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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File Number 1-1136
BRISTOL-MYERS SQUIBB COMPANY
(Exact name of registrant as specified in its charter)
Delaware 22-079-0350
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
345 Park Avenue, New York, N.Y. 10154
(Address of principal executive offices)
Telephone: (212) 546-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock, $.10 Par Value New York Stock Exchange
Pacific Exchange, Inc.
$2 Convertible Preferred Stock, $1 Par Value New York Stock Exchange
Pacific Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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 [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of February 28, 1998 was $99,481,748,374. At February 28,
1998, there were 994,247,077 shares of common stock outstanding.
Documents incorporated by reference
Proxy Statement for Annual Meeting of Stockholders on May 5, 1998. Part III
PART I
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Item 1. BUSINESS.
DESCRIPTION OF BRISTOL-MYERS SQUIBB COMPANY
- -------------------------------------------
General:
- -------
Bristol-Myers Squibb Company ("Bristol-Myers Squibb" or the "Company") was
incorporated under the laws of the State of Delaware in August 1933 under the
name Bristol-Myers Company as successor to a New York business started in
1887. In 1989, the Bristol-Myers Company changed its name to Bristol-Myers
Squibb Company, as a result of a merger. The Company, through its divisions
and subsidiaries, is a major producer and distributor of pharmaceuticals,
consumer medicines, nutritionals, medical devices and beauty care products.
In general, the business of the Company's segments is not seasonal.
BUSINESS SEGMENTS
- -----------------
Reference is made to Note 2 Acquisitions and Divestitures and Note 13 Segment
Information in the Notes to Consolidated Financial Statements included in Part
II, Item 8 of this Form 10-K Annual Report.
DESCRIPTION OF SEGMENTS
- -----------------------
PHARMACEUTICALS:
- ---------------
This segment includes sales of prescription medicines, mainly cardiovascular,
anti-cancer, anti-infective and central nervous system drugs.
1997 1996 1995
------ ------ ------
Cardiovascular $2,905 $2,816 $2,911
Anti-cancer 2,420 1,971 1,600
Anti-infective 2,235 1,856 1,701
Central nervous system 955 760 601
Other 1,417 1,263 932
------ ------ ------
Total Segment $9,932 $8,666 $7,745
------ ------ ------
The principal products in this segment are:
Cardiovascular:
- --------------
PRAVACHOL* Pravastatin sodium, an HMG Co-A reductase inhibitor
* Indicates brand names of products which are registered trademarks owned
by the Company.
1
CAPOTEN*/CAPOZIDE* captopril, an angiotensin converting enzyme (ACE)
inhibitor
MONOPRIL* fosinopril sodium, a second-generation ACE inhibitor
with convenient once-a-day dosing
QUESTRAN* cholestyramine, a cholesterol-reducing agent
SOTACOR* sotalol, a beta blocker with unique antiarrhythmic
qualities
AVAPRO irbesartan, an angiotensin II receptor antagonist,
co-developed and jointly marketed with Sanofi S.A.
CORGARD*/CORZIDE* nadolol, a once-a-day beta blocker used in the
treatment of hypertension and angina pectoris
Anti-cancer:
- -----------
TAXOL*(R) paclitaxel, used in the treatment of refractory ovarian
cancer, the second-line treatment of AIDS-related
Kaposi's sarcoma, and in treatment of breast cancer
after failure of combination chemotherapy for
metastatic disease or relapse within six months of
adjuvant chemotherapy (with an exclusivity period,
granted pursuant to the Hatch-Waxman Act in the U.S.,
which expired in December 1997)
PARAPLATIN* carboplatin, a chemotherapeutic agent used in the
treatment of ovarian cancer
VEPESID* etoposide, used in the treatment of small-cell lung
cancer and refractory testicular cancer
PLATINOL* cisplatin, used in the treatment of ovarian, testicular
and advanced bladder cancer
Anti-infective:
- --------------
ZERIT* stavudine, used in the treatment of persons with
advanced HIV disease
CEFZIL* cefprozil, an oral cephalosporin used in the treatment
of respiratory infections
VIDEX* didanosine, an antiretroviral drug used in the
treatment of adult and pediatric patients with advanced
human immunodeficiency virus (HIV) infection
DURICEF* cefadroxil, an oral cephalosporin
MAXIPIME* cefepime, a fourth generation injectable cephalosporin
2
VELOSEF* cephradine, an oral cephalosporin
AMIKIN* amikacin, an aminoglycoside
AZACTAM* aztreonam, a monobactam antibiotic
FUNGIZONE* amphotericin B, an anti-fungal
Central nervous system:
- ----------------------
BUSPAR* buspirone, a novel anti-anxiety agent that effectively
relieves persistent anxiety with or without
accompanying deprssive symptoms
SERZONE* nefazodone, an antidepressant treatment which offers a
low incidence of side-effects
STADOL NS* butorphanol NS, a prescription nasal spray analgesic
Other:
- -----
DOVONEX* calcipotriene, a vitamin D3 analog for the treatment of
moderate psoriasis
LAC-HYDRIN* used in the treatment of moderate to severe dry skin
GLUCOPHAGE metformin, an oral anti-diabetes agent for type 2 non-
insulin-dependent diabetes
OVCON* an oral contraceptive
ESTRACE* stradiol, a low-dose estrogen replacement therapy
CONSUMER MEDICINES:
- ------------------
This segment includes sales of analgesics, skin care, cough/cold remedies,
antiperspirants and deodorants, and other consumer medicines.
1997 1996 1995
------ ------ ------
Analgesics $ 739 $ 718 $ 669
Other 612 561 551
------ ------ ------
Total Segment $1,351 $1,279 $1,220
------ ------ ------
3
The principal products in this segment are:
EXCEDRIN* analgesics
BUFFERIN*
EFFERALGAN*
DAFALGAN*
ASPIRINE UPSA*
KERI* a line of moisturizing body lotions and shower and bath
oils
SEA BREEZE* skin care products
COMTREX* a multi-symptom cold reliever
BAN* anti-perspirants and deodorants
VAGISTAT-1* for vaginal yeast infections
On March 14, 1998, the Company completed the sale of the assets related to the
BAN* brand of anti-perspirant and deodorant products.
BEAUTY CARE:
- -----------
This segment includes sales of haircoloring and hair care preparations and
other beauty care products.
1997 1996 1995
------ ------ ------
Haircoloring $ 841 $ 812 $ 714
Hair care 794 586 487
Other 70 69 103
------ ------ ------
Total Segment $1,705 $1,467 $1,304
------ ------ ------
The principal products in this segment are:
NICE 'N EASY* haircolorings
MISS CLAIROL*
HYDRIENCE*
NATURAL INSTINCTS*
ULTRESS*
LOVING CARE*
HERBAL ESSENCES* complete lines of shampoos and conditioners
INFUSIUM 23*
DAILY DEFENSE*
SYSTEME BIOLAGE* professional hair care products sold
MATRIX ESSENTIALS* exclusively in beauty salons
VITAL NUTRIENTS*
VAVOOM*
MUM* anti-perspirants and deodorants
4
NUTRITIONALS:
- ------------
This segment includes sales of infant formulas and other nutritional products.
1997 1996 1995
------ ------ ------
Infant formulas $1,219 $1,201 $1,086
Other 692 592 506
------ ------ ------
Total Segment $1,911 $1,793 $1,592
------ ------ ------
The principal products in this segment are:
ENFAMIL* infant formula products
PROSOBEE*
NUTRAMIGEN*
LACTOFREE*
ENFAPRO* follow-up formula products for older babies
NEXT STEP*
ALACTA NF*
SUSTAGEN* nutritional supplements and specialties
CHOCO MILK*
ISOCAL*
SUSTACAL*
NUTRAMENT*
BOOST*
THERAGRAN* vitamins
PLUSSSZ*
POLY-VI-SOL*
POLY-VI-FLOR*
NATALINS*
MEDICAL DEVICES:
- ---------------
This segment includes sales of orthopaedic implants, ostomy and wound care
products and other medical devices.
1997 1996 1995
------ ------ ------
Orthopaedic implants $ 615 $ 644 $ 657
Ostomy 451 452 472
Other 736 764 777
------ ------ ------
Total Segment $1,802 $1,860 $1,906
------ ------ ------
5
The principal products in this segment are:
NEXGEN* Complete Knee Solution
VERSYS* Hip System
CENTRALIGN* Precoat Hip Prosthesis orthopaedic implants
ACTIVE LIFE/ ostomy care products
COLODRESS*
SUR-FIT/
COMBIHESIVE/SECURE*
DUODERM* wound care products
SOURCES AND AVAILABILITY OF RAW MATERIALS
- -----------------------------------------
Bristol-Myers Squibb, for the most part, purchases the principal raw
materials and supplies used in each industry segment in the open market.
Substantially all such materials are obtainable from a number of sources so
that the loss of any one source of supply would not have a material adverse
effect on the Company.
PATENTS, TRADEMARKS AND LICENSES
- --------------------------------
The Company owns or is licensed under a number of patents in the United
States and foreign countries covering products, principally in the
pharmaceuticals and medical devices segments, and has also developed many
brand names and trademarks for products in each industry segment. The
Company considers the overall protection of its patent, trademark and license
rights to be of material value and acts to protect these rights from
infringement. The Company believes that no single patent or license is of
material importance in relation to the business as a whole.
COMPETITION, DISTRIBUTION AND CUSTOMERS
- ---------------------------------------
The markets in which Bristol-Myers Squibb competes are generally broad based,
heavily competitive and include many competitors. The principal means of
competition utilized to market the products of Bristol-Myers Squibb include
quality, service, price and product performance. The products of the
pharmaceuticals segment and the medical devices segment are promoted on a
national and international basis in medical journals and directly to the
medical profession. The Company is also utilizing direct-to-consumer
advertising for a number of its pharmaceutical products. Most of the other
products of Bristol-Myers Squibb are generally advertised and promoted on a
national and international basis through the use of television, radio, print
media, consumer offers, and window and in-store displays. Bristol-Myers
Squibb's products are principally sold to the wholesale and retail trade both
nationally and internationally. Certain products of the pharmaceuticals and
medical devices segments are also sold to other drug manufacturers, hospitals
and the medical profession. None of the segments is dependent upon a single
customer, or a few customers, such that the loss of any one or more would
have a material adverse effect on the segment.
6
RESEARCH AND DEVELOPMENT
- ------------------------
Research and development is essential to Bristol-Myers Squibb's businesses,
particularly to the Pharmaceuticals Segment. Management continues to place
great emphasis on these activities. Pharmaceutical research and development
is carried out by the Bristol-Myers Squibb Pharmaceutical Research Institute
which has major facilities in Princeton, Hopewell and New Brunswick, New
Jersey; and Wallingford, Connecticut. Pharmaceutical research and development
is also carried out at various other facilities in the United States and in
Belgium, France, Germany, Italy, Japan, and the United Kingdom.
Bristol-Myers Squibb spent $1,385 million in 1997, $1,276 million in 1996 and
$1,199 million in 1995 on company sponsored research and development
activities. Pharmaceutical research and development spending, as a percentage
of pharmaceutical sales, was 12.0% in 1997 compared to 12.3% in 1996 and 12.9%
in 1995.
REGULATION
- ----------
Most aspects of the Company's business are subject to some degree of
government regulation in the countries in which its operations are conducted.
The Company's policy is to comply fully with all regulatory requirements
applying to its products and operations. For some products, and in some
countries, government regulation is significant and, in general, there is a
trend to more stringent regulation. The Company devotes significant time,
effort and expense addressing the extensive governmental regulatory
requirements applicable to its business. Governmental regulatory actions can
result in the recall or seizure of products, suspension or revocation of the
authority necessary for the production or sale of a product, and other civil
and criminal sanctions.
In the United States, the drug, medical device, diagnostic, food and cosmetic
industries in which the Company operates have long been subject to regulation
by various federal, state and local agencies, primarily as to product
manufacture, safety, efficacy, advertising and labeling. Assuring compliance
with appropriate laws and regulations requires increasing expenditures of time
and resources.
In addition, governmental bodies in the United States as well as other
countries have expressed concern about costs relating to health care and, in
some cases, have focused attention on the pricing of drugs and on appropriate
drug utilization. Government regulation in these areas already exists in some
countries and may be expanded significantly in the United States and other
countries in the future.
While the Company is unable to predict the extent to which its business may
be affected by future regulatory developments, it believes that its
substantial experience dealing with governmental regulatory requirements and
restrictions on its operations throughout the world and its development of new
and improved products should enable it to compete effectively within this
environment.
7
EMPLOYEES
- ---------
Bristol-Myers Squibb employed approximately 53,600 people at December 31,
1997.
DOMESTIC AND FOREIGN OPERATIONS
- -------------------------------
Reference is made to Note 11 Financial Instruments, and Note 13 Segment
Information in the Notes to Consolidated Financial Statements included in Part
II, Item 8 of this Form 10-K Annual Report.
International operations are subject to certain risks which are inherent in
conducting business abroad, including possible nationalization or
expropriation, price and exchange controls, limitations on foreign
participation in local enterprises and other restrictive governmental actions.
In addition, changes in the relative value of currencies take place from time
to time and their effects may be favorable or unfavorable on Bristol-Myers
Squibb's operations. There are currency restrictions relating to repatriation
of earnings in certain countries.
Item 2. PROPERTIES.
Bristol-Myers Squibb's world headquarters is located at 345 Park Avenue, New
York, New York, where it leases approximately 841,800 square feet of floor
space, approximately 301,800 square feet of which is sublet to others. The
headquarters for the Company's segments are as follows: Pharmaceutical world
headquarters is located in Princeton, New Jersey; Consumer Medicines in
Plainsboro, New Jersey; Beauty Care in Stamford, Connecticut; Nutritionals in
Evansville, Indiana; and Medical Devices in Warsaw, Indiana.
Bristol-Myers Squibb manufactures products at forty-three major worldwide
locations with an aggregate floor space of approximately 12,896,000 square
feet. Forty-one facilities are owned by Bristol-Myers Squibb and two are
leased. The following table illustrates the segment and geographic location
of the Company's significant manufacturing facilities.
Cons Beauty Med
Pharm Med Care Nutri Dev Total
----- ----- ----- ----- ----- -----
United States 7 1 2 2 3 15
Europe, Mid East and Africa 5 5 1 1 1 13
Other Western Hemisphere 6 1 2 9
Pacific 4 1 1 6
----- ----- ----- ----- ----- -----
Total 22 7 4 6 4 43
----- ----- ----- ----- ----- -----
Portions of these facilities and other facilities owned or leased by
Bristol-Myers Squibb in the United States and elsewhere are used for
research, administration, storage and distribution. Bristol-Myers Squibb's
facilities are well-maintained, adequately insured and in satisfactory
condition.
8
Item 3. LEGAL PROCEEDINGS.
Breast Implant Litigation
- -------------------------
Reference is made to Note 16 Contingencies in the Notes to Consolidated
Financial Statements included in Part II, Item 8 of this Form 10-K Annual
Report.
As of December 31, 1997, approximately 23,000 domestic and 1,300 foreign
breast implant recipients were plaintiffs in lawsuits pending in federal and
state courts in the United States and in certain courts in Canada and
Australia. Of the 23,000 domestic plaintiffs, about 12,300 have opted out of
the class action settlement described below. The remaining 10,700 plaintiffs
have chosen to participate in the settlement, and their lawsuits are expected
to be dismissed. Some 400 foreign breast implant recipients have opted out
of the Revised Settlement but the opt-out period has not yet expired for
foreign women. Only those suits filed by plaintiffs who have opted out of
the class action settlement may proceed in the United States. Appeals
related to the Revised Settlement are pending.
Other manufacturers of breast implants, as well as suppliers of component
parts and other parties, are also defendants in the majority of these cases.
Some of these plaintiffs have sued numerous manufacturers without specifying
the manufacturer of the implants involved.
In addition to individual suits, the Company has been named as a defendant,
together with other defendants, in a purported class action brought on behalf
of children allegedly exposed to silicone in utero and through breast milk.
(FEUER, ET AL., V. MCGHAN, ET AL., U.S.D.C, E. Dist. NY, 93-0146.) The
suit, which has not been certified as a class action, names all breast
implant manufacturers as defendants and seeks to establish a medical
monitoring fund. On April 11, 1996, a class action on behalf of all women in
the Canadian province of British Columbia was certified in the provincial
court of British Columbia on the single issue of whether silicone gel breast
implants are reasonably fit for their intended purpose (HARRINGTON V. DOW
CORNING CORPORATION ET AL., Supreme Court, British Columbia, C954330). A
previously certified class action lawsuit entitled IN RE: LOUISIANA BREAST
IMPLANT CLASS ACTION (previously SPITZFADEN, ET AL. VS. DOW CORNING CORP., ET
AL.), No. 92-2589, was decertified by the trial court in December 1997 and is
not expected to proceed as a class action.
The Company is a participant in a class action settlement approved by the
Honorable Sam C. Pointer, Jr., Chief Judge of the United States District
Court for the Northern District of Alabama (LINDSEY, ET AL., V. DOW CORNING,
ET AL., CV-94-P-11558-S), before whom all federal breast implant cases were
consolidated for pretrial purposes. On December 22, 1995, Judge Pointer
approved a revised settlement program (Revised Settlement) for resolution of
claims seeking damages for personal injuries from allegedly defective breast
implants. The Revised Settlement arises out of a class action settlement
approved by the Court on September 1, 1994. On January 16, 1996, the
Company, Baxter Healthcare Corporation and Baxter International
(collectively, Baxter), and Minnesota, Mining and Manufacturing Company (3M)
(hereinafter, the Settling Defendants) each paid $125 million into a court-
established fund as an initial reserve to pay claims under the Revised
Settlement. In 1997, the Company made additional contributions to the court-
established fund totaling approximately $190 million. McGhan Medical
Corporation and Union Carbide Corporation are also parties to the Revised
Settlement.
9
The fifteen-year Revised Settlement program provides benefits to those breast
implant recipients who have had at least one breast implant manufactured by
one of the Settling Defendants (or their predecessors or subsidiaries).
Several kinds of benefits are available for eligible participants with breast
implants made by companies affiliated with Bristol-Myers Squibb, Baxter and
3M: (1) for current claimants, compensation generally ranging from $10,000 to
$50,000 based on disease and disability definitions of the original
settlement, plus supplemental benefits of an additional $15,000 to $50,000
for claimants with ruptured implants; (2) for current claimants seeking
higher benefits and for other registrants, compensation ranging from $75,000
to $250,000 based on more stringent disease and disability definitions (Long-
Term Benefits); and (3) although the Settling Defendants are not recommending
removal of implants absent some specific medical reason, a $3,000 payment for
those class members (other than late registrants) who seek removal of
implants. In addition, current claimants are eligible for an advance payment
of $5,000, and other registrants are eligible for an advance payment of
$1,000. For current claimants, benefits would be payable regardless of the
number of claimants seeking compensation, regardless of the total dollar
value of approved claims, and regardless of the outcome of appeals from the
order approving the settlement. For other registrants, benefits would be
subject to an aggregate $755 million limit for all participating companies
over the fifteen-year life of the program. The Company's individual
aggregate limit for such benefits is $400 million. In the event the dollar
value of the future claims subject to the limit exceeds this amount,
claimants may be afforded additional opt-out rights but without the right to
assert punitive or other statutory multiple damage claims. The Company's
obligations to make payments under the Revised Settlement are not affected by
the number of class members electing to opt out of the settlement or the
number of class members making claims under it. However, the Company's
obligations to fund Long-Term Benefits are cancelable if certain provisions
of the Revised Settlement are disapproved on appeal.
The Revised Settlement was the subject of an appeal filed by certain foreign
breast implant recipients. In November 1996, the Settling Defendants settled
that appeal, and the benefits of the Revised Settlement were extended, with
certain modifications, to foreign breast implant recipients. Pursuant to the
settlement, the Settling Defendants paid (on an equal basis) an aggregate of
$25 million into a court-approved settlement fund as an initial reserve for
payment of foreign claims.
Approximately 380,000 domestic class members (with implants of all
manufacturers, not just MEC, Baxter and 3M) registered with the original
settlement approved in 1994. Around 88,000 of these class members have
indicated that they received at least one breast implant manufactured by MEC
or a related company. Of these 88,000 registrants, 14,300 have opted out of
the Revised Settlement; 6,300 of these have proved to the satisfaction of
the claims office that they received a breast implant of MEC or a related
company, while the remaining 8,000 opt-outs have indicated their belief (but
have not proved) that they received an MEC breast implant. The 14,300 opt-
outs who have or claim to have MEC implants are among the 44,800 domestic
registrants (with implants of all manufacturers) who opted out of the Revised
Settlement. The Company has identified approximately 10,800 persons from
among the 44,800 opt-outs (with implants of all defendants, not just MEC) as
plaintiffs in lawsuits against it. An as yet undetermined number of these
10,800 plaintiffs do not have MEC implants and their claims against the
Company are expected to be dismissed. An additional 1,570 plaintiffs with
claims based upon MEC implants remain from among domestic class members who
10
previously opted out of the settlement originally approved in 1994. Because
the opt-out period is essentially over for domestic class members, the number
of opt-outs is not expected to increase materially. However, because of
continuing uncertainties, it is still not possible to predict on any precise
basis the total number of women with MEC implants who will pursue lawsuits
against the Company.
The cost of the settlement is dependent upon complex and varying factors,
including the number of class members that participate, the kinds of claims
asserted and approved under the settlement, and their dollar value. In light
of the continuing uncertainties attendant to these and other factors, it is
not possible to achieve any precision at this time in estimating the cost of
the settlement to the Company.
In May of 1996, the Company, together with other Settling Defendants, entered
into a $50 million settlement of claims asserted by certain health insurers
based upon payments made or benefits provided by insurers and represented
health plans to participating registrants that allegedly involve or relate to
silicone gel breast implants. The Company has paid $20.2 million to the
settlement, which extinguishes the potential claims of the majority of the
U.S. commercial and non-governmental health care insurer market against both
the defendants and settlement class members.
In July of 1995, the Company entered into a $20.5 million (U.S. funds) class
action settlement with plaintiff representatives in the provinces of Ontario
and Quebec. The class includes persons who have or had MEC breast implants
and who reside in Ontario and Quebec or who received their MEC implants
there. The settlement, which had minimal opt-outs, has been approved by the
provincial courts of Ontario and Quebec.
The Company's insurers were notified of the breast implant claims and the
Revised Settlement, and generally reserved their rights or declined to
confirm coverage. The Company has reached settlements with many of the
insurers (generally in connection with coverage litigation filed by the
Company in Texas state court). The settlement agreements provided cash or
confirmed coverage. Legal proceedings remain unresolved against some of the
insurers.
The cost to the Company of resolving opt-out claims is subject to a number of
complex uncertainties. Primary among them is the difficulty of estimating
with any precision the quantity and quality of such claims. While there have
been large judgments, defendants have won more trials than they have lost,
and in 1996 and 1997, the Company's trial experience was highly favorable.
The Company has maintained throughout this litigation that breast implants do
not cause disease and medical and scientific data support the Company's
position. The Company's view has found strong support in the December 1996
decision of a federal judge in Oregon, who ruled to exclude the testimony of
plaintiffs' experts concerning a causal link between silicone gel breast
implants and systemic illness on the ground that it fails to satisfy
standards for reliability under current Supreme Court guidelines. In
addition, a science panel appointed by Judge Pointer is in the process of
reviewing the scientific literature regarding any relation between breast
implants and disease, and is expected to report its findings in 1998. The
results of continuing medical research and a variety of additional factors,
including the success of other legal defenses and the success of the Revised
Settlement program, might substantially affect the cost of resolving opt-out
cases.
11
In the fourth quarter of 1993, the Company recorded a charge of $500 million
before taxes ($310 million after taxes) in respect of breast implant cases.
The charge consisted of $1.5 billion for potential liabilities and expenses,
offset by $1 billion of expected insurance proceeds. In the fourth quarters
of 1994 and 1995, the Company recorded additional special charges of $750
million before taxes ($488 million after taxes) and $950 million before taxes
($590 million after taxes), respectively, related to breast implant product
liability claims. Although the cost of the Revised Settlement and the
ongoing litigation cannot at present be predicted with any reasonable degree
of precision, the Company, based on the information set forth above and on
related estimates, continues to believe that previously established reserves
should be adequate to address these claims.
Infant Formula Matters
- ----------------------
The Company, one of its subsidiaries, and others are or have been defendants
in a number of antitrust actions in various states filed on behalf of
purported statewide classes of indirect purchasers of infant formula products
and by the Attorneys General of Louisiana, Minnesota and Mississippi,
alleging a price fixing conspiracy and other violations of state antitrust or
deceptive trade practice laws and seeking penalties and other relief. The
Company has previously reported reaching settlements and receiving final
court approval in the majority of these cases. The only open cases are in
Louisiana and Missouri. On November 6, 1997, the court in Louisiana
dismissed the plaintiffs' case. The plaintiffs are appealing that dismissal.
In Missouri, the Company has a motion to dismiss pending. The Company
believes that these actions are without merit and that their ultimate
disposition will not have a material adverse effect on the Company's results
of operations, liquidity or consolidated financial position.
Prescription Drug Litigation
- ----------------------------
As of December 31, 1997, the Company is a defendant in over 100 actions
brought against the Company and more than 30 other pharmaceutical
manufacturers, drug wholesalers and pharmacy benefit managers in various
federal district courts by certain chain drugstores, supermarket chains and
independent drugstores, suing either individually or as a representative of
a nationwide class of retail pharmacies that has been certified. These
cases, which have been coordinated for pretrial purposes in the United States
District Court for the Northern District of Illinois, seek treble damages and
injunctive relief on account of an alleged antitrust conspiracy concerning
the pricing and marketing of brand name prescription drugs in violation of
the Sherman Act; individual retailer plaintiffs also assert claims of
unlawful price discrimination under the Robinson-Patman Act. Discovery has
been completed with respect to claims concerning the alleged Sherman Act
violations. Completion of additional discovery with respect to Robinson-
Patman Act claims against the Company has been stayed. It is estimated that
the class members who have not opted out represent approximately two-thirds
of retail pharmacy purchases of brand name prescription drugs during the
alleged damages period. As of May 1, 1996, the Company, without admitting
any wrongdoing, reached an amended agreement to settle the class action. On
May 30, 1997, the United States Court of Appeals for the Seventh Circuit
dismissed appeals challenging the District Court's approval of the amended
class action settlement. On October 29, 1997, the class settlement became
final. Trial in the class case against the manufacturer and wholesaler
defendants who have not settled is scheduled for September 14, 1998, with
trial in the actions brought by the individual retailer plaintiffs to follow.
The largest opt-out retailer plaintiffs have purported to quantify their
12
Sherman Act damage claims against the defendants, including the Company,
asserting damages aggregating approximately $2.4 billion before trebling. On
November 20, 1997, two large retail chains, Eckerd Corporation and American
Drug Stores, initiated similar actions in the Northern District of Illinois
against several manufacturer and wholesaler defendants, including the
Company. On August 15, 1997, the Seventh Circuit ruled on consolidated
appeals from several District Court rulings. The Appeals Court reversed the
District Court's denial of summary judgment to the manufacturer defendants,
including the Company, on the overcharge damages claims based on plaintiffs'
indirect purchases from wholesalers of defendant manufacturers' drugs.
However, the Court of Appeals also reversed the District Court's grant of
summary judgment to the wholesaler defendants in the class action and stated
that class and individual plaintiffs might be able to recover overcharge
damages on indirect purchases from wholesalers if they demonstrated that
wholesalers participated in the alleged Sherman Act violations. After
remand, the District Court granted the individual plaintiffs leave to amend
their complaints to join the wholesalers as defendants. Class action cases
brought by retail pharmacies in state courts against similar defendants
including the Company and alleging similar claims under state law have been
filed in California, Alabama, Wisconsin, Minnesota and Mississippi. Final
settlements have been approved in the Wisconsin and Minnesota class actions.
The Mississippi court has ruled that the case may not proceed as a class
action, but has refused to dismiss the claims of named plaintiffs. Class
action cases brought by consumers in state courts against similar defendants
including the Company and alleging similar claims under state law have been
brought in Alabama, California, Washington, New York, Arizona, the District
of Columbia, Maine, Michigan, Minnesota, Wisconsin, Kansas, Florida,
Tennessee and North Carolina. Four of these state consumer cases were
removed to federal court and transferred to the consolidated proceedings in
the Northern District of Illinois. These four cases have recently been
remanded to state court and all the consumer class actions are now in state
court. The consumer actions brought in Washington and New York have been
dismissed; an appeal is pending in New York. A consumer class has been
certified in the District of Columbia case, while class certification has
been denied in the Maine, Michigan and Minnesota consumer cases. Plaintiffs
in Minnesota responded to the denial of class certification by filing a new
consumer class action seeking only injunctive relief on August 14, 1997. In
July 1996, the Company received a subpoena from the Federal Trade Commission
(FTC) in an investigation it is conducting to determine whether U.S.
pharmaceutical manufacturers have engaged in unfair methods of competition by
engaging in unlawful concerted activities on prices of pharmaceutical
products. On May 27, 1997, the FTC served a second subpoena and a Civil
Investigative Demand (CID) on the Company for information and documents. The
Company responded to this CID and has completed its document production. On
December 31, 1997, the FTC requested additional documents. The Company
believes that the above-described actions are without merit and that their
ultimate disposition will not have a material adverse effect on the Company's
results of operations, liquidity or consolidated financial position.
Environmental Matters
- ---------------------
The Company, together with others, is a party to, or otherwise involved in,
a number of proceedings brought by the Environmental Protection Agency or
comparable state agencies under the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA or Superfund) or comparable state laws
directed at the cleanup of hazardous waste sites. While it is not possible
to predict with certainty the outcome of these cases, the Company believes
that the ultimate disposition of these matters will not have a material
13
adverse effect on the Company's results of operations, liquidity or
consolidated financial position.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
14
PART IA
------------
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
The following are the executive corporate officers and the other executive
officers of the Registrant:
Positions and Offices Presently
Name Age Held with the Registrant
- ---------------- --- ---------------------------------
Charles A. Heimbold, Jr. 64 Chairman of the Board, Chief Executive
Officer and Director
Hamed M. Adbou, Ph.D. 57 President, Technical Operations, Worldwide
Medicines Group
Harrison M. Bains, Jr. 54 Treasurer and Vice President, Corporate
Staff
Samuel L. Barker, Ph.D. 55 Executive Vice President, Franchise
Management and Strategy, Worldwide
Medicines Group
Alice C. Brennan 45 Secretary, Head of the Office of Corporate
Conduct and Vice President, Corporate Staff
Peter R. Dolan 42 President, Pharmaceutical Group - Europe
and Worldwide Consumer Medicines
Donald J. Hayden, Jr. 42 President, Intercontinental, Worldwide
Medicines Group
George P. Kooluris 53 Senior Vice President, Corporate
Development, Corporate Staff
Richard J. Lane 47 President, U.S. Pharmaceutical Group
John L. McGoldrick 57 General Counsel and Senior Vice President,
Law and Strategic Planning, Corporate Staff
Michael F. Mee 55 Chief Financial Officer and Senior Vice
President, Corporate Staff
Christine A. Poon 45 President, Medical Devices Group
Peter S. Ringrose, Ph.D. 52 President, Bristol-Myers Squibb
Pharmaceutical Research Institute
Stephen I. Sadove 46 President, Worldwide Beauty Care and
Nutritionals
Frederick S. Schiff 50 Controller and Vice President, Financial
Operations, Corporate Staff
15
John L. Skule 54 Vice President, Public Affairs, Corporate
Staff
Charles G. Tharp, Ph.D. 46 Senior Vice President, Human Resources,
Corporate Staff
Kenneth E. Weg 59 Executive Vice President, President,
Worldwide Medicines Group and Director
Persons who hold titles as elected corporate officers of the Registrant
were last elected or reelected to the office held at the general election of
officers by the Registrant's Board of Directors on May 6, 1997. Officers of
the Registrant serve in such capacity at the pleasure of the Board of
Directors of the Registrant.
CHARLES A. HEIMBOLD, JR. - From 1992 to 1996, President of the
Registrant. Mr. Heimbold has been a director of the Registrant since 1989,
the Chief Executive Officer of the Registrant since 1994 and Chairman of the
Board of Directors of the Registrant since 1995.
HAMED M. ABDOU, Ph.D. - From 1993 to 1995, Vice President QA/QC,
Technical Operations PG, a division of the Registrant, and from 1995 to 1997,
Senior Vice President, North America and Intercontinental Manufacturing,
Technical Operations PG, a division of the Registrant. Dr. Abdou has been
President, Technical Operations, Worldwide Medicines Group, a division of the
Registrant since 1997.
HARRISON M. BAINS, JR. - Mr. Bains has been Treasurer and Vice
President, Corporate Staff of the Registrant since 1988.
SAMUEL L. BARKER, Ph.D. - From 1992 to 1994, President, U.S.
Pharmaceutical Group, a division of the Registrant, from 1994 to 1995,
Executive Vice President, and President, U.S. Pharmaceutical Group, a
division of the Registrant and from 1995 to 1997, President, U.S.
Pharmaceutical Group, Worldwide Medicines Group, a division of the
Registrant. Dr. Barker has been Executive Vice President, Franchise
Management and Strategy, Worldwide Medicines Group, a division of the
Registrant since 1997.
ALICE C. BRENNAN - From 1992 to 1994, Secretary of American Cyanamid
Company, a pharmaceutical and agricultural company. Ms. Brennan has been
Secretary and Vice President, Corporate Staff of the Registrant since 1994
and Head of the Office of Corporate Conduct since 1997.
PETER R. DOLAN - From 1993 to 1995, President, Bristol-Myers Products,
a division of the Registrant, from 1995 to 1996, President, Mead Johnson
Nutritional Group, a division of the Registrant, and from 1996 to 1997,
President, Nutritionals and Medical Device Group, a division of the
Registrant. Mr. Dolan has been President, Pharmaceutical Group - Europe and
Worldwide Consumer Medicines, divisions of the Registrant since 1997.
16
DONALD J. HAYDEN, JR. - From 1993 to 1994, Vice President & General
Manager, Bristol-Myers Oncology Division, Specialty Pharmaceuticals, a
division of the Registrant, in 1994, Vice President & General Manager,
Bristol-Myers Oncology Division, a division of the Registrant, from 1994 to
1995, Vice President & General Manager, Bristol-Myers Oncology/Immunology
Division, a division of the Registrant, in 1995, President Oncology &
Immunology, a division of the Registrant, from 1995 to 1997, Senior Vice
President, Worldwide Franchise Management and Business Development, a
division of the Registrant, and in 1997, President, Intercontinental
Pharmaceutical Group and Senior Vice President, Worldwide Business
Development, Worldwide Medicines Group, a division of the Registrant. Mr.
Hayden has been President, Intercontinental, Worldwide Medicines Group, a
division of the Registrant since 1997.
GEORGE P. KOOLURIS - From 1980 to 1993, Vice President, Corporate
Development, Corporate Staff of the Registrant. Mr. Kooluris has been Senior
Vice President, Corporate Development, Corporate Staff of the Registrant
since 1994.
RICHARD J. LANE - From 1993 to 1994, President, Human Health - U.S.,
Merck Co., Inc., in 1994, President, Human Health N.A., Merck & Co., Inc., a
pharmaceutical company, from 1994 to 1995, consultant Schering-Plough
Corporation, a pharmaceutical company, and in 1995, Senior Vice President
Marketing Operations, Sandoz Pharmaceuticals, a pharmaceutical, nutritionals
and chemicals company. From 1995 to 1997, Senior Vice President Marketing,
U.S. Pharmaceuticals, a division of the Registrant, and in 1997, President,
U.S. Primary Care, a division of the Registrant. Mr. Lane has been
President, U.S. Pharmaceuticals, a division of the Registrant since 1997.
JOHN L. McGOLDRICK - From 1974 to 1994, Partner, McCarter & English and
from 1995 to 1997, General Counsel and Senior Vice President, Corporate Staff
of the Registrant. Mr. McGoldrick has been General Counsel and Senior Vice
President, Law and Strategic Planning, Corporate Staff of the Registrant
since 1997.
MICHAEL F. MEE - From 1990 to 1993, director and from 1992 to 1993,
Chairman of the Board and Chief Financial Officer of Wang Laboratories, Inc.,
a provider of computer-based information processing products and services.
Mr. Mee has been Chief Financial Officer and Senior Vice President, Corporate
Staff of the Registrant since 1994.
CHRISTINE A. POON - From 1993 to 1994, Vice President, Business
Strategy, Specialty Pharmaceuticals, a division of the Registrant, from 1994
to 1995, President & General Manager - Canada, Pharmaceutical Group -
Intercontinental, a division of the Registrant, in 1995 Vice President OPS-
Planning - Intercontinental & President, Canada, a division of the
Registrant, from 1995 to 1996, Vice President, Canada and Northern Latin
America, Intercontinental, a division of the Registrant, from 1996 to 1997,
Senior Vice President, Intercontinental Northern Latin America and Canada, a
division of the Registrant, and in 1997, President, Latin America and Canada,
Worldwide Pharmaceutical Group, a division of the Registrant. Ms. Poon has
been President, Medical Devices Group, a division of the Registrant since
1997.
17
PETER S. RINGROSE, Ph.D. - From 1992 to 1994, Senior Vice President,
Medicinal Research & Development, Europe and from 1994 to 1996, Senior Vice
President, Worldwide Discovery and Medicinal Research & Development, Europe
of Pfizer Inc., a health care company. Dr. Ringrose has been President,
Bristol-Myers Squibb Pharmaceutical Research Institute, a division of the
Registrant since 1997.
STEPHEN I. SADOVE - From 1991 to 1994, President, Clairol Incorporated,
a division of the Registrant, from 1994 to 1996, President, Worldwide Clairol
and 1996 to 1997, President, Worldwide Beauty Care, a division of the
Registrant. Mr. Sadove has been President, Worldwide Beauty Care and
Nutritionals, a division of the Registrant since 1997.
FREDERICK S. SCHIFF - From 1990 to 1997, Controller and Vice President,
Corporate Staff of the Registrant. Mr. Schiff has been Controller and Vice
President, Financial Operations, Corporate Staff of the Registrant since
1997.
JOHN L. SKULE - Mr. Skule has been Vice President, Public Affairs,
Corporate Staff of the Registrant since 1993.
CHARLES G. THARP, Ph.D. - Dr. Tharp has been Senior Vice President,
Human Resources, Corporate Staff of the Registrant since 1993.
KENNETH E. WEG - From 1993 to 1996, President, Bristol-Myers Squibb
Pharmaceutical Group, a division of the Registrant. Mr. Weg has been
President, Worldwide Medicines Group, a division of the Registrant, since
1997 and a director of the Registrant since 1995 and Executive Vice President
of the Registrant since 1995.
In addition to the positions and offices heretofore listed, all of the
foregoing executive corporate officers and other executive officers of the
Registrant are directors and/or officers of one or more affiliates of the
Registrant, with the exception of Mr. Skule and Dr. Tharp.
18
PART II
------------
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
MARKET PRICES
- -------------
Bristol-Myers Squibb common and preferred stocks are traded on the New York
Stock Exchange and the Pacific Exchange, Inc. (symbol: BMY). A quarterly
summary of the high and low market prices is presented below:
1997 1996
------------------- ---------------------
High Low High Low
-------- -------- --------- ---------
Common:
First Quarter $69 1/4 $53 1/4 $45 1/8 $40 9/16
Second Quarter 85 3/4 57 1/4 45 1/8 39
Third Quarter 88 5/8 71 49 41 1/2
Fourth Quarter 98 3/16 80 58 3/16 48 1/4
Preferred:
During all four quarters of 1997 and the first quarter of 1996, there were
no trades of the Company's preferred stock. The Company's preferred stock
traded at a high of $369 and a low of $350 1/2 during the second quarter of
1996, a high of $370 and low of $364 during the third quarter of 1996 and
a high and low of $450 during the fourth quarter of 1996.
HOLDERS OF COMMON STOCK
- -----------------------
The approximate number of record holders of common stock at December 31,
1997 was 127,036.
The number of record holders is based upon the actual number of holders
registered on the books of Bristol-Myers Squibb at such date and does not
include holders of shares in "street names" or persons, partnerships,
associations, corporations or other entities identified in security position
listings maintained by depository trust companies.
19
DIVIDENDS
- ---------
Dividend payments per share in 1997 and 1996 were:
Common Preferred
------------------- ----------------
1997 1996 1997 1996
------- --------- ----- -----
First Quarter $ .38 $ .37 1/2 $ .50 $ .50
Second Quarter .38 .37 1/2 .50 .50
Third Quarter .38 .37 1/2 .50 .50
Fourth Quarter .38 .37 1/2 .50 .50
------- --------- ----- -----
Year $ 1.52 $1.50 $2.00 $2.00
======= ========= ===== =====
In December 1997, the Board of Directors of the Company declared a quarterly
dividend of $.39 per share on the common stock of the Company, payable on
February 1, 1998 to shareholders of record as of January 2, 1998. The 1998
indicated annual payment of $1.56 per share represents the twenty-sixth
consecutive year that the Company has raised the dividend on its common
stock.
20
Item 6. SELECTED FINANCIAL DATA.
FIVE-YEAR FINANCIAL SUMMARY
OPERATING RESULTS
- ---------------------------
(in millions,
except per share amounts)
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
Net Sales $16,701 $15,065 $13,767 $11,984 $11,413
------- ------- ------- ------- -------
Expenses:
Cost of products sold 4,464 3,965 3,637 3,122 3,029
Marketing, selling and
administrative 4,173 3,925 3,670 3,166 3,098
Advertising and product
promotion 2,241 1,946 1,646 1,367 1,255
Research and development 1,385 1,276 1,199 1,108 1,128
Other(*) (44) (60) 1,213 666 332
------- ------- ------- ------- -------
12,219 11,052 11,365 9,429 8,842
------- ------- ------- ------- -------
Earnings Before
Income Taxes(*) 4,482 4,013 2,402 2,555 2,571
Provision for income taxes 1,277 1,163 590 713 612
------- ------- ------- ------- -------
Net Earnings(*) $ 3,205 $ 2,850 $ 1,812 $ 1,842 $ 1,959
======= ======= ======= ======= =======
Dividends paid on common
and preferred stock $ 1,515 $ 1,507 $ 1,495 $ 1,485 $ 1,485
Earnings per
common share - Basic(*) 3.22 2.84 1.79 1.81 1.90
Earnings per
common share - Diluted(*) 3.14 2.80 1.78 1.81 1.89
Dividends per common share 1.52 1.50 1.48 1.46 1.44
(*) Includes a gain on the sale of a business of $225 million before taxes,
$140 million after taxes, in 1997. Includes a special charge for
pending and future product liability claims of $950 million before
taxes, $590 million after taxes, or $.58 per common share, basic and
diluted in 1995; $750 million before taxes, $488 million after taxes,
or $.48 per common share, basic and diluted in 1994; and $500 million
before taxes, $310 million after taxes, or $.30 per common share, basic
and diluted in 1993. Includes a provision for restructuring of $225
million before taxes, $140 million after taxes, in 1997 and $310 million
before taxes, $198 million after taxes, in 1995.
21
Item 6. SELECTED FINANCIAL DATA. (Con't.)
FIVE-YEAR FINANCIAL SUMMARY
FINANCIAL POSITION AT DECEMBER 31
- ---------------------------------
(in millions)
except per share amounts)
1997 1996 1995 1994 1993
------- ------- ------- ------ ------
Current assets $ 7,736 $ 7,528 $ 7,018 $ 6,710 $ 6,570
Property, plant and
equipment 4,156 3,964 3,760 3,666 3,374
Total assets 14,977 14,685 13,929 12,910 12,101
Current liabilities 5,032 5,050 4,806 4,274 3,065
Long-term debt 1,279 966 635 644 588
Total liabilities 7,758 8,115 8,107 7,206 6,161
Stockholders' equity $ 7,219 $ 6,570 $ 5,822 $ 5,704 $ 5,940
Average common shares
outstanding - Basic 996 1,004 1,012 1,017 1,030
Average common shares
outstanding - Diluted 1,021 1,018 1,016 1,020 1,038
Reference is made to Note 2 Acquisitions and Divestitures, Note 8 Property,
Plant and Equipment and Note 16 Contingencies, appearing in the Notes to
Consolidated Financial Statements included in Part II, Item 8 of this Form
10-K Annual Report.
22
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Summary
In 1997, Bristol-Myers Squibb achieved record levels of sales, earnings and
earnings per share. Worldwide sales grew to $16.7 billion, an 11% increase
over 1996. Domestic sales, which represent 58% of worldwide sales, increased
14% to $9.6 billion, while international sales increased 7% to $7.1 billion.
Exchange rate fluctuations had an unfavorable effect of 3% on worldwide sales
and 8% on international sales. Sales growth resulted from a 14% increase due
to volume with no changes overall from pricing activity. In 1997,
significant contributions to the Company's sales growth were made by the
Company's most important products, many of which experienced double- and even
triple-digit sales growth on a worldwide basis.
Earnings before income taxes increased 12% to $4,482 million in 1997, net
earnings increased 12% to $3,205 million, basic earnings per share increased
13% to $3.22 and diluted earnings per share increased 12% to $3.14. Net
earnings and basic earnings per share have increased at compound annual
growth rates of 12% and 13%, respectively, over the past 10 years.
Bristol-Myers Squibb's financial position remains strong. At December 31,
1997, the Company held $1.8 billion in cash, time deposits and marketable
securities. Cash provided by operating activities totaled $2.5 billion and
continued to be the primary source of funding to finance dividend
distributions of $1.5 billion and treasury stock repurchases of $1.2 billion.
Dividends per common share were $1.52 in 1997, increasing from $1.50 per
share paid in 1996. The Company's payout ratio, calculated as dividends per
common share over basic earnings per common share, were 47.2%, 52.8% and
57.6%, in 1997, 1996 and 1995, respectively, excluding the 1995 special
charge and provision for restructuring. In December 1997, the Company
announced another dividend increase, the twenty-sixth consecutive year that
dividends have increased. The 1998 indicated annual payment is $1.56 per
share. Bristol-Myers Squibb's strong financial position is evidenced further
by its triple-A credit rating from both Moody's and Standard & Poor's, making
Bristol-Myers Squibb one of only seven U.S. companies with this distinction.
In 1997, Bristol-Myers Squibb established its long-term strategic objective
to be the number one company in earnings per share growth within its
competitive universe. To achieve this objective, the Company is making
strategic investments behind a number of high priority projects. The
Company's top priority project is to become the most productive, respected
and innovative pharmaceutical research and development organization in the
world. Other high priority projects focus on high growth products in fast
growing markets, including PRAVACHOL*, TAXOL*(R) (paclitaxel), GLUCOPHAGE and
HERBAL ESSENCES*, as well as enhancing the balanced strength of its core
businesses. During 1997, increases were made in advertising and promotion
expenditures, sales force personnel and research and development facilities
and personnel to help ensure the success of these high priority projects.
Total equity market capitalization was $94 billion as of December 31, 1997,
a 72.3% increase over last year. Total return to stockholders, share price
appreciation together with reinvested dividends, was 77.0% for 1997, which
compares favorably to the 33.4% return of the Standard & Poor's 500 Index.
23
Employment levels at December 1997 increased to 53,600 from 51,200 at
December 1996, with increases in the pharmaceutical sales force and increases
due to acquisitions.
During the year, the Company made a number of strategic acquisitions. In
January 1998, the Company completed the acquisition of Redmond Products,
Inc., a leading hair care manufacturer in the United States which markets
well-known products including AUSSIE Mega Shampoo, AUSSIE 3 Minute Miracle
Conditioner and AUSSIE Sprunch Spray, among others. In Latin America, the
Company acquired Abeefe S.A., Peru's largest pharmaceutical manufacturer and
marketer of a broad range of prescription and nonprescription anti-infective,
respiratory, anti-inflammatory and dermatological products; CHOCO MILK*,
Mexico's leading milk-based nutritional supplement; and SAL DE UVAS PICOT*,
a leading effervescent antacid product.
Net Sales and Earnings
Worldwide sales increased 11% in 1997 to $16.7 billion, compared with
increases of 9% and 15% in 1996 and 1995, respectively. The consolidated
sales growth resulted from a 14% increase due to volume, a 3% decrease due to
unfavorable foreign exchange rate fluctuations and no changes overall from
pricing activity. In 1996, the 9% increase in sales reflected an 11%
increase due to volume, a 2% decrease due to unfavorable foreign exchange
rate fluctuations and no changes overall from pricing activity. In 1995, the
15% increase in sales reflected a 13% increase due to volume, while price
increases and exchange rate fluctuations each contributed 1% to growth on a
worldwide basis. Domestic sales increased 14% in 1997, and 10% in both 1996
and 1995, while international sales increased 7% in 1997, 9% in 1996 and 22%
in 1995. In general, the businesses of the Company's industry segments are
not seasonal.
Net earnings and basic earnings per share in 1997 increased 12% to $3,205
million and 13% to $3.22 per share from $2,850 million and $2.84 per share in
1996. 1995 net earnings and basic earnings per share were $1,812 million and
$1.79 per share ($2,600 million and $2.57 per share excluding the 1995
provision for restructuring and special charge). Diluted earnings per share
in 1997, 1996 and 1995 were $3.14, $2.80 and $1.78, respectively. Net
earnings margins increased to 19.2% in 1997 from 18.9% in both 1996 and 1995,
excluding the 1995 charges.
The effective income tax rate on earnings before income taxes was 28.5% in
1997 compared to 29.0% and 24.6% in 1996 and 1995, respectively. Excluding
the 1995 special charge and provision for restructuring, the effective income
tax rate on earnings before income taxes was 29.0% in 1995. The lower 1997
effective income tax rate compared to 1996 and 1995 resulted from increased
income in lower tax rate jurisdictions.
As described in the notes to the financial statements, in the fourth quarter
of 1997, the Company divested Linvatec Corporation, its arthroscopy and
surgical powered instrument business, for $370 million, resulting in a gain
of $225 million before taxes, $140 million after taxes. At the same time,
the Company recorded a provision for restructuring of $225 million before
taxes, $140 million after taxes. The provision for restructuring primarily
relates to the consolidation of plants and facilities and related employee
termination costs. In the fourth quarter of 1995, the Company recorded a
special charge to earnings of $950 million before taxes, $590 million after
taxes, or $.58 per common share, basic and diluted (see Note 16 -
Contingencies), as well as a provision for restructuring of $310 million
before taxes, $198 million after taxes.
24
Expenses
Total costs and expenses as a percentage of sales were 73.2% in 1997 compared
with 73.4% in both 1996 and 1995, excluding the 1995 special charge and
provision for restructuring.
As a percentage of sales, cost of products sold increased to 26.7% in 1997
from 26.3% in 1996, principally due to incremental low margin Oncology
Therapeutic Network sales, partially offset by increased sales of higher
margin promoted pharmaceutical products. In 1996, cost of products sold as
a percentage of sales remained relatively unchanged at 26.3% compared to
26.4% in 1995. Excluding 1996 acquisitions, cost of products sold as a
percentage of sales decreased to 25.5% in 1996 due to a favorable product mix
and manufacturing efficiencies.
Advertising and promotion expenses in support of new and existing products
increased 15% to $2,241 million in 1997 from $1,946 million in 1996, and as
a percentage of sales, increased to 13.5% from 12.9%, principally due to
increased spending on direct-to-consumer campaigns for several pharmaceutical
products as well as incremental advertising support of beauty care products.
In 1996, advertising and promotion expenses increased 18% from 1995 levels
primarily due to incremental spending in the Pharmaceuticals and Beauty Care
Segments, supporting direct-to-consumer campaigns and new product launches,
respectively.
Marketing, selling and administrative expenses increased 6% to $4,173 million
in 1997 from $3,925 million in 1996, and as a percentage of sales, decreased
to 25.0% in 1997 from 26.1% in 1996 and 26.7% in 1995 as a direct result of
the Company's productivity programs and higher sales volumes.
The Company's investment in research and development totaled $1,385 million
in 1997, an increase of 9% over 1996, and as a percentage of sales, decreased
to 8.3% in 1997 from 8.5% in 1996. This spending level reflects the
Company's commitment to research over a broad range of therapeutic areas and
clinical development in support of new products. The Company acquired a new
research facility in Hopewell, N.J., and announced its intention to hire
2,000 additional scientists over the next several years. Over the past 10
years, research and development expenses have increased at a compound annual
growth rate of 10%. In 1997, research and development spending dedicated to
the research and development of pharmaceutical products was 12.0% of
pharmaceutical sales compared to 12.3% and 12.9% in 1996 and 1995,
respectively. During 1997, 1996 and 1995, the Company entered into a number
of research alliances, licensing agreements and biotechnology collaborations.
These agreements are providing important new products as well as early-stage
compounds for further development and new processes that will help the
Company screen for new drugs more effectively.
Business Segments
All five of the Company's business segments - Pharmaceuticals, Consumer
Medicines, Nutritionals, Medical Devices and Beauty Care - reported sales
increases, excluding foreign exchange, during the year. By the end of 1997,
Bristol-Myers Squibb had 63 products with more than $50 million in annual
sales, 33 of which had more than $100 million in annual sales.
25
Sales in the Pharmaceuticals Segment, which is the Company's largest segment
at 59% of total Company, increased 15% to $9,932 million in 1997. Sales
growth resulted from a 17% increase in volume and a 1% increase in selling
prices, offset by a 3% decrease due to the unfavorable effect of foreign
exchange rate fluctuations. Domestic sales increased 23% and international
sales increased 13%, excluding foreign exchange, primarily due to volume
growth.
Sales of PRAVACHOL*, a cholesterol-lowering agent, and the Company's largest
selling product, were $1.4 billion, an increase of 34%. Domestic sales
increased 39% to $875 million. Results of the Long-term Intervention with
Pravastatin in Ischaemic Disease (LIPID) trial showed PRAVACHOL* treatment
reduced consequences of coronary heart disease, including heart attack,
stroke and death, by 20% to 30%. Sales of MONOPRIL*, a second generation
angiotensin converting enzyme (ACE) inhibitor with once-a-day dosing,
increased 28% to $328 million, with strong growth in both domestic and
international markets. The Company and Sanofi S.A. received U.S. marketing
clearance from the U.S. Food and Drug Administration (FDA) for irbesartan and
clopidogrel. Irbesartan, sold as AVAPRO in the United States, is an
angiotensin II receptor blocker for the treatment of hypertension, and
clopidogrel, to be sold as PLAVIX in the United States, is a platelet
inhibitor for the reduction of stroke and heart attack in patients with
atherosclerosis. AVAPRO was launched in the United States during the fourth
quarter, and PLAVIX is planned to launch in early 1998. Sales of
cardiovascular drugs, the largest product group in the segment, increased 3%
to $2,905 million. Due to the loss of patent exclusivity in several European
countries in the first quarter of 1997, and in the United States in February
1996, sales of captopril, an ACE inhibitor sold primarily under the trademark
CAPOTEN*, declined $296 million to $795 million. Excluding CAPOTEN* sales,
cardiovascular drugs increased 22%.
Sales of anti-cancer drugs increased 23% to $2,420 million. Sales of TAXOL*,
the Company's leading anti-cancer agent, increased 16% to $941 million. In
June and September 1997, the Company was granted use patents in the United
States covering specific dosage regimes for TAXOL*, and in August 1997, the
FDA cleared TAXOL* for use in second-line treatment of AIDS-related Kaposi's
sarcoma. Sales of PARAPLATIN*, which is used in combination therapy for the
treatment of ovarian cancer, increased 17%. Sales in the Oncology
Therapeutics Network (OTN), a specialty distributor of anti-cancer medicines
and related products, acquired in October 1996, were $480 million.
Anti-infective drug sales were $2,235 million, an increase of 20% over the
prior year. Strong growth was recorded for ZERIT* and VIDEX*, the Company's
two antiretroviral agents. Sales of ZERIT*, the Company's fastest growing
product, increased by $258 million, or 185% to $398 million, while sales of
VIDEX* grew 35% to $152 million. In December 1997, ZERIT* became the most
commonly prescribed thymidine nucleoside reverse transcriptase inhibitor in
HIV therapy in the United States, surpassing AZT. In August 1997, ZERIT*
received approval from the European Union for use in combination therapy for
first-line treatment of HIV, and in January 1997, a new oral solution of
ZERIT*, representing a significant addition to the limited therapeutic
options available to treat HIV-infected infants and children, was introduced.
Sales of CEFZIL*, an oral cephalosporin used in the treatment of respiratory
infections, and MAXIPIME*, a fourth generation injectable cephalosporin, also
contributed to the growth of anti-infectives.
26
Sales of central nervous system drugs increased 26% to $955 million, due to
the strong growth of BUSPAR*, the Company's novel anti-anxiety agent, and
SERZONE*, an antidepressant that offers a low incidence of side effects.
Sales of BUSPAR* increased 20% to $443 million, while sales of SERZONE*
increased 70% to $185 million. In May 1997, studies presented at an American
Psychiatric Association meeting demonstrated that SERZONE* increased sleep
efficiency in people suffering from depression.
GLUCOPHAGE, an oral medication for type 2 (non-insulin-dependent) diabetes
continued to experience strong growth, with sales increasing 74% to $579
million. The Company has sponsored a public awareness program that offers
information to physicians and their patients on the proper management of type
2 diabetes, a serious undertreated medical condition that afflicts more than
15 million Americans. GLUCOPHAGE is the leading branded product in the United
States for this disease.
In 1996, Pharmaceuticals Segment sales increased 12% over 1995 levels.
Increases in sales of PRAVACHOL*, TAXOL*, PARAPLATIN*, ZERIT*, MONOPRIL*,
BUSPAR*, CEFZIL*, GLUCOPHAGE, SERZONE* and VIDEX* were partially offset by
decreases in sales of CAPOTEN*, due to the loss of patent exclusivity,
DURICEF*, QUESTRAN*, VEPESID* and ISOVUE*.
The margin on earnings before taxes decreased to 29.7% in 1997 from 30.4% in
1996 primarily due to increased investment in advertising and promotion
expenses in support of high priority products, and lower margin sales for
OTN. In 1996, the margin on earnings before taxes increased to 30.4% from
29.6% in 1995 due to a decrease, as a percentage of sales, in research and
development spending.
Sales in the Consumer Medicines Segment increased 6% to $1,351 million,
reflecting a 13% increase due to volume, a 6% decrease due to the unfavorable
effect of foreign exchange rate fluctuations and a 1% decrease in selling
prices. International sales increased 6% (17% excluding the unfavorable
effect of foreign exchange), while domestic sales increased 5%. Sales of
analgesic products increased 3% (9% excluding the effect of foreign
exchange), due to volume growth from EFFERALGAN* and ASPIRINE UPSA* from the
UPSA Group, as well as domestic growth of EXCEDRIN*. In January 1998, the
Company received clearance from the FDA to market EXCEDRIN* Migraine, the
first and only medication for migraine headache pain available to consumers
without a prescription. The SEA BREEZE* and KERI* lines of skin care
products also performed well, with strong growth in the Japanese marketplace.
VAGISTAT-1*, the first and only one-dose over-the-counter medication for
vaginal yeast infections, was introduced in April 1997.
In 1996, worldwide sales of Consumer Medicines increased 5% from 1995 levels,
(an increase of 11%, excluding foreign exchange), primarily due to increased
sales of EXCEDRIN*, BUFFERIN* and analgesics from the UPSA Group including
EFFERALGAN*, DAFALGAN* and ASPIRINE UPSA*.
The margin on earnings before taxes improved to 9.3% in 1997, from 7.7% in
1996 and 5.8% in 1995, as a result of efficiency gains due to productivity
programs.
Sales in the Nutritionals Segment increased 7% to $1,911 million, reflecting
a 10% increase due to volume, a 2% decrease due to the unfavorable effect of
foreign exchange rate fluctuations and a 1% decrease in selling prices.
International sales increased 15% (21% excluding the unfavorable effect of
foreign exchange), while domestic sales increased 1%. Mead Johnson continues
27
to increase its worldwide and U.S. leadership position in the infant formula
market. Total infant formula sales increased due to growth of NUTRAMIGEN*,
LACTOFREE* and PROSOBEE* special infant formulas. Sales of ENFAMIL*, the
Company's largest selling infant formula, decreased 3% to $674 million
worldwide, while increasing 9% internationally to $167 million, excluding
foreign exchange. BOOST* and SUSTACAL* adult nutritional beverages, and
ALACTA NF*, a nutritious beverage for preschool-age children sold outside the
U.S., also contributed to sales growth.
In 1996, worldwide sales of Nutritionals increased 13% from 1995 levels,
primarily due to increased sales of infant formulas, including ENFAMIL*, and
adult consumer nutritionals.
The margin on earnings before taxes improved to 21.1% in 1997, from 20.7% in
1996 and 19.9% in 1995, primarily due to higher sales volumes, improved
manufacturing efficiencies and gains due to productivity programs.
In the Medical Devices Segment, sales of $1,802 million reflected a 3%
decrease from prior year levels. Volume gains of 2% were achieved, while
sales were impacted by a 1% decrease due to changes in selling prices and a
4% decrease due to the effect of foreign exchange. International sales
remained constant (excluding the effect of foreign exchange, sales increased
8%), while domestic sales decreased 6%. The Company's ConvaTec division is
the worldwide market share leader in ostomy and advanced wound care products.
Sales of ostomy and wound care products increased 6% and 16%, respectively,
excluding foreign exchange. The Company's Zimmer division continues to be
the world market share leader in knee and hip replacements. Worldwide sales
of knee prosthetic joint implants increased 2%, excluding the effect of
foreign exchange, led by growth of the NEXGEN* Complete Knee Solution. Hip
replacement sales decreased 4%, excluding the effect of foreign exchange.
Zimmer is restructuring to focus on its core businesses of orthopaedic
implants and fracture fixation devices. As discussed in the notes to the
financial statements, the Company completed the sale of Linvatec Corporation,
its arthroscopy and surgical powered instruments business, in December 1997.
Also, as part of its restructuring, Zimmer announced a 10% reduction in its
domestic work force, as well as a restructuring of its European business.
In 1996, worldwide sales of Medical Devices declined by $46 million and 2%,
although excluding foreign exchange, remained at 1995 levels. In 1995,
medical device sales increased 13% as a result of increased sales of knee
implants, and ostomy and wound care products. Excluding the acquisition of
Calgon Vestal Laboratories, and a divestiture in 1994, sales increased 7% in
1995.
The margin on earnings before taxes in the Medical Devices Segment decreased
to 20.0% in 1997, from 22.5% in 1996 and 22.8% in 1995, due to price
decreases, lower sales volumes and incremental manufacturing costs in
connection with recently introduced products.
Sales in the Beauty Care Segment increased 16% in 1997 to $1,705 million,
reflecting a 16% increase due to volume, a 1% increase due to pricing and a
1% decrease due to foreign exchange rate fluctuations. Excluding the effect
of foreign exchange, international sales increased 28% over 1996, while
domestic sales increased 12%. The Company's Clairol division is the number
one hair products company in the United States and continues to maintain its
market share leadership in U.S. haircolorings. Sales of the Company's hair
care products were especially strong, increasing 36% in 1997, primarily due
28
to sales of the HERBAL ESSENCES* complete line of shampoos, conditioners,
styling aids and body wash, which increased 168% to $351 million, aided by
its launch into additional countries in 1997. Sales of INFUSIUM 23* hair
care products also contributed to growth of hair care products. In
September, Clairol launched DAILY DEFENSE*, a complete line of shampoos and
conditioners designed to purify and fortify hair to protect it from
environmental and styling stresses. Also in September, the Company's Matrix
Essentials division launched VITAL NUTRIENTS*, an innovative hair care line
that provides micro-nutrients, daily protection and internal moisture
balance. Haircoloring product sales increased 4%, benefiting from the
continued success of NICE N EASY*, NATURAL INSTINCTS*, salon haircolorings
and HYDRIENCE*, which increased 86% following its launch into international
markets.
In 1996, sales in the Beauty Care Segment increased 13% from 1995 levels,
primarily due to increased sales of haircoloring, hair and skin care
products.
The margin on earnings before taxes in 1997 was 17.1% compared to 17.0% in
1996, and increased from 15.3% in 1995 primarily due to higher volumes and
productivity programs, offset by the cost of new product introductions and
other spending programs.
Geographic Areas
Bristol-Myers Squibb products are available in virtually every country in the
world; its largest markets are the United States, France, Japan, Germany and
Canada.
Sales in the U.S., net of inter-area sales, increased 14% in 1997. Sales in
the Pharmaceuticals, Beauty Care and Nutritionals segments, comprised 59%,
12% and 11%, respectively, of the region's sales. Products with strong
growth in the region included PRAVACHOL*, GLUCOPHAGE, ZERIT*, HERBAL
ESSENCES*, TAXOL*, BUSPAR*, PARAPLATIN*, NUTRAMIGEN*, BOOST* and incremental
sales from the OTN acquisition. The margin on earnings before taxes
decreased to 24.5% in 1997 from 26.0% in 1996 primarily due to increases, as
a percentage of sales, in cost of products sold and advertising and promotion
expenses. In 1996, sales in the U.S. increased 10%, net of inter-area sales,
primarily due to anti-cancer and anti-infective drugs from the
Pharmaceuticals Segment, infant formulas from the Nutritionals Segment and
haircoloring and hair care products from the Beauty Care Segment. Strong
sales increases were achieved despite a 68% decline in sales of CAPOTEN*.
The margin on earnings before taxes increased to 26.0% in 1996 from 25.6% in
1995.
Sales in Europe, Mid-East and Africa, net of inter-area sales, increased 2%
(12% excluding foreign exchange). Pharmaceuticals and Consumer Medicines,
which comprised nearly 73% of sales in the region, increased 10% and 17%,
respectively, excluding foreign exchange. Products with strong growth in the
region included ZERIT*, PRAVACHOL*, TAXOL*, MAXIPIME*, EFFERALGAN*, PLUSSSZ*,
a vitamin-enriched effervescent drink, and the introductions of HERBAL
ESSENCES* and HYDRIENCE*. Increases in sales of these products were
partially offset by decreases in sales of CAPOTEN* due to the loss of
exclusivity in several European countries in early 1997. The margin on
earnings before taxes increased to 23.8% in 1997 from 21.9% in 1996 primarily
due to manufacturing efficiencies as a result of the Company's productivity
programs. In 1996, sales in Europe, Mid-East and Africa, net of inter-area
29
sales, increased 8% (10% excluding foreign exchange), due to strong sales
growth of products from the Pharmaceuticals Segment including anti-cancer and
antiretroviral drugs, which were partially offset by decreases in sales of
CAPOTEN* and penicillins and from the Medical Devices Segment, including
ostomy and wound care products. In the Nutritionals Segment, sales of
PLUSSSZ* and vitamins from the 1996 acquisition of Pharmavit, as well as
analgesic products in the Consumer Medicines Segment, contributed to sales
growth in the region. The margin on earnings before taxes decreased to 21.9%
in 1996 from 22.7% in 1995.
Sales in Other Western Hemisphere countries, net of inter-area sales,
increased 25% in 1997 (26% excluding foreign exchange). Pharmaceuticals,
which comprised nearly 66% of the region's sales, increased 22%. Products
with strong growth included PRAVACHOL*, VIDEX*, ZERIT*, TAXOL*, introductory
sales of HYDRIENCE* and HERBAL ESSENCES*, and sales from the acquisitions of
CHOCO MILK* and SAL DE UVAS PICOT*. The margin on earnings before taxes
increased to 14.2% in 1997 from 11.1% in 1996 reflecting improved gross
margins due to manufacturing efficiencies. In 1996, sales in Other Western
Hemisphere countries increased 19% (25% excluding foreign exchange), due to
increased sales of cardiovascular, anti-cancer and anti-infective drugs from
the Pharmaceuticals Segment, infant formulas from the Nutritionals Segment,
and haircoloring and hair care products from the Beauty Care Segment. Sales
of pharmaceutical products from the 1996 acquisition of Argentia S.A. also
contributed to sales growth in the region. The margin on earnings before
taxes decreased to 11.1% in 1996 from 12.2% in 1995.
Sales in the Pacific region increased 5%, net of inter-area sales, (13%
excluding foreign exchange) in 1997. Pharmaceuticals and Nutritionals
comprised 38% and 30%, respectively, of the region's sales. Products with
strong growth included PRAVACHOL*, SEA BREEZE*, ZERIT*, TAXOL*, KERI*
products, ALACTA NF*, ENFAMIL* and the launch of HERBAL ESSENCES*. The
margin on earnings before taxes decreased to 3.2% in 1997 from 4.4% in 1996
due to increases, as a percentage of sales, in cost of products sold and
sales force expenses. In 1996, sales in the Pacific region, net of inter-
area sales, increased 2% (12% excluding foreign exchange), as a result of
increased sales from analgesics, infant formulas, school-age nutritional
beverages, skin care, anti-infective and cardiovascular drugs. The margin on
earnings before taxes decreased to 4.4% in 1996 from 5.8% in 1995, primarily
as a result of increases, as a percentage of sales, in advertising and
promotion expenditures in support of new and existing products.
Financial Position
Cash and cash equivalents, time deposits and marketable securities totaled
$1.8 billion at December 31, 1997, compared to $2.2 billion at both December
31, 1996 and 1995. Working capital was $2.7 billion at December 31, 1997,
compared to $2.5 billion and $2.2 billion at December 31, 1996 and 1995,
respectively. Cash and cash equivalents, time deposits and marketable
securities, and the conversion of other working capital items are expected to
fund near-term operations of the Company.
In August 1997, the Company issued $300 million principal amount of 6.875%
Debentures due August 1, 2097, and in November 1996, the Company issued $350
million principal amount of 6.80% Debentures due November 15, 2026. Proceeds
from the sale of these securities have been used for general corporate
purposes, including working capital, capital expenditures, stock repurchase
programs, repayment or refinancing of borrowings, and acquisitions.
30
The Company is exposed to market risk, including changes in currency exchange
rates and interest rates. To reduce financial risks, the Company enters into
certain derivative financial instruments where available on a cost effective
basis to hedge its underlying economic exposure. These instruments are also
managed on a consolidated basis to efficiently net exposures and thus take
advantage of any natural offsets.
It is the Company's policy to hedge underlying economic exposures to reduce
foreign exchange and interest rate risk. Derivative financial instruments
are not used for trading purposes. Gains and losses on hedging transactions
are offset by gains and losses on the underlying exposures being hedged.
Foreign exchange option contracts and, to a lesser extent, forward contracts,
are used to hedge anticipated transactions. The Company's primary foreign
currency exposures in relation to the U.S. dollar are the French franc,
Deutsche mark, Spanish peseta and Japanese yen.
The table below summarizes the Company's outstanding foreign exchange option
contracts as of December 31, 1997. The fair value of option contracts, which
will change over time, is estimated based on forward currency rates and other
relevant market factors. The fair value of option contracts should be viewed
in relation to the fair value of the underlying hedged transactions and the
overall reduction in exposure to adverse fluctuations in foreign currency
exchange rates.
Dollars in Millions
Weighted
Average Notional Carrying Fair
Strike Price Amount Value Value Maturity
------------ -------- -------- ----- --------
Option Contracts Purchased
Right to Sell:
French franc FF 5.89 $461 $6 $19 1998
Deutsche mark DM 1.77 286 6 11 1998
Spanish peseta Pts 147.07 113 2 6 1998
Other Currencies Various 175 3 12 1998
Right to Buy:
Japanese yen Y 127.60 103 2 3 1998
Japanese yen for
Deutsche marks DM 73.77 113 2 3 1998
Other Currencies Various 28 1 1 1998
------ --- ---
$1,279 $22 $55
====== === ===
The Company maintains cash and cash equivalents, time deposits and marketable
securities with various financial institutions. These financial institutions
are located primarily in the U.S., Puerto Rico and Ireland, and Company
policy is designed to limit exposure to any one financial institution.
Cash and cash equivalents, time deposits and marketable securities at
December 31, 1997 were denominated primarily in U.S. dollar instruments with
near-term maturities. The average interest yield on cash and cash
equivalents was 5.6% at December 31, 1997 while interest yields on time
deposits and marketable securities averaged 5.1% at December 31, 1997.
31
Short-term borrowings and long-term debt at December 31, 1997 are denominated
primarily in U.S. dollars but also include French franc short-term borrowings
due to banks of $191 million and Japanese yen long-term debt of $171 million.
Disclosures related to short-term borrowings and long-term debt are included
in the notes to the financial statements.
Internally generated cash provided by operations was $2.5 billion in 1997,
$2.6 billion in 1996 and $2.5 billion in 1995. Cash provided by operations
continued to be the Company's primary source of funds to finance operating
needs and expenditures for new plants and equipment. As part of the
Company's ongoing commitment to improve plant efficiency and maintain
superior research facilities, the Company has invested nearly $1.9 billion in
capital expansion over the past three years.
Cash provided by operations was also used to pay dividends of over $4.5
billion over the past three years, to fund acquisitions at a cost of $920
million over the last three years, and to finance the share repurchase
program. The Company's share repurchase program authorizes the purchase of
common stock from time to time in the open market or through private
transactions as market conditions permit. During 1997, the Company purchased
16.8 million shares of common stock at a cost of $1,162 million, bringing the
total shares acquired since the program's inception to 123 million. During
the past three years, the Company has repurchased 43 million shares at a cost
of $2.3 billion.
Return on Stockholder's Equity was 46.5% in 1997, 46.0% in 1996 and 45.1% in
1995, excluding the 1995 special charge and the provision for restructuring.
The Company will adopt recently issued Statement of Financial Accounting
Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits, in 1998. This statement does not change the
measurement or the recognition of pension and postretirement expenses. It
eliminates certain current disclosures, and requires additional disclosures
or changes on the benefit obligation and fair value of plan assets.
Subsequent to year end, the Company entered into two revolving credit
facility agreements totaling $500 million. They are available for use as
needed for general corporate purposes.
The Company has reviewed its information systems for YEAR 2000 compliance and
has initiated plans to remedy any deficiencies in a timely manner. As a
result of the review and action plan, the Company believes the cost of such
remedial corrective actions are not material to the Company's financial
position, results of operations or cash flows.
32
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF EARNINGS, COMPREHENSIVE INCOME and
RETAINED EARNINGS
(in millions, except per share amounts)
Year Ended December 31,
EARNINGS ---------------------------
1997 1996 1995
------- ------- -------
Net Sales $16,701 $15,065 $13,767
------- ------- -------
Expenses:
Cost of products sold 4,464 3,965 3,637
Marketing, selling and administrative 4,173 3,925 3,670
Advertising and product promotion 2,241 1,946 1,646
Research and development 1,385 1,276 1,199
Provision for restructuring 225 - 310
Gain on sale of a business (225) - -
Special charge - - 950
Other (44) (60) (47)
------- ------- -------
12,219 11,052 11,365
------- ------- -------
Earnings Before Income Taxes 4,482 4,013 2,402
Provision for income taxes 1,277 1,163 590
------- ------- -------
Net Earnings $ 3,205 $ 2,850 $ 1,812
======= ======= =======
Earnings Per Common Share:
Basic $3.22 $2.84 $1.79
Diluted $3.14 $2.80 $1.78
Average Common Shares Outstanding:
Basic 996 1,004 1,012
Diluted 1,021 1,018 1,016
COMPREHENSIVE INCOME
- --------------------
Net Earnings $3,205 $2,850 $1,812
Other Comprehensive Income:
Foreign currency translation (195) (38) (21)
Tax effect 23 4 (5)
------ ------ ------
Total Other Comprehensive Income (172) (34) (26)
------ ------ ------
Comprehensive Income $3,033 $2,816 $1,786
====== ====== ======
The accompanying notes are an integral part of these financial statements.
33
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF EARNINGS, COMPREHENSIVE INCOME and
RETAINED EARNINGS
(in millions, except per share amounts)
Year Ended December 31,
--------------------------
1997 1996 1995
------ ------ ------
RETAINED EARNINGS
- -----------------
Retained Earnings, January 1 $ 9,260 $ 7,917 $7,600
Net earnings 3,205 2,850 1,812
------- ------- ------
12,465 10,767 9,412
Less dividends 1,515 1,507 1,495
------- ------- ------
Retained Earnings, December 31 $10,950 $ 9,260 $7,917
======= ======= ======
The accompanying notes are an integral part of these financial statements.
34
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEET
ASSETS
(dollars in millions)
December 31,
---------------------------
1997 1996 1995
------- ------- -------
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 1,456 $ 1,681 $ 1,645
Time deposits and marketable securities 338 504 533
Receivables, net of allowances 2,973 2,651 2,356
Inventories 1,799 1,669 1,451
Prepaid expenses 1,170 1,023 1,033
------- ------- -------
Total Current Assets 7,736 7,528 7,018
Property, Plant and Equipment 4,156 3,964 3,760
Insurance Recoverable 619 853 959
Excess of cost over net tangible assets
received in business acquisitions 1,625 1,508 1,219
Other Assets 841 832 973
------- ------- -------
$14,977 $14,685 $13,929
======= ======= =======
The accompanying notes are an integral part of these financial statements.
35
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(dollars in millions)
December 31,
---------------------------
1997 1996 1995
------- ------- -------
LIABILITIES
- -----------
Current Liabilities:
Short-term borrowings $ 543 $ 513 $ 575
Accounts payable 1,017 1,064 848
Accrued expenses 1,939 1,962 1,939
Product liability 865 800 700
U.S. and foreign income taxes payable 668 711 744
------- ------- -------
Total Current Liabilities 5,032 5,050 4,806
Product Liability 171 1,031 1,645
Other Liabilities 1,276 1,068 1,021
Long-Term Debt 1,279 966 635
------- ------- -------
Total Liabilities 7,758 8,115 8,107
------- ------- -------
STOCKHOLDERS' EQUITY
- --------------------
Preferred stock, $2 convertible series:
Authorized 10 million shares; issued and
outstanding 12,936 in 1997, 15,245 in 1996
and 19,023 in 1995, liquidation value of
$50 per share - - -
Common stock, par value of $.10 per share:
Authorized 2.25 billion shares; issued
1,083,253,703 in 1997, 1,082,496,016 in
1996 and 540,185,639 in 1995 108 108 54
Capital in excess of par value of stock 544 382 375
Cumulative translation adjustments (533) (361) (327)
Retained earnings 10,950 9,260 7,917
------- ------- -------
11,069 9,389 8,019
Less cost of treasury stock - 90,069,383
common shares in 1997, 81,806,550 in
1996 and 34,953,311 in 1995 3,850 2,819 2,197
------- ------- -------
Total Stockholders' Equity 7,219 6,570 5,822
------- ------- -------
$14,977 $14,685 $13,929
======= ======= =======
The accompanying notes are an integral part of these financial statements.
36
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in millions)
Year Ended December 31,
--------------------------
1997 1996 1995
------ ------ ------
Cash Flows From Operating Activities:
Net Earnings $3,205 $2,850 $1,812
Depreciation and amortization 591 519 448
Provision for restructuring 225 - 310
Gain on sale of a business (225) - -
Special charge - - 950
Other operating items 33 (52) (34)
Receivables (479) (262) (319)
Inventories (288) (227) (50)
Accounts payable 2 177 155
Accrued expenses (181) 42 166
Income taxes 318 250 (252)
Product liability (795) (514) (441)
Insurance recoverable 234 106 9
Other assets and liabilities (164) (248) (255)
------ ------ ------
Net Cash Provided by Operating Activities 2,476 2,641 2,499
------ ------ ------
Cash Flows From Investing Activities:
Proceeds from sales of time deposits and
marketable securities 530 406 349
Purchases of time deposits and marketable
securities (363) (379) (80)
Additions to fixed assets (767) (601) (513)
Proceeds from sales of businesses 370 213 -
Business acquisitions (254) (316) (350)
Other, net (48) (40) (37)
------ ------ ------
Net Cash Used in Investing Activities (532) (717) (631)
------ ------ ------
Cash Flows From Financing Activities:
Short-term borrowings 81 (78) (181)
Long-term debt 328 346 (10)
Issuances of common stock under stock plans 117 206 71
Purchases of treasury stock (1,162) (852) (244)
Dividends paid (1,515) (1,507) (1,495)
------ ------ ------
Net Cash Used in Financing Activities (2,151) (1,885) (1,859)
------ ------ ------
Effect of Exchange Rates on Cash (18) (3) (6)
------ ------ ------
(Decrease) Increase in Cash and
Cash Equivalents (225) 36 3
Cash and Cash Equivalents at Beginning
of Year 1,681 1,645 1,642
------ ------ ------
Cash and Cash Equivalents at End of Year $1,456 $1,681 $1,645
====== ====== ======
The accompanying notes are an integral part of these financial statements.
37
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 1 ACCOUNTING POLICIES
- ---------------------------
Basis of Consolidation - The consolidated financial statements include
the accounts of Bristol-Myers Squibb Company and all of its
subsidiaries.
Cash and Cash Equivalents - Cash and cash equivalents primarily include
securities with a maturity of three months or less at the time of
purchase, recorded at cost, which approximates market.
Time Deposits and Marketable Securities - Time deposits and marketable
securities are available for sale and are recorded at fair value, which
approximates cost.
Inventory Valuation - Inventories are generally stated at average cost,
not in excess of market.
Capital Assets and Depreciation - Expenditures for additions, renewals
and betterments are capitalized at cost. Depreciation is generally
computed by the straight-line method based on the estimated useful lives
of the related assets.
Excess of Cost over Net Tangible Assets - The excess of cost over net
tangible assets received in business acquisitions is being amortized on
a straight-line basis over periods not exceeding 40 years.
Earnings Per Share - Basic earnings per common share are computed using
the weighted average number of shares outstanding during the year.
Diluted earnings per common share are computed using the weighted
average number of shares outstanding during the year, plus the
incremental shares outstanding assuming the exercise of dilutive stock
options.
Note 2 ACQUISITIONS AND DIVESTITURES
- -------------------------------------
In January 1998, the Company acquired Redmond Products, Inc., a leading
hair care manufacturer in the United States.
On December 31, 1997, the Company completed the sale of Linvatec
Corporation, its arthroscopy and surgical powered instrument business,
for $370 million in cash. The sale resulted in a gain of $225 million
before taxes, $140 million after taxes.
In November 1997, the Company acquired Abeefe S.A., Peru's largest
pharmaceutical manufacturer and marketer of a broad range of
prescription and nonprescription anti-infective, respiratory, anti-
inflammatory and dermatological products.
38
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
In July 1997, the Company acquired CHOCO MILK*, Mexico's leading milk-based
nutritional supplement.
In March 1997, the Company acquired SAL DE UVAS PICOT*, a leading
effervescent antacid product in Mexico.
In 1996, the Company acquired Pharmavit Gyogyszer-es Elelmiszeripari
Reszvenytarsasag, one of Hungary's leading manufacturers of over-the-counter
medicines, nutritional products and generic pharmaceuticals. The Company
also acquired Argentia S.A., one of Argentina's largest manufacturers and
marketers of ethical pharmaceuticals and completed the acquisition of
Oncology Therapeutics Network, a specialty distributor of anti-cancer
medicines and related products.
In 1995, the Company acquired A/S GEA Farmaceutisk Fabrik, a leading
manufacturer and marketer of branded generic pharmaceuticals for the
Scandinavian market, and completed the acquisition of Calgon Vestal
Laboratories, a wound and skin care and infection control products
business.
Note 3 RESTRUCTURING
- ---------------------
The Company recorded a $225 million restructuring charge, $140 million
after taxes, in the fourth quarter of 1997. The restructuring charge
primarily relates to the consolidation of plants and facilities, and
related employee terminations. The restructuring charge consists of
employee-related costs of $93 million, $74 million of asset write-downs
and $58 million of other related expenses.
The Company recorded a $310 million restructuring charge, $198 million
after taxes, in the fourth quarter of 1995. The restructuring charge
related to the consolidation of plants and facilities, and related
employee terminations. The restructuring charge consisted of employee-
related costs of $190 million, $100 million of asset write-downs and $20
million of other related expenses.
Note 4 OTHER INCOME AND EXPENSES
- ---------------------------------
Year Ended December 31,
-----------------------
1997 1996 1995
---- ---- ----
Interest income $106 $95 $139
Interest expense (118) (78) (97)
Other - net 56 43 5
---- ---- ----
$ 44 $ 60 $ 47
==== ==== ====
39
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Cash payments for interest were $110 million, $76 million and $93 million
in 1997, 1996 and 1995, respectively.
Note 5 FOREIGN CURRENCY TRANSLATION
- ------------------------------------
Cumulative translation adjustments, which represent the effect of
translating assets and liabilities of the Company's non-U.S. entities,
except those in highly inflationary economies, were:
1997 1996 1995
---- ---- ----
Balance, January 1 $361 $327 $301
Effect of balance sheet translations:
Amount 195 38 21
Tax effect (23) (4) 5
---- ---- ----
Balance, December 31 $533 $361 $327
==== ==== ====
Note 6 PROVISION FOR INCOME TAXES
- ----------------------------------
The components of earnings before income taxes were:
Year Ended December 31,
-----------------------
1997 1996 1995
------ ------ ------
U.S. $2,858 $2,332 $1,195
Non-U.S. 1,624 1,681 1,207
------ ------ ------
$4,482 $4,013 $2,402
====== ====== ======
The provision for income taxes consisted of:
Year Ended December 31,
------------------------
1997 1996 1995
------ ------ ------
Current:
U.S. $633 $462 $466
Non-U.S. 471 442 356
------ ------ ------
1,104 904 822
------ ------ ------
40
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Year Ended December 31,
-----------------------
1997 1996 1995
------ ----- -----
Deferred:
U.S. 220 232 (200)
Non-U.S. (47) 27 (32)
------ ----- -----
173 259 (232)
------ ----- -----
$1,277 $1,163 $590
====== ====== =====
Income taxes paid during the year were $898 million, $861 million and $856
million in 1997, 1996 and 1995, respectively.
The Company's provision for income taxes in 1997, 1996 and 1995 was
different from the amount computed by applying the statutory United States
Federal income tax rate to earnings before income taxes, as a result of
the following:
% of Earnings
Before Income Taxes
----------------------
1997 1996 1995
------ ----- -----
U.S. statutory rate 35.0% 35.0% 35.0%
Effect of operations in
Puerto Rico and Ireland (5.5) (5.5) (9.7)
State and local taxes .6 .6 .8
Other (1.6) (1.1) (1.5)
----- ----- -----
28.5% 29.0% 24.6%
===== ===== =====
Prepaid taxes at December 31, 1997, 1996 and 1995 were $818 million, $757
million and $786 million, respectively. The deferred income tax liability,
included in Other Liabilities, at December 31, 1997 and 1996 was $352 and $124
million, respectively. The deferred income tax asset, included in Other
Assets, at December 31, 1995 was $130 million.
The components of prepaid and deferred income taxes consisted of:
41
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
December 31,
----------------------
1997 1996 1995
---- ---- ----
Product liability $154 $383 $527
Postretirement and pension benefits 191 129 163
Restructuring 77 88 130
Depreciation (278) (245) (210)
Other 322 278 306
---- ---- ----
$466 $633 $916
==== ==== ====
The Company has settled its United States Federal income tax returns with the
Internal Revenue Service through 1991.
United States Federal income taxes have not been provided on substantially
all of the unremitted earnings of non-U.S. subsidiaries, since it is
management's practice and intent to reinvest such earnings in the operations
of these subsidiaries. The total amount of the net unremitted earnings of
non-U.S. subsidiaries was approximately $2.6 billion at December 31, 1997.
Note 7 INVENTORIES
- ------------------- December 31,
------------------------
1997 1996 1995
------ ------ ------
Finished goods $1,153 $ 994 $ 892
Work in process 197 223 180
Raw and packaging materials 449 452 379
------ ------ ------
$1,799 $1,669 $1,451
====== ====== ======
Note 8 PROPERTY, PLANT AND EQUIPMENT
- -------------------------------------
December 31,
-------------------------
1997 1996 1995
------ ------ ------
Land $ 180 $ 160 $ 160
Buildings 2,631 2,427 2,296
Machinery, equipment and fixtures 3,646 3,626 3,403
Construction in progress 544 433 405
------ ------ ------
7,001 6,646 6,264
Less accumulated depreciation 2,845 2,682 2,504
------ ------ ------
$4,156 $3,964 $3,760
====== ====== ======
42
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 9 SHORT-TERM BORROWINGS AND LONG-TERM DEBT
- ------------------------------------------------
Short-term borrowings included amounts primarily due to foreign banks of $524
million, $440 million and $558 million at December 31, 1997, 1996 and 1995,
respectively, and current installments of long-term debt of $19 million, $73
million and $17 million at December 31, 1997, 1996 and 1995, respectively.
The average interest rate on short-term borrowings was 13.9% at December 31,
1997 and 7.6% on current installments of long-term debt.
The Company has short-term lines of credit with domestic and foreign banks.
At December 31, 1997, the unused portions of these lines of credit were
approximately $200 million and $593 million, respectively.
The components of long-term debt were:
December 31,
--------------------------
1997 1996 1995
------ ---- ----
6.80% Debentures, due in 2026 $ 344 $344 -
7.15% Debentures, due in 2023 343 343 $343
6.875% Debentures, due in 2097 296 - -
Various Rate Yen Term Loans, due in 2003 70 76 -
3.51% Deutsche Mark Interest on Yen Principal
Term Loan, due in 2005 49 53 59
5.75% Industrial Revenue Bonds, due in 2024 34 34 34
5.00% Yen Term Loan, due in 2000 29 31 69
Various Rate Turkish Lira Term Loans,
due in 1999 26 - -
2.83% Yen Term Loan, due in 2002 24 27 -
Capitalized Leases 26 19 19
6.18% Yen Term Loan, paid in 1997 - - 64
Other, 4.30% to 10.25%,due in varying
amounts through 2014 38 39 47
------ ---- ----
$1,279 $966 $635
====== ==== ====
Subsequent to year end, the Company entered into two revolving credit
facility agreements totaling $500 million. They are available for use as
needed for general corporate purposes.
43
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 10 STOCKHOLDERS' EQUITY
- -----------------------------
Changes in capital shares and capital in excess of par value of stock were:
Capital in
Excess of
Shares of Common Stock Par Value
--------------------------- of Stock
Issued Treasury (in millions)
------------- ---------- ----------
Balance, December 31, 1994 540,173,669 32,887,848 $397
Issued pursuant to stock plans,
options and rights - (1,602,537) (22)
Conversions of preferred stock 11,970 - -
Purchases - 3,668,000 -
------------- ---------- ----
Balance, December 31, 1995 540,185,639 34,953,311 375
Effect of two-for-one
stock split 540,185,639 34,953,311 (54)
Issued pursuant to stock plans,
options and rights 221,032 (6,623,272) (25)
Conversions of preferred stock 31,960 - -
Purchases - 18,523,200 -
Other 1,871,746 - 86
------------- ---------- ----
Balance, December 31, 1996 1,082,496,016 81,806,550 382
Issued pursuant to stock plans
and options 738,151 (8,514,867) 162
Conversions of preferred stock 19,536 - -
Purchases - 16,777,700 -
------------- ---------- ----
Balance, December 31, 1997 1,083,253,703 90,069,383 $544
============= ========== ====
Each share of the Company's preferred stock is convertible into 8.48
shares of common stock and is callable at the Company's option. The
reductions in the number of issued shares of preferred stock in 1997, 1996
and 1995 were due to conversions into shares of common stock.
Dividends per common share were $1.52 in 1997, $1.50 in 1996 and $1.48 in
1995.
Stock Compensation Plans
- ------------------------
Under the Company's stock option plans, officers, directors and key
employees may be granted options to purchase the Company's common stock
at no less than 100% of the market price on the date the option is
granted. Options generally become exercisable in installments of 25% per
year on each of the first through the fourth anniversaries of the grant
date and have a maximum term of 10 years. Additionally, the plans provide
44
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
for the granting of stock appreciation rights whereby the grantee may
surrender exercisable options and receive common stock and/or cash
measured by the excess of the market price of the common stock over the
option exercise price. The plans also provide for the granting of
performance-based stock options to certain key executives.
Under the terms of the 1983 Stock Option Plan, as amended, additional
shares are authorized in the amount of 0.9% of the outstanding shares per
year through 2003 and incorporates the Company's long-term performance
award plan.
Under the TeamShare Stock Option Plan, all full-time employees, excluding
key executives, meeting certain years of service requirements are granted
options to purchase the Company's common stock at the market price on the
date the options are granted. The Company has authorized 30,000,000
shares for issuance under the plan. As of December 31, 1997, a total of
21,984,200 options were granted under the plan with generally 400 options
granted to each eligible employee. Individual grants generally become
exercisable on or after the third anniversary of the grant date.
The Company's restricted stock award plan provides for the granting of up
to 6,000,000 shares of common stock to key employees, subject to
restrictions as to continuous employment except in the case of death or
normal retirement. Restrictions generally expire over a five-year period
from date of grant. Compensation expense is recognized over the
restricted period. At December 31, 1997, a total of 1,253,352 shares were
outstanding under the plan.
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting
for its plans. Accordingly, no compensation expense has been recognized
for its stock-based compensation plans other than for restricted stock and
performance-based awards. Had compensation cost for the Company's other
stock option plans been determined based upon the fair value at the grant
date for awards under these plans consistent with the methodology
prescribed under Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, the Company's net income and
basic earnings per share would have been reduced by approximately $85
million, or $.09 per common share - basic and $.08 per common share -
diluted, in 1997, $55 million, or $.05 per common share, basic and diluted
in 1996 and $35 million, or $.03 per common share, basic and diluted in
1995. The fair value of the options granted during 1997, 1996 and 1995
was estimated as $12.82 per common share, $8.51 per share and $6.47 per
share, respectively, on the date of grant using the Black-Scholes option-
pricing model with the following assumptions:
45
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
1997 1996 1995
----- ----- -----
Dividend yield 4.3% 4.3% 4.2%
Volatility 19.3% 17.0% 18.2%
Risk-free interest rate 6.5% 6.5% 6.9%
Assumed forfeiture rate 3.0% 3.0% 3.0%
Expected life (years) 7 7 7
Stock option transactions were:
Weighted
Average of
Shares of Common Stock Exercise
-------------------------- Price
Available Under of Shares
for Option Plan Under Plan
----------- ----------- ----------
Balance, December 31, 1994 4,567,924 21,946,987 $56.99
Authorized 19,565,572 - -
Granted (13,449,952) 13,449,952 61.79
Exercised - (2,012,827) 40.96
Lapsed 1,129,560 (1,129,574) 61.92
----------- -----------
Balance, December 31, 1995 11,813,104 32,254,538 59.76
----------- -----------
Effect of two-for-one
stock split 11,813,104 32,254,538 -
Authorized 9,094,182 - -
Granted (16,179,560) 16,179,560 46.92
Exercised - (8,863,078) 27.62
Lapsed 1,788,528 (1,796,826) 33.00
----------- -----------
Balance, December 31, 1996 18,329,358 70,028,732 34.27
----------- -----------
Authorized 9,006,205 - -
Granted (11,347,801) 11,347,801 65.77
Exercised - (12,787,811) 30.34
Lapsed 2,284,788 (2,287,820) 45.63
----------- -----------
Balance, December 31, 1997 18,272,550 66,300,902 $40.08
=========== ===========
The following table summarizes information concerning currently outstanding
and exercisable options:
46
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Options Outstanding Options Exercisable
----------------------------------- --------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
- ------------ ----------- ----------- -------- ----------- ---------
$ 0 - $ 20 325,808 0.94 $14.07 325,808 $14.07
$20 - $ 40 40,931,295 6.02 30.88 22,779,341 31.10
$40 - $ 60 16,621,274 8.45 48.74 3,007,105 43.68
$60 - $ 80 7,620,950 9.18 67.36 - -
$80 - $100 801,575 9.55 82.10 - -
---------- ----------
66,300,902 26,112,254
========== ==========
At December 31, 1997, 104,710,291 shares of common stock were reserved
for issuance pursuant to stock plans, options and conversions of
preferred stock.
Note 11 FINANCIAL INSTRUMENTS
- ------------------------------
Foreign exchange option contracts and, to a lesser extent, forward
contracts, are used to hedge anticipated transactions.
The Company has exposures to net foreign currency denominated assets
and liabilities, which approximated $2,070 million, $1,640 million and
$1,385 million at December 31, 1997, 1996 and 1995, respectively,
primarily in Deutsche marks, French francs, Italian lire and Japanese
yen. The Company mitigates the effect of these exposures through
third-party borrowings and foreign exchange forward contracts.
The risk of loss associated with the types of foreign exchange option
contracts entered into by the Company is limited to premium amounts
paid for the option contracts. Premiums are deferred in Prepaid
expenses and amortized in the consolidated statement of earnings (in
the Other caption) over the time frame of the underlying hedged
transaction. Gains and losses related to the option contracts, which
qualify as hedges of foreign currency anticipated transactions, are
recognized in earnings when the hedged transactions are recognized.
Gains and losses on foreign exchange forward contracts are recognized
in the basis of the underlying transaction being hedged.
The notional amounts of the Company's foreign exchange option
contracts at December 31, 1997, 1996 and 1995 were $1,279 million,
$1,172 million and $1,126 million, respectively.
47
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The Company does not anticipate any material adverse effect on its
financial position resulting from its involvement in these
instruments, nor does it anticipate non-performance by any of its
counterparties.
At December 31, 1997, 1996 and 1995, the carrying value of all
financial instruments, both short- and long-term, approximated their
fair values.
Note 12 LEASES
- ---------------
Minimum rental commitments under all noncancelable operating leases,
primarily real estate, in effect at December 31, 1997 were:
Years Ending December 31,
- -------------------------
1998 $116
1999 88
2000 71
2001 59
2002 45
Later years 159
----
Total minimum payments 538
Less total minimum sublease rentals 152
----
Net minimum rental commitments $386
====
Operating lease rental expense (net of sublease rental income of $26
million in 1997, $27 million in 1996 and $25 million in 1995) was $124
million in 1997, $129 million in 1996 and $135 million in 1995.
Note 13 SEGMENT INFORMATION
- ----------------------------
The major product categories for each business segment are as follows:
Year Ended December 31,
------------------------
1997 1996 1995
------ ------ ------
Pharmaceuticals
Cardiovascular $2,905 $2,816 $2,911
Anti-cancer 2,420 1,971 1,600
Anti-infective 2,235 1,856 1,701
Central nervous system 955 760 601
Consumer Medicines
48
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Analgesics 739 718 669
Nutritionals
Infant formulas 1,219 1,201 1,086
Medical Devices
Orthopaedic implants 615 644 657
Ostomy 451 452 472
Beauty Care
Haircolor 841 812 714
Hair care 794 586 487
Inter-area sales, which are usually billed at or above manufacturing
costs, by geographic area, were:
Year Ended December 31,
-------------------------
1997 1996 1995
------ ------ ------
United States $1,370 $1,210 $ 977
Europe, Mid-East and Africa 762 692 542
Other Western Hemisphere 32 59 49
Pacific 24 25 21
------ ------ ------
Total inter-area eliminations $2,188 $1,986 $1,589
====== ====== ======
Included in earnings before taxes of each segment is a cost of capital
charge. The offset to the cost of capital share is included in Other. In
addition, Other principally consists of interest income, interest expense and
certain administrative expenses, and in 1996, the cost of certain of the
Company's productivity programs. In 1997, Other includes the gain on sale of
a business of $225 million and the provision for restructuring of $225
million. In 1995, Other includes the provision for restructuring of $310
million and the special charge of $950 million for pending and future product
liability claims. Other assets principally consist of cash and cash
equivalents, time deposits and marketable securities and certain other
assets.
BUSINESS SEGMENTS Net Sales Earnings Before Taxes
- ----------------- ----------------------- ----------------------
1997 1996 1995 1997 1996 1995
------- ------- ------- ------ ------ ------
Pharmaceuticals $ 9,932 $ 8,666 $ 7,745 $2,945 $2,634 $2,290
Consumer Medicines 1,351 1,279 1,220 125 99 71
Nutritionals 1,911 1,793 1,592 403 371 317
Medical Devices 1,802 1,860 1,906 361 419 435
Beauty Care 1,705 1,467 1,304 292 250 200
------- ------- ------- ------ ------ ------
Net sales and earnings
before taxes $16,701 $15,065 $13,767 $4,126 $3,773 $3,313
======= ======= ======= ====== ====== ======
49
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
GEOGRAPHIC AREAS Net Sales Earnings Before Taxes
- ---------------- ------------------------ ------------------------
1997 1996 1995 1997 1996 1995
------- ------- ------- ------ ------ ------
United States $11,014 $ 9,661 $ 8,662 $2,700 $2,512 $2,220
Europe, Mid-East and
Africa 4,653 4,520 4,074 1,109 988 925
Other Western Hemisphere 1,586 1,307 1,097 225 145 134
Pacific 1,636 1,563 1,523 52 69 89
Inter-area eliminations (2,188) (1,986) (1,589) 40 59 (55)
------- ------ ------ ------ ----- -----
Net sales and earnings
before taxes $16,701 $15,065 $13,767 4,126 3,773 3,313
======= ======= =======
Other 356 240 (911)
------ ------ ------
Earnings before taxes $4,482 $4,013 $2,402
====== ====== ======
BUSINESS SEGMENTS Year-End Assets
- ----------------- --------------------------
1997 1996 1995
------- ------- -------
Pharmaceuticals $ 6,705 $ 6,098 $5,221
Consumer Medicines 1,573 1,450 1,474
Nutritionals 1,021 910 797
Medical Devices 1,225 1,376 1,407
Beauty Care 743 652 537
------- ------- ------
Identifiable segment assets $11,267 $10,486 $9,436
======= ======= ======
GEOGRAPHIC AREAS Year-End Assets
- ---------------- -------------------------
1997 1996 1995
------- ------- -------
United States $ 6,545 $ 5,925 $ 5,239
Europe, Mid-East and Africa 3,430 3,376 3,230
Other Western Hemisphere 1,063 741 462
Pacific 989 1,023 1,030
Inter-area eliminations (760) (579) (525)
------- ------- -------
Identifiable geographic assets 11,267 10,486 9,436
Other assets 3,710 4,199 4,493
------- ------- -------
Total assets $14,977 $14,685 $13,929
======= ======= =======
50
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Capital
BUSINESS SEGMENTS Expenditures Depreciation
- ----------------- ------------------ ----------------
1997 1996 1995 1997 1996 1995
---- ---- ---- ---- ---- ----
Pharmaceuticals $525 $402 $333 $241 $232 $225
Consumer Medicines 48 32 17 24 20 19
Nutritionals 55 43 60 43 45 30
Medical Devices 24 36 47 46 43 42
Beauty Care 53 67 33 20 26 26
---- ---- ---- ---- ---- ----
Business segment total 705 580 490 374 366 342
Other 62 21 23 23 21 23
---- ---- ---- ---- ---- ----
Total $767 $601 $513 $397 $387 $365
==== ==== ==== ==== ==== ====
Note 14 RETIREMENT BENEFIT PLANS
- ---------------------------------
The Company and certain of its subsidiaries have defined benefit pension
plans for regular full-time employees. The principal pension plan is the
Bristol-Myers Squibb Retirement Income Plan. The Company's funding policy
is to contribute amounts to provide for current service and to fund past
service liability. Plan benefits are primarily based on years of credited
service and on participants' compensation. Plan assets principally
consist of equity securities and fixed income securities.
Cost for the Company's defined benefit plans included the following
components:
Year Ended December 31,
-----------------------
1997 1996 1995
----- ----- -----
Service cost - benefits earned during the year $ 135 $ 127 $ 101
Interest cost on projected benefit obligation 203 191 183
Actual earnings on plan assets (504) (359) (406)
Net amortization and deferral 283 171 213
----- ----- -----
Net pension expense $ 117 $ 130 $ 91
===== ===== =====
The weighted average actuarial assumptions for the Company's pension plans
were as follows:
December 31,
-----------------------
1997 1996 1995
----- ----- -----
Discount rate 7.5% 7.8% 7.3%
Compensation increase 4.5% 4.8% 4.5%
Long-term rate of return 10.0% 10.0% 10.0%
51
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The funded status of the plans was as follows:
December 31,
---------------------------
1997 1996 1995
------- ------- -------
Actuarial present value of
accumulated benefit obligation:
Vested $(2,174) $(2,044) $(2,059)
Non-vested (257) (252) (217)
------- ------- -------
$(2,431) $(2,296) $(2,276)
======= ======= =======
Total projected benefit obligation $(2,928) $(2,734) $(2,689)
Plan assets at fair value 2,949 2,596 2,307
------- ------- -------
Plan assets in excess of (less than)
projected benefit obligation 21 (138) (382)
Unamortized net assets at adoption (47) (62) (76)
Unrecognized prior service cost 56 67 78
Unrecognized net losses 13 235 516
Adjustment required to recognize minimum
pension liability recorded in Other Assets (22) (26) (48)
======= ======= =======
Prepaid pension expense $ 21 $ 76 $ 88
======= ======= =======
Plan assets in excess of (less than) projected benefit obligation included
$188 million, $184 million and $150 million in an unfunded benefit
equalization plan at December 31, 1997, 1996 and 1995, respectively.
Note 15 POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS
- ---------------------------------------------------------
The Company provides comprehensive medical and group life benefits to
substantially all U.S. retirees who elect to participate in the Company's
comprehensive medical and group life plans. The medical plan is
contributory. Contributions are adjusted periodically and vary by date
of retirement and the original retiring company. The life insurance plan
is non-contributory.
Cost for the Company's postretirement benefit plans included the following
components:
52
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Year Ended
December 31,
--------------------
1997 1996 1995
----- ----- -----
Service cost - benefits earned during the year $ 9 $ 9 $ 8
Interest cost on accumulated postretirement
benefit obligation 36 34 41
Actual earnings on plan assets (20) (13) (11)
Net amortization and deferral 9 6 7
---- ----- ----
Net postretirement benefit expense $ 34 $ 36 $ 45
==== ==== ====
The status of the plans was as follows:
December 31,
-------------------
1997 1996 1995
----- ----- -----
Accumulated postretirement benefit obligation:
Retirees $(338) $(347) $(403)
Fully eligible active plan participants (19) (17) (17)
Other active plan participants (171) (147) (159)
----- ----- -----
(528) (511) (579)
Plan assets at fair value 113 89 74
----- ----- -----
Accumulated postretirement benefit obligation
in excess of plan assets (415) (422) (505)
Unrecognized prior service cost 4 5 3
Unrecognized net (earnings) losses (65) (56) 38
----- ----- -----
Accrued postretirement benefit expense $(476) $(473) $(464)
===== ===== =====
For measurement purposes, an annual rate of increase in the per capita
cost of covered health care benefits of 7.8% for participants under age
65 and 7.0% for participants age 65 and over was assumed for 1998; the
rate was assumed to decrease gradually to 5.0% in 2007 and to remain at
that level thereafter. Increasing the assumed medical care cost trend
rates by 1 percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1997 by $23 million
and the aggregate of the service and interest cost components of net
postretirement benefit expense for the year then ended by $2 million. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% in 1997, 7.8% in 1996 and 7.3%
in 1995.
Plan assets principally consist of equity securities and fixed income
securities. The expected long-term rate of return on plan assets was
10.0% in 1997, 1996 and 1995.
53
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 16 CONTINGENCIES
- ----------------------
Various lawsuits, claims and proceedings of a nature considered normal to
its businesses are pending against the Company and certain of its
subsidiaries. The most significant of these are described below.
Reference is made to Item 3 Legal Proceedings in Part 1 of this Form 10-K
Annual Report.
Breast Implant Litigation
- -------------------------
As of December 31, 1997, approximately 24,000 persons were plaintiffs in
suits against the Company, its subsidiary, Medical Engineering Corporation
(MEC), and certain other subsidiaries, in federal and state courts in the
United States and in certain courts in Canada and Australia, alleging
damages for personal injuries of various types resulting from
polyurethane-covered breast implants and smooth-walled breast implants.
The Company, MEC and certain other defendants are participants in a
settlement program originally approved on September 1, 1994, and revised
on December 22, 1995, by the Federal District Court in Birmingham,
Alabama. About 11,000 of these plaintiffs are participating in the
revised settlement, and are expected to discontinue their lawsuits.
Separate class action settlements have been approved in the provincial
courts of Ontario and Quebec, and an agreement has been reached under
which other foreign breast implant recipients may settle their claims.
Approximately 380,000 domestic class members (with implants of all
manufacturers, not just MEC, Baxter and 3M) originally registered with the
revised settlement. Around 88,000 of these class members have indicated
that they received at least one breast implant manufactured by MEC or a
related company. Of these 88,000 registrants, 14,300 have opted out of
the revised settlement; 6,300 of these have proved to the satisfaction of
the claims office that they received a breast implant of MEC or a related
company, while the remaining 8,000 opt-outs have indicated their belief
(but have not proved) that they received an MEC breast implant. The
14,300 opt-outs who have or claim to have MEC implants are among the
44,800 domestic registrants (with implants of all manufacturers) who opted
out of the revised settlement. The Company has identified approximately
10,800 persons from among the 44,800 opt-outs (with implants of all
defendants, not just MEC) as plaintiffs in lawsuits against it. An as yet
undetermined number of these 10,800 plaintiffs do not have MEC implants
and their claims against the Company are expected to be dismissed. An
additional 1,570 claims based upon MEC implants remain from among domestic
class members who previously opted out of the settlement originally
approved in 1994. Because the opt-out period is essentially over, the
number of opt-outs in not expected to increase materially. However,
because of continuing uncertainties, it is still not possible to predict
on any precise basis the total number of women with MEC implants who will
pursue lawsuits against the Company.
The cost of the settlement is dependent upon complex and varying factors,
including the number of class members that participate, the kinds of
claims approved and their dollar value. The cost to the Company of
54
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
resolving opt-out claims is also subject to a number of complex uncertain-
ties in addition to the unknown quantity and quality of such claims. As
set forth in the Consolidated Statement of Cash Flows, in 1995, 1996 and
1997, the Company paid substantial sums to settle litigation and opt-out
claims and for litigation expenses, as well as to the revised settlement.
In connection with breast implant product liability claims, the Company
recorded special charges in 1993 of $500 million before taxes, $310
million after taxes, or $.30 per common share, basic and diluted; in 1994
of $750 million before taxes, $488 million after taxes, or $.48 per common
share, basic and diluted; and in 1995 of $950 million before taxes, $590
million after taxes, or $.58 per common share, basic and diluted. The
1993 special charge consisted of $1.5 billion (recorded as Product
Liability), offset by $1.0 billion of expected insurance proceeds
(recorded as Insurance Recoverable).
In light of the continuing uncertainties (including additional insurance
recoveries), the cost of the revised settlement and the ongoing litigation
cannot at present be predicted with any reasonable degree of precision.
However, the Company, based on the information set forth above and on
related estimates, continues to believe that previously established
reserves should be adequate to address these claims.
Other Actions
- -------------
The Company, one of its subsidiaries, and others are or have been
defendants in a number of antitrust actions in various states filed on
behalf of purported statewide classes of indirect purchasers of infant
formula products and by the Attorneys General of Louisiana, Minnesota and
Mississippi, alleging a price fixing conspiracy and other violations of
state antitrust or deceptive trade practice laws and seeking penalties and
other relief. The Company has previously reported reaching settlements
and receiving final court approval in the majority of these cases. The
only open cases are in Louisiana and Missouri. On November 6, 1997, the
court in Louisiana dismissed the plaintiffs' case. The plaintiffs are
appealing that dismissal. In Missouri, the Company has a motion to
dismiss pending.
As of December 31, 1997, the Company is a defendant in over 100 actions
brought against the Company and more than 30 other pharmaceutical
manufacturers, drug wholesalers and pharmacy benefit managers in various
federal district courts by certain chain drugstores, supermarket chains
and independent drugstores, suing either individually or as
representatives of a nationwide class of retail pharmacies that has been
certified. These cases, which have been coordinated for pretrial
purposes, all seek treble damages and injunctive relief on account of
alleged antitrust violations in the pricing and marketing of brand name
prescription drugs. The Company, without admitting any wrongdoing,
reached an amended agreement as of May 1, 1996, to settle the class
action, and that settlement has become final. The largest opt-out
retailer plaintiffs have purported to quantify their damage claims against
the defendants, including the Company, asserting damages aggregating
approximately $2.4 billion before trebling. Cases brought by retail
55
pharmacies in state court under state law alleging similar grounds are
proceeding in California, Alabama, Mississippi, Wisconsin and Minnesota;
the Wisconsin and Minnesota cases are subject to settlements. Purported
class actions brought by consumers in state court under state law alleging
similar grounds have been brought in California, Washington, New York,
Arizona, Maine, Alabama, Michigan, Minnesota, Wisconsin, the District of
Columbia, Kansas, Florida, Tennessee and North Carolina.
While it is not possible to predict with certainty the outcome of these
cases, it is the opinion of management that these lawsuits, claims and
proceedings which are pending against the Company are without merit or
will not have a material adverse effect on the Company's operating
results, liquidity or consolidated financial position.
Note 17 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
- ------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ------
1997:
Net Sales $4,045 $4,064 $4,151 $4,441 $16,701
Gross Profit 2,967 2,967 3,041 3,262 12,237
Net Earnings * 810 738 855 802 3,205
Earnings Per Common Share
Basic .81 .74 .86 .81 3.22
Diluted .79 .73 .84 .78 3.14
1996:
Net Sales $3,669 $3,696 $3,745 $3,955 $15,065
Gross Profit 2,734 2,734 2,742 2,890 11,100
Net Earnings 726 655 753 716 2,850
Earnings Per Common Share
Basic .72 .65 .75 .71 2.84
Diluted .71 .64 .74 .70 2.80
* In 1997, the fourth quarter and annual results included a gain on the
sale of a business of $225 million ($140 million after taxes) and a
provision for restructuring of $225 million ($140 million after
taxes).
56
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
and Stockholders of
Bristol-Myers Squibb Company
In our opinion, the consolidated financial statements listed in the
index appearing under Item 14(a)(1) and (2) on page 59 present fairly,
in all material respects, the financial position of Bristol-Myers
Squibb Company and its subsidiaries at December 31, 1997, 1996 and
1995, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting
principles. 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 of these statements in accordance with generally accepted
auditing standards which 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
- ------------------------
1177 Avenue of the Americas
New York, New York 10036
January 22, 1998
57
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
---------
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
(a) Reference is made to the Proxy Statement for the Annual Meeting of
Stockholders on May 5, 1998 with respect to the Directors of the
Registrant which is incorporated herein by reference and made a part
hereof in response to the information required by Item 10.
(b) The information required by Item 10 with respect to the Executive
Officers of the Registrant has been included in Part IA of this Form
10-K Annual Report in reliance on General Instruction G of Form 10-K
and Instruction 3 to Item 401(b) of Regulation S-K.
Item 11. EXECUTIVE COMPENSATION.
Reference is made to the Proxy Statement for the Annual Meeting of
Stockholders on May 5, 1998 with respect to Executive Compensation which
is incorporated herein by reference and made a part hereof in response to
the information required by Item 11.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Reference is made to the Proxy Statement for the Annual Meeting of
Stockholders on May 5, 1998 with respect to the security ownership of
certain beneficial owners and management which is incorporated herein by
reference and made a part hereof in response to information required by
Item 12.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Reference is made to the Proxy Statement for the Annual Meeting of
Stockholders on May 5, 1998 with respect to certain relationships and
related transactions which is incorporated herein by reference and made
a part hereof in response to the information required by Item 13.
58
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
Page
Number
------
(a)
1. Financial Statements 33-37
Notes to Consolidated Financial Statements 38-56
Report of Independent Accountants 57
2. Financial Statement Schedules
Schedule Page
Number Number
-------- ------
Valuation and qualifying accounts II S-1
All other schedules not included with this additional financial data
are omitted because they are not applicable or the required
information is included in the financial statements or notes thereto.
3. Exhibit List
The Exhibits listed below are identified by numbers corresponding to the
Exhibit Table of Item 601 of Regulation S-K. The Exhibits designated by two
asterisks (**) are management contracts or compensatory plans or arrangements
required to be filed pursuant to this Item 14. Unless otherwise indicated,
all Exhibits are part of Commission File Number 1-1136.
3a. Restated Certificate of Incorporation of Bristol-Myers Squibb
Company (filed as Exhibit 4a to Registrant's Registration Statement
on Form S-3, Registration Statement No. 33-33682, dated March 7,
1990, as amended through May 6, 1997).
3b. Bylaws of Bristol-Myers Squibb Company, as amended through January
1, 1998 (incorporated herein by reference to Exhibit 4(b) to
Registration Statement on Form S-8 filed March 5, 1998).
4a. Letter of Agreement dated March 28, 1984 (incorporated herein by
reference to Exhibit 4 to Form 10-K for the fiscal year ended
December 31, 1983).
4b. Indenture, dated as of June 1, 1993, between Bristol-Myers Squibb
Company and The Chase Manhattan Bank (National Association), as
trustee (incorporated herein by reference to Exhibit 4.1 to the Form
8-K dated May 27, 1993, and filed on June 3, 1993).
4c. Form of 7.15% Debenture Due 2023 of Bristol-Myers Squibb Company
(incorporated herein by reference to Exhibit 4.2 to the Form 8-K
dated May 27, 1993, and filed on June 3, 1993).
4d. Form of 6.80% Debenture Due 2026 of Bristol-Myers Squibb Company
(incorporated herein by reference to Exhibit 4e to the Form 10-K for
the fiscal year ended December 31, 1996).
59
4e. Form of 6.875% Debenture Due 2097 of Bristol-Myers Squibb Company
(incorporated herein by reference to Exhibit 4f to the Form 10-Q for
the quarterly period ended September 30, 1997).
4f. Five Year Competitive Advance and Revolving Credit Facility
Agreement dated as of March 17, 1998 among Bristol-Myers Squibb
Company, the Borrowing Subsidiaries (as defined in the Agreement),
the Lenders listed in Schedule 2.1 to the Agreement, The Chase
Manhattan Bank as Administrative Agent and Citibank, N.A., as
Administrative Agent, filed herewith.
4g. 364-Day Competitive Advance and Revolving Credit Facility Agreement
dated as of March 17, 1998 among Bristol-Myers Squibb Company, the
Borrowing Subsidiaries (as defined in the Agreement), the Lenders
listed in Schedule 2.1 to the Agreement, The Chase Manhattan Bank as
Administrative Agent and Citibank, N.A., as Administrative Agent,
filed herewith.
**10a. Bristol-Myers Squibb Company 1997 Stock Incentive Plan, effective as
of May 6, 1997 and as amended effective December 2, 1997
(incorporated herein by reference to Exhibit 99(a) to the
Registration Statement on Form S-8 filed March 5, 1998), filed
herewith.
**10b. Bristol-Myers Squibb Company Executive Performance Incentive Plan
(incorporated herein by reference to Exhibit 10b to the Form 10-K
for the fiscal year ended December 31, 1996).
**10c. Bristol-Myers Squibb Company 1983 Stock Option Plan, as amended and
restated as of September 10, 1996, as amended January 1, 1997, filed
herewith.
**10d. Squibb Corporation 1982 Option, Restricted Stock and Performance
Unit Plan, as amended (incorporated herein by reference to Exhibit
10b to the Form 10-K for the fiscal year ended December 31, 1993).
**10e. Squibb Corporation 1986 Option, Restricted Stock and Performance
Unit Plan, as amended (as adopted, incorporated herein by reference
to Exhibit 10k to the Squibb Corporation Form 10-K for the fiscal
year ended December 31, 1988, File No. 1-5514; as amended effective
July 1, 1993, and incorporated herein by reference to Exhibit 10c to
the Form 10-K for the fiscal year ended December 31, 1993).
**10f. Bristol-Myers Squibb Company Performance Incentive Plan, as amended
(as adopted, incorporated herein by reference to Exhibit 2 to the
Form 10-K for the fiscal year ended December 31, 1978; as amended as
of January 8, 1990, incorporated herein by reference to Exhibit 19b
to the Form 10-K for the fiscal year ended December 31, 1990; as
amended on April 2, 1991, incorporated herein by reference to
Exhibit 19b to the Form 10-K for the fiscal year ended December 31,
1991; as amended effective January 1, 1994, incorporated herein by
reference to Exhibit 10d to the Form 10-K for the fiscal year ended
December 31, 1993; and as amended effective January 1, 1994,
incorporated herein by reference to Exhibit 10d to the Form
10-K for the fiscal year ended December 31, 1994).
**10g. Benefit Equalization Plan of Bristol-Myers Squibb Company and its
Subsidiary or Affiliated Corporations Participating in the Bristol-
Myers Squibb Company Retirement Income Plan or the Bristol-Myers
60
Squibb Puerto Rico, Inc. Retirement Income Plan, as amended (as
amended and restated as of January 1, 1993, as amended effective
October 1, 1993, incorporated herein by reference to Exhibit 10e to
the Form 10-K for the fiscal year ended December 31, 1993; and as
amended effective February 1, 1995, incorporated herein by reference
to Exhibit 10e to the Form 10-K for the fiscal year ended December
31, 1995).
**10h. Benefit Equalization Plan of Bristol-Myers Squibb Company and its
Subsidiary or Affiliated Corporations Participating in the Bristol-
Myers Squibb Company Savings and Investment Program, as amended (as
amended and restated as of May 1, 1990, incorporated herein by
reference to Exhibit 19d to the Form 10-K for the fiscal year ended
December 31, 1990; as amended as of January 1, 1991, incorporated
herein by reference to Exhibit 19g to the Form 10-K for the fiscal
year ended December 31, 1990; as amended as of January 1, 1991,
incorporated herein by reference to Exhibit 19e to the Form 10-K for
the fiscal year ended December 31, 1991, as amended as of October 1,
1994, incorporated herein by reference to Exhibit 10f to the Form
10-K for the fiscal year ended December 31, 1994).
**10i. Squibb Corporation Supplementary Pension Plan, as amended (as
previously amended and restated, incorporated herein by reference to
Exhibit 19g to the Form 10-K for the fiscal year ended December 31,
1991; as amended as of September 14, 1993, and incorporated herein
by reference to Exhibit 10g to the Form 10-K for the fiscal year
ended December 31, 1993).
**10j. Bristol-Myers Squibb Company Restricted Stock Award Plan, as amended
(as adopted on November 7, 1989, incorporated herein by reference to
Exhibit 10t to the Form 10-K for the fiscal year ended December 31,
1989; as amended on December 4, 1990, incorporated herein by
reference to Exhibit 19a to the Form 10-K for the fiscal year ended
December 31, 1990; as amended effective July 1, 1993, incorporated
herein by reference to Exhibit 10h to the Form 10-K for the fiscal
year ended December 31, 1993; as amended effective December 6, 1994,
incorporated herein by reference to Exhibit 10h to the Form 10-K for
the fiscal year ended December 31, 1994).
**10k. Bristol-Myers Squibb Company Retirement Income Plan for Non-Employee
Directors, as amended to March 5, 1996 (incorporated herein by
reference to Exhibit 10k to the Form 10-K for the fiscal year ended
December 31, 1996).
**10l. Bristol-Myers Squibb Company 1987 Deferred Compensation Plan for
Non-Employee Directors, as amended to January 13, 1998, filed
herewith.
**10m. Bristol-Myers Squibb Company Non-Employee Directors' Stock Option
Plan, as amended (as approved by the Stockholders on May 1, 1990,
incorporated herein by reference to Exhibit 28 to Registration
Statement No. 33-38587 on Form S-8; as amended May 7, 1991,
incorporated herein by reference to Exhibit 19c to the Form 10-K for
the fiscal year ended December 31, 1991), as amended January 13,
1998, filed herewith.
**10n. Squibb Corporation Deferral Plan for Fees of Outside Directors, as
amended (as adopted, incorporated herein by reference to Exhibit 10e
to the Squibb Corporation Form 10-K for the fiscal year ended
61
December 31, 1987, File No. 1-5514; as amended effective December
31, 1991, incorporated herein by reference to Exhibit 10m to the
Form 10-K for the fiscal year ended December 31, 1992).
**10o. Amendment to all of the Company's plans, agreements, legal documents
and other writings, pursuant to action of the Board of Directors on
October 3, 1989, to reflect the change of the Company's name to
Bristol-Myers Squibb Company (incorporated herein by reference to
Exhibit 10v to the Form 10-K for the fiscal year ended December 31,
1989).
**10p. Employment agreement of March 1998 for Charles A. Heimbold, Jr.,
filed herewith.
21. Subsidiaries of the Registrant (filed herewith).
23. Consent of Price Waterhouse LLP(filed herewith).
27. Bristol-Myers Squibb Company Financial Data Schedule (filed herewith).
99. Additional Exhibit (filed herewith).
(b) Reports on Form 8-K
None.
62
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.
BRISTOL-MYERS SQUIBB COMPANY
(Registrant)
By /s/ Charles A. Heimbold, Jr.
----------------------------------
Charles A. Heimbold, Jr.
Chairman of the Board and
Chief Executive Officer
March 31, 1998
----------------------------------
Date
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.
Signature Title Date
---------- -------- -------
Chairman of the Board,
Chief Executive Officer
And Director (Principal
/s/ Charles A. Heimbold, Jr. Executive Officer) March 31, 1998
- ------------------------------
(Charles A. Heimbold, Jr.)
Chief Financial Officer
and Senior Vice President
Corporate Staff(Principal
/s/ Michael F. Mee Financial Officer) March 31, 1998
- ------------------------------
(Michael F. Mee)
Controller and Vice President,
Financial Operations,
Corporate Staff (Principal
/s/ Frederick S. Schiff Accounting Officer) March 31, 1998
- ------------------------------
(Frederick S. Schiff)
63
Signature Title Date
- -------- ------ ------
/s/ Robert E. Allen Director March 31, 1998
- -----------------------------
(Robert E. Allen)
/s/ Vance D. Coffman Director March 31, 1998
- -----------------------------
(Vance D. Coffman)
/s/ Ellen V. Futter Director March 31, 1998
- -----------------------------
(Ellen V. Futter)
/s/ Louis V. Gerstner, Jr. Director March 31, 1998
- -----------------------------
(Louis V. Gerstner, Jr.)
/s/ Laurie H. Glimcher, M.D. Director March 31, 1998
- -----------------------------
(Laurie H. Glimcher, M.D.)
/s/ John D. Macomber Director March 31, 1998
- -----------------------------
(John D. Macomber)
/s/ James D. Robinson III Director March 31, 1998
- -----------------------------
(James D. Robinson III)
/s/ Andrew C. Sigler Director March 31, 1998
- -----------------------------
(Andrew C. Sigler)
/s/ Louis W. Sullivan, M.D. Director March 31, 1998
- -----------------------------
(Louis W. Sullivan, M.D.)
Executive Vice President,
President Worldwide Medicines
/s/ Kenneth E. Weg Group and Director March 31, 1998
- ----------------------------
(Kenneth E. Weg)
64
EXHIBIT INDEX
-------------
The Exhibits listed below are identified by numbers corresponding to the
Exhibit Table of Item 601 of Regulation S-K. The Exhibits designed by
two asterisks (**) are management contracts or compensatory plans or
arrangements required to be filed pursuant to this Item 14. An asterisk
(*) in the Page column indicates that the Exhibit has been previously
filed with the Commission and is incorporated herein by reference.
Unless otherwise indicated, all Exhibits are part of Commission File
Number 1-1136.
Exhibit Number and Description Page
------------------------------ ----
3a. Restated Certificate of Incorporation of Bristol- *
Myers Squibb Company (incorporated herein by
reference to Exhibit 4a to Registration Statement
No. 33-33682 on Form S-3).
3b. Bylaws of Bristol-Myers Squibb Company, as amended *
through January 1, 1998 (incorporated herein by
reference to Exhibit 4(b) to Registration Statement
on Form S-8 filed March 5, 1998).
4a. Letter of Agreement dated March 28, 1984 *
(incorporated herein by reference to Exhibit 4 to
Form 10-K for the fiscal year ended December 31,1983).
4b. Indenture, dated as of June 1, 1993, between *
Bristol-Myers Squibb Company and The Chase
Manhattan Bank (National Association), as trustee
(incorporated herein by reference to Exhibit 4.1
to the Form 8-K dated May 27, 1993, and filed on
June 3, 1993).
4c. Form of 7.15% Debenture Due 2023 of Bristol-Myers *
Squibb Company (incorporated herein by reference
to Exhibit 4.2 to the Form 8-K dated May 27, 1993,
and filed on June 3, 1993).
4d. Form of 6.80% Debenture Due 2026 of Bristol-Myers *
Squibb Company (incorporated herein by reference to
Exhibit 4e to the Form 10-K for the fiscal year
ended December 31, 1996).
4e. Form of 6.875% Debenture Due 2097 of Bristol-Myers *
Squibb Company (incorporated herein by reference to
Exhibit 4f to the Form 10-Q for the quarterly period
ended September 30, 1997).
65
Exhibit Number and Description Page
------------------------------ ----
4f. Five Year Competitive Advance and Revolving E-1-1
Credit Facility Agreement dated as of March 17,
1998 among Bristol-Myers Squibb Company, the
Borrowing Subsidiaries (as defined in the Agreement),
the Lenders listed in Schedule 2.1 to the Agreement,
The Chase Manhattan Bank as Administrative Agent and
Citibank, N.A., as Administrative Agent.
4g. 364-Day Competitive Advance and Revolving Credit E-2-1
Facility Agreement dated as of March 17, 1998 among
Bristol-Myers Squibb Company, the Borrowing
Subsidiaries (as defined in the Agreement), the Lenders
listed in Schedule 2.1 to the Agreement, The Chase
Manhattan Bank as Administrative Agent and Citibank,
N.A., as Administrative Agent.
** 10a. Bristol-Myers Squibb Company 1997 Stock Incentive E-3-1
Plan, effective as of May 6, 1997 and as amended
effective December 2, 1997 (incorporated herein
by reference to Exhibit 99(a) to the Registration
Statement on Form S-8 filed March 5, 1998).
** 10b. Bristol-Myers Squibb Company Executive Performance *
Incentive Plan (incorporated herein by reference to
Exhibit 10b to the Form 10-K for the fiscal year
ended December 31, 1996).
** 10c. Bristol-Myers Squibb Company 1983 Stock Option Plan, E-4-1
as amended and restated as of September 10, 1996, as
amended January 1, 1997.
** 10d. Squibb Corporation 1982 Option, Restricted Stock *
and Performance Unit Plan, as amended (incorporated
by reference to Exhibit 10b to the Form 10-K for
the fiscal year ended December 31, 1993).
** 10e. Squibb Corporation 1986 Option, Restricted Stock *
and Performance Unit Plan, as amended (as adopted,
incorporated herein by reference to Exhibit 10k to
the Squibb Corporation Form 10-K for the fiscal
year ended December 31, 1988, File No. 1-5514, as
amended July 1, 1993, incorporated herein
by reference to Exhibit 10c to the Form 10-K for
the fiscal year ended December 31, 1993).
** 10f. Bristol-Myers Squibb Company Performance Incentive *
Plan, as amended (as adopted, incorporated herein
by reference to Exhibit 2 to the Form 10-K for the
66
Exhibit Number and Description Page
------------------------------ ----
fiscal year ended December 31, 1978; as amended as
of January 8, 1990, incorporated herein by reference
to Exhibit 19b to the Form 10-K for the fiscal year
ended December 31, 1990; as amended on April 2, 1991,
incorporated herein by reference to Exhibit 19b to
the Form 10-K for the fiscal year ended December 31,
1991; as amended effective on January 1, 1994, and
incorporated herein by reference to Exhibit 10d to the
Form 10-K for the fiscal year ended December 31, 1994).
** 10g. Benefit Equalization Plan of Bristol-Myers Squibb *
Company and its Subsidiary or Affiliated
Corporations Participating in the Bristol-Myers
Squibb Company Retirement Income Plan or the
Bristol-Myers Squibb Puerto Rico, Inc. Retirement
Income Plan, as amended (as amended and restated as
of January 1, 1993, as amended effective October 1,
1993, incorporated herein by reference to Exhibit
10e to the Form 10-K for the fiscal year ended
December 31, 1993 and amended effective February 1,
1995, incorporated by reference to Exhibit 10e
to the Form 10-K for the fiscal year ended
December 31, 1995).
** 10h. Benefit Equalization Plan of Bristol-Myers Squibb *
Company and its Subsidiary or Affiliated Corporations
Participating in the Bristol-Myers Squibb Company
Savings and Investment Program, as amended (as
amended and restated as of May 1, 1990, incorporated
herein by reference to Exhibit 19d to the Form 10-K
for the fiscal year ended December 31, 1990; as
amended as of January 1, 1991, incorporated herein
by reference to Exhibit 19g to the Form 10-K for the
fiscal year ended December 31, 1990; as amended as
of January 1, 1991, incorporated herein by reference
to Exhibit 19e to the Form 10-K for the fiscal year
ended December 31, 1991; as amended as of October 1,
1994, incorporated herein by reference to Exhibit
10f of the Form 10-K for the fiscal year ended
December 31, 1994).
** 10i. Squibb Corporation Supplementary Pension Plan, as *
amended (as previously amended and restated,
incorporated herein by reference to Exhibit 19g to
the Form 10-K for the fiscal year ended December 31,
1991; as amended on September 14, 1993, incorporated
by reference to Exhibit 10g to the Form 10-K for the
fiscal year ended December 31, 1993).
** 10j. Bristol-Myers Squibb Company Restricted Stock Award *
Plan, as amended (as adopted on November 7, 1989,
67
Exhibit Number and Description Page
------------------------------ ----
incorporated herein by reference to Exhibit 10t to
the Form 10-K for the fiscal year ended December 31,
1989; as amended on December 4, 1990, incorporated
herein by reference to Exhibit 19a to the Form 10-K
for the fiscal year ended December 31, 1990; as
amended July 1, 1993, incorporated by reference to
Exhibit 10h to the Form 10-K for the fiscal year
ended December 31, 1993; as amended effective
December 6, 1994, incorporated by reference to
Exhibit 10h to the Form 10-K for the fiscal year
Ended January 31, 1994).
** 10k. Bristol-Myers Squibb Company Retirement Income Plan *
for Non-Employee Directors, as amended to March 5,1996
(incorporated herein by reference to Exhibit 10k
to the Form 10-K for the fiscal year ended December
31, 1996).
** 10l. Bristol-Myers Squibb Company 1987 Deferred E-5-1
Compensation Plan for Non-Employee Directors,
as amended to January 13, 1998.
** 10m. Bristol-Myers Squibb Company Non-Employee Directors' E-6-1
Stock Option Plan, as amended (as approved by the
Stockholders on May 1, 1990, incorporated herein by
reference to Exhibit 28 to Registration Statement
No. 33-38587 on Form S-8; as amended May 7, 1991,
incorporated herein by reference to Exhibit 19c to
the Form 10-K for the fiscal year ended December 31,
1991), as amended January 13, 1998.
** 10n. Squibb Corporation Deferral Plan for Fees of Outside *
Directors, as amended (as adopted, incorporated
herein by reference to Exhibit 10e to the Squibb
Corporation Form 10-K for the fiscal year ended
December 31, 1987, File No. 1-5514; as amended
effective December 31, 1991, incorporated herein
by reference to Exhibit 10m to the Form 10-K for
the fiscal year ended December 31, 1992).
** 10o. Amendment to all of the Company's plans, agreements, *
legal documents and other writings, pursuant to
action of the Board of Directors on October 3,
1989, to reflect the change of the Company's name to
Bristol-Myers Squibb Company (incorporated herein by
reference to Exhibit 10v to the Form 10-K for the
fiscal year ended December 31, 1989).
68
Exhibit Number and Description Page
------------------------------ ----
** 10p. Employment agreement of March 1998 for Charles A. E-7-1
Heimbold, Jr.
21. Subsidiaries of the Registrant. E-8-1
23. Consent of Price Waterhouse LLP. E-9-1
27. Bristol-Myers Squibb Company Financial E-10-1
Data Schedule
99. Additional Exhibit E-11-1
69
SCHEDULE II
-----------
BRISTOL-MYERS SQUIBB COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(dollars in millions)
Additions
Balance at charged to Deductions- Balance at
beginning costs and bad debts end
Description of period expenses written off of period
- --------------- ---------- ---------- ------------ ----------
Allowances for
discounts and
doubtful accounts:
For the year ended
December 31, 1997 $107 $19 $17 $109
========== ========== ============ ===========
For the year ended
December 31, 1996 $100 $39 $32 $107
========== ========== ============ ===========
For the year ended
December 31, 1995 $77 $31 $8 $100
========== ========== ============ ===========
S-1