
company's 1995 Annual Report on Form 10-K is
incorporated herein by reference.
10x* William T. Tumber Change of Control Agreement dated as
of March 13, 1996 filed as Exhibit 10x to the
company's 1995 Annual Report on Form 10-K is
incorporated herein by reference.
10y* Timothy M. Ring Change of Control Agreement dated as
of March 12, 1996 filed as Exhibit 10y to the
company's 1995 Annual Report on Form 10-K is
incorporated herein by reference.
10z* Guy J. Jordan Change of Control Agreement dated as
of October 10, 1996 filed as Exhibit 10z to the
company's 1996 Annual Report on Form 10-K is
incorporated herein by reference.
10aa* Charles P. Grom Change of Control Agreement dated as
of December 11, 1996, filed as Exhibit 10aa to the
company's 1996 Annual Report on Form 10-K is
incorporated herein by reference.
10ab* Richard D. Manthei Change of Control Agreement dated
as of February 11, 1998. (p. IV-8)
12.1 Computation in Support of Ratio of Earnings to Fixed
Charges. (p. IV-23)
IV-4
C. R. BARD, INC. AND SUBSIDIARIES
3. Exhibits, No. (Continued)
21 Subsidiaries of registrant. (p. IV-24).
23 Arthur Andersen LLP consent to the incorporation by
reference of their report on Form 10-K into previously
filed Forms S-8 and S-3. (p. IV-26)
27 Financial data schedule
99 Indemnity agreement between the company and each of
its directors and officers, filed as Exhibit 99 to
the company's 1993 Annual Report on Form 10-K is
incorporated herein by reference.
* 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.
(b) Reports on Form 8-K
(b) There were no reports on Form 8-K filed by the company
during the quarter ended December 31, 1997.
IV-5
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
Executive Vice President and
Chief Financial Officer
Date: March 10, 1998
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/ Chairman and March 10,1998
William H. Longfield Chief Executive Officer
and Director
(Principal Executive
Officer)
William C. Bopp /s/ Executive Vice President March 10, 1998
William C. Bopp and Chief Financial
Officer and Director
(Principal Financial
Officer)
Charles P. Grom /s/ Vice President and March 10, 1998
Charles P. Grom Controller
(Principal Accounting
Officer)
Benson F. Smith /s/ President and March 10, 1998
Benson F. Smith Chief Operating
Officer and Director
IV-6
Signatures Title Date
Joseph F. Abely, Jr. /s/ Director March 10, 1998
Joseph F. Abely, Jr.
Marc C. Breslawsky /s/ Director March 10, 1998
Marc C. Breslawsky
William T. Butler, M.D. /s/ Director March 6, 1998
William T. Butler, M.D.
Daniel A. Cronin, Jr. /s/ Director March 10, 1998
Daniel A. Cronin, Jr.
T. Kevin Dunnigan /s/ Director March 10, 1998
T. Kevin Dunnigan
Regina E. Herzlinger /s/ Director March 10, 1998
Regina E. Herzlinger
Robert P. Luciano /s/ Director March 9, 1998
Robert P. Luciano
Tony L. White /s/ Director March 9, 1998
Tony L. White