-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KM/6DPq6e/MTO+hYJaa6+2KkuzRUa7HBLMGVmWVp2kCChdiJ6+JdQ/q4Q4JETzux 4WRtKOeoJaURJfMhA6e8OA== 0000009892-99-000024.txt : 19990811 0000009892-99-000024.hdr.sgml : 19990811 ACCESSION NUMBER: 0000009892-99-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARD C R INC /NJ/ CENTRAL INDEX KEY: 0000009892 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 221454160 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06926 FILM NUMBER: 99682693 BUSINESS ADDRESS: STREET 1: 730 CENTRAL AVE CITY: MURRAY HILL STATE: NJ ZIP: 07974 BUSINESS PHONE: 9082778000 MAIL ADDRESS: STREET 1: 730 CENTRAL AVENUE CITY: MURRAY HILL STATE: NJ ZIP: 07974 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 1999 Commission File Number 1-6926 C. R. BARD, INC. (Exact name of registrant as specified in its charter) New Jersey 22-1454160 (State of incorporation) (I.R.S. Employer Identification No.) 730 Central Avenue, Murray Hill, New Jersey 07974 (Address of principal executive offices) Registrant's telephone number, including area code: (908) 277-8000 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 Outstanding at July 30, 1999 Common Stock - $.25 par value 51,238,316 C. R. BARD, INC. AND SUBSIDIARIES INDEX Page No. PART I - FINANCIAL INFORMATION Condensed Consolidated Balance Sheets - June 30, 1999 and December 31, 1998 1 Condensed Consolidated Statements of Income For The Quarter and Six Months Ended June 30, 1999 and 1998 2 Condensed Consolidated Statements of Shareholders' Investment For The Six Months Ended June 30, 1999 and 1998 3 Condensed Consolidated Statements of Cash Flows For The Six Months Ended June 30, 1999 and 1998 4 Notes to Condensed Consolidated Financial Statements 5 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION 11 C. R. BARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (thousands of dollars)
June 30, December 31, 1999 1998 (Unaduited) ASSETS Current Assets: Cash and short-term investments $ 49,600 $ 42,400 Accounts receivable, net 202,400 217,800 Inventories 203,900 182,500 Other current assets 44,200 45,800 Total current assets 500,100 488,500 Property, plant and equipment, net 170,300 172,700 Intangible assets, net of amortization 348,300 358,900 Other assets 55,700 59,700 $1,074,400 $1,079,800
LIABILITIES AND SHAREHOLDERS' INVESTMENT Current Liabilities: Short-term borrowings and current maturities of long-term debt $ 81,600 $ 2,000 Accounts payable 48,800 67,400 Accrued expenses 163,000 187,400 Federal and foreign income taxes 29,900 46,000 Total current liabilities 323,300 302,800 Long-term debt 159,000 160,000 Other long-term liabilities 38,800 49,400 Shareholders' Investment: Preferred stock, $1 par value, authorized 5,000,000 shares; none issued --- --- Common stock, $.25 par value, authorized 300,000,000 shares; issued and outstanding 51,128,696 shares and 51,497,564 shares 14,600 14,300 Capital in excess of par value 153,600 132,300 Retained earnings 447,200 452,200 Accumulated other comprehensive income (45,500) (23,100) Unamortized expenses under stock plans (16,600) (8,100) 553,300 567,600 $1,074,400 $1,079,800
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. - 1 - C. R. BARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (thousands except per share amounts) (Unaudited)
For Quarter Ended For Six Months Ended June 30, June 30, 1999 1998 1999 1998 Net sales $257,800 $300,600 $506,300 $596,900 Costs and expenses: Cost of goods sold 114,500 144,600 223,900 285,500 Marketing, selling and administrative 82,700 97,400 163,400 192,700 Research & development 14,500 20,800 28,300 40,000 Interest expense 4,800 7,100 9,000 15,300 Other(income)expense, net (100) (31,500) 400 (35,100) Total costs and expenses 216,400 238,400 425,000 498,400 Income before taxes 41,400 62,200 81,300 98,500 Provision for income taxes 13,200 22,000 26,500 33,400 Net income $ 28,200 $ 40,200 $ 54,800 $ 65,100 Basic earnings per share $ .55 $ .71 $ 1.07 $ 1.15 Diluted earnings per share $ .55 $ .71 $ 1.06 $ 1.14 Cash dividends per share $ .19 $ .18 $ .38 $ .36 Average common shares outstanding-basic 51,128 56,593 51,244 56,683 Average common shares outstanding-diluted 51,667 56,944 51,864 57,010
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. -2- C. R. BARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT (thousands of dollars except per share amounts) (Unaudited)
Six Months Ended June 30, 1999 Unamortized Expenses Cumulative Under Capital in Retained Translation Stock Shares Amount Excess of Par Earnings Adjustment Plan Total Balance at December 31, 1998 51,497,564 $14,300 $132,300 $452,200 $(23,100) $ (8,100) $567,600 Net income 54,800 54,800 Currency translation adjustments (22,400) (22,400) Comprehensive income 32,400 Cash dividends ($.19 per share) (19,500) (19,500) Treasury stock acquired (1,009,100) (52,500) (52,500) Employee stock plans 640,232 300 21,300 12,200 (8,500) 25,300 Balance at June 30, 1999 51,128,696 $14,600 $153,600 $447,200 $(45,500) $(16,600) $553,300
Six Months Ended June 30, 1998 Unamortized Expenses Cumulative Under Capital in Retained Translation Stock Shares Amount Excess of Par Earnings Adjustment Plan Total Balance at December 31, 1997 56,784,551 $14,100 $101,100 $506,700 $(38,500) $(10,300) $573,100 Net income 65,100 65,100 Currency translation adjustments (12,900) (12,900) Comprehensive income 52,200 Cash dividends ($.18 per share) (20,500) (20,500) Treasury stock acquired (600,000) (21,000) (21,000) Employee stock plans 137,328 2,800 1,700 4,500 Balance at June 30, 1998 56,321,879 $14,100 $103,900 $530,300 $(51,400) $ (8,600) $588,300
The accompanying notes to condensed consolidated financial statements are an integral part of these statements. - 3 - C. R. BARD, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (thousands of dollars) (Unaudited)
For The Six Months Ended June 30, 1999 1998 Cash flows from operating activities: Net income $ 54,800 $ 65,100 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 24,000 29,700 Other non-cash items 2,600 22,700 Changes in assets and liabilities: Current assets (19,000) (12,300) Current liabilities (50,100) 20,000 Other (12,000) 6,000 300 131,200 Cash flows from investing activities: Capital expenditures (12,600) (21,700) Other long-term investments, net (5,900) (13,100) (18,500) (34,800) Cash flows from financing activities: Purchase of common stock (52,500) (21,100) Dividends paid (19,500) (20,500) Short-term borrowings and other 96,600 39,600 Long-term borrowings (500) (60,400) 24,100 (62,400) Net increase in cash and cash equivalents 5,900 34,000 Cash and cash equivalents at January 1, 41,200 36,400 Cash and cash equivalents at June 30, $ 47,100 $ 70,400
The accompanying notes to consolidated financial statements are an integral part of these statements. - 4 - C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The financial statements contained in this filing have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and have not been audited. However, C. R. Bard, Inc. ("Bard" or the "company") believes that it has included all adjustments to the interim financial statements, consisting only of normal recurring adjustments, which are necessary to present fairly Bard's financial condition and results of operations at the dates and for the periods presented. The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements as filed by the company in the 1998 Annual Report on Form 10-K. Consolidation The consolidated financial statements include the accounts of the company and its majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Earnings Per Share "Basic earnings per share" represents net income divided by the weighted average shares outstanding. "Diluted earnings per share" represents net income divided by weighted average shares outstanding adjusted for the incremental dilution of outstanding employee stock options and awards. Unless indicated otherwise per share amounts are calculated on a diluted basis. Derivative Instruments In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133"). FAS 133 establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. FAS 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. In June of 1999, the Financial Accounting Standards Board deferred the effective date of FAS 133 to all fiscal quarters for all fiscal years beginning after June 15, 1999. The company does not expect that the adoption of FAS 133 will have a material impact on its financial statements. - 5 - C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Use of Estimates The financial statements and related disclosures have been prepared in conformity with generally accepted accounting principles and, accordingly, include amounts based on estimates and judgments of management with consideration given to materiality. Actual results could differ from those estimates. Short Term Borrowings and Long-Term Debt In June 1996 the company filed a shelf registration with the Securities and Exchange Commission for the future issuance of up to $200,000,000 of long-term debt. As part of the registration, in December 1996, the company issued $150,000,000 of long-term notes due 2026. These notes may be redeemed at the option of the note holders on December 1, 2006, at a redemption price equal to the principal amount. Income Taxes The company's other current assets contain certain deferred tax assets of approximately $34,000,000 at December 31, 1998 and $29,600,000 at June 30, 1999. Segment Information The company's management considers its business to be a single segment entity - the manufacture and sale of medical devices. The company's products generally share similar distribution channels and customers. The company designs, manufactures, packages, distributes and sells medical, surgical, diagnostic and patient care devices which, for the most part, are purchased by hospitals, physicians and nursing homes, used once and discarded. Management evaluates its various global product portfolios on a revenue basis, which is presented below. Management generally evaluates profitability and associated investment on an enterprise-wide basis due to shared infrastructures.
(thousands of Quarter Ended Six Months Ended dollars) June 30, June 30, % % 1999 1998 Chg 1999 1998 Chg Vascular $ 57,400 $ 50,000 15 $110,000 $100,500 9 Urology 87,900 85,400 3 172,800 164,600 5 Oncology 57,600 52,300 10 114,700 103,800 11 Surgery 41,000 37,000 11 81,200 72,000 13 Other Ongoing products 13,900 14,800 (6) 27,600 29,700 (7) Total ongoing products 257,800 239,500 8 506,300 470,600 8 Divested products --- 61,100 -- --- 126,300 -- Net sales $257,800 $300,600 (14) $506,300 596,900 (15)
- 6 - C. R. BARD, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) Segment Information (continued)
(thousands of Quarter Ended Six Months Ended dollars) June 30, June 30, 1999 1998 1999 1998 Income before taxes $ 41,400 $ 62,200 $ 81,300 $ 98,500 Total assets $1,074,400 $1,283,800 $1,074,400 $1,283,800 Capital expenditures $ 6,100 $ 11,800 $ 12,600 $ 21,700 Depreciation and amortization $ 11,700 $ 13,700 $ 24,000 $ 29,700
The following table presents sales of ongoing products by geography based on the location of the external customer.
(thousands of Quarter Ended Six Months Ended dollars) June 30, June 30, 1999 1998 1999 1998 United States $180,700 $168,100 $359,900 $333,600 Europe 49,400 46,400 95,900 87,800 Japan 13,300 12,400 23,900 25,500 Rest of world 14,400 12,600 26,600 23,700 Total $257,800 $239,500 $506,300 $470,600
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The discussion below does not include net sales of divested products for the three and six month periods ending June 30, 1998. Consolidated net sales for the second quarter of 1999 of $257,800,000 increased 8 percent from the second quarter of 1998 net sales of ongoing products of $239,500,000. Net sales in the U.S. for the second quarter of 1999 were $180,700,000, an increase of 8 percent from net sales of ongoing products for the second quarter of 1998, while international net sales for the second quarter of 1999 were $77,100,000, up 8 percent against net sales of ongoing products for the second quarter of 1998. The impact of a stronger U.S. dollar in the second quarter of 1999 decreased reported sales outside the U.S. by approximately 2 percent compared to the prior year period. For the first six months of 1999, U.S. sales totaled $359,900,000 up 8 percent as compared to the same period in 1998, while international sales increased 7 percent to $146,400,000 as compared to the same period in 1998. Currency translation for the first half of 1999 did not have a material impact on international sales. - 7 - C. R. BARD, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Vascular sales for the quarter and year-to-date periods ending June 30, 1999 increased by 15 and 9 percent, respectively, as compared to the same periods in 1998, due to electrophysiology and radiology product growth. Urological sales for the quarter and year-to-date periods increased by 3 and 5 percent, respectively, as compared to the same periods in 1998, due to infection control catheters and brachytherapy growth. Oncology sales for the quarter and year-to-date periods increased 10 percent and 11 percent, respectively, as compared to the same periods in 1998 due to specialty access products. Surgical sales for the quarter and year-to-date periods increased by 11 percent and 13 percent, respectively, as compared to the same periods in 1998, due to soft tissue repair products. The company's gross profit margin for the quarter and year-to-date periods ended June 30, 1999 of 55.6 percent and 55.8 percent, respectively, improved from the gross profit margins for the quarter and year-to-date periods ended June 30, 1998 of 51.9 and 52.2 percent, respectively. These improvements were primarily the result of the company's divestiture of several cardiology businesses and improvements resulting from steps to improve global manufacturing efficiencies. Other income and expense for the second quarter of 1999 is composed primarily of interest income and foreign exchange. Other income and expense for the second quarter of 1998 was affected by several nonrecurring, one-time items. These include the gain from an intellectual property settlement of $80,000,000 (net of a third-party royalty payment); the writedown of several businesses of $24,100,000 (including Bard's Diagnostic Sciences Division in anticipation of its sale to Polymedco, Inc., which was completed on July 7, 1998); $18,200,000 related to legal settlements; and $6,500,000 related to other items. The net after-tax favorable impact of these items was $18,700,000 or 33 cents per share on a diluted basis. During the first six months of 1999, the company acquired 1,009,100 of its common shares. During the first six months of 1998, the company acquired 600,000 of its common shares. Restructuring Charges In connection with the company's restructuring plans, restructuring accruals during the six-month period ended June 30, 1999 have decreased by approximately $4,000,000 compared to the year ended December 31, 1998, primarily for cash expenditures related to employees severed and other facility exit costs. Facility closing plans proceeded as planned with no additional facilities closed during the second quarter. - 8 - C. R. BARD, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Year 2000 Functionality Bard has a company-wide initiative to address Year 2000 functionality. A team of management and technical representatives oversees the Year 2000 effort. The company divides its Year 2000 initiative into two components, information technology (IT) and non-information technology (Non-IT). The IT initiative includes purchased and internally developed mainframe and desktop computer systems and applications. The Non-IT initiative includes suppliers, manufacturing and support systems and the company's customers. Internal and external resources are being used to identify needs, make the required IT modifications and test for Year 2000 functionality. The identification process of all critical IT applications is complete. The company is currently on schedule to complete the implementation of all modifications to these applications by the third quarter of 1999. The company is utilizing both internal and external resources to provide independent system verification and validation of Year 2000 functionality. This process will continue through the end of 1999 and includes the development and implementation of contingency plans to address unforeseen problems. The company's Non-IT efforts include addressing Year 2000 functionality of suppliers, manufacturing and support systems and the company's larger customers. The company is communicating with suppliers that provide critical products or services and customers. The company is testing significant manufacturing and support systems. If as a result of the company's communications or as a result of the company's testing of Non-IT systems there appear to be potential Year 2000 functionality problems, additional contingency plans under development should address these risks. There can be no guaranty that the systems of other businesses on which the company's systems rely will be converted in a timely manner, or that a failure to convert by another business (including the company's suppliers and customers), or a conversion that is incompatible with the company's systems, would not have a material adverse effect on the company. In addition, there are many risks associated with the Year 2000 issue, including but not limited to the possible failure of the company's IT and Non-IT technology systems. Any such failure may have a material adverse financial or operational effect on the company. - 9 - C. R. BARD, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Year 2000 Functionality (continued) The company's marketing, selling and administrative expense included $800,000 for IT-related Year 2000 expenditures during the second quarter of 1999 and $1,200,000 during the second quarter of 1998. Management believes that the company will incur additional expenses of approximately $1,400,000 in 1999. These incremental costs do not include existing internal resources allocated to the project effort. These costs and the date on which the company plans to complete the Year 2000 modification and testing processes are based on management's best estimates, which were derived utilizing numerous assumptions of future events including the continued availability of certain resources, third-party modification plans and other factors. However, there can be no guaranty that these estimates will be achieved and actual results could differ from those plans. Cautionary Statement Regarding Forward-Looking Information Certain statements contained herein or in other company documents and certain statements that may be made by management of the company orally, including without limitation statements regarding cost savings from restructuring, statements regarding Year 2000 functionality and statements regarding the company's future performance, may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because actual results are affected by risks and uncertainties, the company cautions investors that actual results may differ materially from those expressed or implied. Factors which could cause the actual results to differ materially from expected and historical results include, but are not limited to: health care industry consolidation resulting in customer demands for price concessions; competitors' attempts to gain market share through aggressive marketing programs; fewer medical procedures performed in a cost-conscious environment; the unpredictability of the approval time by the FDA or other government authorities to clear medical devices for commercial release; unanticipated product failures; legislative or administrative reforms to the U.S. Medicare and Medicaid systems or other non-U.S. reimbursement systems in a manner that would significantly reduce reimbursements for procedures using the company's medical devices; the acquisition of key patents by competitors that would have the effect of excluding the company from new market segments; the uncertainty of whether increased research and development expenditures will result in increased - 10 - C. R. BARD, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Cautionary Statement Regarding Forward-Looking Information (continued) sales; unpredictability of existing and future litigation including without limitation litigation regarding product liability; uncertainty related to tax appeals and litigation; price increases from the company's suppliers of critical components; foreign currency fluctuations; unanticipated business disruptions from Year 2000 issues; the risk that the company may not achieve manufacturing or administrative efficiencies as a result of the company's restructuring and/or in the integration of acquired businesses or divestitures. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 12.1 - Computation of Ratio of Earnings to Fixed Charges (b) Exhibit 27 - Financial Data Schedule 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. C. R. BARD, INC. (Registrant) Charles P. Slacik /s/ Charles P. Slacik Senior Vice President and Chief Financial Officer Charles P. Grom /s/ Charles P. Grom Vice President and Controller and Chief Accounting Officer DATE: August 10, 1999 - 11 - EX-12 2
Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges Six Months Ending 6/30/99 1998 1997 1996 1995 1994 Earnings before taxes $41,400 $464,400 $104,900 $102,700 $123,500 $104,100 Add(Deduct) Fixed Charges 7,400 31,400 38,200 33,500 31,500 23,200 Undistributed earnings of less than 50% owned companies carried at equity (700) (800) (500) (700) (800) (400) Interest capitalized 0 0 0 0 0 (200) Earnings available for fixed charges $48,100 $495,000 $142,600 $135,500 $154,200 $126,700 Fixed charges: Interest, including amounts capitalized 4,800 26,400 32,900 26,400 24,200 16,500 Proportion of rent expense deemed to represent interest factor 2,600 5,000 5,300 7,100 7,300 6,700 Fixed Charges $ 7,400 $ 31,400 $ 38,200 $ 33,500 $ 31,500 $ 23,200 Ratio of earnings to fixed charges 6.5 15.76 3.73 4.04 4.89 5.46
EX-27 3
5 1,000 6-MOS DEC-31-1999 JUN-30-1999 20500 29100 202400 9500 203900 500100 297700 127400 1074400 323300 159000 0 0 14600 600800 1074400 506300 506300 223900 415600 400 0 9000 81300 26500 54800 0 0 0 54800 1.07 1.06
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