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, 2001
Business Overview: BD manufactures and sells medical supplies, devices, laboratory equipment, and diagnostic products. Operations are organized into three segments: Medical Systems, Clinical Laboratory Solutions, and Biosciences. The company operates globally with significant manufacturing and sales presence in Europe, Asia Pacific, and the Americas.
Key Financial Metrics
Note: Specific revenue, profit, cash flow, and debt figures are incorporated by reference to the 2001 Annual Report (pages 18-48) and are not explicitly detailed in the provided text.
- Research & Development (R&D): $212,000,000 for fiscal 2001 (compared to $224,000,000 in 2000 and $254,000,000 in 1999).
- Valuation and Qualifying Accounts (Schedule II):
- Allowance for doubtful accounts (end of period): $29,748,000.
- Allowance for cash discounts (end of period): $12,544,000.
- Total deductions (write-offs) for doubtful accounts in 2001: $10,301,000.
- Employees: Approximately 24,800 total (11,300 in the U.S.) as of September 30, 2001.
- Stock Outstanding: 258,699,104 shares as of November 30, 2001.
- Market Value: Approximately $8.74 billion held by nonaffiliates as of November 30, 2001.
Material Changes and Accounting Updates
Adoption of SAB 101: In the fourth quarter of 2001, BD adopted Staff Accounting Bulletin No. 101 retroactive to October 1, 2000. This resulted in two significant accounting changes:
- Biosciences Segment: Revenue for instrument sales is now recognized upon completion of installation at the customer site, rather than upon shipment.
- Medical Systems Segment: Revenue for branded insulin syringes sold under incentive programs to U.S. distributors is now recognized upon sell-through to the end customer.
Foreign Operations: Profitability from foreign revenues continues to fluctuate more than domestic revenues due to exchange rate fluctuations and local economic conditions.
Outlook, Risks, and Contingencies
Legal Proceedings:
- Latex Litigation: BD is a defendant in approximately 482 product liability lawsuits regarding natural rubber latex allergies. BD divested its glove business in 1995 but continues to defend these claims. Reserves have been established for defense costs.
- Needlestick Litigation: BD is a defendant in 11 lawsuits regarding accidental needlesticks. Several class action certifications have been denied or dismissed (e.g., in California, Florida, New Jersey, Pennsylvania, and Texas), though proceedings continue in other states.
- Antitrust: Retractable Technologies, Inc. filed an antitrust action alleging BD conspired to exclude them from the market via contracts with Group Purchasing Organizations. The case is in preliminary stages.
- Regulatory: CalOSHA issued a citation regarding the BD Eclipse blood collection device; BD has intervened in the appeal.
Forward-Looking Risks: Management highlights risks including foreign currency fluctuations, competitive pricing pressures, healthcare cost containment, raw material costs, and the potential for product recalls or regulatory actions.
Investor Verification Checklist
- Verify the specific impact of the SAB 101 adoption on 2001 revenue recognition by reviewing the "Financial Review" section of the 2001 Annual Report (pages 20-26).
- Confirm total revenue, net income, and cash flow figures from the Consolidated Statements of Income and Cash Flows (pages 28 and 31 of the Annual Report).
- Review the status of the 482 latex lawsuits and the 11 needlestick lawsuits to assess potential liability exposure beyond current reserves.
- Monitor the outcome of the antitrust lawsuit filed by Retractable Technologies, Inc.
- Assess the impact of foreign exchange rates on the Medical Systems and Clinical Laboratory Solutions segments, given the company's global footprint.