Business Context and Reporting Period
Company: Becton, Dickinson and Company (BD)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended September 30, 1998
Business Overview: BD is a global manufacturer of medical supplies, devices, and diagnostic systems. Operations are divided into two segments: Medical Supplies and Devices (hypodermic products, diabetes care, infusion therapy) and Diagnostic Systems (microbiology, sample collection, flow cytometry). The company operates in the United States, Europe, and Other regions (Canada, Latin America, Japan, Asia Pacific).
Key Financial Metrics
Note: Specific consolidated revenue, net income, cash flow, and debt figures are incorporated by reference from the 1998 Annual Report to Shareholders (Exhibit 13) and are not explicitly stated in the provided text.
- Research & Development (R&D): $217.9 million for fiscal 1998 (up from $180.6 million in 1997 and $154.2 million in 1996).
- R&D Write-offs: Included $30.0 million in write-offs for acquired in-process R&D in 1998.
- Employee Count: Approximately 21,700 employees as of September 30, 1998 (10,100 in the U.S.).
- Market Capitalization: As of November 30, 1998, the aggregate market value of common stock held by nonaffiliates was approximately $10.51 billion.
- Shareholders: Approximately 10,058 shareholders of record as of November 30, 1998.
- Valuation Accounts: Total balance for doubtful accounts and cash discounts against trade receivables was $35.5 million as of September 30, 1998.
Material Changes and Acquisitions
The company executed an aggressive acquisition strategy in fiscal 1998 to expand its product portfolio and geographic reach. Operating results for these acquisitions are included from their respective dates of purchase:
- December 1997: Visitec (ophthalmic surgical products).
- January 1998: IntelliCode division of MedPlus, Inc. (electronic bar coding).
- February 1998: Tru-Fit Marketing Corporation (sports health care products).
- April 1998: Medical Devices Division (MDD) from The BOC Group (European IV catheters).
- May 1998: Concepts in Healthcare, Inc. (healthcare consulting).
- September 1998: Boin Medica Co., Ltd. (Korean medical devices).
- Post-Period Acquisitions: MDI Instruments, Inc. (October 1998) and Glentech, Inc. (December 1998).
Facility Expansion: Construction of a hypodermic syringe manufacturing facility in India was scheduled for completion in December 1998.
Guidance, Risks, and Legal Proceedings
Forward-Looking Statements: The filing contains forward-looking statements regarding future revenues and income. Management notes that actual results could vary due to competitive factors, economic conditions, interest/currency rate fluctuations, product introduction delays, Year 2000 issues, and regulatory changes.
Legal Proceedings:
- Latex Litigation: Named as a defendant in approximately 196 product liability lawsuits regarding natural rubber latex allergies. The company divested its glove business in 1995 but is vigorously defending these suits.
- Needlestick Litigation: Named in nine product liability lawsuits alleging accidental needlesticks by health care workers. These are in preliminary stages; no class has been certified.
- Antitrust Action: Named in an antitrust action under the Texas Free Enterprise Act alleging exclusion of a competitor from the syringe market via Group Purchasing Organization contracts.
- Environmental: Settled a New Jersey Department of Environmental Protection matter regarding a previously owned division for a $345,000 penalty.
Management Commentary: Management believes the results of pending legal matters will not have a material effect on operations, financial condition, or cash flows. The company maintains that its facilities are fully utilized and operating at normal capacity.
Investor Verification Checklist
- Verify the specific consolidated revenue, net income, and operating margin figures in the "Seven-Year Summary of Selected Financial Data" (Exhibit 13, page 43 of the Annual Report).
- Review the "Financial Review" section (Exhibit 13, pages 35-42) for detailed segment performance and cash flow analysis.
- Assess the financial impact of the $30 million in-process R&D write-off included in 1998 R&D expenses.
- Monitor the status of the 196 latex-related lawsuits and the nine needlestick class action suits for potential future liabilities.
- Confirm the integration progress and financial contribution of the six major acquisitions completed during fiscal 1998.