Back to GetFilings.com
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________________ to _______________
Commission file number 001-4802
Becton, Dickinson and Company
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-0760120
- -------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 Becton Drive, Franklin Lakes, New Jersey 07417-1880
-----------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(201) 847-6800
----------------------------------------------------
(Registrant's telephone number, including area code)
N/A
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X. No .
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class of Common Stock Shares Outstanding as of July 31, 2002
--------------------- --------------------------------------
Common stock, par value $1.00 256,721,084
BECTON, DICKINSON AND COMPANY
FORM 10-Q
For the quarterly period ended June 30, 2002
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION Page Number
- ------- --------------------- -----------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets.......................... 3
Condensed Consolidated Statements of Income..................... 4
Condensed Consolidated Statements of Cash Flows................. 5
Notes to Condensed Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk........... 23
Part II. OTHER INFORMATION
- -------- -----------------
Item 1. Legal Proceedings.................................................... 24
Item 2. Changes in Securities and Use of Proceeds............................ 25
Item 3. Defaults Upon Senior Securities...................................... 25
Item 4. Submission of Matters to a Vote of Security Holders.................. 25
Item 5. Other Information.................................................... 25
Item 6. Exhibits and Reports on Form 8-K..................................... 25
Signatures ..................................................................... 27
2
ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
June 30, September 30,
Assets 2002 2001
----------- -------------
(Unaudited)
Current Assets:
Cash and equivalents $ 175,981 $ 82,129
Short-term investments - 4,571
Trade receivables, net 735,464 768,047
Inventories:
Materials 154,050 160,208
Work in process 136,468 115,257
Finished products 433,817 432,279
----------- -----------
724,335 707,744
Prepaid expenses, deferred taxes and other 199,965 200,451
----------- -----------
Total Current Assets 1,835,745 1,762,942
Property, plant and equipment 3,569,734 3,420,294
Less allowances for depreciation and amortization 1,826,206 1,704,271
----------- -----------
1,743,528 1,716,023
Goodwill, Net 493,351 431,452
Core and Developed Technology, Net 288,548 304,688
Other Intangibles, Net 125,345 164,643
Capitalized Software, Net 273,418 231,123
Other 163,447 191,416
----------- -----------
Total Assets $ 4,923,382 $4,802,287
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 471,050 $ 454,012
Payables and accrued expenses 809,262 810,664
----------- -----------
Total Current Liabilities 1,280,312 1,264,676
Long-Term Debt 782,383 782,996
Long-Term Employee Benefit Obligations 252,615 335,731
Deferred Income Taxes and Other 93,327 90,117
Commitments and Contingencies - -
Shareholders' Equity:
Preferred stock 38,625 40,528
Common stock 332,662 332,662
Capital in excess of par value 181,353 148,690
Retained earnings 3,408,388 3,137,304
Unearned ESOP compensation (13,727) (12,001)
Deferred compensation 8,458 7,096
Common shares in treasury - at cost (1,089,989) (937,790)
Accumulated other comprehensive loss (351,025) (387,722)
----------- -----------
Total Shareholders' Equity 2,514,745 2,328,767
----------- -----------
Total Liabilities and Shareholders' Equity $ 4,923,382 $ 4,802,287
=========== ===========
See notes to condensed consolidated financial statements
3
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Thousands of Dollars, Except Per-share Data
(Unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------ --------------------------
2002 2001 2002 2001
-------- -------- ---------- ----------
Revenues $998,460 $943,290 $2,956,377 $2,758,657
Cost of products sold 514,071 474,891 1,536,966 1,415,547
Selling and administrative 253,857 248,709 749,811 725,913
Research and development 53,037 53,105 164,588 160,329
Special charges 11,571 - 21,508 -
-------- -------- ---------- ----------
Total Operating Costs and Expenses 832,536 776,705 2,472,873 2,301,789
-------- -------- ---------- ----------
Operating Income 165,924 166,585 483,504 456,868
Interest expense, net (8,678) (13,155) (27,088) (47,717)
Other income (expense), net 1,313 (367) 189 (5,626)
-------- -------- ---------- ----------
Income Before Income Taxes and Cumulative
Effect of Change in Accounting Principle 158,559 153,063 456,605 403,525
Income tax provision 38,834 34,934 108,019 97,533
-------- -------- ---------- ----------
Income Before Cumulative Effect of Change
in Accounting Principle 119,725 118,129 348,586 305,992
Cumulative effect of change in
accounting principle, net of tax - - - (36,750)
-------- -------- ---------- ----------
Net Income $119,725 $118,129 $ 348,586 $ 269,242
======== ======== ========== ==========
Basic Earnings Per Share
Before Cumulative Effect of Change in
Accounting Principle $ .46 $ .46 $ 1.34 $ 1.18
Cumulative effect of change in accounting
principle, net of tax - - - (.14)
-------- -------- ---------- ----------
Basic Earnings Per Share $ .46 $ .46 $ 1.34 $ 1.04
======== ======== ========== ==========
Diluted Earnings Per Share
Before Cumulative Effect of Change in
Accounting Principle $ .44 $ .44 $ 1.29 $ 1.14
Cumulative effect of change in accounting
principle, net of tax - - - (.14)
-------- -------- ---------- ----------
Diluted Earnings Per Share $ .44 $ .44 $ 1.29 $ 1.00
======== ======== ========== ==========
Dividends Per Common Share $ .0975 $ .095 $ .2925 $ .285
======== ======== ========== ==========
See notes to condensed consolidated financial statements
4
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)
Nine Months Ended
June 30,
--------------------------
2002 2001
--------- ----------
Operating Activities
Net income $ 348,586 $ 269,242
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 224,486 232,437
Pension contribution (100,000) -
Non-cash special charges 6,526 -
Cumulative effect of change in accounting principle, net of tax - 36,750
Change in working capital 34,388 (53,270)
Other, net 18,415 39,344
--------- ----------
Net Cash Provided by Operating Activities 532,401 524,503
--------- ----------
Investing Activities
Capital expenditures (163,041) (265,888)
Capitalized software (61,638) (54,207)
Sales (purchases) of investments, net 6,826 (6,781)
Acquisitions of businesses, net of cash acquired - (30,953)
Other, net (24,090) (38,844)
--------- ----------
Net Cash Used for Investing Activities (241,943) (396,673)
--------- ----------
Financing Activities
Change in short-term debt 18,674 4,030
Proceeds from long-term debt 4,496 2,387
Payments of long-term debt (3,842) (102,594)
Repurchase of common stock (173,750) -
Issuance of common stock from treasury 33,980 69,379
Dividends paid (77,335) (75,974)
--------- ----------
Net Cash Used for Financing Activities (197,777) (102,772)
--------- ----------
Effect of exchange rate changes on cash and equivalents 1,171 (2,963)
--------- ----------
Net increase in cash and equivalents 93,852 22,095
Opening Cash and Equivalents 82,129 49,196
--------- ----------
Closing Cash and Equivalents $ 175,981 $ 71,291
========= ==========
See notes to condensed consolidated financial statements
5
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar and Share Amounts in Thousands, Except Per-share Data
June 30, 2002
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion of
the management of the Company, include all adjustments which are of a normal
recurring nature, necessary for a fair presentation of financial position and
the results of operations and cash flows for the periods presented. However, the
financial statements do not include all information and footnotes required for a
presentation in accordance with generally accepted accounting principles. These
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included or
incorporated by reference in the Company's 2001 Annual Report on Form 10-K. The
results of operations for the interim periods are not necessarily indicative of
the results of operations to be expected for the full year.
The Company adopted the provisions of Securities and Exchange Commission Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
("SAB 101") in the fourth quarter of fiscal 2001, retroactive to October 1,
2000, as more fully discussed in the 2001 Annual Report on Form 10-K. Prior year
results have been restated to reflect this adoption.
Effective October 1, 2001, the Company adopted the provisions of Statement of
Financial Accounting Standard ("SFAS") No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets," as more fully discussed in
Note 8. As a result of the adoption of these Statements, the Company is no
longer amortizing goodwill and indefinite-lived intangible assets, and has
reclassified certain assets to Goodwill, Net from Other Intangibles, Net that
did not meet the criteria for recognition apart from goodwill.
The Company redesignated its cash flow hedges in April 2001 pursuant to
implementation guidance released by the Derivatives Implementation Group of the
Financial Accounting Standards Board ("FASB") related to SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as more fully
discussed in the 2001 Annual Report on Form 10-K. This interpretation allows
changes in the time value of option contracts to be included in effectiveness
testing. Prior to the release of this guidance and the redesignation of these
hedges, the Company recorded hedging costs related to the change in the time
value of option contracts in other expense. Prior year hedging costs recorded in
other expense of $8,121 for the first six months of fiscal 2001 have been
reclassified as a reduction in revenues, to conform with the current year
presentation.
Capitalized software primarily represents costs associated with our
enterprise-wide program to upgrade our business information systems, known
internally as Genesis. The costs associated with the Genesis program will be
fully amortized by 2009, with amortization expense being primarily reported as
Selling and administrative expense.
6
Note 2 - Inventory Valuation
The Company uses the last-in, first-out ("LIFO") method of determining cost for
substantially all inventories in the United States. An actual valuation of
inventory under the LIFO method will be made only at the end of each fiscal year
based on the inventory levels and costs at that time. Accordingly, interim LIFO
calculations are based on management's estimates of expected year-end inventory
levels and costs. All other inventories are accounted for using the first-in,
first-out ("FIFO") method. At September 30, 2001, inventories valued under the
LIFO method approximated current cost.
Note 3 - Comprehensive Income
Comprehensive income for the Company is comprised of the following:
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------------- -------------------------
2002 2001 2002 2001
-------- ------- -------- --------
Net Income $119,725 $118,129 $348,586 $269,242
Other Comprehensive Income,
Net of Tax
Foreign currency translation
adjustments 73,429 (24,009) 38,167 (59,400)
Unrealized (loss) gain on
investments, net of
amounts realized (1,991) 1,142 1,536 (1,567)
Unrealized (loss) gain on
cash flow hedges, net of
amounts realized (6,855) (2,018) (3,006) 3,253
-------- -------- -------- --------
Comprehensive Income $184,308 $ 93,244 $385,283 $211,528
======== ======== ======== ========
The amount of unrealized gains or losses on investments and cash flow hedges in
comprehensive income has been adjusted to reflect the realized gains and losses
included in net income during the three and nine months ended June 30, 2002 and
2001.
Note 4 - Earnings per Share
The following table sets forth the computations of basic and diluted earnings
per share, before the cumulative effect of accounting change:
7
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------------- -------------------------
2002 2001 2002 2001
-------- ------- -------- --------
Income Before Cumulative
Effect of Accounting Change $119,725 $118,129 $348,586 $305,992
Preferred stock dividends (634) (672) (1,934) (2,058)
-------- -------- -------- --------
Income available to common
shareholders (A) 119,091 117,457 346,652 303,934
Preferred stock dividends -
using "if converted" method 634 672 1,934 2,058
Additional ESOP contribution -
using "if converted" method (145) (152) (455) (482)
-------- -------- -------- --------
Income available to common
shareholders after assumed
conversions (B) $119,580 $117,977 $348,131 $305,510
======== ======== ======== ========
Average common shares
outstanding (C) 258,067 258,086 258,568 256,513
Dilutive stock equivalents from
stock plans 6,754 7,095 6,976 7,372
Shares issuable upon conversion
of preferred stock 4,190 4,472 4,190 4,472
-------- -------- -------- --------
Average common and common
equivalent shares outstanding
- assuming dilution (D) 269,011 269,653 269,734 268,357
======== ======== ======== ========
Basic earnings per share (A/C) $ .46 $ .46 $ 1.34 $ 1.18
======== ======== ======== ========
Diluted earnings per share (B/D) $ .44 $ .44 $ 1.29 $ 1.14
======== ======== ======== ========
Note 5 - Contingencies
The Company is involved, both as a plaintiff and a defendant, in various legal
proceedings and claims which arise in the ordinary course of business,
including, without limitation, product liability, and environmental matters.
While it is not possible to predict or determine the outcome of the legal
actions brought against the Company, upon resolution of such matters, the
Company may incur charges in excess of presently established reserves. While
such future charges, individually and in the aggregate, could have a material
adverse impact on the Company's net income and net cash flows in the period in
which they are recorded or paid, in the Company's opinion, the results of these
matters, individually and in the aggregate, are not expected to have a material
adverse effect on the Company's consolidated financial condition. Further
discussion of legal proceedings is included in Part II of this Report on Form
10-Q.
8
Note 6 - Segment Data
For the nine months ended June 30, 2002, decisions about resource allocation and
performance assessment were made separately for the BD Medical Systems
("Medical") segment, the BD Clinical Laboratory Solutions ("Clinical Lab")
segment, and the BD Biosciences ("Biosciences") segment.
The Company evaluates performance based upon operating income. Segment operating
income represents revenues reduced by product costs and operating expenses. As
discussed more fully in the Company's 2001 Annual Report on Form 10-K, during
fiscal 2001, the Company refined its methodology for allocating indirect
expenses for purposes of reporting segment operating income to the chief
operating decision maker. The Company believes this new approach is a preferable
method for allocating shared expenses as the allocations are now being performed
at a more detailed level of reporting. As a result of this change in
methodology, segment operating income has been restated for the prior year.
Financial information for the Company's segments is as follows:
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------------- -------------------------
2002 2001(A) 2002 2001(A)
-------- -------- -------- ----------
Revenues
Medical $544,176 $507,418 $1,577,590 $1,467,331
Clinical Lab 298,030 284,416 910,436 856,492
Biosciences 156,254 151,456 468,351 434,834
-------- -------- ---------- ----------
Total Revenues (B) $998,460 $943,290 $2,956,377 $2,758,657
======== ======== ========== ==========
Segment Operating Income (C)
Medical $119,284 $118,062 $ 329,412 $ 319,624
Clinical Lab 57,661 53,779 181,111 157,097
Biosciences 23,377 26,614 81,267 66,938
-------- -------- ---------- ----------
Total Segment
Operating Income 200,322 198,455 591,790 543,659
Unallocated Items (D) (41,763) (45,392) (135,185) (140,134)
-------- -------- ---------- ----------
Income Before Income Taxes and
Cumulative Effect of Change in
Accounting Principle $158,559 $153,063 $ 456,605 $ 403,525
======== ======== ========== ==========
(A) Prior year amounts have been restated to reflect the adoption of SAB 101.
Also, as discussed in Note 1, prior year to date amounts reflect the
reclassification of hedging costs from other expense to revenues. The
amounts reclassified were $2,768 for Medical, $3,017 for Clinical Lab, and
$2,336 for Biosciences for the first six months of fiscal 2001.
(B) Intersegment revenues are not material.
(C) The Company ceased amortizing goodwill and indefinite-lived intangible
assets on 10/1/2001, as discussed in Note 8. In addition, the current year
includes special charges of $11,571 for the quarter and $21,508 for the
nine months, as discussed in Note 7. The allocation of special charges for
the quarter is as follows: $12,663 for Medical, $(468) for Clinical Lab,
$(447) for Biosciences, and $(177) for Unallocated. The allocation of
special charges for the nine months is as follows: $22,600 for Medical,
$(468) for Clinical Lab, $(447) for Biosciences, and $(177) for
Unallocated.
(D) Includes interest, net; foreign exchange; corporate expenses; gains on
sales of investments and certain legal defense costs.
9
Note 7 - Special Charges
Fiscal Year 2002
The Company recorded special charges of $9,937 and $15,760 during the second and
third quarters of fiscal 2002, respectively, related to a manufacturing
restructuring program in the Medical segment that is aimed at optimizing
manufacturing efficiencies and improving the Company's competitiveness in the
different markets in which it operates. Of these charges, $19,171 represented
exit costs, which included $18,533 related to severance costs. This program
involves the termination of 533 employees in China, France, Germany, Ireland,
Mexico, and the United States. As of June 30, 2002, 74 of the targeted employees
had been severed. The Company expects these terminations to be completed and the
related accrued severance to be substantially paid by the end of fiscal 2003.
Also included in special charges for the nine month period were asset
write-downs of $6,526. Included in this amount were asset impairments in China
of $5,109 that represented the excess carrying values over the fair values of
machinery and equipment, based on discounted cash flow estimates. The
depreciation of the remaining carrying value of these assets will be accelerated
over the period remaining until the completion of the exit plan. The remaining
asset write-downs recorded in the special charge included machinery and
equipment, which were written down to zero. These assets were taken out of
service immediately after the write-down occurred and will be scrapped.
Offsetting special charges in the third quarter were $4,189 of reversals of
fiscal 2000 special charges. These charges primarily related to a manufacturing
restructuring that took place in Europe and includes excess reserves primarily
related to severance and lease cancellation costs. The lower severance costs
were due to the ability to sever individuals at a lower cost. The lower lease
cancellation cost was due to the decision not to exit a leased facility as
originally planned. These changes primarily resulted from further analysis of
our European manufacturing structure and a modified restructuring plan approved
in the third quarter of 2002. These reversals, the majority of which related to
the Medical segment, were recorded to Special Charges, consistent with the
original accounting treatment.
A summary of the 2002 special charge accrual activity follows:
Severance Restructuring
---------- -------------
2002 Special Charges $18,500 $600
Foreign Currency Translation 1,200 -
Payments (700) -
------- ----
Accrual Balance at
June 30, 2002 $19,000 $600
======= ====
10
Fiscal Year 2000
The Company recorded special charges of $57,514 in fiscal year 2000, as
discussed in the 2001 Annual Report on Form 10-K. The Company developed a
worldwide organizational restructuring plan to align its existing infrastructure
with its projected growth programs. This plan included the elimination of open
positions and employee terminations from all businesses, functional areas and
regions for the sole purpose of cost reduction. As discussed earlier, the
Company reversed $4,189 of these charges in the third quarter of fiscal 2002
primarily related to severance and lease cancellation costs. Of the 600
employees originally targeted for termination under this plan, approximately 30
remained to be severed as of June 30, 2002. The remaining terminations and
related accrued severance are expected to be substantially completed and paid no
later than the end of 2002.
A summary of the 2000 special charge accrual activity during the first nine
months of fiscal 2002 follows:
Severance Restructuring Other
--------- ------------- -----
Accrual Balance at
September 30, 2001 $6,300 $ 1,200 $11,700
Reversals (3,000) (1,200) -
Payments (1,800) - (6,300)
------- -------- -------
Accrual Balance at
June 30, 2002 $1,500 $ - $ 5,400
====== ======= =======
Fiscal Year 1998
The Company recorded special charges of $90,945 in fiscal year 1998 as discussed
in the 2001 Annual Report on Form 10-K. In an effort to improve manufacturing
efficiencies at certain of its locations, the Company initiated a restructuring
plan in 1998, which included the closing of a surgical blade plant in Hancock,
New York. The move of a production line from Hancock to another location has
been delayed, as more fully described in the Company's 2001 Annual Report on
Form 10-K. The Company expects the Hancock restructuring plan to be completed
and the related accruals to be substantially paid by December 2002. The
remaining 150 employees will be terminated upon closure of the plant.
A summary of the 1998 special charge accrual activity during the first nine
months of fiscal 2002 follows:
Severance Restructuring Other
--------- ------------- -----
Accrual Balance at September 30, 2001 $6,900 $1,500 $1,300
Payments (500) (800) (200)
------ ------ ------
Accrual Balance at June 30, 2002 $6,400 $700 $1,100
====== ====== ======
11
Note 8 - Adoption of New Accounting Standards
Effective October 1, 2001, the Company adopted the provisions of SFAS No. 141,
"Business Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141, among other things, changes the criteria for recognizing
intangible assets apart from goodwill. SFAS No. 142 stipulates that goodwill and
indefinite-lived intangible assets will no longer be amortized, but instead will
be periodically reviewed for impairment. Diluted earnings per share for the nine
months ended June 30, 2002 reflect an approximate 7 1/2 cent benefit from the
adoption of SFAS 142.
Upon adoption of these Statements, the Company reclassified approximately
$28,500 of assets from Other Intangibles, Net to Goodwill, Net, primarily
related to assembled workforce. These assets did not meet the criteria for
recognition apart from goodwill under SFAS No. 141. Of this amount,
approximately $18,400 related to the Biosciences segment and approximately
$10,100 related to the Medical segment. The Company also ceased amortizing
certain trademarks that were deemed to have indefinite lives as they are
expected to generate cash flows indefinitely. The following table reconciles
reported net income to that which would have been reported if the current method
of accounting for goodwill and indefinite-lived asset amortization was used for
the quarter and nine months ended June 30, 2001:
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------- ----------------------
2002 2001 2002 2001
--------------------- ----------------------
Reported Net Income $119,725 $118,129 $348,586 $269,242
Add back: Goodwill
Amortization -- 6,809 -- 19,549
Add back: Amortization
of Indefinite-Lived
Intangible Assets -- 344 -- 963
-------- -------- -------- --------
Adjusted Net Income $119,725 $125,282 $348,586 $289,754
======== ======== ======== ========
Basic Earnings Per Share $ .46 $ .46 $ 1.34 $ 1.04
Goodwill Amortization -- .03 -- .10
Amortization of
Indefinite-Lived
Intangible Assets -- -- -- --
-------- -------- -------- --------
Adjusted Basic Earnings
Per Share $ .46 $ .49 $ 1.34 $ 1.14
======== ======== ======== ========
Diluted Earnings Per
Share $ .44 $ .44 $ 1.29 $ 1.00
Goodwill Amortization -- .03 -- .07
Amortization of
Indefinite-Lived
Intangible Assets -- -- -- --
-------- -------- -------- --------
Adjusted Diluted Earnings
Per Share $ .44 $ .47 $ 1.29 $ 1.07
======== ======== ======== ========
12
Acquired Intangible Assets
As of June 30, 2002
-------------------------------
Gross Carrying Accumulated
Amount Amortization
------ ------------
Amortized intangible assets:
Core and Developed Technology $370,044 $81,496
Patents, Trademarks, & Other 302,539 194,815
-------- --------
Total $672,583 $276,311
======== ========
Unamortized intangible assets:
Goodwill $493,351
Trademarks 17,621
--------
Total $510,972
========
Estimated Intangible Amortization Expense:
For the Years Ending September 30:
2002 $37,168
2003 37,297
2004 35,370
2005 32,834
2006 31,415
2007 31,099
On March 31, 2002, the Company completed its goodwill impairment assessment as
required by SFAS No. 142. The adoption of this aspect of SFAS No. 142 did not
result in a goodwill impairment and therefore had no impact on the results of
operations or financial condition of the Company.
Pending Adoption of New Accounting Standard
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This Statement requires that one accounting
model be used for long-lived assets to be disposed of by sale and it broadens
the presentation of discontinued operations to include more disposal
transactions. The provisions relating to long-lived assets to be disposed of by
sale or otherwise are effective for disposal activities initiated by a
commitment to a plan after the effective date of the Statement. The Company is
required to adopt the provisions of this Statement no later than October 1,
2002, and does not expect that this Statement will have a material impact on its
consolidated financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This Statement requires that a liability for
a cost associated with an exit or
13
disposal activity be recognized when the liability is incurred. Previous
guidance had required that liabilities for exit costs be recognized at the date
of an entity's commitment to an exit plan. The Company is required to adopt the
provisions of this Statement for any exit or disposal activities that are
initiated after December 31, 2002. The Company is in the process of evaluating
this Statement and has not yet determined the future impact, if any, on its
consolidated financial statements.
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Becton, Dickinson and Company ("BD") adopted the provisions of Securities and
Exchange Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements," ("SAB 101") in the fourth quarter of fiscal 2001,
retroactive to October 1, 2000, as more fully discussed in our 2001 Annual
Report on Form 10-K (the "2001 10-K"). Prior year results have been restated to
reflect this adoption.
Third quarter revenues of $998 million represented a six percent increase from
the same period a year ago. Revenues for the nine months were $2.956 million, a
seven percent increase over a year ago. International revenue growth of seven
percent for the quarter and nine months was equally affected by the weakening of
currency exchange rates in both Latin America and Japan. After excluding this
unfavorable impact of foreign currency translation, international revenues grew
nine percent for both the three and nine months.
BD Medical Systems ("Medical") revenues increased seven percent for the quarter.
International Medical revenue growth was nine percent, after excluding the
unfavorable impact of foreign currency translation. Included in Medical revenues
were U.S. safety-engineered product sales of $88 million, compared with $66
million in the prior year's quarter. Medical revenue growth attributable to the
transition to safety-engineered devices was offset by reduced sales of
conventional devices in the United States. Also contributing to the growth of
the segment were sales of worldwide prefillable drug delivery devices, which
grew about $15 million or 20%.
Medical revenue was also offset in part by lower revenue in the consumer health
care product area. Pursuant to the adoption of SAB 101, we changed our method of
accounting for revenue related to branded insulin syringe products that are sold
under incentive programs to distributors in the U.S. consumer trade channel. We
now recognize revenues on branded insulin syringes upon the sell-through of the
respective product from the distribution channel partner to their end customer.
In determining the amount of sales to be recorded each quarter, we rely upon
independent sales and inventory data from our distribution channel partners. In
the third quarter, one distribution channel partner reported data reflecting a
higher level of inventory than previously reported data would have indicated. As
a result, reported sales of insulin syringes were negatively impacted by
approximately $8 million.
BD Clinical Laboratory Solutions ("Clinical Lab") revenues increased five
percent for the quarter. International Clinical Lab revenue growth was eight
percent, after excluding the unfavorable impact of foreign currency translation.
Revenue growth of 11 percent in the preanalytical solutions product area is
attributable primarily to U.S. safety-engineered device sales, which were $57
million compared with $43 million in the prior year's quarter. As is the case in
the Medical segment, Clinical Lab revenue growth attributable to the transition
to safety-engineered devices was offset by the reduced sales of conventional
devices in the United States. Worldwide sales in the diagnostic systems product
area declined two percent. Inventory stocking by U.S. distributors during the
second quarter in advance of the installation of a new enterprise resource
planning system adversely impacted revenue growth for the third quarter.
15
BD Biosciences ("Biosciences") revenues grew three percent for the quarter.
International Biosciences revenues grew approximately nine percent, after
excluding the unfavorable impact of foreign currency translation. Revenue growth
for the segment was driven primarily by strong sales of immunology/cell biology
reagents and discovery labware products, which reported combined revenues of $72
million compared with $65 million in the prior year's quarter. Revenue growth
for the segment was adversely impacted by essentially flat sales of flow
cytometry instruments and reagents, due to softness in pharmaceutical research
and development and related capital spending, coupled with the timing of certain
instrument installations. Molecular biology reagent revenues (Clontech)
decreased about 8% to $18 million. This decline is due to continued weakness in
some portions of the molecular biology market, largely due to an industry shift
from early stage drug target identification, for which many of our products are
used, to later stage drug development products.
Three Months Ended June 30, Nine Months Ended June 30,
Segment Revenues ------------------------------ ------------------------------
(Dollars in millions) 2002 2001 % Change 2002 2001 % Change
===================================================================================================
Medical
United States $272 $255 6 $ 792 $ 726 9
International 272 252 8 786 741 6
---- ---- - ------ ------ -
Total $544 $507 7 $1,578 $1,467 8
==== ==== = ====== ====== =
Clinical Lab
United States $175 $169 4 $ 541 $ 504 7
International 123 116 6 370 352 5
---- ---- - ------ ------ -
Total $298 $284 5 $ 910 $ 856 6
==== ==== = ====== ====== =
Biosciences
United States $ 85 $ 85 - $ 250 $ 241 4
International 71 66 7 218 194 13
---- ---- - ------ ------ -
Total $156 $151 3 $ 468 $ 435 8
==== ==== = ====== ====== =
Total Revenues
United States $532 $509 4 $1,583 $1,471 8
International 466 434 7 1,373 1,287 7
---- ---- - ------ ------ -
Total $998 $943 6 $2,956 $2,759 7
==== ==== = ====== ====== =
Refer to Note 6 in Notes to Condensed Consolidated Financial Statements for
additional segment data.
Excluding the impact of special charges as more fully described below and in
Note 7 of the Notes to Condensed Consolidated Financial Statements and the
adoption of Statement of Financial Accounting Standards ("SFAS") Nos. 141 and
142 as more fully described in Note 8 of the Notes to Condensed Consolidated
Financial Statements, changes in segment operating income were primarily driven
by the changes in revenue discussed above. Biosciences segment operating income
was adversely impacted by lower sales of molecular biology reagents, which have
higher overall gross profit margins, as compared to the same period in the prior
year.
Gross profit margin was 48.5% for the quarter and 48.0% for the nine months,
compared with 49.7% and 48.7%, respectively, for the prior year. Gross profit
margin for the quarter reflects the impact of $3 million of other manufacturing
costs, primarily accelerated depreciation, related to
16
the restructuring program in the Medical segment, which is more fully described
in Note 7 of the Notes to Condensed Consolidated Financial Statements. In
addition, higher gross margins from sales of our advanced protection products
were more than offset by lower recorded sales in the current quarter of products
with overall higher gross profit margins, including insulin syringes and
products in the Biosciences segment, both as discussed earlier. Gross profit
margin was also negatively impacted by higher manufacturing costs and the impact
of an inventory reduction program in the Medical segment.
Selling and administrative expense was 25.4% of revenues for both the quarter
and nine months, compared with the prior year's ratios of 26.4% and 26.3%,
respectively. Excluding goodwill amortization associated with the adoption of
SFAS Nos. 141 and 142, prior year's selling and administrative expense as a
percent of revenues would have been about the same as this year. Investment in
research and development was 5.3% of revenues for the quarter and 5.6% of
revenues for the nine months, compared with 5.6% and 5.8% of revenues,
respectively, in the prior year. Investment in research and development for the
quarter and nine months reflects lower spending than in the prior year,
primarily due to lower ongoing development costs resulting from the recent
introduction of BD ProbeTec ET'TM' and BD Phoenix'TM'.
Operating margin was 16.6% for the quarter and 16.4% for the nine months,
compared with 17.7% and 16.6%, respectively, in the prior year. Excluding the
aforementioned impact of special charges and other restructuring costs in the
current year and goodwill amortization in the prior year, operating margin as a
percent of revenue would have been about the same as last year for both the
quarter and nine months. Net interest expense declined $4 million for the
quarter and $21 million for the nine months compared with the prior year,
primarily due to lower short-term interest rates.
Other income, net was $1 million higher for the current quarter compared with a
year ago, primarily due to foreign exchange gains. For the nine months, foreign
exchange gains of $15 million were offset by net losses on investments of $7
million and write-downs of assets of $8 million. As further described in Note 1
of the Notes to Condensed Consolidated Financial Statements, hedging costs of $8
million recorded in other expense in the first six months of fiscal 2001 have
been reclassified as a reduction in revenues, to conform with the current year
presentation.
We have an equity investment in a publicly-held company with an original
carrying value of $15 million that has been trading below its carrying value
since the end of January 2002. We are currently considering the provisions of
Securities and Exchange Commission Staff Accounting Bulletin No. 59 in
determining whether the market value of this investment has been affected by
general market conditions or whether this decline would be considered other than
temporary. If we determine this decline to be other than temporary, we will
write-down the carrying value of this investment to its fair value in the fourth
quarter of fiscal 2002. As of June 30, 2002, comprehensive income included a
cumulative unrealized loss of $4 million for this investment. As of July 31,
2002, the cumulative unrealized loss for this investment was approximately $10
million.
The income tax rate was 25% for the quarter, or 24% excluding the impact of
special charges. Our tax rate in the prior year was 23% on a post-SAB 101 basis.
We expect our tax rate for the full year to be about 24%, excluding the impact
of special charges.
17
Net income and diluted earnings per share for the current quarter were $120
million and 44 cents, respectively, compared with $118 million and 44 cents in
the prior year. Reported net income and diluted earnings per share for the
current nine months were $349 million and $1.29, respectively, compared with net
income and diluted earnings per share, excluding the cumulative effect of
accounting change, of $306 million and $1.14 for the same period in fiscal 2001.
Excluding the impact of special charges discussed earlier, diluted earnings per
share would have been 48 cents and $1.35 for the current quarter and nine months
ended June 30, 2002, respectively. Diluted earnings per share for the current
quarter and nine months reflect a benefit of approximately 2 1/2 cents and 7 1/2
cents, respectively, from the adoption of SFAS No. 142.
On April 8, 2002, we entered into a non-binding letter of intent with AorTech
International plc ("AorTech") to sell our critical care product line. Almost
one-half of the current negotiated purchase price would be paid over 30 months
following the date of closing and is subject to adjustments based on future
sales results. Several important actions must occur, including the execution of
a definitive purchase agreement and the approval of Aortech's Board of Directors
and shareholders, before the sale can be completed. Taken together, the actions
represent significant uncertainty with respect to determining whether the sale
will be consummated. Therefore, we have not recorded the loss that will be
reflected if the product line is sold. Assuming these actions are completed, we
would record a substantially non-cash pre-tax loss that is currently estimated
to be in the range of $35 to $40 million.
Special Charges
We recorded special charges of $12 million, or four cents per share, during the
third quarter and $22 million, or six cents per share, for the nine months
related to a manufacturing restructuring program in the Medical segment, as more
fully described in Note 7 of the Notes to Condensed Consolidated Financial
Statements. Also included in the third quarter charges was the reversal of $4
million of fiscal 2000 special charges, primarily related to severance and
lease cancellation costs. Third quarter results also reflected other
manufacturing costs related to the restructuring program of $3 million, or one
cent per share, that are included in cost of products sold. Over the next nine
months, we expect any savings from the reduction in salaries and wages expense
to be more than offset by other costs related to this restructuring program,
including accelerated depreciation and equipment transfer costs. Beginning in
Q3 of fiscal 2003, we anticipate the net savings associated with this program
to be approximately $2 million each quarter.
We recorded special charges of $58 million and $91 million in fiscal years 2000
and 1998, respectively, as described in Note 7 of the Notes to Condensed
Consolidated Financial Statements. For the 2000 restructuring plan, the annual
savings from the reduction in salaries and wages expense are estimated to be $30
million. As anticipated, these savings, beginning in 2001, offset incremental
costs relating to programs, such as advanced protection technologies, molecular
oncology, and our enterprise-wide program to upgrade our business information
systems, known internally as Genesis. The estimated annual benefits of $4
million for the 1998 restructuring plan related to reduced manufacturing costs
and tax savings associated with the move of a surgical blade plant are expected
to be realized following the closure of the facility. See Note 7 of the Notes to
Condensed Consolidated Financial Statements for further discussion.
18
Liquidity and Capital Resources
During the first nine months of fiscal 2002, cash provided by operating
activities was $532 million compared to $525 million during the first nine
months of last year. Cash provided by operations in fiscal 2002 was reduced by a
$100 million cash contribution to the U.S. pension plan made in November 2001.
As of June 30, 2002, total debt of $1.3 billion represented 32.7% of total
capital (shareholders' equity, net non-current deferred income tax liabilities,
and debt), down from 36.4% a year ago. We use commercial paper to meet our
short-term financing needs, including working capital requirements. As discussed
in our 2001 Form 10-K, we currently have in place two syndicated credit
facilities totaling $900 million, consisting of a $450 million line of credit
expiring in August 2002 and a $450 million line of credit expiring in August
2006. We will be renewing and extending for an additional 364-day period the
line due to expire this month. Both lines are available to provide backup
support for our commercial paper program and for other general corporate
purposes. Each of these facilities contains a single financial covenant relating
to our interest coverage ratio. Given the availability of these facilities and
our strong credit ratings, we continue to have a high degree of confidence in
our ability to refinance maturing short-term and long-term debt, as well as
incur substantial additional debt, if required.
Capital expenditures during the first nine months were $163 million, compared
with last year's amount of $266 million. We do not expect capital spending for
fiscal 2002 to exceed $300 million. The decline in cash provided by financing
activities is primarily due to the repurchase of 4.9 million shares of our
common stock for $174 million during the first nine months. At June 30, 2002,
5.1 million shares remained under a September 2001 Board of Directors'
resolution that authorized the repurchase of up to 10 million common shares.
Critical Accounting Policies
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" discusses our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, as well as the disclosure of
contingent assets and liabilities at the date of the financial statements. Some
of those judgments can be subjective and complex, and consequently, actual
results could differ from those estimates. Management bases its estimates and
judgments on historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. For any given estimate or
assumption made by management, there may also be other estimates or assumptions
that are reasonable. However, we believe that given the current facts and
circumstances, it is unlikely that applying any such alternative judgments would
materially impact the accompanying financial statements. Management believes the
following critical accounting policies affect its more significant judgments and
estimates used in the preparation of BD's consolidated financial statements.
19
Revenue Recognition
We recognize revenue for most instruments sold from the Biosciences segment upon
installation at the customer's site, due to the fact that a substantive
installation effort is required and only we can perform the service. We also
defer revenue recognition related to branded insulin syringe products that are
sold to distributors in the U.S. consumer trade channel. These distributors have
implied rights of return on unsold merchandise held by them. We recognize
revenue on these products upon the sell-through of the respective product from
the distribution channel partner to their end customer. In determining the
amount of sales to record each quarter, we rely on independent sales and
inventory data provided to us from distribution channel partners. Substantially
all other revenue is recognized when products are shipped to customers.
Investments
We hold minority interests in companies having operations or technology in areas
within or adjacent to BD's strategic focus. Some of these companies are publicly
traded for which share prices are available, and some are non-publicly traded
whose value is difficult to determine. We write down an investment when
management believes an investment has experienced a decline in value that is
other than temporary. Future adverse changes in market conditions or poor
operating results of the underlying investments could result in an inability to
recover the carrying value of the investments, thereby possibly requiring
impairment charges in the future. As of June 30, 2002, our condensed
consolidated balance sheet included total investments of $32 million.
Restructuring
During the current year, we recorded reserves in connection with our
restructuring program. These reserves include estimates pertaining to employee
separation costs. In fiscal years 2000 and 1998, we also recorded reserves
related to restructuring programs. These reserves included estimates pertaining
to employee separation costs, as well as litigation defense costs associated
with our latex glove business, which was divested in 1995. See Note 7 of the
Notes to Condensed Consolidated Financial Statements for further discussion.
Although we do not anticipate significant changes, the actual costs may differ
from these estimates.
Contingencies
We are involved, both as a plaintiff and a defendant, in various legal
proceedings which arise in the ordinary course of business, including, without
limitation, product liability and environmental matters. A more complete
description of legal proceedings has been set forth in our 2001 Form 10-K,
subsequent periodic reports filed with the Securities and Exchange Commission on
Forms 10-Q and 8-K and in Part II of this Report on Form 10-Q. We assess the
likelihood of any adverse judgments or outcomes to these matters as well as
potential ranges of probable losses. A determination of the amount of reserves,
if any, for these contingencies is made after careful analysis of each
individual issue and, when appropriate, is developed after consultation with
outside counsel. The reserves may change in the future due to new developments
in each matter or changes in our strategy in dealing with these matters.
20
Benefit Plans
We have significant pension and post-retirement benefit costs and credits that
are developed from actuarial valuations. Inherent in these valuations are key
assumptions including discount rates and expected return on plan assets. We
consider current market conditions, including changes in interest rates and
market returns, in selecting these assumptions. Changes in the related pension
and post-retirement benefit costs or credits may occur in the future due to
changes in the assumptions.
Stock-Based Compensation
As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," we
currently account for stock options by the disclosure-only provision of this
Statement, and therefore we use the intrinsic value method as prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," for accounting for stock-based compensation. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of our stock at the date of the option grant over the
exercise price. We have not incurred any such compensation expense during the
last three fiscal years.
If we had elected to account for our stock-based compensation awards issued
subsequent to October 1, 1995 using the fair value method, the estimated fair
value of awards would have been charged against income on a straight-line basis
over the vesting period, which generally ranges from zero to three years. For
the year ended September 30, 2001, our net income and diluted earnings per share
would have been lower by an estimated $34 million and 12 cents, respectively,
under the fair value method. This effect is not likely representative of the pro
forma effect on net income in future years.
Cautionary Statement Pursuant to Private Securities Litigation Reform Act of
1995 -- "Safe Harbor" for Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a safe
harbor for forward-looking statements made by or on behalf of BD. BD and its
representatives may from time to time make certain forward-looking statements in
publicly-released materials, both written and oral, including statements
contained in this report and filings with the Securities and Exchange Commission
and in our other reports to shareowners. Forward-looking statements may be
identified by the use of words like "plan," "expect," "believe," "intend,"
"will," "anticipate," "estimate" and other words of similar meaning in
conjunction with, among other things, discussions of future operations and
financial performance, as well as our strategy for growth, product development,
regulatory approvals, market position and expenditures. All statements which
address operating performance or events or developments that we expect or
anticipate will occur in the future -- including statements relating to volume
growth, sales and earnings per share growth and statements expressing views
about future operating results -- are forward-looking statements within the
meaning of the Act.
Forward-looking statements are based on current expectations of future events.
The forward-looking statements are and will be based on management's then
current views and assumptions regarding future events and operating performance,
and speak only as of their dates. Investors
21
should realize that if underlying assumptions prove inaccurate or unknown risks
or uncertainties materialize, actual results could vary materially from our
expectations and projections. Investors are therefore cautioned not to place
undue reliance on any forward-looking statements. Furthermore, we undertake no
obligation to update or revise any forward-looking statements whether as a
result of new information, future events and developments or otherwise.
The following are some important factors that could cause our actual results to
differ from our expectations in any forward-looking statements:
o Regional, national and foreign economic factors, including inflation and
fluctuations in interest rates and foreign currency exchange rates and the
potential effect of such fluctuations on revenues, expenses and resulting
margins.
o Competitive product and pricing pressures and our ability to gain or
maintain market share in the global market as a result of actions by
competitors, including technological advances achieved and patents attained
by competitors as patents on our products expire. While we believe our
opportunities for sustained, profitable growth are considerable, actions of
competitors could impact our earnings, share of sales and volume growth.
o Changes in domestic and foreign healthcare resulting in pricing pressures,
including the continued consolidation among healthcare providers, trends
toward managed care and healthcare cost containment and government laws and
regulations relating to sales and promotion, reimbursement and pricing
generally.
o The effects, if any, of governmental and media activities relating to U.S.
Congressional hearings regarding the business practices of group purchasing
organizations, which negotiate product prices on behalf of their member
hospitals with BD and other suppliers.
o Fluctuations in the cost and availability of raw materials and the ability
to maintain favorable supplier arrangements and relationships.
o Adoption of or changes in government laws and regulations affecting
domestic and foreign operations, including those relating to trade,
monetary and fiscal policies, taxation, environmental matters, sales
practices, price controls, licensing and regulatory approval of new
products, or changes in enforcement practices with respect to any such laws
and regulations.
o Difficulties inherent in product development, including the potential
inability to successfully continue technological innovation, complete
clinical trials, obtain regulatory approvals in the United States and
abroad, or gain and maintain market approval of products, and the
possibility of encountering infringement claims by competitors with respect
to patent or other intellectual property rights, all of which can preclude
or delay commercialization of a product.
o Significant litigation adverse to BD, including product liability claims,
patent infringement claims, and antitrust claims, as well as other risks
and uncertainties detailed from time to time in our Securities and Exchange
Commission filings.
22
o The effects, if any, of adverse media exposure or other publicity regarding
allegations made or related to litigation pending against BD.
o Our ability to achieve earnings forecasts, which are generated based on
projected volumes and sales of many product types, some of which are more
profitable than others. There can be no assurance that we will achieve the
projected level or mix of product sales.
o Product efficacy or safety concerns resulting in product recalls,
regulatory action on the part of the Food and Drug Administration (or
foreign counterparts) or declining sales.
o Economic and political conditions in international markets, including civil
unrest, governmental changes and restrictions on the ability to transfer
capital across borders.
o Our ability to penetrate developing and emerging markets, which also
depends on economic and political conditions, and how well we are able to
acquire or form strategic business alliances with local companies and make
necessary infrastructure enhancements to production facilities,
distribution networks, sales equipment and technology.
o The impact of business combinations, including acquisitions and
divestitures, both internally for BD and externally in the healthcare
industry.
o Issuance of new or revised accounting standards by the American Institute
of Certified Public Accountants, the Financial Accounting Standards Board
or the Securities and Exchange Commission.
The foregoing list sets forth many, but not all, of the factors that could
impact our ability to achieve results described in any forward-looking
statements. Investors should understand that it is not possible to predict or
identify all such factors and should not consider this list to be a complete
statement of all potential risks and uncertainties.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in information reported since the fiscal
year ended September 30, 2001.
23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We are involved, both as a plaintiff and a defendant, in various legal
proceedings which arise in the ordinary course of business, including,
without limitation, product liability and environmental matters.
A more complete description of legal proceedings has been set forth in
our 2001 Form 10-K. For the quarter ended June 30, 2002, the following
changes have occurred.
Latex Cases
We have received a total of 513 claims to date, relating to alleged
reactions caused by exposure to latex resulting from the use, over
time, of latex gloves. The facts and circumstances of new claims filed
since the 2001 10-K are similar to those previously filed and we are of
the same opinion as stated in the 2001 10-K.
RTI Litigation
On January 18, 2002, Retractable Technologies, Inc. ("RTI" or
"plaintiff") filed a second amended complaint against BD, another
manufacturer, and two group purchasing organizations ("GPOs") under the
caption Retractable Technologies, Inc. vs. Becton, Dickinson and
Company, et al. (Civil Action No. 501 CV 036, United States District
Court, Eastern District of Texas) for alleged violations of state and
Federal antitrust laws. Plaintiff also has asserted claims for business
disparagement, common law conspiracy, and tortious interference with
business relationships. Plaintiff seeks money damages in an as yet
undisclosed amount. On February 22, 2002, BD filed a motion to dismiss
the second amended complaint. On August 2, 2002, the court issued a
Memorandum Opinion and Order denying that motion. The trial currently
is scheduled to begin on January 10, 2003. We continue to vigorously
defend this matter.
Class Action Cases
We, along with another manufacturer and several medical product
distributors, have been named as a defendant in product liability class
action lawsuits relating to healthcare workers who allegedly sustained
needlesticks on conventional products, but have not become infected
with any disease. At the time of the filing of our Quarterly Report on
Form 10-Q for the quarter ended March 31, 2002, cases were pending on
behalf of an unspecified number of healthcare workers in four states
seeking class certification under the laws of these states. Since the
filing of our Quarterly Report on Form 10-Q for the period ended March
31, 2002, the following development has occurred:
o In Ohio, in Grant v. Becton Dickinson et al. (Case No.
98CVB075616, Franklin County Court), which was filed on July 22,
1998, the court issued a decision on July 17, 2002 certifying a
class. We have filed an appeal of the court's ruling with the
Ohio Court of Appeals for the 10th Appellate Judicial District.
24
We will continue our vigorous defense of the four class action lawsuits
pending.
Summary
While it is not possible to predict or determine the outcome of the
above or other legal actions brought against BD, upon resolution of
such matters, we may incur charges in excess of presently established
reserves. Such future charges, individually and in the aggregate, could
have a material adverse impact on our net income and net cash flows in
the period in which they are recorded or paid, however, in our opinion,
the results of the above matters, individually and in the aggregate,
are not expected to have a material adverse effect on the Company's
consolidated financial condition.
Item 2. Changes in Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
None.
b) Reports on Form 8-K
During the three-month period ended June 30, 2002, we filed four
Current Reports on Form 8-K:
(i) Under Item 9 - Regulation FD Disclosure, we furnished
information in a report dated April 11, 2002 regarding our
signing of a non-binding letter of intent to divest our
critical care product line.
(ii) Under Item 5 - Other Events, we announced our results for the
second quarter ended March 31, 2002 in a report dated April
24, 2002.
(iii) Under Item 9 - Regulation FD Disclosure, in a report dated
May 7, 2002, we furnished information regarding recent stock
option exercises
25
by Edward J. Ludwig, Chairman, President and Chief Executive
Officer.
(iv) Under Item 9 - Regulation FD Disclosure, we furnished
information in a report dated May 16, 2002 regarding recent
stock option exercises by a corporate officer.
In addition, in a Report on Form 8-K, under Item 9 - Regulation FD
Disclosure dated August 12, 2002, we furnished information regarding
the submission of sworn statements by our Chief Executive Officer
and Chief Financial Officer to the Securities and Exchange
Commission pursuant to SEC Order No. 4-460.
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Becton, Dickinson and Company
(Registrant)
Date: August 13, 2002
/s/ John R. Considine
-------------------------------
John R. Considine
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ Richard M. Hyne
-------------------------------
Richard M. Hyne
Vice President and Controller
(Chief Accounting Officer)
27
STATEMENT OF DIFFERENCES
The trademark symbol shall be expressed as............................... 'TM'