BECTON DICKINSON & CO — Interim / Quarterly Report 1994

May 13, 1994

FORM 10-Q 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, 1994 ------------------------------------------ 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 1-4802 --------- 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 April 30, 1994 --------------------- --------------------------------------- Common stock, par value $1.00 71,678,462 Page 1 of 13 Pages (Exhibit Index is on Page 12) PART I - FINANCIAL INFORMATION ------------------------------ Item 1. Financial Statements. --------------------- Condensed Consolidated Balance Sheets at March 31, 1994 and September 30, 1993 Condensed Consolidated Statements of Operations for the three and six month periods ended March 31, 1994 and 1993 Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 1994 and 1993 Notes to Condensed Consolidated Financial Statements -2-

See notes to condensed consolidated financial statements -3- BECTON DICKINSON AND COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Thousands of Dollars, Except Per Share Data (Unaudited)

• Restated to reflect adoption of SFAS Nos. 106, 109, and 112 in the fourth quarter of fiscal 1993 retroactive to October 1, 1992. See notes to condensed consolidated financial statements -4-

• Restated to reflect the adoption of SFAS Nos. 106, 109 and 112 in the fourth quarter of fiscal 1993 retroactive to October 1, 1992. See notes to condensed consolidated financial statements -5- BECTON, DICKINSON AND COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1994 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 1993 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. Note 2 - Inventory Valuation - - ---------------------------- An actual valuation of inventory under the LIFO method can 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. -6- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. -------------------------------------------- Results of Operations - - --------------------- Second Quarter 1994 vs. Second Quarter 1993 - - ------------------------------------------- Second quarter revenues of $635 million exceeded the prior year's revenues of $613 million by 4%. Revenues would have increased 6% after excluding the estimated $12 million adverse impact of foreign currency translation. Orders for high volume Medical and Diagnostic products in the Company's core businesses in the United States and Europe continued to be at expected growth rates, confirming that there does not seem to be an adverse effect from the uncertainty about health care reform. The Company's growth in core businesses continues to be driven by the heightened concern for safety for health care workers. Medical Supplies and Devices segment revenues of $352 million increased 5% and Diagnostic Systems segment revenues of $283 million increased 2%, but would have increased 8% and 3%, respectively, after excluding the estimated adverse impact of foreign currency translation. Domestic Medical segment revenues increased 4%. International Medical segment revenues increased 6.5% but would have increased 11.5% after excluding the estimated adverse impact of foreign currency translation. The growth rates reflect strong sales of safety products, and of diabetic and prefillable syringes. Domestic Diagnostic segment revenues increased 2%. International Diagnostic segment revenues increased 2%, or 5% after excluding the estimated adverse impact of foreign currency translation. In comparison with last year, revenue growth was adversely affected by prior year amounts which reflected shipments of new systems after a period of pent-up demand. International revenues were also affected by the continuing economic weakness in European countries, especially Italy and Spain. Good growth rates continued in Japan and Latin America. The gross profit margin of 46.0% was substantially higher than last year's second quarter rate of 44.5%. The mix of product revenues, as well as productivity improvements, were the principal reasons for the improvement. Selling and administrative expense was 25.6% of revenues, which was more than a full percentage point better than last year's second quarter ratio of 26.7%, reflecting tight spending controls and cost reduction programs. Reported expense of $163 million was about the same as last year's second quarter expense. Investment of $36 million in research and development increased 5% over last year's second quarter expenditures. As a percent of revenues, research and development expense was 5.6%, the same as in last year's second quarter. Operating income of $93 million increased 25% from last year's second quarter amount of $75 million despite the adverse effect of a stronger dollar. The improvement of the operating margin from 12.2% in the second quarter last year to 14.7% in the current quarter reflects productivity improvements in both manufacturing and operating expenses. Net interest expense of $14 million was about the same as last year's second quarter amount. Lower interest rates offset a reduction in capitalized interest. -7- Other (expense) income, net was $13 million unfavorable compared with last year's second quarter. $5 million of the change was due to a capital gain recorded in last year's second quarter in connection with the February 18, 1993 merger of Applied Biosystems, Inc. with The Perkin-Elmer Corporation as well as the Company's share of earnings of Applied Biosystems, Inc. In addition, higher charges related to foreign exchange in the current quarter resulted in an unfavorable comparison of $5 million with the prior year's second quarter. The income tax rate of 24.0%, compared with last year's second quarter rate of 19.1%, resulted from the projected mix of income from the various tax rate jurisdictions in which the Company operates. Earnings per share were $.76, an increase of 7% over last year's $.71 which included a gain of $.04 related to the Perkin-Elmer transaction. Foreign currency translation decreased earnings per share by an estimated $.03. Without the estimated adverse impact from foreign currency translation and the gain related to the Perkin-Elmer transaction, earnings per share would have increased 18%. Six Months 1994 vs. Six Months 1993 - - ----------------------------------- Reported revenues of $1.189 billion exceeded the prior year level of $1.173 billion by 1%. Revenues would have increased 4% without the estimated adverse impact of foreign currency translation. Medical Supplies and Devices segment revenues increased 2% to $648 million. Diagnostic Systems segment revenues were $541 million, an increase of 1%. Geographically, domestic revenues increased 2% to $664 million and international revenues increased less than 1% to $525 million, but would have increased 7% after excluding the estimated adverse impact of foreign currency translation. The gross profit margin of 44.8% was higher than last year's rate of 43.8%. Selling and administrative expense was 26.9%, lower than last year's rate of 27.4%, reflecting effective spending controls and cost reduction programs. Investment of $70 million in research and development expense increased 6% over last year's expenditures. As a percent of revenues, research and development expense was 5.9%, compared with last year's 5.7%. Operating income of $142 million increased $17 million over last year. As a percent of revenues, operating income was 12.0% compared with last year's 10.7%, resulting from productivity improvements in both manufacturing and operating expenses. Other (expense) income, net was $11 million unfavorable compared with last year. The change is principally due to the absence of a capital gain recorded last year in connection with the Perkin-Elmer transaction, as well as the Company's share of earnings of Applied Biosystems, Inc., in the amount of $6 million, and miscellaneous other income. The income tax rate of 24.0%, compared with last year's rate of 20.4%, resulted from the projected mix of income from the various tax rate jurisdictions in which the Company operates. Income before cumulative effect of accounting changes was $83 million compared with $79 million last year, an increase of 4%. Net income was $83 million, compared with a net loss of $62 million last year which included an after-tax charge of $141 million, or $1.83 per share, representing the cumulative effect of accounting changes adopted in 1993. -8- Earnings per share were $1.09, an increase of 8% over last year's $1.01 before the cumulative effect of accounting changes, which included a gain of $.04 related to the Perkin-Elmer transaction. Foreign currency translation decreased earnings per share by an estimated $.07. Financial Condition - - ------------------- During the first six months of 1994, cash provided by operations was $196 million, compared with $163 million during the first six months of last year. Debt remained basically unchanged during the first six months of 1994. The percentage of debt to capitalization (defined as the sum of shareholders' equity, net non-current deferred income tax liabilities, and debt) was 38.8%, lower than 39.7% a year ago. Last year's ratio has been restated to reflect the cumulative effect of accounting changes referred to previously. Capital expenditures for the six months were $57 million compared with $81 million during the first six months of last year, due to the absence of any major projects. For the full year, capital expenditures are expected to be less than $150 million. Because of its strong credit ratings, the Company believes it has the capacity to arrange significant additional borrowings should the need arise. During the first six months of 1994, the Company repurchased 3.1 million shares of its common stock for a total cost of $114 million. At March 31, 1994, authorizations from the Board of Directors remained outstanding to acquire an additional 2.1 million shares. -9- PART II - OTHER INFORMATION --------------------------- Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- a) The Annual Meeting of Shareholders of the Company was held on February 8, 1994. c) (i) A management proposal for the election of three directors for the terms indicated below was voted upon as follows:

(ii) A management proposal to ratify the selection of Ernst & Young as independent auditors for fiscal year 1994 was voted upon. 64,050,033 shares were voted for the proposal, 149,243 shares were voted against and 215,001 shares abstained. (iii) A management proposal to approve the 1994 Restricted Stock Plan for Non-Employee Directors was voted upon. 61,287,700 shares were voted for the proposal, 2,543,258 shares were voted against and 583,319 shares abstained. (iv) A shareholder proposal to recommend that the Company disclose in newspapers of general publication a detailed statement of political contributions made by the Company was voted upon. 3,361,576 shares were voted for the proposal, 54,014,055 shares were voted against and 2,436,775 shares abstained. Item 6. Exhibits and Reports on Form 8-K. --------------------------------- a) Exhibits 11 - Computation of Earnings Per Share. b) Reports on Form 8-K There were no reports on Form 8-K filed for the quarter ended March 31, 1994. -10- SIGNATURE 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 12, 1994 ------------------- /s/Robert A. Reynolds ----------------------------------- Robert A. Reynolds Vice President - Finance and Controller (Principal Financial and Accounting Officer) -11- EXHIBIT INDEX -------------

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