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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 March 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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 by checkmark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). 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 April 30, 2003
--------------------- ---------------------------------------
Common stock, par value $1.00 254,712,745
BECTON, DICKINSON AND COMPANY
FORM 10-Q
For the quarterly period ended March 31, 2003
TABLE OF CONTENTS
Page Number
-----------
Part I. FINANCIAL INFORMATION
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................................................................. 14
Item 3. Quantitative and Qualitative Disclosures About Market Risk................. 20
Item 4. Controls and Procedures.................................................... 21
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................................... 22
Item 2. Changes in Securities and Use of Proceeds.................................. 23
Item 3. Defaults Upon Senior Securities............................................ 23
Item 4. Submission of Matters to a Vote of Security Holders........................ 23
Item 5. Other Information.......................................................... 24
Item 6. Exhibits and Reports on Form 8-K........................................... 24
Signatures ........................................................................... 26
Certifications ........................................................................... 27
Exhibits ........................................................................... 31
2
ITEM 1. FINANCIAL STATEMENTS
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
Thousands of Dollars
March 31, September 30,
2003 2002
----------- -------------
(Unaudited)
Assets
Current Assets:
Cash and equivalents $ 285,471 $ 243,115
Short-term investments 3,543 1,850
Trade receivables, net 792,130 745,998
Inventories:
Materials 132,039 137,688
Work in process 149,651 132,051
Finished products 479,487 427,957
----------- -----------
761,177 697,696
Prepaid expenses, deferred taxes and other 245,789 240,048
----------- -----------
Total Current Assets 2,088,110 1,928,707
Property, plant and equipment 3,677,444 3,621,361
Less allowances for depreciation and amortization 1,896,657 1,855,631
----------- -----------
1,780,787 1,765,730
Goodwill, Net 508,685 492,327
Core and Developed Technology, Net 272,407 283,166
Other Intangibles, Net 120,007 126,758
Capitalized Software, Net 303,243 284,109
Other 173,785 159,663
----------- -----------
Total Assets $ 5,247,024 $ 5,040,460
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 485,228 $ 434,642
Payables and accrued expenses 829,017 817,811
----------- -----------
Total Current Liabilities 1,314,245 1,252,453
Long-Term Debt 806,283 802,967
Long-Term Employee Benefit Obligations 311,325 391,607
Deferred Income Taxes and Other 110,250 105,459
Commitments and Contingencies -- --
Shareholders' Equity:
Preferred stock 36,306 37,945
Common stock 332,662 332,662
Capital in excess of par value 206,264 185,122
Retained earnings 3,717,845 3,514,465
Unearned ESOP compensation (9,317) (7,847)
Deferred compensation 9,060 8,496
Common shares in treasury - at cost (1,224,946) (1,137,583)
Accumulated other comprehensive loss (362,953) (445,286)
----------- -----------
Total Shareholders' Equity 2,704,921 2,487,974
----------- -----------
Total Liabilities and Shareholders' Equity $ 5,247,024 $ 5,040,460
=========== ===========
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 Six Months Ended
March 31, March 31,
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenues $1,134,041 $1,012,971 $2,185,689 $1,957,917
Cost of products sold 578,428 523,133 1,128,467 1,022,895
Selling and administrative 298,798 247,660 582,979 495,954
Research and development 60,034 56,314 119,879 111,551
Special charges -- 9,937 -- 9,937
---------- ---------- ---------- ----------
Total Operating Costs and Expenses 937,260 837,044 1,831,325 1,640,337
---------- ---------- ---------- ----------
Operating Income 196,781 175,927 354,364 317,580
Interest expense, net (8,653) (8,839) (17,286) (18,410)
Other (expense) income, net (1,847) 492 (1,763) (1,124)
---------- ---------- ---------- ----------
Income Before Income Taxes 186,281 167,580 335,315 298,046
Income tax provision 44,241 38,392 79,637 69,185
---------- ---------- ---------- ----------
Net Income $ 142,040 $ 129,188 $ 255,678 $ 228,861
========== ========== ========== ==========
Earnings Per Share:
Basic $ .56 $ .50 $ 1.00 $ .88
========== ========== ========== ==========
Diluted $ .54 $ .48 $ .97 $ .85
========== ========== ========== ==========
Dividends Per Common Share $ .10 $ .0975 $ .20 $ .195
========== ========== ========== ==========
See notes to condensed consolidated financial statements
4
BECTON, DICKINSON AND COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Thousands of Dollars
(Unaudited)
Six Months Ended
March 31,
----------------------
2003 2002
--------- ---------
Operating Activities
Net income $ 255,678 $ 228,861
Adjustments to net income to derive net cash
provided by operating activities:
Depreciation and amortization 168,131 145,683
Pension contribution (100,000) (100,000)
Non-cash special charges -- 5,109
Change in working capital (53,477) (4,766)
Other, net 22,501 17,246
--------- ---------
Net Cash Provided by Operating Activities 292,833 292,133
--------- ---------
Investing Activities
Capital expenditures (108,243) (115,159)
Capitalized software (36,852) (42,407)
(Purchases) sales of investments, net (1,672) 5,233
Other, net (25,263) (18,485)
--------- ---------
Net Cash Used for Investing Activities (172,030) (170,818)
--------- ---------
Financing Activities
Change in short-term debt 51,794 107,818
Proceeds from long-term debt -- 3,822
Payments of long-term debt (873) (2,354)
Repurchase of common stock (106,490) (103,022)
Issuance of common stock from treasury 25,982 24,134
Dividends paid (53,033) (51,635)
--------- ---------
Net Cash Used for Financing Activities (82,620) (21,237)
--------- ---------
Effect of exchange rate changes on cash and equivalents 4,173 (2,080)
--------- ---------
Net increase in cash and equivalents 42,356 97,998
Opening Cash and Equivalents 243,115 82,129
--------- ---------
Closing Cash and Equivalents $ 285,471 $ 180,127
========= =========
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
March 31, 2003
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 2002 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 has
reclassified certain prior year information to conform with the current year
presentation.
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.
Note 3 - Comprehensive Income
Comprehensive income for the Company is comprised of the following:
Three Months Ended Six Months Ended
March 31, March 31,
------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net Income $142,040 $129,188 $255,678 $228,861
Other Comprehensive Income,
Net of Tax
Foreign currency translation
adjustments 33,485 (23,429) 81,575 (35,262)
Unrealized gains (losses) on
investments, net of
amounts recognized 2,371 (2,806) 2,848 3,527
Unrealized (losses) gains on
cash flow hedges, net of
amounts realized (1,532) 984 (2,090) 3,849
-------- -------- -------- --------
Comprehensive Income $176,364 $103,937 $338,011 $200,975
======== ======== ======== ========
6
Included in the unrealized losses on cash flow hedges for the current period was
an unrealized loss of $1,614, net of tax, relating to interest rate derivative
transactions entered into in the current quarter in anticipation of a $400,000
debt issuance in April 2003. See Note 11 for further discussion.
The amount of unrealized gains or losses on investments and cash flow hedges in
comprehensive income has been adjusted to reflect any realized gains and
recognized losses included in net income during the three and six months ended
March 31, 2003 and 2002.
Note 4 - Earnings per Share
The following table sets forth the computations of basic and diluted earnings
per share:
Three Months Ended Six Months Ended
March 31, March 31,
------------------- -------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net Income $142,040 $129,188 $255,678 $228,861
Preferred stock dividends (595) (646) (1,201) (1,300)
-------- -------- -------- --------
Income available to common
shareholders (A) 141,445 128,542 254,477 227,561
Preferred stock dividends -
using "if converted" method 595 646 1,201 1,300
Additional ESOP contribution -
Using "if converted" method (119) (146) (244) (297)
-------- -------- -------- --------
Income available to common
shareholders after assumed
conversions (B) $141,921 $129,042 $255,434 $228,564
======== ======== ======== ========
Average common shares
outstanding (C) 254,694 258,436 254,994 258,819
Dilutive stock equivalents from
stock plans 4,737 6,970 4,396 6,908
Shares issuable upon conversion
of preferred stock 3,938 4,303 3,938 4,303
-------- -------- -------- --------
Average common and common
equivalent shares outstanding
- assuming dilution (D) 263,369 269,709 263,328 270,030
======== ======== ======== ========
Basic earnings per share (A/C) $ .56 $ .50 $ 1.00 $ .88
======== ======== ======== ========
Diluted earnings per share (B/D) $ .54 $ .48 $ .97 $ .85
======== ======== ======== ========
7
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.
The Company currently is engaged in discovery or is otherwise in the early
stages with respect to certain of the litigation to which it is a party, and
therefore, it is difficult to predict the outcome of such litigation. In
addition, given the uncertain nature of litigation generally and of the current
litigation environment, it is difficult to predict the outcome of any litigation
regardless of its stage. A number of the cases pending against the Company
present complex factual and legal issues and are subject to a number of
variables, including, but not limited to, the facts and circumstances of each
particular case, the jurisdiction in which each suit is brought, and differences
in applicable law. As a result, the Company is not able to estimate the amount
or range of loss that could result from an unfavorable outcome of each and every
matter. In accordance with generally accepted accounting principles, the Company
establishes reserves to the extent probable future losses are estimable. While
the Company believes that the claims against it, upon resolution, should not
have a material adverse effect on the Company, in view of the uncertainties
discussed above, the Company could incur charges in excess of currently
established reserves and, to the extent available, excess liability insurance.
Accordingly, in the opinion of management any such future charges, individually
or in the aggregate, could have a material adverse effect on the Company's
consolidated results of operations and consolidated net cash flows in the period
or periods in which they are recorded or paid. The Company continues to believe
that it has a number of valid defenses to each of the suits pending against it
and is engaged in a vigorous defense of each of these matters. Further
discussion of legal proceedings is included in Part II of this Report on Form
10-Q.
Note 6 - Segment Data
The Company's organizational structure is based upon its three principal
business segments: BD Medical Systems ("Medical"), BD Clinical Laboratory
Solutions ("Clinical Lab"), and BD Biosciences ("Biosciences"). The Company
evaluates performance based upon operating income. Segment operating income
represents revenues reduced by product costs and operating expenses. Financial
information for the Company's segments is as follows:
Three Months Ended Six Months Ended
March 31, March 31,
----------------------- -----------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenues
Medical $ 601,819 $ 530,384 $1,173,456 $1,033,414
Clinical Lab 356,800 317,657 688,454 612,406
Biosciences 175,422 164,930 323,779 312,097
---------- ---------- ---------- ----------
Total Revenues (A) $1,134,041 $1,012,971 $2,185,689 $1,957,917
========== ========== ========== ==========
8
Three Months Ended Six Months Ended
March 31, March 31,
------------------- --------------------
2003 2002 2003 2002
-------- -------- --------- --------
Segment Operating Income
Medical (B) $129,811 $111,896 $ 252,610 $210,128
Clinical Lab 84,928 68,728 151,026 123,450
Biosciences 28,348 32,406 47,215 57,890
-------- -------- --------- --------
Total Segment Operating Income 243,087 213,030 450,851 391,468
Unallocated Items (C) (56,806) (45,450) (115,536) (93,422)
-------- -------- --------- --------
Income Before Income Taxes $186,281 $167,580 $ 335,315 $298,046
======== ======== ========= ========
(A) Intersegment revenues are not material.
(B) Prior year amounts include $9,937 for special charges, as discussed in Note
8.
(C) Includes primarily interest, net; foreign exchange; corporate expenses;
and certain legal costs.
Note 7 - Stock-Based Compensation
Effective with the quarter ended March 31, 2003, the Company adopted the
additional disclosure provisions of Statement of Financial Accounting Standards
("SFAS") No. 148, "Accounting for Stock-Based Compensation - Transition and
Disclosure," which amended SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 148 requires more prominent and frequent disclosure of
the effects of an entity's accounting policy with respect to stock-based
compensation.
As permitted by SFAS No. 123, as amended, the Company will continue to account
for stock-based employee compensation using the intrinsic value method
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Under the intrinsic value
method, compensation cost of stock options is measured as the excess, if any, of
the quoted market price of the Company's stock at the date of the grant over the
exercise price. Accordingly, no stock-based compensation cost has been reflected
in the Company's net income for the three and six months ended March 31, 2003
and 2002, as all options granted under the Company's stock option plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant.
The following table illustrates the effect on net income and earnings per share
if the Company were to have applied the fair value recognition provisions of
SFAS No. 123, as amended, to account for stock-based compensation for the
periods indicated. These pro forma amounts may not be representative of the
effects on net income in future years since options generally vest over several
years and additional awards may be made each year.
9
Three Months Ended March 31, Six Months Ended March 31,
---------------------------- --------------------------
2003 2002 2003 2002
-------- -------- -------- --------
Net income, as reported $142,040 $129,188 $255,678 $228,861
Less stock-based compensation
expense, net of tax (8,584) (8,965) (17,638) (17,992)
-------- -------- -------- --------
Pro forma net income $133,456 $120,223 $238,040 $210,869
======== ======== ======== ========
Reported earnings per share:
Basic $ .56 $ .50 $ 1.00 $ .88
Diluted $ .54 $ .48 $ .97 $ .85
======== ======== ======== ========
Pro forma earnings per share:
Basic $ .52 $ .46 $ .93 $ .81
Diluted $ .51 $ .45 $ .91 $ .78
======== ======== ======== ========
The Company estimated the fair value of stock options using the Black-Scholes
option-pricing model, modified for dividends and using certain assumptions for
stock price volatility, risk free interest rates, dividend yields and expected
terms until exercise. The value determined by the Black-Scholes option-pricing
model is based on assumptions at the time of grant and subsequent modifications
to such assumptions are not reflected in the value of prior grants. The
Black-Scholes model is a trading option-pricing model that does not reflect the
non-traded nature of employee stock options nor the limited transferability of
options. This model also does not consider restrictions on trading for all
employees, including restrictions imposed on senior management of the Company,
who are only permitted to trade in the Company's securities during a stated
30-day period each quarter. Therefore, if the Company had used an option-pricing
model other than Black-Scholes, pro forma results different from those shown
above may have been reported.
Note 8 - Special Charges
The Company recorded special charges of $21,508, $57,514 and $90,945 in fiscal
years 2002, 2000 and 1998, respectively, as discussed in the Company's 2002
Annual Report on Form 10-K.
Fiscal Year 2002
In fiscal year 2002, the Company recorded special charges of $9,937 and $15,760
during the second and third quarters, respectively, related to a manufacturing
restructuring program in the Medical segment that was aimed at optimizing
manufacturing efficiencies and improving the Company's competitiveness in the
different markets in which it operates. Offsetting special charges in the third
quarter of 2002 were $4,189 of reversals of fiscal 2000 special charges. The
Medical manufacturing restructuring program involves the termination of 533
employees in China, France, Germany, Ireland, Mexico and the United States. As
of March 31, 2003, 414 of the targeted employees had been severed. The Company
expects the remaining terminations to
10
be completed and the related accrued severance to be substantially paid by the
end of fiscal 2003.
A summary of the 2002 special charge accrual activity during the first six
months of fiscal 2003 follows:
Severance Restructuring
--------- ------------
Accrual Balance at September 30, 2002 $13,400 $ 600
Payments (6,300) (200)
------- -----
Accrual Balance at March 31, 2003 $ 7,100 $ 400
======= =====
Fiscal Year 2000
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. Of the 600
employees originally targeted for termination under this plan, 15 remained to be
severed as of March 31, 2003. The remaining terminations and related accrued
severance are expected to be substantially completed and paid by March 2004,
which is approximately six months later than previously reported due to delays
in the transition of the Company's operations at one facility to a new location.
A summary of the 2000 special charge accrual activity during the first six
months of fiscal 2003 follows:
Severance Other
--------- -------
Accrual Balance at September 30, 2002 $ 700 $ 2,400
Payments (100) (2,400)
----- -------
Accrual Balance at March 31, 2003 $ 600 $ --
===== =======
Fiscal Year 1998
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 was delayed, as more fully described in the
Company's 2002 Annual Report on Form 10-K. Production at the Hancock facility
ceased in September 2002. Of the 200 planned terminations, 50 employees were
terminated in September 1999, 122 employees were terminated in September 2002,
and 21 employees were terminated during the first six months of fiscal 2003. As
of the end of the second quarter, seven employees remained to be terminated. The
Company expects these terminations to be completed and the remaining accruals to
be paid upon the conclusion of shutdown activities.
11
A summary of the 1998 special charge accrual activity during the first six
months of fiscal 2003 follows:
Severance Restructuring Other
--------- ------------- -------
Accrual Balance at September 30, 2002 $ 5,800 $400 $1,000
Payments (5,100) -- (200)
------- ---- ------
Accrual Balance at March 31, 2003 $ 700 $400 800
======= ==== ======
Note 9 - Goodwill and Other Intangible Assets
The components of intangible assets are as follows:
March 31, 2003 September 30, 2002
----------------------- -----------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
-------- ------------ -------- ------------
Amortized intangible assets:
Core and Developed Technology $370,044 $ 97,637 $370,044 $ 86,878
Patents, Trademarks, & Other 310,242 207,242 308,202 199,065
-------- -------- -------- --------
Total $680,286 $304,879 $678,246 $285,943
======== ======== ======== ========
Unamortized intangible assets:
Goodwill $508,685 $492,327
Trademarks 17,007* 17,621
-------- --------
Total $525,692 $509,948
======== ========
* Includes $614 write down of trademarks in the Biosciences segment during
the second quarter recorded to Cost of products sold.
The estimated intangible amortization expense for the fiscal years ending
September 30, 2003 to 2008 are as follows: 2003 - $37,600; 2004 - $37,100; 2005
- - $35,400; 2006 - $32,500; 2007 - $32,200; 2008 - $31,200.
Note 10 - Adoption of New Accounting Standards
In June 2002, the Financial Accounting Standards Board ("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
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, and does not expect that this Statement will
have a material impact on its consolidated financial position or results of
operations in 2003.
On April 30, 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133
on Derivative Instruments and Hedging Activities." This Statement amends and
clarifies the financial accounting and reporting for derivative instruments,
including certain derivative
12
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
Statement No. 149 includes decisions made as part of the Derivatives
Implementation Group process that effectively required amendments to Statement
No. 133. Statement No. 149 is effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designated after June 30,
2003. The provisions of Statement No. 149 that relate to SFAS No. 133
Implementation Issues and that have been effective for fiscal quarters that
began prior to June 15, 2003 will continue to be applied in accordance with
their respective effective dates. The Company is in the process of evaluating
the new guidance issued under Statement No. 149.
Note 11 - Subsequent Event
On April 9, 2003, the Company issued $200,000 of 4.55% Notes due on April 15,
2013 and $200,000 of 4.9% Notes due on April 15, 2018. The effective yields of
these Notes were 4.71% and 5.03%, respectively, including the results of the
hedging activity described below and other financing costs.
In anticipation of the issuance of these Notes in April, the Company entered
into a series of interest rate derivatives transactions at the end of the
current quarter in order to reduce the exposure to changing interest rates
during the period leading up to the issuance of the debt. Under these
agreements, the Company fixed the interest rate on $250,000 notional amount of
U.S. Treasury securities against which the debt issuance would be priced. These
agreements are designated as "highly effective" cash flow hedges, as defined by
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
Accordingly, changes in the fair value of these hedges are recorded to other
comprehensive income. As of March 31, 2003, other comprehensive income included
an unrealized loss of $1,614, net of tax, relating to these cash flow hedges.
There was no ineffective portion to the hedges recognized in earnings during the
period.
The Company entered into additional interest rate derivative agreements in the
beginning of April 2003 which, when combined with those executed during the
second quarter, resulted in interest rate protection on $345,000 in notional
amount of the new debt issuance. Upon the issuance of the debt on April 9, 2003,
these agreements were settled for cash, resulting in an unrealized loss of about
$500, net of tax, remaining in other comprehensive income.
In the beginning of April 2003, the Company entered into an interest rate swap
agreement, with an effective date of April 9, 2003, on $200,000 of 4.9% Notes
due April 15, 2018. Under this agreement, the Company will pay interest at a
variable rate in exchange for fixed rate payments, effectively transforming
these Notes to floating rate obligations. This swap is designated as a fair
value hedge with no ineffectiveness, as defined by SFAS No. 133. Changes in the
fair value of the interest rate swap offset changes in the fair value of the
fixed rate debt due to changes in market interest rates.
13
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Becton Dickinson and Company ("BD") reported second quarter revenues of $1.134
billion, an increase of 12 percent from the same period a year ago. After
excluding the favorable impact of foreign currency translation, revenues for the
quarter increased approximately seven percent. For the six months, reported
revenues of $2.186 billion represented a 12 percent increase from a year ago, or
approximately eight percent at constant foreign exchange rates. International
revenue growth of 19 percent and 15 percent for the three and six months,
respectively, was favorably affected by foreign currency translation, primarily
the euro. After excluding the favorable impact of foreign currency translation,
international revenues grew approximately nine percent and seven percent for the
three and six months, respectively.
BD Medical Systems ("Medical") revenues of $602 million increased 13 percent for
the quarter, or nine percent at constant foreign exchange rates. Included in
Medical revenues were U.S. safety-engineered product sales of $98 million,
compared with $85 million in the prior year's quarter. Also contributing to the
growth of segment were worldwide sales of prefillable drug delivery devices,
which grew 44 percent to $114 million. International Medical revenue growth was
nine percent after excluding the favorable impact of foreign currency
translation. Revenue growth in the Medical segment was partly offset by reduced
sales of certain conventional devices in the United States due to the transition
to safety-engineered devices.
BD Clinical Laboratory Solutions ("Clinical Lab") revenues of $357 million
increased 12 percent for the quarter, or eight percent after excluding the
favorable impact of foreign currency translation. Clinical Lab revenues included
sales of U.S. safety-engineered devices of $68 million compared with $50 million
in the prior year's quarter. Revenues from sales of diagnostic systems grew 10
percent to $181 million, due in part to sales of its molecular diagnostic
platform, BD ProbeTec'TM'ET, which reported sales of $16 million compared with
$9 million in the prior year's quarter. Clinical Lab revenue growth was partly
offset by reduced sales of certain conventional devices in the United States due
to the transition to safety-engineered devices.
BD Biosciences ("Biosciences") revenues of $175 million grew six percent for the
quarter. After excluding the favorable impact of foreign currency translation,
Biosciences revenues were slightly below the prior year's quarter. Growth in
immunology/cell biology and flow cytometry reagents and discovery labware
products was partly offset by continued weaker demand for certain molecular
biology reagents. In addition, flow cytometry instrument sales of $38 million
for the second quarter were about the same as last year, resulting from a
reduction in order backlog in fiscal 2002 and a decline in uninstalled
instruments. Flow cytometry instrument sales were also negatively impacted as
some customers decided to postpone orders in anticipation of the availability of
the new BD FACSAria'TM' cell sorter, which began initial shipments in the U.S.
and Japan at the end of the second quarter.
Refer to Note 6 in Notes to Condensed Consolidated Financial Statements for
additional segment
14
data.
Changes in segment operating income were primarily driven by fluctuations in
revenue, as discussed above. Segment operating income for Medical and Clinical
Lab was also favorably impacted by increased sales of products with higher
overall gross profit margins, including safety-engineered products, compared to
products sold in the same period in the prior year. Medical segment operating
income also benefited from the absence of certain costs recorded in the prior
year's quarter, including unfavorable variances associated with an inventory
reduction program, as well as special charges that are more fully described in
Note 8 in the Notes to Condensed Consolidated Financial Statements ("Note 8").
Biosciences segment operating income was negatively impacted by expenses
associated with new product launches, and by competitive and market factors in
molecular biology reagents that resulted in additional reserves for excess
inventories.
Gross profit margin was 49.0% for the quarter and 48.4% for the six months,
compared with 48.4% and 47.8%, respectively, for the prior year. The increase in
gross profit margin reflected increased sales of products with higher overall
gross profit margins, including safety-engineered products, compared to products
sold in the prior year. Gross profit margin also was favorably impacted by the
absence of costs associated with the inventory reduction program in the Medical
segment, as discussed above. Gross profit margin was adversely affected by the
launch of our new blood glucose monitoring products, additional reserves for
excess molecular biology inventory, as discussed above, and increased pension
costs.
Selling and administrative expense increased to 26.3% of revenues for the
quarter and 26.7% of revenues for the six months, compared with the prior year's
ratios of 24.4% and 25.3%, respectively. This increase was primarily the result
of incremental spending on key initiatives, including our enterprise-wide
program to upgrade our business information systems and processes and the launch
of our blood glucose monitoring products. Increased pension costs of $2 million
for the quarter also adversely impacted this ratio. Investment in research and
development was 5.3% of revenues for the quarter and 5.5% of revenues for the
six months, compared with 5.6% and 5.7% of revenues, respectively, for the prior
year.
Operating margin of 17.4% for the quarter and 16.2% for the six months was the
same as the prior year amounts. Operating income in the current year was
adversely impacted by increased selling and administrative expense, as discussed
above. The prior year's operating income included special charges, as discussed
in Note 8.
Net interest expense for the quarter was about the same as last year and for the
six months declined about $1 million compared with the prior year. Other
expense, net for the quarter and six months of $2 million primarily consisted of
the write-down of investments to fair value.
The income tax rate was 24% for the quarter and the six months. The prior year's
tax rate was 23% for both the quarter and six months. We expect the tax rate for
the fiscal year to remain at approximately 24%.
Net income and diluted earnings per share for the current quarter were $142
million and 54 cents, respectively, compared with $129 million and 48 cents in
the prior year. Excluding the 2-cent impact of special charges discussed in Note
8, diluted earnings per share for the prior year's
15
quarter would have been 50 cents. Reported net income and diluted earnings per
share for the current six months were $256 million and 97 cents, respectively.
Prior Year Special Charges
In fiscal 2002, we recorded special charges of $10 million and $16 million
during the second and third quarters, respectively, relating to a manufacturing
restructuring program in the Medical segment, as discussed in Note 8 and in the
2002 Annual Report on Form 10-K. In the second half of fiscal 2002, we also
recorded $7 million of other manufacturing costs, primarily accelerated
depreciation, related to this restructuring program that were included in cost
of products sold. For fiscal 2003, we expect any cost savings from this program
to be fully offset by the remaining manufacturing restructuring costs. Beginning
in fiscal 2004, we expect to achieve savings of approximately $15 million
related to this restructuring program.
We recorded special charges of $58 million and $91 million in fiscal years 2000
and 1998, respectively, as described in Note 8. For the 2000 restructuring plan,
the annual savings from the reduction in salaries and wages expense were
estimated to be $30 million. As anticipated, these savings offset incremental
costs during fiscal 2002 and 2001 relating to certain BD initiatives, such as
advanced protection technologies and molecular oncology, and continue to offset
costs associated with our enterprise-wide program to upgrade our business
information systems, known internally as Genesis. The estimated annual benefits
of $3 million from the 1998 restructuring plan consisting of reduced
manufacturing costs and tax savings associated with the move of a surgical blade
plant are expected to be realized in 2004. See Note 8 for further discussion.
Liquidity and Capital Resources
During the first six months of fiscal 2003, cash provided by operating
activities was $293 million, which was about the same as last year. Cash
provided by operations was reduced by $100 million in the first six months of
both fiscal 2003 and 2002, reflecting the impact of cash contributions to the
U.S. pension plan.
Capital expenditures during the first six months were $108 million, compared
with last year's amount of $115 million. We expect capital spending for fiscal
2003 to be $275 million to $300 million. Cash used for financing activities in
the first six months of the year included the repurchase of 3.4 million shares
of our common stock for $106 million. As of March 31, 2003, authorization to
repurchase an additional 10 million common shares remained under a January 2003
resolution of the Board of Directors.
As of March 31, 2003, total debt of $1.3 billion represented 31.6% of total
capital (shareholders' equity, net non-current deferred income tax liabilities,
and debt), down from 32.5% at September 30, 2002. We issued additional debt in
April 2003, as discussed in the "Subsequent Event" section below. We use
commercial paper to meet our short-term financing needs, including working
capital requirements. As discussed in our 2002 Annual Report on Form 10-K, we
currently have in place two syndicated credit facilities totaling $900 million
that are available to provide backup support for our commercial paper program
and for other general corporate
16
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 to
incur substantial additional debt, if required.
Subsequent Event
On April 9, 2003, we issued $200 million of 4.55% Notes due on April 15, 2013
and $200 million of 4.9% Notes due on April 15, 2018. The effective yields of
these Notes were 4.71% and 5.03%, respectively, including the results of the
hedging activity described below and other financing costs.
In anticipation of the issuance of these Notes in April, we entered into a
series of interest rate derivatives transactions at the end of the current
quarter in order to reduce the exposure to changing interest rates during the
period leading up to the issuance of the debt. Under these agreements, we fixed
the interest rate on $250 million notional amount of U.S. Treasury securities
against which the debt issuance would be priced. These agreements are designated
as "highly effective" cash flow hedges, as defined by SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." Accordingly, changes in the
fair value of these hedges are recorded to other comprehensive income. As of
March 31, 2003, other comprehensive income included an unrealized loss of $2
million, net of tax, relating to these cash flow hedges. There was no
ineffective portion to the hedges recognized in earnings during the period.
We entered into additional interest rate derivative agreements in the beginning
of April 2003 which, when combined with those executed during the second
quarter, resulted in interest rate protection on $345 million in notional amount
of the new debt issuance. Upon the issuance of the debt on April 9, 2003, these
agreements were settled for cash, resulting in an unrealized loss of about $500
thousand, net of tax, remaining in other comprehensive income.
In the beginning of April 2003, we entered into an interest rate swap agreement,
with an effective date of April 9, 2003, on $200 million of 4.9% Notes due April
15, 2018. Under this agreement, we will pay interest at a variable rate in
exchange for fixed rate payments, effectively transforming these Notes to
floating rate obligations. This swap is designated as a fair value hedge with no
ineffectiveness, as defined by SFAS No. 133. Changes in the fair value of the
interest rate swap offset changes in the fair value of the fixed rate debt due
to changes in market interest rates.
Use of Non-GAAP Financial Measures
When discussing the Company's financial performance, the Company at times will
present certain non-GAAP (generally accepted accounting principles) financial
measures, as follows:
o The Company presents the Company's revenue growth rates at constant foreign
exchange rates. Management believes that presenting growth rates at
constant foreign exchange rates allows investors to view the actual
operating results of the Company and of its segments
17
without the impact of fluctuations in foreign currency exchange rates,
thereby facilitating comparisons to prior periods.
o The Company presents the Company's earnings per share and other financial
measures after excluding the impact of charges or of unusual or
non-recurring items. Management believes that excluding such impact from
earnings per share and other financial measures allows investors to more
easily compare the Company's financial performance to the corresponding
prior period and to understand the operating results of the Company without
the effects of these charges and unusual or non-recurring items.
The Company's management considers these non-GAAP financial measures internally
in evaluating the Company's performance. Investors should consider these
non-GAAP measures in addition to, not as a substitute for or as superior to,
measures of financial performance prepared in accordance with GAAP.
This Report on Form 10-Q contains certain non-GAAP financial measures. A
reconciliation of these measures to the comparable GAAP measures is included in
Exhibit 99.3 of this Report on Form 10-Q.
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 Becton, Dickinson
and Company ("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 shareholders.
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 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:
18
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, including
without limitation, shortages, if any, of components supplied by West
Pharmaceutical Services, Inc. ("West") as a result of the recent damage to
West's Kinston, North Carolina facility.
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, public health, 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 The effects, if any, of the Severe Acute Respiratory Syndrome ("SARS")
epidemic.
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.
o The effects, if any, of adverse media exposure or other publicity regarding
BD's business, operations or allegations made or related to litigation
pending against BD.
19
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 The effect of market fluctuations on the value of assets in BD's pension
plans and the possibility that BD may need to make additional contributions
to the plans as a result of any decline in the value of such assets.
o Our ability to effect infrastructure enhancements and incorporate new
systems technologies into our operations.
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 our ability to
successfully 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, 2002.
20
Item 4. Controls and Procedures
Within the 90-day period prior to the filing of this report, an evaluation was
carried out under the supervision and with the participation of BD's management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of BD's disclosure controls and
procedures (as defined in Rule 13a-14(c) under the Securities Exchange Act of
1934). Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the design and operation of these disclosure
controls and procedures were effective and designed to ensure that material
information relating to BD and its consolidated subsidiaries would be made known
to them by others within these entities. There were no significant changes in
our internal controls or, to our knowledge, in other factors that could
significantly affect these internal controls subsequent to the date of their
evaluation.
21
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
product liability and environmental matters.
A more complete description of legal proceedings has been set forth in our
2002 Annual Report on Form 10-K (the "10-K"). For the quarter ended March
31, 2003, the following changes have occurred.
Litigation - Other than Environmental
Latex Cases
We have received a total of 522 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
10-K are similar to those previously filed and we are of the same opinion
as stated in the 10-K. Since the inception of this litigation, 294 of these
cases have been closed with no liability to BD (227 of which have been
closed with prejudice) and 18 cases have been settled for an aggregate de
minimis amount. We are vigorously defending the remaining lawsuits.
RTI Litigation
In the action entitled Retractable Technologies, Inc. vs. Becton Dickinson
and Company, et al. (Civil Action No. 501 CV 036, United States District
Court, Eastern District of Texas), the Court, by order dated March 6, 2003,
reset the trial date in this action from April 8, 2003 to February 3, 2004.
On May 7, 2003, plaintiff in this matter announced that as part of several
settlement agreements, the litigation against BD's co-defendants had been
dismissed. We continue to vigorously defend this matter.
Class Action Cases
In New York, in the action entitled Benner vs. Becton Dickinson et al.
(Case No. 99Civ4798(WHP)), the Court, by order dated March 28, 2003, denied
the plaintiff's motion for class certification.
Summary
We currently are engaged in discovery or are otherwise in the early stages
with respect to certain of the litigation to which we are a party, and
therefore, it is difficult to predict the outcome of such litigation. In
addition, given the uncertain nature of litigation generally and of the
current litigation environment, it is difficult to predict the outcome of
any litigation regardless of its stage. A number of the cases pending
against BD present complex factual and legal issues and are subject to a
number of variables, including, but not limited to, the facts and
circumstances of each particular case, the jurisdiction in which each suit
is brought, and differences in applicable law. As a result, we are not able
to estimate the amount or range of loss that could result from an
unfavorable outcome of each and every matter. In accordance with generally
accepted accounting principles, we establish reserves to the extent
22
probable future losses are estimable. While we believe that the claims
against BD are without merit and, upon resolution, should not have a
material adverse effect on BD, in view of the uncertainties discussed
above, we could incur charges in excess of currently established reserves
and, to the extent available, excess liability insurance. Accordingly, in
the opinion of management, any such future charges, individually or in the
aggregate, could have a material adverse effect on BD's consolidated
results of operations and consolidated net cash flows in the period or
periods in which they are recorded or paid. We continue to believe that we
have a number of valid defenses to each of the suits pending against BD and
are engaged in a vigorous defense of each of these matters.
Environmental Matters
We are also a party to a number of Federal proceedings in the United States
brought under the Comprehensive Environment Response, Compensation and
Liability Act, also known as "Superfund," and similar state laws. For all
sites, there are other potentially responsible parties that may be jointly
or severally liable to pay all cleanup costs. We accrue costs for estimated
environmental liabilities based upon our best estimate within the range of
probable losses, without considering possible third-party recoveries. While
we believe that, upon resolution, the environmental claims against BD
should not have a material adverse effect on BD, we could incur charges in
excess of presently established reserves and, to the extent available,
excess liability insurance. Accordingly, in the opinion of management, any
such future charges, individually or in the aggregate, could have a
material adverse effect on BD's consolidated results of operations and
consolidated net cash flows in the period or periods in which they are
recorded or paid.
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.
a.) Our Annual Meeting of Shareholders was held on February 11, 2003.
c.) i.) A management proposal for the election of five directors for the
terms indicated below was voted upon as follows:
Votes
Nominee Term For Votes Withheld
------------------------ ------- ----------- --------------
Harry N. Beaty 2 Years 181,765,790 25,901,012
Frank A. Olson 2 Years 185,849,179 21,817,623
Edward J. Ludwig 3 Years 204,794,863 2,871,939
23
Willard J. Overlock, Jr. 3 Years 184,147,376 23,519,426
Bertram L. Scott 3 Years 183,236,078 24,430,724
ii.) A management proposal to approve the selection of Ernst & Young,
LLP as independent auditors for the fiscal year ending September
30, 2003 was voted upon. 179,582,250 shares were voted for the
proposal, 27,847,775 shares were voted against, and 236,777
shares abstained.
iii.) A shareholder proposal requesting the Board of Directors take
the necessary steps to provide for cumulative voting in the
election of directors was voted upon. 78,242,414 shares were
voted for the proposal, 92,448,298 shares were voted against,
14,755,396 shares abstained, and there were 22,220,694 broker
non-votes.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits
Exhibit 99.1 Certification of Edward J. Ludwig, Chief Executive
Officer, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Exhibit 99.2 Certification of John R. Considine, Chief Financial
Officer, pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Exhibit 99.3 Supplemental Revenue Information.
b) Reports on Form 8-K
During the three-month period ended March 31, 2003, we filed nine
Current Reports on Form 8-K:
(i) Under Item 9 - Regulation FD Disclosure, in a report dated
January 8, 2003, we furnished information regarding the
introduction of two new blood glucose monitoring products and the
entering into of strategic relationships with Medtronic MiniMed
and Eli Lilly and Company.
(ii) Under Item 5 - Other Events and Regulation FD Disclosure, in a
report dated January 23, 2003, we announced our results for the
first quarter ended December 31, 2002.
(iii) Under Item 5 - Other Events and Regulation FD Disclosure, in a
report dated January 28, 2003, we announced the declaration of
our quarterly dividend and Board of Director authorization of
additional share repurchases.
24
(iv) Under Item 5 - Other Events and Regulation FD Disclosure, in a
report dated February 4, 2003, we announced certain amendments to
our By-laws, effective February 11, 2003.
(v) Under Item 9 - Regulation FD Disclosure, in a report dated
February 5, 2003, we furnished information regarding the West
Pharmaceutical Services, Inc. plant incident.
(vi) Under Item 9 - Regulation FD Disclosure, in a report dated
February 13, 2003, we furnished information regarding the
submission to the Securities and Exchange Commission of the
certifications of each of BD's Chief Executive Officer and Chief
Financial Officer relating to BD's Quarterly Report on Form 10-Q
for the quarterly period ended December 31, 2002, pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(vii) Under Item 9 - Regulation FD Disclosure, in a report dated March
14, 2003, we furnished information regarding the appointment of
Vincent A. Forlenza to the position of President, BD Biosciences.
(viii) Under Item 5 - Other Events and Regulation FD Disclosure, in a
report dated March 19, 2003, we announced certain developments in
the matter of Rectractable Technologies, Inc. vs. Becton
Dickinson and Company, et al.
(ix) Under Item 5 - Other Events and Regulation FD Disclosure, in a
report dated March 31, 2003, we announced certain developments in
the matter of Benner v. Becton Dickinson et al.
25
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 May 14, 2003
/s/ John R. Considine
----------------------------------------------------
John R. Considine
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
/s/ William A. Tozzi
----------------------------------------------------
William A. Tozzi
Vice President and Controller
(Chief Accounting Officer)
26
CERTIFICATIONS
I, Edward J. Ludwig, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Becton, Dickinson
and Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
27
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 14, 2003
/s/ Edward J. Ludwig
- ---------------------------
Edward J. Ludwig
Chairman, President and
Chief Executive Officer
28
I, John R. Considine, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Becton, Dickinson
and Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
29
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 14, 2003
/s/ John R. Considine
- ------------------------------
John R. Considine
Executive Vice President and
Chief Financial Officer
30
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
99.1 Certification of Edward J. Ludwig, Chief Executive Officer,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of John R. Considine, Chief Financial Officer,
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.3 Supplemental Revenue Information.
31
STATEMENT OF DIFFERENCES
The trademark symbol shall be expressed as.................. 'TM'