Becton Dickinson, also known as BD, is one of the largest international medical technology companies that develops, produces and sells disposable medical devices, device systems and reagents. BD supplies hospitals, health care facilities, life scientists, clinical laboratories and the pharmaceutical industry.
FORM 10-QUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, 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 December 31, 2004
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)
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 o
Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No o
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 December 31, 2004
Common stock, par value $1.00
252,915,147
BECTON, DICKINSON AND COMPANYFORM 10-QFor the quarterly period ended December 31, 2004
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
16
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
28
Item 4.
Controls and Procedures
Part II.
OTHER INFORMATION
Legal Proceedings
29
Unregistered Sales of Equity Securities and Use of Proceeds
30
Defaults Upon Senior Securities
Submission of Matters to a Vote of Security Holders
31
Item 5.
Other Information
32
Item 6.
Exhibits
Signatures
33
34
2
ITEM 1. FINANCIAL STATEMENTSBECTON, DICKINSON AND COMPANYCONDENSED CONSOLIDATED BALANCE SHEETSThousands of Dollars
December 31,2004
September 30,2004
Assets
(Unaudited)
Current Assets:
Cash and equivalents
$
822,037
719,378
Short-term investments
51,495
32,119
Trade receivables, net
818,147
807,380
Inventories:
Materials
100,331
96,020
Work in process
142,372
132,841
Finished products
553,545
509,917
796,248
738,778
Prepaid expenses, deferred taxes and other
263,987
279,985
Assets held for sale
63,711
63,694
Total Current Assets
2,815,625
2,641,334
Property, plant and equipment
4,234,118
4,104,222
Less allowances for depreciation and amortization
2,319,021
2,223,225
1,915,097
1,880,997
Goodwill, Net
490,768
473,211
Core and Developed Technology, Net
194,808
188,541
Other Intangibles, Net
89,606
93,466
Capitalized Software, Net
275,834
283,918
Other
191,687
191,112
Total Assets
5,973,425
5,752,579
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt
108,263
49,289
Payables and accrued expenses
1,045,481
986,612
Liabilities held for sale
11,728
14,181
Total Current Liabilities
1,165,472
1,050,082
Long-Term Debt
1,061,341
1,171,506
Long-Term Employee Benefit Obligations
312,972
374,222
Deferred Income Taxes and Other
91,428
88,906
Commitments and Contingencies
Shareholders’ Equity:
Preferred stock
—
31,142
Common stock
332,662
Capital in excess of par value
491,529
414,515
Retained earnings
4,414,071
4,264,778
Deferred compensation
10,366
10,222
Common shares in treasury - at cost
(1,883,342
)
(1,816,756
Accumulated other comprehensive loss
(23,074
(168,700
Total Shareholders’ Equity
3,342,212
3,067,863
Total Liabilities and Shareholders’ Equity
See notes to condensed consolidated financial statements
BECTON, DICKINSON AND COMPANYCONDENSED CONSOLIDATED STATEMENTS OF INCOMEThousands of Dollars, Except Per-share Data(Unaudited)
Three Months EndedDecember 31,
2004
2003
Revenues
1,288,369
1,185,120
Cost of products sold
634,501
634,255
Selling and administrative
341,088
324,097
Research and development
62,083
58,288
Total Operating Costs and Expenses
1,037,672
1,016,640
Operating Income
250,697
168,480
Interest expense, net
(9,122
(8,928
Other expense, net
(2,861
(911
Income From Continuing Operations Before Income Taxes
238,714
158,641
Income tax provision
44,316
33,716
Income From Continuing Operations
194,398
124,925
Income from Discontinued Operations, net of income tax provision of $623 and $ 281, respectively
953
477
Net Income
195,351
125,402
Basic Earnings Per Share:
Income from Continuing Operations
0.77
0.49
Loss from Discontinued Operations
Basic Earnings Per Share
0.78
0.50
Diluted Earnings Per Share:
0.74
0.48
Diluted Earnings Per Share
0.75
Dividends Per Common Share
.18
.15
BECTON, DICKINSON AND COMPANYCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSThousands of Dollars(Unaudited)
Operating Activities
Net income
Income from discontinued operations, net
(953
(477
Income from continuing operations, net
Adjustments to income from continuing operations to derive net cash provided by operating activities:
Depreciation and amortization
94,686
87,992
Share-based compensation (Note 7)
11,590
Pension contributions
(68,000
BGM charges (Note 8)
38,551
Change in working capital
7,544
(63,169
Other, net
16,931
7,902
Net Cash Provided by Continuing Operating Activities
257,149
196,201
Investing Activities
Capital expenditures
(49,932
(44,459
Capitalized software
(5,042
(11,794
Purchases of investments, net
(18,254
(3,020
(6,233
(8,764
Net Cash Used for Continuing Investing Activities
(79,461
(68,037
Financing Activities
Change in short-term debt
(44,953
(100,025
Payments of long-term debt
(357
(16,854
Repurchase of common stock
(112,460
(75,143
Issuance of common stock from treasury
58,643
58,748
Tax benefit from stock option exercises
21,657
13,029
Dividends paid
(251
(28
Net Cash Used for Continuing Financing Activities
(77,721
(120,273
Net Cash (Used for) Provided by Discontinued Operations
(1,517
3,605
Effect of exchange rate changes on cash and equivalents
4,209
3,258
Net increase in cash and equivalents
102,659
14,754
Opening Cash and Equivalents
519,886
Closing Cash and Equivalents
534,640
BECTON, DICKINSON AND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar and Share Amounts in Thousands, Except Per-share Data
December 31, 2004
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 2004 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. Certain reclassifications have been made to prior year amounts to conform to current year presentation.
Note 2 – Comprehensive Income
Comprehensive income for the Company is comprised of the following:
Three Months Ended December 31,
Other Comprehensive Income, Net of Tax
Foreign currency translation adjustments
149,931
68,398
Unrealized gains (losses) on investments, net of amounts recognized
1,360
(1,280
Unrealized losses on cash flow hedges, net of amounts realized
(5,665
(2,414
Comprehensive Income
340,977
190,106
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 months ended December 31, 2004 and 2003.
Note 3 - Earnings per Share
The following table sets forth the computations of basic and diluted earnings per share:
Income from continuing operations
Preferred stock dividends
(367
(550
Income from continuing operations available to common shareholders (A)
194,031
124,375
Preferred stock dividends – using “if converted” method
367
550
Additional ESOP contribution – using “if converted” method
(2
Income from continuing operations available to common shareholders after assumed conversions (B)
124,923
Average common shares outstanding (C)
251,232
252,132
Dilutive stock equivalents from stock plans
8,309
6,096
Shares issuable upon conversion of preferred stock
2,429
3,644
Average common and common equivalent shares outstanding – assuming dilution (D)
261,970
261,872
Basic earnings per share – income from continuing operations (A/C)
.77
.49
Diluted earnings per share - income from continuing operations (B/D)
.74
.48
There were 2,212 and 2,571 common shares issued upon exercise of stock options during the three months ended December 31, 2004 and 2003, respectively.
7
Note 4 - 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.
Given the uncertain nature of litigation generally, the Company is not able to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which it is a party. In accordance with accounting principles generally accepted in the United States, the Company establishes accruals to the extent probable future losses are estimable. While the Company believes 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, the Company could incur charges in excess of any 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. The Company continues to believe that BD has 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 5 – Segment Data
The Company’s organizational structure is based upon its three principal business segments: BD Medical (“Medical”), BD Diagnostics (“Diagnostics”), and BD Biosciences (“Biosciences”). The Company evaluates segment 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:
Medical
693,822
626,868
Diagnostics
413,783
400,945
Biosciences
180,764
157,307
Total Revenues (A)
8
Segment Operating Income
Medical (B)
163,321
91,946
102,895
97,635
37,299
29,143
Total Segment Operating Income
303,515
218,724
Unallocated Items (C)
(64,801
(60,083
Income from Continuing Operations Before Income Taxes
Revenues by Organizational Units
BD Medical
Medical Surgical Systems
409,564
374,843
Diabetes Care
158,678
133,026
Pharmaceutical Systems
110,685
105,199
Ophthalmic Systems
14,895
13,800
BD Diagnostics
Preanalytical Systems
208,521
184,980
Diagnostic Systems
205,262
215,965
BD Biosciences
Immunocytometry Systems
100,100
82,086
Pharmingen
33,701
30,338
Discovery Labware
46,963
44,883
Total
(A)
Intersegment revenues are not material.
(B)
Prior year amount includes $45,024 of charges related to blood glucose monitoring products as discussed further in Note 8 in Notes to the Condensed Consolidated Financial Statements.
(C)
Includes primarily interest, net; foreign exchange; corporate expenses; share-based compensation expense in 2004; and legal costs relating to litigation with Retractable Technologies, Inc. in 2003.
9
Note 6 – Goodwill and Other Intangible Assets
The components of intangible assets are as follows:
September 30, 2004
Gross Carrying Amount
Accumulated Amortization
Amortized intangible assets:
Core and Developed Technology
312,829
118,021
297,342
108,801
Patents, Trademarks, & Other
309,119
234,650
307,376
229,047
621,948
352,671
604,718
337,848
Unamortized intangible assets:
Goodwill
Trademarks
15,137
505,905
488,348
The change in the carrying amount of goodwill and core and developed technology for the three months ended December 31, 2004 relates to foreign currency translation adjustments.
The estimated intangible amortization expense for the fiscal years ending September 30, 2005 to 2010 are as follows: 2005 - $33,600; 2006 - $29,300; 2007 - $29,200; 2008 - $27,800; 2009 - $26,100; 2010 - $25,600.
Note 7 – Share-Based Compensation
Fair Value Method Accounting
Historically, the Company accounted for stock options using the intrinsic value method. This method measures stock compensation expense as the amount by which the market price of the stock on the date of grant exceeds the exercise price. The Company has not recognized any stock compensation expense under this method in recent years because the Company granted stock options at the current stock price.
Effective October 1, 2004, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004) – Share-Based Payment (“SFAS No. 123 (R)”). This Statement requires compensation cost relating to share-based payment transactions to be recognized in the financial statements using a fair-value measurement method. Under the fair value method, the estimated fair value of awards is charged against income on a straight-line basis over the requisite service period, which is generally the vesting period. In addition, the Company granted restricted stock awards in November 2004 under its new long-term incentive program, as discussed further below. The Company selected the modified prospective method as prescribed in SFAS No. 123 (R) and therefore, prior periods were not restated. Under the modified prospective application, this Statement was applied to new awards granted in fiscal 2005, as well as to the unvested portion of previously granted equity-based awards for which the requisite service had not been rendered as of October 1, 2004. In the first quarter of 2005, the Company recorded share-based compensation expense associated with the SFAS No. 123 (R) adoption and the restricted stock awards of $11,590 or, $8,494 after-tax. This expense is net of a cumulative pre-tax adjustment
10
of $1,799 resulting from a change to the estimated forfeiture rate for current and prior period unvested stock option grants.
For the three months ended December 31, 2004, share-based compensation expense reduced the Company’s results of operations as follows:
Before Income Taxes
(11,590
(8,494
(.03
Income from Discontinued Operations
In accordance with SFAS No. 123 (R), tax benefits from stock option exercises in the current quarter of $21,657 were reclassified from cash flows from continuing operating activities to cash flows from continuing financing activities in the Company’s Condensed Consolidated Statement of Cash Flows.
Long-Term Incentive Plan
In November 2004, the Company granted stock-based awards under the 2004 Employee and Director Equity-Based Compensation Plan (the “2004 Plan”), which provides for long-term incentive compensation to employees and directors. The November 2004 awards consisted of stock options, performance restricted stock units and time-vested restricted stock units. The Company believes that such awards align the interest of its employees with those of its shareholders, and to encourage employees to act as equity owners of the Company.
Stock options
All stock option grants are for a ten-year term. Stock options issued after November 2001 vest over a four-year period. Stock options issued prior to November 2001 vested over a three-year period. The fair value of the November 2004 stock option grants were estimated on the date of grant using a lattice-based binomial option valuation model that uses the following weighted-average assumptions: risk free interest rate of 3.93%, expected volatility of 29%; expected dividend yield of 1.28% and expected life of 6.5 years. Expected volatility is based upon historical volatility for the Company’s common stock and other factors. The expected term of options granted is derived from the output of the model, using assumed exercise rates based on historical exercise patterns, and represents the period of time that options granted are expected to
11
be outstanding. The risk free interest rate used is based upon the published U.S. Treasury yield curve in effect at the time of grant for instruments with a similar life. The dividend yield is based upon the most recently declared quarterly dividend as of the grant date. Stock options granted prior to October 1, 2004 were valued based on the grant date fair value of those awards, using the Black-Scholes option pricing model, as previously calculated for pro-forma disclosures under SFAS No. 123 – Accounting for Stock-based Compensation.
Performance-Based Restricted Stock Units
Performance-based restricted stock units cliff vest after three years, and are tied to BD’s performance against pre-established targets, including its compound growth rate of consolidated revenues and average return on invested capital, over a three-year performance period. Under BD’s long-term incentive program, the actual payout under these awards may vary from zero to 250% of an employee’s target payout, based on BD’s actual performance over the three-year performance period. The fair value is based on the market price of the Company’s stock on the date of grant and assumes that the target payout level will be achieved. Compensation cost is adjusted for subsequent changes in the outcome of performance-related conditions until the vesting date.
Time Vested Restricted Stock Units
Time vested restricted stock units cliff vest three years after the date of grant. For certain key executives of the Company, such units generally vest one year following the employee’s retirement and the related stock-based compensation expense is recorded over the requisite service period based on an assumed average retirement age. The fair value of all time vested restricted units is based on the market value of the Company’s stock on the date of grant.
Pro-forma Disclosure
The following table illustrates the effect on net income and earnings per share if the Company were to have applied the fair-value based method to account for all stock-based awards for the three months ended December 31, 2003.
12
Three Months Ended December 31, 2003
Net income, as reported
(a)
Less stock-based compensation expense, net of tax
(8,439
Pro-forma net income
116,963
Reported earnings per share:
Basic
.50
Diluted
Pro-forma earnings per share:
.46
.45
Includes $540 of stock-based compensation expense relating to restricted stock awards granted in November 2003.
The pro-forma amounts and fair value of each option grant were estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in all periods: risk free interest rates of 3.66% to 4.50%; expected volatility of 32.5% to 33.2%; expected dividend yield of 1.16% to 1.21%; and expected life of 6 years.
Note 8 – Blood Glucose Monitoring Charges
The Company recorded a pre-tax charge of $45,024 to cost of products sold in the Company’s results of operations for the three months ended December 31, 2003 related to its blood glucose monitoring (“BGM”) products, which included a reserve of $6,473 in connection with the voluntary product recall of certain lots of BGM test strips and the write-off of $29,803 of certain test strip inventories. Based upon internal testing, it was determined that certain BGM test strip lots, produced by BD’s manufacturing partner, were not performing within BD’s specifications. As a result, the Company decided to recall the affected lots and dispose of the non-conforming product in inventory. In addition, the charge reflects BD’s decision to focus its sales and marketing efforts on the BD Logic™ and Paradigm Link™ blood glucose meters in the United States, and to discontinue support of the BD Latitude™ system product offering in the United States, resulting in a write-off of $8,748 of related blood glucose meters and fixed assets. As of December 31, 2004, a $1,676 accrual remains for product to be returned related to this product recall, which is expected to be fully utilized in 2005.
13
Note 9 – Benefit Plans
The Company has defined benefit pension plans covering substantially all of its employees in the United States and certain foreign locations. The Company also provides certain postretirement healthcare and life insurance benefits to qualifying domestic retirees. Postretirement benefit plans in foreign countries are not material.
Net pension and postretirement expense included the following components for the three months ended December 31:
Pension Plans
Other Postretirement Benefits
Components of net pension and postretirement costs:
Service cost
15,294
14,254
913
877
Interest cost
16,698
15,707
3,832
3,623
Expected return on plan assets
(14,710
(12,981
Amortization of prior service cost
83
45
(1,558
Amortization of loss
5,708
4,396
1,520
1,029
(42
Net pension and postretirement costs
23,073
21,379
4,723
3,971
Net pension expense attributable to foreign plans included in the preceding table was $4,102 and $4,014 for the three months ended December 31, 2004 and 2003, respectively.
The Company contributed approximately $50,000 and $18,000, on a discretionary basis, to increase the funding for its U.S. and foreign pension plans, respectively, during the first quarter of 2005. In addition, the Company contributed an additional $35,000 to the U.S. pension plan, on a discretionary basis, in January 2005.
Note 10 – Employee Stock Ownership Plan
During the first quarter of 2005, the Trustee of the Company’s Employee Stock Ownership Plan (“ESOP”) converted all of the outstanding shares of Series B ESOP Convertible Preferred Stock (“ESOP Preferred”) into Becton, Dickinson and Company common stock. This was done in response to the November 2004 dividend declaration, which reflected a 20% increase in the common dividend versus the preceding quarter and increased the difference between the common dividend and the fixed dividend payable on the ESOP Preferred shares (on an equivalent share basis). Conversion of the ESOP Preferred occurred at the rate of 6.4 Common shares for each share of ESOP Preferred.
14
Note 11 – Discontinued Operations
On September 28, 2004, the Company’s Board of Directors approved a plan to sell the Clontech unit of the BD Biosciences segment. As a result, Clontech’s results of operations are reported as Discontinued Operations for all periods presented in the accompanying Condensed Consolidated Statements of Income. Clontech’s statement of financial position is classified as Assets held for sale and Liabilities held for sale, in the accompanying Condensed Consolidated Balance Sheets for all periods presented.
Results of Discontinued Operations for the three months ended December 31 are as follows:
13,439
14,411
Income from discontinued operations before income taxes
1,576
758
(623
(281
Income from discontinued operations
Assets held for sale included the following at:
Current assets
26,640
26,676
10,035
9,562
Core and developed technology
15,256
Other intangible assets
8,729
Other assets
3,051
3,471
Liabilities held for sale included the following at:
Current liabilities
11,206
13,522
Long-term liabilities
522
659
The components of Income from Discontinued Operations Before Income Taxes for the three months ended December 31 follow:
Domestic, including Puerto Rico
643
(965
Foreign
933
1,723
15
Company Overview
BD is a medical technology company that serves healthcare institutions, life science researchers, clinical laboratories, industry and the general public. BD manufactures and sells a broad range of medical supplies, devices, laboratory equipment and diagnostic products. We focus strategically on achieving growth in three worldwide business segments – BD Medical (“Medical”), BD Diagnostics (“Diagnostics”) and BD Biosciences (“Biosciences”). Our products are marketed in the United States and internationally through independent distribution channels, directly to end users and by sales representatives.
BD’s management operates the business consistent with the following core strategies:
•
to increase revenue growth by focusing on products that deliver greater benefits to patients, healthcare workers and researchers;
to improve operating effectiveness and balance sheet productivity; and,
to strengthen organizational and associate capabilities in the ever-changing healthcare environment.
In assessing the outcomes of these strategies and BD’s financial condition and operating performance, management generally reviews quarterly forecast data, monthly actual results, segment sales and other similar information. We also consider trends related to certain key financial data, including gross profit margin, selling and administrative expense and cash flows.
The results of our strategies are reflected in our first quarter 2005 financial and operational performance. BD reported first quarter revenues of $1.3 billion, an increase of 9% from the same period a year ago. After excluding the favorable impact of foreign currency translation, revenues for the quarter increased approximately 6%. Sales in the United States of safety-engineered devices grew 12% to $212 million in the first quarter of 2005. International sales of safety-engineered devices grew 37% to $60 million in the first quarter of 2005. International revenue growth of 11% for the three-month period was favorably affected by foreign currency translation, primarily the Euro. After excluding the favorable impact of foreign currency translation, international revenues grew approximately 5% for the three-month period. As further discussed in our 2004 Annual Report on Form 10-K, we face currency exposure that arises from translating the results of our worldwide operations to the U.S. dollar at exchange rates that have fluctuated from the beginning of the period. We purchase option and forward contracts to partially protect against adverse foreign exchange rate movements.
Our balance sheet remains strong with net cash provided by continuing operations at approximately $257 million for the three months ended December 31, 2004 and our debt-to-capitalization ratio (shareholders’ equity, net non-current deferred income tax liabilities, and debt) improved to 25.6% at December 31, 2004 from 28.1% at September 30, 2004.
Our ability to sustain our long-term growth will depend on a number of factors, including our ability to expand our core business (including geographical expansion), develop innovative new products with higher gross profit margins across our business segments, and continue to improve operating efficiency and organizational effectiveness. Numerous factors can affect our ability to achieve these goals, including without limitation, U.S and global economic conditions, increased competition and healthcare cost containment initiatives. We believe that there are several important factors relating to our business that tend to reduce the impact on BD of any potential economic or political events in countries in which we do business, including the effects of possible healthcare system reforms. These include the non-discretionary nature of the demand for many of our core products, which may reduce the impact of economic downturns, our international diversification and our ability to meet the needs of the worldwide healthcare industry with cost-effective and innovative products.
Our anticipated revenue growth over the next three years is expected to come from the following:
Core business growth and expansion, including the continued transition to safety-engineered devices;
Expanding the sale of our high quality products around the globe; and,
Development in each business segment of new products and services that provide increased benefits to patients, healthcare workers and researchers.
Results of Operations
Refer to Note 5 in the Notes to Condensed Consolidated Financial Statements for segment financial data.
Medical Segment – First quarter revenues of $694 million represented an increase of 11% from the prior year’s period, or 8% at constant foreign exchange rates. Medical revenues reflect the continued conversion in the United States to safety-engineered products, accounting for sales of $126 million, as compared with $114 million in the prior year’s quarter. Included in Medical revenues were international sales of safety-engineered products of $18 million, compared with $14 million in the prior year’s quarter. Also contributing to the growth of the segment were strong sales in the Diabetes Care unit.
Diagnostics Segment – First quarter revenues of $414 million represented an increase of 3% over the prior year period, or 1% excluding the favorable impact of foreign currency translation. Diagnostics revenues reflect the continued conversion in the United States to safety-engineered products, accounting for sales of $86 million, as compared with $76 million in the prior year’s quarter. Diagnostics revenues also include international sales of safety-engineered products of $42 million, compared with $29 million in the prior year’s quarter. As anticipated, and despite strong sales from the BD ProbeTec™ ET and BD Phoenix™ instruments, revenues in the Diagnostic Systems unit of the segment declined 5% from the prior year’s quarter. The first
17
quarter of fiscal 2004 benefited from exceptionally strong sales of flu tests in Japan and the United States, which did not recur in this year’s fiscal first quarter.
Biosciences Segment — First quarter revenues of $181 million represented an increase of 15% over the prior year period, or 11% excluding the favorable impact of foreign currency translation. Instrument sales growth was a primary driver of overall revenue growth and was driven by sales of the recently launched BD FACSCanto™ analyzer. Continued strong market acceptance of the BD FACSAria™ cell sorter also contributed to instrument sales. First quarter sales of flow cytometry reagents continued to be strong in both the clinical and research markets and were also key contributors to revenue growth.
Share-Based Compensation
We believe stock ownership and stock-based incentive awards are the best way to align the interests of employees with those of our shareholders. Historically, we have used stock options as our primary form of incentive compensation. In November 2004, stock-based awards were granted to employees under a new long-term incentive program, which consisted of both stock options and restricted stock awards.
Historically, we accounted for stock options using the intrinsic value method. This method measures stock compensation expense as the amount by which the market price of the stock on the date of grant exceeds the exercise price. We have not recognized any stock compensation expense under this method in recent years because we granted stock options at the current stock price.
Effective October 1, 2004, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004) – Share-Based Payment (“SFAS No. 123 (R)”). This Statement requires compensation cost relating to share-based payment transactions to be recognized in our financial statements using a fair-value measurement method. Under the fair value method, the estimated fair value of awards is charged against income on a straight-line basis over the requisite service period, which is generally the vesting period. In the first quarter of 2005, we recorded share-based compensation expense associated with the SFAS No. 123 (R) adoption and the restricted stock awards, of $11.6 million of which $9.1 million was recorded in selling and administrative expense, $1.5 million was recorded in cost of products sold, and $1.0 million was recorded in research and development expense. Share-based compensation expense is recorded in corporate unallocated expense for segment reporting purposes. The first quarter 2005 expense is net of a cumulative pre-tax adjustment of $1,799 resulting from a change to the estimated forfeiture rate for current and prior period unvested stock option grants.
For the current quarter, share-based compensation reduced diluted earnings per share from continuing operations by 3 cents. Our full year fiscal 2005 stock compensation expense, including restricted stock awards, is estimated to reduce diluted earnings per share from continuing operations by approximately 17 cents. See Note 7 in the Notes to Condensed Consolidated Financial Statements for prior period pro-forma data and additional discussion.
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Medical Segment
Segment operating income for the first quarter was $163 million compared to $92 million in the prior year’s first quarter. The prior year amount included $45 million of blood glucose monitoring (“BGM”) charges as discussed in Note 8 to the Condensed Consolidated Financial Statements. Excluding the BGM charges in last year’s quarter, the increase in Medical operating income reflects increased sales of products with higher overall gross profit compared to products sold in the prior year.
Diagnostics Segment
Segment operating income for the first quarter was $103 million compared to $98 million in the prior year’s first quarter and reflects the impact of revenue fluctuations, as noted above. Segment operating income also reflects reduced research and development spending relating to the completion of our cancer biomarker discovery program in the third quarter of fiscal 2004.
Biosciences Segment
Segment operating income was $37 million for the first quarter compared to $29 million in the prior year’s first quarter and primarily reflects revenue growth of instruments and reagents, as discussed above.
Gross Profit Margin
Gross profit margin was 50.8% for the first quarter, compared with 46.5% for the comparable prior year period. Excluding share-based compensation in the current year of $1.5 million and the BGM charges of $45 million in the prior year, the increase in gross profit margin for the first quarter reflected increased sales of products with higher gross profit margins. In addition, gross profit margin benefited from a weaker U.S. dollar. Excluding share-based compensation expense in the current year and the BGM charges in the prior year, we expect improvement in gross profit margin of about 30 to 40 basis points for fiscal 2005, despite the current impact of higher resin prices on our cost of products sold.
Selling and Administrative Expense
Selling and administrative expense was 26.5% of revenues for the first quarter, compared with the prior year’s ratio of 27.3%. As discussed above, $9.1 million of stock-based compensation was recorded to selling and administrative expense in 2005, which amounted to 0.7% of revenues. Aggregate expenses were higher for the current quarter, reflecting increased investment in various strategic initiatives, as well as a weaker U.S. dollar. Selling and administrative expense in the prior year included legal fees incurred in connection with the Retractable Technologies, Inc. litigation that was settled in July 2004. Selling and administrative expense, as a percentage of revenues, is expected to improve by 75 to 100 basis points for fiscal 2005, excluding share-based compensation expense.
Research and Development Expense
Research and development expense was $62.1 million or 4.8% of revenues for the first quarter, compared with the prior year’s amount of $58.3 million or 4.9% of revenues. As discussed above, $1.0 million of stock-based compensation was recorded to research and development expense in 2005. The increase in research and development expenditures is also attributable to spending for new programs in each of our segments, partially offset by reduced spending from
19
molecular oncology diagnostics following the completion of our cancer biomarker discovery program in the third quarter of fiscal 2004. Excluding share-based compensation expense, we anticipate spending to increase 12 % to 15% for fiscal 2005.
Interest Expense, Net
Interest expense, net, increased slightly to $9.1 million in the current quarter from $8.9 million in the prior year’s quarter. The impact of higher interest rates on long-term debt was offset by interest income on increased investment levels.
Income Taxes
The reported income tax rate was 18.6% for the first quarter, which reflects an estimated 5% benefit due to the reversal of tax reserves in connection with the conclusion of tax examinations in four non-U.S. jurisdictions. In addition, certain tax-related events caused the reported tax rate for the quarter to vary from the expected effective tax rate for the year of approximately 25.5%. The prior year’s tax rate was 21% for the quarter, which reflected the impact of the aforementioned BGM charges.
Income from Continuing Operations and Diluted Earnings Per Share from Continuing Operations
Income from continuing operations and diluted earnings per share from continuing operations for the first quarter were $194 million and 74 cents, respectively. The net effect of share-based compensation and the reversal of tax reserves described above increased income from continuing operations by $2.8 million and diluted earnings per share from continuing operations by 1 cent in the first quarter. This compared with $125 million and 48 cents, respectively, in the comparable prior year period. The BGM charges reduced income from continuing operations and diluted earnings per share from continuing operations in the prior year period by $28 million and 11 cents, respectively.
Liquidity and Capital Resources
Net cash provided by continuing operating activities, which continues to be our primary source of funds to finance operating needs and capital expenditures, was $257 million during the first quarter of fiscal 2005, and $196 million in the same period in fiscal 2004. Net cash provided by operations was reduced by $50 million and $18 million in discretionary cash contributions to the U.S. and foreign pension plans during the first quarter of 2005. The Company contributed an additional $35 million on a discretionary basis to its U.S. Pension Plan in January of 2005. BD’s funding policy for its defined benefit pension plans is to contribute amounts sufficient to meet the minimum funding requirement of the Employee Retirement Income Security Act of 1974, plus any additional amounts that management may determine to be appropriate considering the funded status of the plans, tax deductibility, cash flows, and other factors. As further discussed in our fiscal year 2004 Annual Report on Form 10-K, changes in pension costs may occur in the future due to changes in assumptions inherent in the actuarial valuations used, in part, to determine the Company’s minimum funding obligations.
Net cash used for continuing investing activities for the first quarter of the current year was $79 million, compared to $68 million in the same period a year ago. Capital expenditures were $50 million in the first quarter of fiscal 2005 and $44 million in the same period in fiscal 2004. We expect capital spending for fiscal 2005 to be between $300 million and $325 million.
20
Net cash used for continuing financing activities in the first quarter of the current year was $78 million, compared to $120 million in the prior year period, and included the repurchase of shares of our common stock for approximately $112 million, compared to approximately $75 million in the prior year period. As of December 31, 2004, authorization to repurchase an additional 12.1 million common shares remained. Stock repurchases were offset, in part, by the issuance of common stock from treasury due to the exercising of stock options by employees. The Company recognized approximately $22 million in tax benefits from the exercise of stock options in the current quarter, as compared to $13 million in the prior year’s quarter. In the current year, cash used for the repayment of debt was approximately $45 million, as compared to $117 million in the prior year. As of December 31, 2004, total debt of $1.2 billion represented 25.6% of total capital (shareholders’ equity, net non-current deferred income tax liabilities, and debt), an improvement from 28.1% at September 30, 2004. We have in place a commercial paper borrowing program that is available to meet our short-term financing needs, including working capital requirements. There were no borrowings outstanding under this program as of December 31, 2004. As discussed in our fiscal year 2004 Annual Report on Form 10-K, we have in place a syndicated credit facility totaling $900 million in order to provide backup support for our commercial paper program and for other general corporate purposes. This credit facility expires in August 2009. The facility contains a single financial covenant that requires BD to maintain an interest expense coverage ratio (ratio of earnings before income taxes, depreciation and amortization to interest expense) of not less than 5-to-1 for the most recent four consecutive fiscal quarters. For the last eight measurement dates, this ratio has ranged from 18-to-1 up to 21-to-1. Given the availability of this facility and our strong credit ratings, we continue to have a high degree of confidence in our ability to refinance debt maturities, as well as to incur substantial additional debt, if required.
During the quarter, under the terms of its 8.7% Debentures, due January 15, 2025, we exercised the early redemption option and redeemed the full $100 million principal amount outstanding effective January 15, 2005, at a redemption price of 103.949%. We had utilized an interest rate swap (designated for accounting purposes as a fair value hedge) to effectively convert the fixed rate of interest under the Debentures to a floating rate. This swap was terminated during the first quarter of 2005, which resulted in a gain that is reflected in the carrying value of the Debentures at December 31, 2004 and largely offsets the additional expense of the early redemption.
BD’s ability to generate cash flow from operations, issue debt, enter into other financing arrangements and attract long-term capital on acceptable terms could be adversely affected in the event there was a material decline in the demand for BD’s products, deterioration in BD’s key financial ratios or credit ratings, or other significantly unfavorable changes in conditions. While a deterioration in the Company’s credit ratings would increase the costs associated with maintaining and borrowing under its existing credit arrangements, such a downgrade would not affect the Company’s ability to draw on these credit facilities, nor would it result in an acceleration of the scheduled maturities of any outstanding debt.
The American Jobs Creation Act of 2004, which was signed into law on October 22, 2004, provides corporate taxpayers with an election to claim a deduction equal to 85% of cash dividends in excess of a base-period amount received from controlled foreign corporations if the dividends are invested in the United States under a properly approved domestic investment plan. As a result of the passage of the American Jobs Creation Act, we are currently revisiting our policy of indefinite reinvestment of foreign earnings. The deduction is subject to a number of
21
limitations and, as of today, uncertainty remains as to how to interpret certain provisions of this legislation. As such, we have not concluded as to whether, when, and to what extent, we might repatriate foreign earnings that have not yet been remitted to the United States. However, we currently expect that any such repatriation would be about $500 million and that the tax cost would be approximately 6% to 8% for every $100 million repatriated.
Critical Accounting Policies
The preparation of financial statements in accordance with generally accepted accounting principles (“GAAP”) requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. A summary of our significant accounting policies is included in Note 1 to our consolidated financial statements for the year ended September 30, 2004, which are incorporated by reference in our 2004 Annual Report on Form 10-K. Certain of our accounting policies are considered critical, as summarized in the Financial Review section of our 2004 Annual Report on Form 10-K, as these policies are the most important to the depiction of our financial statements and require significant, difficult or complex judgments by management, often employing the use of estimates about the effects of matters that are inherently uncertain. Estimation methodologies are applied consistently from year to year. Other than the adoption of SFAS No. 123 (R), as discussed in Note 7 in the Notes to Condensed Consolidated Financial Statements, there have been no significant changes in the application of the critical accounting policies since September 30, 2004. These critical accounting policies have been reviewed with the Audit Committee of the Board of Directors.
Use of Non-GAAP Financial Measures
We prepare BD’s financial statements in accordance with U.S. GAAP. When discussing our financial performance, we at times will present certain non-GAAP financial measures, as follows:
We present revenue growth rates at constant foreign exchange rates. We believe that presenting growth rates at constant foreign exchange rates allows investors to view the underlying operating results of BD and of its segments without the impact of fluctuations in foreign currency exchange rates, thereby facilitating comparisons to prior periods.
We present earnings per share and other financial measures after excluding the impact of significant charges, and the impact of unusual or non-recurring items. We believe that excluding such impact from these financial measures allows investors to more easily compare BD’s financial performance with prior period performance and to understand the operating results of BD without the effects of these significant charges and unusual or non-recurring items.
We present earnings per share and other financial measures after excluding the impact of share-based compensation expense for the period, to the extent such period is being compared to a prior period where such expense was either not recognized or was immaterial. We believe that excluding these expenses, which are non-cash items, allows investors to more easily compare BD’s financial performance with prior period performance.
We present earnings per share and other financial measures after excluding the effects of changes in tax laws and regulations (including without limitation, rate changes) and other
22
events that cause the tax rate for the period being presented to vary from the Company’s expected effective tax rate for the full fiscal year. We believe that excluding such effects facilitates comparisons of BD’s financial performance with prior period performance.
BD’s management considers these non-GAAP financial measures internally in evaluating BD’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.
BECTON DICKINSON AND COMPANYSUPPLEMENTAL REVENUE INFORMATIONREVENUES BY BUSINESS SEGMENTS AND UNITSThree Months Ended December 31, (Unaudited; Amounts in thousands)
United States
% Change
BD MEDICAL
215,506
198,519
8.6
88,461
74,849
18.2
20,049
24,355
(17.7
5,638
6,025
(6.4
TOTAL
329,654
303,748
8.5
BD DIAGNOSTICS
114,763
106,627
7.6
103,945
106,290
(2.2
218,708
212,917
2.7
BD BIOSCIENCES
24,094
23,415
2.9
34,694
28,768
20.6
16,909
15,993
5.7
75,697
68,176
11.0
TOTAL UNITED STATES
624,059
584,841
6.7
23
BECTON DICKINSON AND COMPANYSUPPLEMENTAL REVENUE INFORMATIONREVENUES BY BUSINESS SEGMENTS AND UNITSThree Months Ended December 31, (continued)(Unaudited; Amounts in thousands)
International
Reported
FX Neutral
FX Impact
194,058
176,324
10.1
4.6
5.5
70,217
58,177
20.7
14.1
6.6
90,636
80,844
12.1
4.9
7.2
9,257
7,775
19.1
11.5
364,168
323,120
12.7
6.1
93,758
78,353
19.7
13.1
101,317
109,675
(7.6
(12.4
4.8
195,075
188,028
3.7
(1.8
22,869
21,468
6.5
0.7
5.8
65,406
53,318
22.7
15.9
6.8
16,792
14,345
17.1
11.1
6.0
105,067
89,131
17.9
6.4
TOTAL INTERNATIONAL
664,310
600,279
10.7
4.7
24
9.3
2.6
19.3
16.4
5.2
(0.4
5.6
7.9
4.2
7.5
3.2
9.9
2.8
(5.0
(7.4
2.4
0.6
1.8
21.9
17.6
4.3
8.3
14.9
11.3
3.6
TOTAL REVENUES
8.7
3.0
25
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:
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.
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, particularly 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.
Changes in domestic and foreign healthcare industry practices and regulations resulting in increased 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.
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.
26
Fluctuations in the cost and availability of raw materials and the ability to maintain favorable supplier arrangements and relationships.
Our ability to obtain the anticipated benefits of any restructuring programs, if any, that we may undertake.
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.
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, as well as 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.
Pending and potential litigation or other proceedings 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.
The effects, if any, of adverse media exposure or other publicity regarding BD’s business or operations.
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.
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.
Our ability to effect infrastructure enhancements and incorporate new systems technologies into our operations.
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.
Economic and political conditions in international markets, including civil unrest, governmental changes and restrictions on the ability to transfer capital across borders.
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.
27
The impact of business combinations, including acquisitions and divestitures, both internally for BD and externally, in the healthcare industry.
Our ability to successfully complete the divestiture of Clontech within the expected timeframe.
The structure of any transaction involving the divestiture of Clontech and the sales price and other terms relating thereto.
Issuance of new or revised accounting standards by the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board.
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, 2004.
Item 4. Controls and Procedures
An evaluation was carried out by BD’s management, with the participation of 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-15(e) under the Securities Exchange Act of 1934) as of December 31, 2004. 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, as of the end of the period covered by this report, 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 changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2004 identified in connection with the above-referenced evaluation that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
The table below sets forth certain information regarding our purchases of common stock of BD during the fiscal quarter ended December 31, 2004.
Issuer Repurchases of Equity Securities
For the three months ended December 31, 2004
Total Number of Shares Purchased (1)
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2)
Maximum Number of Shares that may yet be Purchased Under the Plans or Programs
October 1 – 31, 2004
625
$51.28
0
4,056,714
November 1 – 30, 2004
274,899
$54.04
272,300
13,784,414
December 1 – 31, 2004
1,734,634
$56.83
1,720,000
12,064,414
2,010,158
$56.45
1,992,300
(1)
Includes 15,652 shares purchased in open market transactions by the trustee under the Deferred Compensation Plan and the 1996 Directors’ Deferral Plan, and 2,206 shares delivered to the Company in connection with stock option exercises.
(2)
These repurchases were made pursuant to a repurchase program for 10 million shares announced on January 27, 2004 (the “January 2004 Program”). There is no expiration date for the January 2004 Program. On November 23, 2004, the Board of Directors of BD authorized an additional repurchase program for 10 million shares (the “November 2004 Program”). There is no expiration date for the November 2004 Program.
Nominee
Term
For
Votes Withheld
Basil L. Anderson
3 Years
194,964,379
17,815,009
Gary A. Mecklenburg
194,831,450
17,947,938
James E. Perrella
207,520,240
5,259,148
Alfred Sommer
200,565,619
12,213,769
The directors whose term of office as a director continued after the meeting are: Henry P. Becton, Jr., Edward F. DeGraan, Edward J. Ludwig, James F. Orr, Willard J. Overlock, Jr., Bertram L. Scott and Margaretha af Ugglas.
The directors who retired at the meeting pursuant to the Company’s mandatory director retirement policy are: Harry N. Beaty and Frank A. Olson.
ii.) A management proposal to ratify the selection of Ernst & Young, LLP as independent registered public accounting firm for the fiscal year ending September 30, 2005 was voted upon. 197,102,490 shares were voted for the proposal, 13,994,856 shares were voted against, and 1,682,042 shares abstained.
iii.) A management proposal to approve the Performance Incentive Plan was voted upon. 199,374,590 shares were voted for the proposal, 11,533,301 shares were voted against, and 1,871,497 shares abstained.
iv.) A shareholder proposal requesting that the Board of Directors take the necessary steps to provide for cumulative voting in the election of directors was voted upon. 73,603,124 shares were voted for the proposal, 102,719,157 shares were voted against, 13,862,128 shares abstained, and there were 22,594,979 broker non-votes.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits
Exhibit 31
Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to SEC Rule 13a - 14(a).
Exhibit 32
Certifications of Chief Executive Officer and Chief Financial Officer, pursuant to Rule 13a - 14(b) and Section 1350 of Chapter 63 of Title 18 of the U.S. Code.
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)
Dated: February 8, 2005
/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)
INDEX TO EXHIBITS
Exhibit Number
Description of Exhibits