SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
January 24th 2001
Date of Report
BRISTOL-MYERS SQUIBB COMPANY
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
1-1136 | 22-079-0350 |
Commission File Number | (IRS Employer Identification No.) |
345 Park Avenue, New York, N.Y. 10154
(Address of principal executive offices)
Telephone: (212) 546-4000
ITEM 5 OTHER EVENTS
On September 28, 2000, Bristol-Myers Squibb Company announced the planned divestitures of its Clairol and Zimmer businesses. As a result of this announcement, the Company's financial statements have been restated to present Clairol (which includes its Matrix Essentials, Inc. affiliate) and Zimmer as discontinued operations. Also, the company has included restated historical consolidated financial information for the five years ended December 31, 1999.
ITEM 7 FINANCIAL STATEMENTS
The following historical financial information and audited consolidated statements of the Company are filed herewith as follows:
Page No. | |
| 1. Selected Historical Consolidated Financial Information | 2-3 |
| 2. Audited Consolidated Financial Statements | |
| 4 |
December 31, 1999, 1998 and 1997 | 5 |
| 6 |
| 7-8 |
| 9 |
| 10-33 |
| 34 |
| 3. Schedule II - Valuation and Qualifying Accounts | 35 |
Exhibits - The following exhibits are filed herewith:
| Exhibit No. | Description | Page No. |
| 23. | Consent of PricewaterhouseCoopers LLP. | 36 |
| 27.1 | Restated Bristol-Myers Squibb Company Financial Data Schedule (for year ended December 31, 1999). | 37 |
| 27.2 | Restated Bristol-Myers Squibb Company Financial Data Schedule (for year ended December 31, 1998). | 38 |
| 27.3 | Restated Bristol-Myers Squibb Company Financial Data Schedule (for year ended December 31, 1997). | 39 |
27.4 | Restated Bristol-Myers Squibb Company Financial Data Schedule (for quarter ended June 30, 2000). | 40 |
27.5 | Restated Bristol-Myers Squibb Company Financial Data Schedule (for quarter ended March 31, 2000). | 41 |
27.6 | Restated Bristol-Myers Squibb Company Financial Data Schedule (for quarter ended September 30, 1999). | 42 |
27.7 | Restated Bristol-Myers Squibb Company Financial Data Schedule (for quarter ended June 30, 1999). | 43 |
27.8 | Restated Bristol-Myers Squibb Company Financial Data Schedule (for quarter ended March 31, 1999). | 44 |
RESTATED SELECTED FINANCIAL DATA
FIVE-YEAR FINANCIAL SUMMARY
OPERATING RESULTS(Unaudited, in millions, except per share amounts)
1999 | 1998 | 1997 | 1996 | 1995 | |
Net Sales | $16,878 | $15,061 | $13,698 | $12,268 | $11,320 |
Expenses: | |||||
Cost of products sold | 4,542 | 3,896 | 3,548 | 3,134 | 2,900 |
Marketing, selling and administrative | 3,789 | 3,685 | 3,425 | 3,220 | 3,020 |
Advertising and product promotion | 1,549 | 1,518 | 1,582 | 1,355 | 1,201 |
Research and development | 1,759 | 1,506 | 1,322 | 1,203 | 1,131 |
Other(a) | 81 | 818 | 83 | (67) | 1,134 |
11,720 | 11,423 | 9,960 | 8,845 | 9,386 | |
Earnings from Continuing Operations Before Income Taxes (a) | 5,158 | 3,638 | 3,738 | 3,423 | 1,934 |
Provision for income taxes | 1,369 | 888 | 994 | 939 | 417 |
Earnings from Continuing Operations(a) | 3,789 | 2,750 | 2,744 | 2,484 | 1,517 |
Discontinued Operations, net (b) | 378 | 391 | 461 | 366 | 295 |
Net Earnings | $4,167 | $3,141 | $3,205 | $2,850 | $1,812 |
Dividends paid on common And preferred stock | $1,707 | $1,551 | $1,515 | $1,507 | $1,495 |
Earnings per common share - Basic | |||||
| $1.91 | $1.38 | $1.38 | $1.24 | $.75 |
| .19 | .20 | .23 | .18 | .14 |
| $2.10 | $1.58 | $1.61 | 1.42 | .89 |
Earnings per common share - Diluted | |||||
| $1.87 | $1.36 | $1.34 | $1.22 | .75 |
| .19 | .19 | .23 | .18 | .14 |
| $2.06 | 1.55 | 1.57 | 1.40 | .89 |
Dividends per common share | .86 | .78 | .76 | .75 | .74 |
RESTATED SELECTED FINANCIAL DATA. (Con't.)
1997; and $263 million before taxes, $168 million after taxes, in 1995.
FIVE-YEAR FINANCIAL SUMMARY
FINANCIAL POSITION AT DECEMBER 31
(Unaudited, in millions, except per share amounts)
1999 | 1998 | 1997 | 1996 | 1995 | |
Current assets | $9,267 | $8,782 | $7,736 | $7,528 | $7,018 |
Property, plant and equipment | 4,621 | 4,429 | 4,156 | 3,964 | 3,760 |
Total assets | 17,114 | 16,272 | 14,977 | 14,685 | 13,929 |
Current liabilities | 5,537 | 5,791 | 5,032 | 5,050 | 4,806 |
Long-term debt | 1,342 | 1,364 | 1,279 | 966 | 635 |
Total liabilities | 8,469 | 8,696 | 7,758 | 8,115 | 8,107 |
Stockholders' equity | $8,645 | $7,576 | $7,219 | $6,570 | $5,822 |
Average common shares outstanding - Basic | 1,984 | 1,987 | 1,992 | 2,007 | 2,024 |
Average common shares outstanding - Diluted | 2,027 | 2,031 | 2,042 | 2,035 | 2,032 |
Reference is made to Note 2 Acquisitions and Divestitures, Note 8 Property, Plant and Equipment and Note 16 Litigation, appearing in the Notes to Consolidated Financial Statements included this Form 8-K.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Bristol-Myers Squibb Company
In our opinion, the consolidated financial statements listed in the index appearing under Item 7.2 on page 1 present fairly, in all material respects, the financial position of Bristol-Myers Squibb Company and its subsidiaries at December 31, 1999, 1998 and 1997, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 7.3 on page 1 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
New York, New York
January 24, 2000,
except as to the effects of the discontinued
operations presentation described in Note 3
for which the date is September 28, 2000
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF EARNINGS
(in millions except per share amounts)
Year Ended December 31, | |||
EARNINGS | 1999 | 1998 | 1997 |
Net Sales | $16,878 | $15,061 | $13,698 |
Expenses: | |||
Cost of products sold | 4,542 | 3,896 | 3,548 |
Marketing, selling and administrative | 3,789 | 3,685 | 3,425 |
Advertising and product promotion | 1,549 | 1,518 | 1,582 |
Research and development | 1,759 | 1,506 | 1,322 |
Special charge | - | 800 | - |
Provision for restructuring | - | 157 | 120 |
Gain on sale of business | - | (201) | - |
Other | 81 | 62 | (37) |
11,720 | 11,423 | 9,960 | |
Earnings from Continuing Operations Before Income Taxes | 5,158 | 3,638 | 3,738 |
Provision for income taxes | 1,369 | 888 | 994 |
Earnings from Continuing Operations | 3,789 | 2,750 | 2,744 |
Discontinued Operations, net | 378 | 391 | 461 |
Net Earnings | $4,167 | $3,141 | $3,205 |
Earnings Per Common Share | |||
Basic | |||
Earnings from Continuing Operations | $1.91 | $1.38 | $1.38 |
Discontinued Operations | .19 | .20 | .23 |
Net Earnings | $2.10 | $1.58 | $1.61 |
Diluted | |||
Earnings from Continuing Operations | $1.87 | $1.36 | $1.34 |
Discontinued Operations | .19 | .19 | .23 |
Net Earnings | $2.06 | $1.55 | $1.57 |
Average Common Shares Outstanding | |||
| 1,984 | 1,987 | 1,992 |
| 2,027 | 2,031 | 2,042 |
Dividends Per Common Share | $.86 | $.78 | $.76 |
The accompanying notes are an integral part of these financial statements.
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME AND RETAINED EARNINGS
(in millions except per share amounts)
Year Ended December 31, | |||
1999 | 1998 | 1997 | |
COMPREHENSIVE INCOME | |||
Net Earnings | $4,167 | $3,141 | $3,205 |
Other Comprehensive Income: | |||
Foreign currency translation | (212) | (86) | (195) |
Tax effect | 18 | (3) | 23 |
Total Other Comprehensive Income | (194) | (89) | (172) |
Comprehensive Income | $3,973 | $3,052 | $3,033 |
RETAINED EARNINGS | |||
Retained Earnings, January 1 | $12,540 | $10,950 | $9,260 |
Net earnings | 4,167 | 3,141 | 3,205 |
16,707 | 14,091 | 12,465 | |
Less dividends | 1,707 | 1,551 | 1,515 |
Retained Earnings, December 31 | $15,000 | $12,540 | $10,950 |
The accompanying notes are an integral part of these financial statements.
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEET
ASSETS
(dollars in millions)
December 31, | |||
ASSETS | 1999 | 1998 | 1997 |
Current Assets: | |||
Cash and cash equivalents | $2,720 | $2,244 | $1,456 |
Time deposits and marketable securities | 237 | 285 | 338 |
Receivables, net of allowances | 3,272 | 3,190 | 2,973 |
Inventories | 2,126 | 1,873 | 1,799 |
Prepaid expenses | 912 | 1,190 | 1,170 |
Total Current Assets | 9,267 | 8,782 | 7,736 |
Property, Plant and Equipment, net | 4,621 | 4,429 | 4,156 |
Insurance Recoverable | 468 | 523 | 619 |
Excess of cost over net tangible assets Received in business acquisitions | 1,502 | 1,587 | 1,625 |
Other Assets | 1,256 | 951 | 841 |
Total Assets | $17,114 | $16,272 | $14,977 |
The accompanying notes are an integral part of these financial statements.
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(dollars in millions)
December 31, | |||
LIABILITIES | 1999 | 1998 | 1997 |
Current Liabilities: | |||
Short-term borrowings | $432 | $482 | $543 |
Accounts payable | 1,657 | 1,380 | 1,017 |
Accrued expenses | 2,367 | 2,302 | 1,939 |
Product liability | 287 | 877 | 865 |
U.S. and foreign income taxes payable | 794 | 750 | 668 |
Total Current Liabilities | 5,537 | 5,791 | 5,032 |
Other Liabilities | 1,590 | 1,541 | 1,447 |
Long-Term Debt | 1,342 | 1,364 | 1,279 |
Total Liabilities | 8,469 | 8,696 | 7,758 |
STOCKHOLDERS' EQUITY | |||
Preferred stock, $2 convertible series: Authorized 10 million shares; issued and outstanding 10,977 in 1999, 11,684 in 1998 and 12,936 in 1997, liquidation value of $50 per share |
- |
- |
- |
Common stock, par value of $.10 per share: Authorized 4.5 billion shares; issued 2,192,970,504 in 1999, 2,188,316,808 in 1998 and 1,083,253,703 in 1997 |
219 |
219 |
108 |
Capital in excess of par value of stock | 1,533 | 1,075 | 544 |
Other Comprehensive Income | (816) | (622) | (533) |
Retained earnings | 15,000 | 12,540 | 10,950 |
15,936 | 13,212 | 11,069 | |
Less cost of treasury stock - 212,164,851 common shares in 1999, 199,550,532 in 1998 and 90,069,383 in 1997 | 7,291 | 5,636 | 3,850 |
Total Stockholders' Equity | 8,645 | 7,576 | 7,219 |
Total Liabilities and Stockholders' Equity | $17,114 | $16,272 | $14,977 |
The accompanying notes are an integral part of these financial statements.
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(dollars in millions)
Year Ended December 31, | |||
1999 | 1998 | 1997 | |
Cash Flows From Operating Activities: | |||
Net earnings | $4,167 | $3,141 | $3,205 |
Depreciation and amortization | 678 | 625 | 591 |
Special Charge | - | 800 | - |
Provision for restructuring | - | 201 | 225 |
Gain on sale of businesses | - | (201) | (225) |
Other operating items | (79) | (1) | 33 |
Receivables | (176) | (253) | (479) |
Inventories | (317) | (139) | (288) |
Accounts payable and accrued expenses | 243 | 242 | (179) |
Income taxes | 738 | 414 | 318 |
Product liability | (726) | (715) | (795) |
Insurance recoverable | 59 | 196 | 234 |
Other assets and liabilities | (117) | (190) | (164) |
Net Cash Provided by Operating Activities | 4,470 | 4,120 | 2,476 |
Cash Flows From Investing Activities: | |||
Proceeds from sales of time deposits and marketable securities | 51 | 309 | 530 |
Purchases of time deposits and marketable securities | (4) | (256) | (363) |
Additions to fixed assets | (709) | (788) | (767) |
Proceeds from sale of business | 134 | 417 | 370 |
Acquisition of businesses | (266) | (93) | (254) |
Other, net | 35 | 65 | (48) |
Net Cash Used in Investing Activities | (759) | (346) | (532) |
Cash Flows From Financing Activities: | |||
Short-term borrowings | (26) | (81) | 81 |
Long-term debt | (54) | 73 | 328 |
Issuances of common stock under stock plans | 8 | 140 | 117 |
Purchases of treasury stock | (1,419) | (1,561) | (1,162) |
Dividends paid | (1,707) | (1,551) | (1,515) |
Net Cash Used in Financing Activities | (3,198) | (2,980) | (2,151) |
Effect of Exchange Rates on Cash | (37) | (6) | (18) |
Increase (Decrease) in Cash and Cash Equivalents | 476 | 788 | (225) |
Cash and Cash Equivalents at Beginning of Period | 2,244 | 1,456 | 1,681 |
Cash and Cash Equivalents at End of Period | $2,720 | $2,244 | $1,456 |
The accompanying notes are an integral part of these financial statements.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 1 ACCOUNTING POLICIES
The financial statements have been restated to present the results of the Company's Beauty Care and Zimmer businesses as discontinued operations. Previously reported amounts have been reclassified to make them consistent with the 1999 presentation.
Basis of Consolidation - The consolidated financial statements include the accounts of Bristol-Myers Squibb Company and all of its subsidiaries.
Cash and Cash Equivalents - Cash and cash equivalents primarily include securities with a maturity of three months or less at the time of purchase, recorded at cost, which approximates market.
Time Deposits and Marketable Securities - Time deposits and marketable securities are available for sale and are recorded at fair value, which approximates cost.
Inventory Valuation - Inventories are generally stated at average cost, not in excess of market.
Capital Assets and Depreciation - Expenditures for additions, renewals and betterments are capitalized at cost. Depreciation is generally computed by the straight-line method based on the estimated useful lives of the related assets. The estimated useful lives of the major classes of depreciable assets are 50 years for buildings and 3 to 40 years for machinery, equipment and fixtures.
Excess of Cost over Net Tangible Assets - The excess of cost over net tangible assets received in business acquisitions is being amortized on a straight-line basis over periods not exceeding 40 years. The excess of cost over net tangible assets is periodically reviewed for impairment based on an assessment of future operations (including cash flows) to ensure that the excess of cost over net tangible assets is appropriately valued.
Product Liability - Accruals for product liability are recorded, on an undiscounted basis, when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on existing information. These accruals are adjusted periodically as assessment efforts progress or as additional information becomes available. Receivables for related insurance or other third party recoveries for product liabilities are recorded, on an undiscounted basis, when it is probable that a recovery will be realized. Insurance recoverable recorded on the balance sheet has, in general, payment terms of three years or less.
Revenue Recognition - Revenue from product sales is recognized upon shipment to customers.
Earnings Per Share - Basic earnings per common share are computed using the weighted average number of shares outstanding during the year. Diluted earnings per common share are computed using the weighted average number of shares outstanding during the year, plus the incremental shares outstanding assuming the exercise of dilutive stock options.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 2 ACQUISITIONS AND DIVESTITURES
In June 1999, the Company acquired Cal-C-Tose, a nutritional milk modifier. In September 1999, the Company entered into a development and commercialization agreement for aripiprazole, a novel drug under study in Phase III trials as a treatment for schizophrenia, with Otsuka Pharmaceutical Co., Ltd. In December 1999 the Company completed the sale of Laboratori Guieu, a gynecological, pediatric and dermatological products business headquartered in Milan Italy. The gain on the sale was not material.
In 1998 the Company acquired Redmond Products, Inc., a leading hair care manufacturer in the United States, and Phytoervas, a line of premium retail shampoos and conditioners in Brazil. The Company also in 1998 acquired Dong-A-Biotech Co., Ltd., a marketer and distributor of pharmaceutical products in South Korea. In 1998, the Company divested its Ban brand of anti-perspirants and deodorants, A/S GEA, a Denmark-based generic drug business, and Hexachimie, a specialty chemical manufacturer based in France, resulting in a combined pretax gain of $201 million.
In 1997, the Company completed the sale of Linvatec Corporation, its arthroscopy and surgical powered instrument business, resulting in a pretax gain of $225 million included in earnings from discontinued operations. The Company acquired Abeefe S.A., Peru's largest pharmaceutical manufacturer and marketer of a broad range of prescription and nonprescription anti-infective, respiratory, anti-inflammatory and dermatological products. The Company also acquired CHOCO MILK*, Mexico's leading milk-based nutritional supplement, and SAL DE UVAS PICOT*, a leading effervescent antacid product in Mexico.
Note 3 DISCONTINUED OPERATIONS
On September 28, 2000, the Company announced the planned divestitures of Clairol and Zimmer. The Company expects these businesses to be divested in 2001. Accordingly, the operations of Clairol (which includes its Matrix Essentials, Inc. affiliate) and Zimmer have been reflected as discontinued operations in the accompanying consolidated financial statements.
The net sales and earnings of discontinued operations are as follows:
Year Ended December 31, | |||
1999 | 1998 | 1997 | |
Net sales | $3,344 | $3,223 | $3,003 |
Earnings before income taxes | 609 | 630 | 744 |
Income taxes | 231 | 239 | 283 |
Net earnings from discontinued operations | $378 | $391 | $461 |
Earnings before income taxes for the years ended December 31, 1998 and 1997 include restructuring charges of $44 million and $105 million, respectively. Earnings before income taxes for the year ended December 31, 1997 include a gain on the sale of a business of $225 million.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The consolidated balance sheet, consolidated statement of comprehensive income and retained earnings and consolidated statement of cash flows include the Clairol and Zimmer businesses ("Discontinued Operations"). On a historical basis, the Company did not allocate any debt to these businesses as the Company uses a centralized approach to cash management and financing of its operations. The net assets of Discontinued Operations expected to be disposed at December 31, 1999, 1998 and 1997 were as follows:
December 31, | |||
1999 | 1998 | 1997 | |
Net current assets | $566 | $612 | $598 |
Property, Plant and Equipment, net | 396 | 375 | 342 |
Other non-current assets and liabilities, net | 233 | 213 | 176 |
Net assets of discontinued operations | $1,195 | $1,200 | $1,116 |
Cash flows from operating and investing activities of Discontinued Operations for the years ended December 31, 1999, 1998 and 1997 were $261 million, $289 million and $452 million (including $370 million of proceeds from the sale of Linvatec Corporation), respectively.
Note 4 EARNINGS PER SHARE
The computations for basic earnings per common share and diluted earnings per common share are as follows:
Year Ended December 31, | ||||||
Earnings per Common Share - Basic: | 1999 | 1998 | 1997 | |||
Net Earnings from Continuing Operations | $3,789 | $2,750 | $2,744 | |||
Discontinued Operations | 378 | 391 | 461 | |||
Net Earnings | $4,167 | $3,141 | $3,205 | |||
Average Common Shares Outstanding | 1,984 | 1,987 | 1,992 | |||
Earnings Per Common Share - Basic | ||||||
Earnings from Continuing Operations | $1.91 | $1.38 | $1.38 | |||
Discontinued Operations | .19 | .20 | .23 | |||
Net Earnings | $2.10 | $1.58 | $1.61 | |||
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Year Ended December 31, | ||||||||
Earnings per Common Share - Diluted: | 1999 | 1998 | 1997 | |||||
Net Earnings from Continuing Operations | $3,789 | $2,750 | $2,744 | |||||
Discontinued Operations | 378 | 391 | 461 | |||||
Net Earnings | $4,167 | $3,141 | $3,205 | |||||
Average Common Shares Outstanding | 1,984 | 1,987 | 1,992 | |||||
Incremental Shares Outstanding Assuming the Exercise of Dilutive Stock Options | 43 | 44 | 50 | |||||
2,027 | 2,031 | 2,042 | ||||||
Earnings from Continuing Operations | $1.87 | $1.36 | $1.34 | |||||
Discontinued Operations | .19 | .19 | .23 | |||||
Net Earnings | $2.06 | $1.55 | $1.57 | |||||
Note 5 OTHER INCOME AND EXPENSES
Year Ended December 31, | |||
1999 | 1998 | 1997 | |
Interest income | $107 | $87 | $106 |
Interest expense | (130) | (154) | (118) |
Other - net | (58) | 5 | 49 |
$(81) | $(62) | $37 | |
Cash payments for interest were $119 million, $157 million and $110 million in 1999, 1998 and 1997, respectively.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 6 PROVISION FOR INCOME TAXES
The components of earnings from continuing operations before income taxes were:
December 31, | |||
1999 | 1998 | 1997 | |
U.S. | $3,203 | $2,191 | $2,363 |
Non-U.S. | 1,955 | 1,447 | 1,375 |
$5,158 | $3,638 | $3,738 | |
The provision for income taxes consisted of:
December 31, | |||
1999 | 1998 | 1997 | |
Current: | |||
U.S. | $602 | $658 | $453 |
Non-U.S. | 346 | 271 | 370 |
948 | 929 | 823 | |
Deferred: | |||
U.S. | 369 | (71) | 221 |
Non-U.S. | 52 | 30 | (50) |
421 | (41) | 171 | |
$1,369 | $888 | $994 | |
Income taxes paid during the year were $719 million, $579 million and $706 million in 1999, 1998 and 1997, respectively.
The Company's provision for income taxes in 1999, 1998 and 1997 was different from the amount computed by applying the statutory United States Federal income tax rate to earnings before income taxes, as a result of the following:
% of Earnings | |||
Before Income Taxes | |||
1999 | 1998 | 1997 | |
U.S. statutory rate | 35.0% | 35.0% | 35.0% |
Foreign | (5.6) | (5.0) | (3.6) |
Effect of operations in Puerto Rico | (2.0) | (2.9) | (3.4) |
Special charge | - | (.7) | - |
State and local taxes | .5 | .4 | .4 |
Other | (1.4) | (2.4) | (1.8) |
26.5% | 24.4% | 26.6% | |
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Prepaid taxes at December 31, 1999, 1998 and 1997 were $567 million, $809 million and $818 million, respectively. Prepaid taxes relating to discontinued operations ranged between approximately 3% to 9% of total company prepaid taxes for the years ended December 31, 1999, 1998 and 1997 respectively. The deferred income tax liability, included in Other Liabilities, at December 31, 1999, 1998 and 1997 was $445 million, $277 million and $352 million, respectively. The amounts of deferred income tax liability relating to discontinued operations for the years ended December 31, 1999, 1998 and 1997 are not material.
The components of prepaid and deferred income taxes consisted of:
December 31, | |||
1999 | 1998 | 1997 | |
Depreciation | $(278) | $(278) | $(278) |
Post retirement and pension benefits | 120 | 195 | 191 |
Product liability | (13) | 248 | 154 |
Restructuring | 25 | 55 | 77 |
Other | 268 | 312 | 322 |
$122 | $532 | $466 | |
The Company has settled its United States Federal income tax returns with the Internal Revenue Service through 1991.
United States Federal income taxes have not been provided on substantially all of the unremitted earnings of non-U.S. subsidiaries, since it is management's practice and intent to reinvest such earnings in the operations of these subsidiaries. The total amount of the net unremitted earnings of non-U.S. subsidiaries was approximately $4.3 billion at December 31, 1999.
Note 7 INVENTORIES
December 31, | |||
1999 | 1998 | 1997 | |
Finished goods | $1,472 | $1,209 | $1,153 |
Work in process | 302 | 236 | 197 |
Raw and packaging materials | 352 | 428 | 449 |
$2,126 | $1,873 | $1,799 | |
Inventories of discontinued operations comprised approximately 23% of total company inventory for the years ended December 31, 1999, 1998 and 1997.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 8 PROPERTY, PLANT AND EQUIPMENT
December 31, | |||
1999 | 1998 | 1997 | |
Land | $170 | $176 | $180 |
Buildings | 3,096 | 2,875 | 2,631 |
Machinery, equipment and fixtures | 4,093 | 3,885 | 3,646 |
Construction in progress | 482 | 572 | 544 |
7,841 | 7,508 | 7,001 | |
Less accumulated depreciation | 3,220 | 3,079 | 2,845 |
$4,621 | $4,429 | $4,156 | |
Property, plant and equipment of discontinued operations comprised approximately 8% of total company
property, plant and equipment, net for the years ended December 31, 1999, 1998 and 1997.
Note 9 SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Included in short-term borrowings were amounts due to banks, primarily foreign banks, of $245 million, $272 million and $524 million at December 31, 1999, 1998 and 1997, respectively, and current installments of long-term debt of $10 million, $43 million and $19 million at December 31, 1999, 1998, and 1997, respectively. Also included in short-term borrowings at December 31, 1999 and 1998, was $177 million and $167 million, respectively, of commercial paper outstanding. This commercial paper has original maturities not exceeding 270 days and is denominated in euros and U.S. dollars. The average interest rate on short-term borrowings was 6.76% and on current installments of long-term debt was 6.81% at December 31, 1999.
During 1999, the Company renewed two credit facilities, aggregating $500 million, with a syndicate of lenders as support for its commercial paper program. The credit facilities consist of a $250 million, 364-day credit facility, which may be renewed annually with the consent of the lenders for an additional 364-day period and a $250 million, four- and five-year credit facility, extendible at each anniversary date with the consent of the lenders. There were no borrowings outstanding under the credit facilities at December 31, 1999. In addition, the Company has unused short-term lines of credit with foreign banks of $420 million.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The components of long-term debt were:
December 31, | |||
1999 | 1998 | 1997 | |
6.80% Debentures, due in 2026 | $345 | $345 | $344 |
7.15% Debentures, due in 2023 | 344 | 344 | 343 |
6.875% Debentures, due in 2097 | 296 | 296 | 296 |
Various Rate Yen Term Loans, due in 2003 | 71 | 71 | 70 |
2.14% Yen Notes, due in 2005 | 62 | 55 | - |
1.73% Yen Notes, due in 2003 | 62 | 54 | - |
3.51% Deutsche Mark Interest on Yen Principal Term Loan, due in 2005 | 57 | 50 | 49 |
5.75% Industrial Revenue Bonds, due in 2024 | 34 | 34 | 34 |
5.00% Yen Term Loan, paid in 1999 | - | 29 | 29 |
Various Rate Term Loans, paid in 1999 | - | - | 26 |
2.83% Yen Term Loan, due in 2002 | 28 | 25 | 24 |
Capitalized Leases | 22 | 29 | 26 |
Other, 4.30% to 10.25%,due in varying Amounts through 2014 | 21 | 32 | 38 |
$1,342 | $1,364 | $1,279 | |
Note 10 STOCKHOLDERS' EQUITY
Changes in capital shares and capital in excess of par value of stock were:
Shares of Common Stock | Capital in Excess of Par Value of Stock (dollars inmillions) | ||
Issued |
Treasury | ||
Balance, December 31, 1996 | 1,082,496,016 | 81,806,550 | $382 |
Issued pursuant to stock plans and options | 738,151 | (8,514,867) | 162 |
Conversions of preferred stock | 19,536 | - | - |
Purchases | - | 16,777,700 | - |
Balance, December 31, 1997 | 1,083,253,703 | 90,069,383 | 544 |
Effect of two-for-one stock split | 1,083,253,703 | 90,069,383 | (108) |
Issued pursuant to stock plans and options | 16,931,302 | (11,189,998) | 700 |
Conversions of preferred stock | 21,230 | - | - |
Purchases | - | 30,601,764 | - |
Other | 4,856,870 | - | (61) |
Balance, December 31, 1998 | 2,188,316,808 | 199,550,532 | 1,075 |
Issued pursuant to stock plans and options | 4,641,700 | (9,694,871) | 458 |
Conversions of preferred stock | 11,996 | - | - |
Purchases | - | 22,309,190 | - |
Balance, December 31, 1999 | 2,192,970,504 | 212,164,851 | $1,533 |
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Each share of the Company's preferred stock is convertible into 16.96 shares of common stock and is callable at the Company's option. The reductions in the number of issued shares of preferred stock in 1999, 1998 and 1997 were due to conversions into shares of common stock.
Dividends per common share were $.86 in 1999, $.78 in 1998 and $.76 in 1997.
Stock Compensation Plans
Under the Company's 1997 Stock Incentive Plan, officers, directors and key employees may be granted options to purchase the Company's common stock at no less than 100% of the market price on the date the option is granted. Options generally become exercisable in installments of 25% per year on each of the first through the fourth anniversaries of the grant date and have a maximum term of 10 years. Additionally, the plan provides for the granting of stock appreciation rights whereby the grantee may surrender exercisable options and receive common stock and/or cash measured by the excess of the market price of the common stock over the option exercise price. The plan also provides for the granting of performance-based stock options to certain key executives.
Under the terms of the 1997 Stock Incentive Plan, as amended, additional shares are authorized in the amount of 0.9% of the outstanding shares per year through 2002. The plan incorporates the Company's long-term performance awards.
In addition, the 1997 Stock Incentive Plan provides for the granting of up to 20,000,000 shares of common stock to key employees, subject to restrictions as to continuous employment except in the case of death or normal retirement. Restrictions generally expire over a five-year period from date of grant. Compensation expense is recognized over the restricted period. At December 31, 1999, a total of 2,135,524 restricted shares were outstanding under the plan.
Under the TeamShare Stock Option Plan, all full-time employees, excluding key executives, meeting certain years of service requirements are granted options to purchase the Company's common stock at the market price on the date the options are granted. The Company has authorized 62,000,000 shares for issuance under the plan. As of December 31, 1999, a total of 23,579,400 shares have been exercised under the plan.
The Company applies Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for its plans. Accordingly, no compensation expense has been recognized for its stock-based compensation plans other than for restricted stock and performance-based awards. Had compensation cost for the Company's other stock option plans been determined based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed under Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, the Company's net income and earnings per share would have been reduced by approximately $198 million, or $.10 per common share, basic and diluted, in 1999, $136 million, or $.07 per common share, basic and diluted, in 1998 and $85 million, or $.04 per common share, basic and diluted, in 1997. The fair value of the options granted during 1999, 1998 and 1997 was estimated as $17.37 per common share, $11.80 per common share and $6.41 per common share, respectively, on the date of grant using the Black-Scholes option-pricing model with the
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
following assumptions:
1999 | 1998 | 1997 | |
Dividend yield | 2.4% | 3.1% | 4.3% |
Volatility | 21.8% | 18.2% | 19.3% |
Risk-free interest rate | 5.5% | 6.3% | 6.5% |
Assumed forfeiture rate | 3.0% | 3.0% | 3.0% |
Expected life (years) | 7 | 7 | 7 |
Stock option transactions were:
Shares of Common Stock | Weighted Average Exercise Price of Shares UnderPlan | ||
Available forOption | Under Plan | ||
Balance, December 31, 1996 | 18,329,358 | 70,028,732 | $34.27 |
Authorized | 9,006,205 | - | - |
Granted | (11,347,801) | 11,347,801 | 65.77 |
Exercised | - | (12,787,811) | 30.34 |
Lapsed | 2,284,788 | (2,287,820) | 45.63 |
Balance, December 31, 1997 | 18,272,550 | 66,300,902 | 40.08 |
Effect of two-for-one stock split | 18,272,550 | 66,300,902 | - |
Authorized | 17,877,318 | - | - |
Granted | (35,498,350) | 35,498,350 | 51.40 |
Exercised | - | (36,697,942) | 16.30 |
Lapsed | 2,382,746 | (2,382,746) | 34.27 |
Balance, December 31, 1998 | 21,306,814 | 129,019,466 | 29.47 |
Authorized | 19,898,896 | - | - |
Granted | (24,221,950) | 24,221,950 | 65.39 |
Exercised | - | (20,425,070) | 20.41 |
Lapsed | 3,552,037 | (3,552,037) | 42.51 |
Balance, December 31, 1999 | 20,535,797 | 129,264,309 | $37.27 |
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The following table summarizes information concerning currently outstanding and exercisable options:
Options Outstanding | Options Exercisable | ||||
Range of Exercise Prices | Number Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price |
$10 - $20 | 36,055,360 | 4.10 | $15.61 | 36,050,360 | $15.61 |
$20 - $30 | 23,777,750 | 6.29 | 24.32 | 19,415,975 | 24.57 |
$30 - $40 | 12,441,697 | 7.19 | 33.68 | 6,530,637 | 33.68 |
$40 - $50 | 4,319,338 | 8.09 | 45.70 | 158,263 | 44.10 |
$50 - $60 | 29,924,664 | 8.18 | 51.73 | 5,012,685 | 51.00 |
$60 - up | 22,745,500 | 9.19 | 66.49 | 152,319 | 61.10 |
129,264,309 | 67,320,239 | ||||
At December 31, 1999, 204,705,699 shares of common stock were reserved for issuance pursuant to stock plans, options and conversions of preferred stock. Options related to discontinued operations and included in the above amounts are not material.
Note 11 FINANCIAL INSTRUMENTS
Foreign exchange option contracts and, to a lesser extent, forward contracts, are used to hedge anticipated foreign currency transactions, primarily intercompany inventory purchases expected to occur within the next year.
The Company has exposures to net foreign currency denominated assets and liabilities, which approximated $2,179 million, $2,310 million and $2,070 million at December 31, 1999, 1998 and 1997, respectively, primarily in Europe, Japan and Canada. The Company mitigates the effect of these exposures through third-party borrowings. The exposures to net foreign currency denominated assets and liabilities related to discontinued operations and included in the above amounts are not material.
The risk of loss associated with the types of foreign exchange option contracts entered into by the Company is limited to premium amounts paid for the option contracts. Premiums are deferred in Prepaid Expenses and amortized in the consolidated statement of earnings (in the Other caption) over the time frame of the underlying hedged transaction. Gains related to the option contracts, which qualify as hedges of foreign currency anticipated transactions, are recognized in earnings when the hedged transactions are recognized. Gains and losses on foreign exchange forward contracts are recognized in the basis of the underlying transaction being hedged.
The notional amounts of the Company's foreign exchange option contracts at December 31, 1999, 1998 and 1997 were $1,762 million, $1,307 million and $1,279 million, respectively. The notional amounts of foreign exchange contracts related to discontinued operations and included in the above amounts are not material.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The Company does not anticipate any material adverse effect on its financial position resulting from its involvement in these instruments, nor does it anticipate non-performance by any of its counterparties.
At December 31, 1999, 1998 and 1997, the carrying value of all financial instruments, both short- and long-term, approximated their fair values.
Note 12 LEASES
Minimum rental commitments under all noncancelable operating leases, primarily real estate, in effect at December 31, 1999 were:
Years Ending December 31, | |
2000 | $109 |
2001 | 97 |
2002 | 80 |
2003 | 60 |
2004 | 46 |
Later years | 141 |
Total minimum payments | 533 |
Less total minimum sublease rentals | 111 |
Net minimum rental commitments | $422 |
Operating lease rental expense (net of sublease rental income of $24 million in 1999, $27 million in 1998 and $26 million in 1997) was $90 million in 1999, $105 million in 1998 and $124 million in 1997.
Minimum rental commitments and operating lease rental expense related to discontinued operations and included in the above amounts are not material.
Note 13 SEGMENT INFORMATION
On September 28, 2000, as described in Note 3, the Company announced its planned divestitures of the Clairol and Zimmer businesses. Consistent with this announcement and the Company's decision to focus its resources on the medicines business the Company has reduced the number of its reporting segments from four segments to one segment. The Company will continue to operate its Nutritional and ConvaTec businesses, however, these are not material and share many of the same economic and operating characteristics as the medicines business. The segment information presented herein does not reflect this reorganization of the Company's operating segments that was effected with the discontinuance of the Beauty Care and Zimmer businesses.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
The major product categories for each business segment are as follows:
Year Ended December 31, | |||
1999 | 1998 | 1997 | |
Medicines | |||
PRAVACHOL* | $1,704 | $1,643 | $1.437 |
TAXOL* | 1,481 | 1,206 | 941 |
GLUCOPHAGE | 1,317 | 862 | 579 |
Oncology Therapeutics Network | 894 | 657 | 480 |
BUSPAR* | 605 | 531 | 443 |
ZERIT* | 605 | 551 | 398 |
PARAPLATIN* | 600 | 525 | 437 |
PLAVIX | 547 | 144 | - |
Beauty Care | |||
Hair care | 1,250 | 1,179 | 794 |
Hair color | 905 | 894 | 841 |
Nutritionals | |||
Infant formulas | 1,233 | 1,203 | 1.219 |
Medical Devices | |||
Orthopedic implants | 665 | 596 | 615 |
Ostomy | 449 | 464 | 451 |
Inter-area sales, which are usually billed at or above manufacturing costs, by geographic area, were:
December 31, | |||
1999 | 1998 | 1997 | |
United States | $1,647 | $1,434 | $1,370 |
Europe, Mid-East and Africa | 937 | 843 | 762 |
Other Western Hemisphere | 46 | 29 | 32 |
Pacific | 25 | 16 | 24 |
Total inter-area eliminations | $2,655 | $2,322 | $2,188 |
The Medicines Segment represents pharmaceuticals and consumer medicines businesses. In addition, the segment information reflects certain internal organizational changes made in 1999. Prior year data has been restated accordingly.
Included in earnings before taxes of each segment is a cost of capital charge. The offset to the cost of capital charge is included in Other. In addition, Other principally consists of interest income, interest expense, certain administrative expenses and allocations to the industry segments for certain corporate programs. In 1998, Other includes the gain on sale of businesses of $201 million and the provision for restructuring of $201 million. In 1997, Other includes the gain on sale of a business of $225 million and the provision for restructuring of $225 million. Other assets principally consist of cash and cash equivalents, time deposits and marketable securities, and certain other assets.
* Indicates brand names of products which are trademarks owned by the Company.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
BUSINESS SEGMENTS | Net Sales | Earnings Before Taxes | ||||
1999 | 1998 | 1997 | 1999 | 1998 | 1997 | |
Medicines | $14,309 | $12,573 | $11,211 | $4,018 | $3,402 | $3,033 |
Beauty Care | 2,381 | 2,305 | 1,895 | 247 | 343 | 269 |
Nutritionals | 1,850 | 1,759 | 1,793 | 375 | 371 | 360 |
Medical Devices | 1,682 | 1,647 | 1,802 | 365 | 336 | 345 |
Net sales and earnings Before taxes | $20,222 | $18,284 | $16,701 | $5,005 | $4,452 | $4,007 |
GEOGRAPHIC AREAS | Net Sales | Earnings Before Taxes | ||||
1999 | 1998 | 1997 | 1999 | 1998 | 1997 | |
United States | $14,445 | $12,527 | $11,014 | $3,491 | $3,164 | $2,581 |
Europe, Mid-East and Africa | 5,040 | 4,873 | 4,653 | 1,268 | 1,139 | 1,109 |
Other Western Hemisphere | 1,681 | 1,749 | 1,586 | 110 | 223 | 225 |
Pacific | 1,711 | 1,457 | 1,636 | 83 | 2 | 52 |
Inter-area eliminations | (2,655) | (2,322) | (2,188) | 53 | (76) | 40 |
Net sales and earnings Before taxes | $20,222 | $18,284 | $16,701 | 5,005 | 4,452 | 4,007 |
Special Charge | - | (800) | - | |||
Other | 762 | 616 | 475 | |||
$5,767 | $4,268 | $4,482 | ||||
BUSINESS SEGMENTS | Year-End Assets | ||
1999 | 1998 | 1997 | |
Medicines | $8,769 | $8,296 | $7,964 |
Beauty Care | 1,121 | 1,058 | 833 |
Nutritionals | 1,190 | 1,094 | 1,113 |
Medical Devices | 1,185 | 1,174 | 1,225 |
Identifiable segment assets | $12,265 | $11,622 | $11,135 |
GEOGRAPHIC AREAS | Year-End Assets | ||
1999 | 1998 | 1997 | |
United States | $6,989 | $6,657 | $6,417 |
Europe, Mid-East and Africa | 3,622 | 3,533 | 3,426 |
Other Western Hemisphere | 1,425 | 1,238 | 1,063 |
Pacific | 943 | 942 | 989 |
Inter-area eliminations | (714) | (748) | (760) |
Identifiable geographic assets | $12,265 | $11,622 | $11,135 |
Other assets | 4,849 | 4,650 | 3,842 |
$17,114 | $16,272 | $14,977 | |
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
BUSINESS SEGMENTS | Capital Expenditures | Depreciation | ||||
1999 | 1998 | 1997 | 1999 | 1998 | 1997 | |
Medicines | $457 | $535 | $524 | $279 | $272 | $244 |
Beauty Care | 58 | 71 | 58 | 35 | 29 | 22 |
Nutritionals | 56 | 59 | 61 | 43 | 38 | 42 |
Medical Devices | 44 | 33 | 24 | 32 | 36 | 46 |
Business segment total | 615 | 698 | 667 | 389 | 375 | 354 |
94 | 90 | 100 | 49 | 38 | 43 | |
$709 | $788 | $767 | $438 | $413 | $397 | |
Note 14 RETIREMENT PLANS
The Company and certain of its subsidiaries have defined benefit pension plans and defined contribution plans for regular full-time employees. The principal pension plan is the Bristol-Myers Squibb Retirement Income Plan. The Company's funding policy is to contribute amounts to provide for current service and to fund past service liability. Plan benefits are primarily based on years of credited service and on the participants' compensation. Plan assets principally consist of equity and fixed income securities.
The Company's share of the components of total net pension expense and pension assets and obligation, related to continuing operations as well as any curtailment gain or loss, has not yet been determined, and therefore the following information relates to the Company's pension plan including discontinued operations. The amounts related to discontinued operations are estimated to represent approximately 10% of total pension obligations and assets of the Company's retirement plans.
Cost for the Company's defined benefit plans included the following components:
Year Ended December 31, | |||
1999 | 1998 | 1997 | |
Service cost - benefits earned during the year | $161 | $132 | $135 |
Interest cost on projected benefit obligation | 217 | 207 | 203 |
Expected earnings on plan assets | (285) | (258) | (231) |
Net amortization and deferral | 4 | (1) | 10 |
Net pension expense | $97 | $80 | $117 |
The weighted average actuarial assumptions for the Company's pension plans were as follows:
December 31, | |||
1999 | 1998 | 1997 | |
Discount rate | 7.8% | 7.0% | 7.5% |
Compensation increase | 4.8% | 4.3% | 4.5% |
Long-term rate of return | 10.0% | 10.0% | 10.0% |
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Changes in benefit obligation and plan assets were:
Year Ended December 31, | |||
1999 | 1998 | 1997 | |
Benefit obligation at beginning of year | $3,216 | $2,928 | $2,734 |
Service cost - benefits earned during the year | 161 | 132 | 135 |
Interest cost on projected benefit obligation | 217 | 207 | 203 |
Actuarial (gains) and losses | (203) | 160 | 45 |
Benefits paid | (254) | (211) | (189) |
Benefit obligation at end of year | $3,137 | $3,216 | $2,928 |
December 31, | |||
1999 | 1998 | 1997 | |
Fair value of plan assets at beginning of year | $3,137 | $2,949 | $2,596 |
Actual earnings on plan assets | 561 | 359 | 504 |
Employer contribution | 46 | 40 | 38 |
Benefits paid | (254) | (211) | (189) |
Fair value of plan assets at end of year | $3,490 | $3,137 | $2,949 |
December 31, | |||
1999 | 1998 | 1997 | |
Plan assets in excess of (less than) projected benefit obligation | $353 | $(79) | $21 |
Unamortized net assets at adoption | (2) | (33) | (47) |
Unrecognized prior service cost | 37 | 48 | 56 |
Unrecognized net (gains) and losses | (385) | 87 | 13 |
Net amount recognized | $3 | $23 | $43 |
Amounts recognized in the consolidated balance sheet consist of:
Prepaid benefit cost | 181 | 187 | 194 |
Accrued benefit liability | (190) | (190) | (173) |
Other asset | 12 | 26 | 22 |
Net amount recognized | $3 | $23 | $43 |
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $319 million, $245 million and $56 million, respectively, as of December 31, 1999, $288 million, $230 million and $40 million, respectively, as of December 31, 1998 and $271 million, $208 million and $37 million, respectively, as of December 31, 1997. This is primarily attributable to an unfunded benefit equalization plan.
The principal defined contribution plan is the Bristol-Myers Squibb Savings and Investment Program. The Company's contribution is based on employee contributions and the level of company match. Company contributions to the plan were $49 million in 1999, $45 million in 1998 and $40 million in 1997.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 15 POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS
The Company provides comprehensive medical and group life benefits to substantially all U.S. retirees who elect to participate in the Company's comprehensive medical and group life plans. The medical plan is contributory. Contributions are adjusted periodically and vary by date of retirement and the original retiring company. The life insurance plan is non-contributory. Plan assets principally consist of equity securities and fixed income securities.
The Company's share of the components of total post retirement benefit expense and post retirement benefit assets and obligation, related to continuing operations as well as any curtailment gain or loss, has not yet been determined, and therefore the following information relates to the Company's post retirement benefit plan including discontinued operations.
Cost for the Company's post retirement benefit plans included the following components:
Year Ended December 31, | |||
1999 | 1998 | 1997 | |
Service cost - benefits earned during the year | $10 | $8 | $9 |
Interest cost on accumulated post retirement benefit obligation | 36 | 35 | 36 |
Expected earnings on plan assets | (13) | (11) | (9) |
Net amortization and deferral | 1 | (3) | (2) |
Net post retirement benefit expense | $34 | $29 | $34 |
The weighted average actuarial assumptions for the Company's post retirement benefit plans were as follows:
December 31, | |||
1999 | 1998 | 1997 | |
Discount rate | 7.8% | 7.0% | 7.5% |
Long-term rate of return | 10.0% | 10.0% | 10.0% |
Changes in benefit obligation and plan assets were:
Year Ended December 31, | |||
1999 | 1998 | 1997 | |
Benefit obligation at beginning of year | $507 | $495 | $482 |
Service cost - benefits earned during the year | 10 | 8 | 9 |
Interest cost on accumulated post-retirement benefit obligation | 36 | 35 | 36 |
Plan participants' contributions | 2 | 2 | 2 |
Plan amendments | (9) | (1) | - |
Actuarial (gains) and losses | 16 | 6 | (2) |
Benefits paid | (41) | (38) | (32) |
Benefit obligation at end of year | $521 | $507 | $495 |
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
December 31, | |||
1999 | 1998 | 1997 | |
Fair value of plan assets at beginning of year | $128 | $113 | $89 |
Actual earnings on plan assets | 24 | 15 | 20 |
Employer contribution | 39 | 36 | 34 |
Plan participants' contributions | 2 | 2 | 2 |
Benefits paid | (41) | (38) | (32) |
Fair value of plan assets at end of year | $152 | $128 | $113 |
December 31, | |||
1999 | 1998 | 1997 | |
Accumulated post retirement benefit obligation in excess of plan assets | $(369) | $(379) | $(382) |
Unrecognized prior service cost | (6) | 3 | 4 |
Unrecognized net earnings | (55) | (60) | (65) |
Accrued post retirement benefit expense | $(430) | $(436) | $(443) |
For measurement purposes, an annual rate of increase in the per capita cost of covered health care benefits of 7% for participants was assumed for 2000; the rate was assumed to decrease gradually to 5% in 2007 and to remain at that level thereafter.
A one-percentage-point change in assumed health care cost trend rates would have the following effects:
1-Percentage- Point Increase | 1-Percentage- Point Decrease | |
Effect on the aggregate of the service and interest cost Components of net post retirement benefit expense | $1 | $(1) |
Effect on the accumulated post retirement benefit obligation | $21 | $(19) |
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 16 LITIGATION
Various lawsuits, claims and proceedings of a nature considered ordinary and routine to its business are pending against the Company and certain of its subsidiaries. The most significant of these are described below. Material developments in such matters are described in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000, June 30, 2000, September 30, 2000, and below. Reference is made to Item 3 Legal Proceedings in Part 1 in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1999.
Breast Implant
The Company, together with its subsidiary, Medical Engineering Corporation (MEC), and certain other companies, has been named as a defendant in a number of claims and lawsuits alleging damages for personal injuries of various types resulting from polyurethane-covered breast implants and smooth-walled breast implants formerly manufactured by MEC or a related Company. Of the more than 90,000 claims or potential claims against the Company in direct lawsuits or through registration in the nationwide class action settlement approved by the Federal District Court in Birmingham, Alabama (the "Revised Settlement"), most have been dealt with through the Revised Settlement, other settlements, or trial. As of August 1, 2000, the Company's contingent liability in respect of breast implant claims was limited to residual unpaid Revised Settlement obligations and to roughly 950 remaining opt-outs who have pursued or may pursue their claims in court.
As of October 31, 2000, approximately 5,000 United States and 300 foreign breast implant recipients were plaintiffs in lawsuits pending in federal and state courts in the United States and certain courts in Canada and Australia. These figures include the claims of plaintiffs that are in the process of being settled and/or dismissed. In these lawsuits, about 2,300 U.S. and 70 foreign plaintiffs opted out of the Revised Settlement. The lawsuits of the 2,700 U.S. plaintiffs who did not opt out are expected to be dismissed since these plaintiffs are among the estimated 74,000 women with MEC implants who chose to participate in the nationwide settlement. Of the 2,300 opt-out plaintiffs, an estimated 1,350 have claims based upon products that were not manufactured or sold by MEC or that have been or are in the process of being settled and/or dismissed. Accordingly, the number of remaining plaintiffs who have pursued or may pursue their claims in court against the Company is roughly 950 as stated in the preceding paragraph.
Under the terms of the Revised Settlement, additional opt-outs are expected to be minimal since the deadline for U.S. class members to opt out has passed. In addition, the Company's remaining obligations under the Revised Settlement Program are limited because most payments to "Current Claimants" have already been made, no additional "Current Claims" may be filed without court approval, and because payments of claims to so-called "Other Registrants" and "Late Registrants" are limited by the terms of the Revised Settlement. Separate class action settlements have been approved in the provincial courts of Ontario and
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Quebec, and an agreement has been reached under which other foreign breast implant recipients may settle their claims. The Company believes it will be able to address remaining opt-out claims as well as expected remaining obligations under the Revised Settlement program within its reserves described below.
On March 31, 2000, the federal government filed a civil suit in federal district court in Birmingham, Alabama, against several parties in the breast implant litigation, including the Company. The government claims it is entitled to reimbursement for certain costs incurred in connection with medical treatment provided to women with breast implants. The Company believes this case is wholly without merit, and in all events it will be able to address the government lawsuit within its reserves as described below.
In the fourth quarter of 1993, the Company recorded a charge of $500 million before taxes ($310 million after taxes) in respect of breast implant cases. The charge consisted of $1.5 billion for potential liabilities and expenses, offset by $1.0 billion of expected insurance proceeds. In the fourth quarters of 1994 and 1995, the Company recorded additional special charges of $750 million before taxes ($488 million after taxes) and $950 million before taxes ($590 million after taxes), respectively, related to breast implant product liability claims. In the fourth quarter of 1998, the Company recorded an additional special charge to earnings in the amount of $800 million before taxes and increased its insurance receivable in the amount of $100 million, resulting in a net charge to earnings of $433 million after taxes in respect of breast implant product liability claims. During 1999, 1998 and 1997, cash payments, net of insurance receipts, of $631 million, $551 million and $549 million, respectively, were made related to the breast implant product liability claims. At December 31, 1999, $354 million was included in current and other liabilities for breast implant product liability claims.
Prescription Drug
As of December 31, 1999, the Company remains a defendant in several actions challenging pricing on brand name prescription drugs. These actions include several currently consolidated antitrust actions brought against the Company and more than 30 other pharmaceutical manufacturers, drug wholesalers and pharmacy benefit managers by certain chain drugstores, supermarket chains and independent drugstores; state pharmaceutical actions; and purported class actions on behalf of consumers. In the fourth quarter of 1998, the Company recorded a special charge to earnings in the amount of $100 million before taxes ($62 million after taxes) in respect of this prescription drug litigation. The Company will continue to defend vigorously its position in this ongoing litigation and believes it will be able to address all remaining claims within its reserves. During 1999, cash payments of $59 million were made related to the pricing litigation claims.
TAXOL*
There is no composition of matter patent for paclitaxel (the active ingredient in TAXOL*). In the United States, the Company is presently the only manufacturer and marketer of a product
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
containing paclitaxel. In 1997 and 1998, the Company filed several lawsuits alleging that a number of generic drug companies infringed its patents covering certain methods of administering paclitaxel when they filed abbreviated new drug applications seeking regulatory approval to sell paclitaxel. These actions were consolidated for discovery in the United States
District Court for the District of New Jersey. The Company does not assert a monetary claim against any of the defendants, but seeks to prevent the defendants from marketing paclitaxel in a manner that violates the Company's patents. The defendants have asserted that they do not infringe the Company's patents and that these patents are invalid and unenforceable. Some defendants also asserted counterclaims seeking damages for alleged antitrust and unfair competition violations.
On January 4, 2000, the District Court granted the Company's motion to dismiss certain of the antitrust and unfair competition counterclaims. The Company's motion for summary judgment on the remaining antitrust and unfair competition counterclaims was denied on March 17, 2000.
On February 29, 2000, the District Court granted in part the generic companies' summary judgment motions for invalidity by finding all claims of the Company's patents in dispute invalid, except for claims limited to the treatment of ovarian cancer. As a result of this ruling, the generic companies may obtain U.S. Food and Drug Administration approval to market paclitaxel solely for treatment of metastatic breast cancer after failure of combination chemotherapy. The District Court's opinion left for determination at trial the validity of the claims of the Company's patents directed to the low dose, three-hour administration of paclitaxel for ovarian cancer and denied the generic companies' summary judgment motion arguing non-infringement of the Company's patents.
In order to pursue an immediate appellate review of the District Court's invalidity findings, the Company voluntarily relinquished all rights in the remaining ovarian tumor specific claims of its patents. On April 7, 2000, the District Court granted the Company's request for an entry of judgment. The Company's appeal of the District Court's judgment is pending before the Federal Circuit Court of Appeals. If the Company is successful on appeal and the trial that would follow a successful appeal, the Company believes its remaining patent rights would apply to all tumor types.
In September 2000, one of the defendants received final approval from the United States Food and Drug Administration for its Abbreviated New Drug Application for paclitaxel and can market the product. Also in September, another defendant received tentative approval from the United States Food and Drug Administration and can market their paclitaxel product after the other defendant's statutory six-month period of generic exclusivity expires.
It is not possible at this time to make a reasonable assessment of the outcome of the appeal and the remaining claims in these actions nor to reasonably estimate the impact on TAXOL* sales or the amount of damages were the Company not to prevail.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
VANLEV* Litigation
The Company, its Chairman of the Board and Chief Executive Officer, Charles A. Heimbold, Jr. and its Chief Scientific Officer and President - Pharmaceutical Research Institute, Peter S. Ringrose, Ph.D., are defendants in a number of purported class actions filed in the U.S. District Court for the District of New Jersey in April, May and June alleging violations of federal securities laws and regulations. Plaintiffs claim that the defendants disseminated materially false and misleading statements and failed to disclose information concerning the safety and expected availability of its product VANLEV* during the period November 8, 1999 through April 19, 2000. Plaintiffs seek compensatory damages and costs and expenses.
It is not possible at this time to make a reasonable assessment of the outcome of this matter or the amount of damages were the Company not to prevail.
While it is not possible to predict with certainty the outcome of these cases, it is the opinion of management that they will not have a material adverse effect on the Company's operating results, liquidity or consolidated financial position.
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
Note 17 SELECTED QUARTERLY FINANCIAL DATA
(Unaudited, in millions, except per share amounts)
First Quarter | Second Quarter | Third Quarter | Fourth Quarter |
Year | |
1999: | |||||
Net Sales | $4,044 | $4,054 | $4,190 | $4,590 | $16,878 |
Gross Profit | 2,983 | 2,948 | 3,035 | 3,370 | 12,336 |
Net earnings from Continuing Operations | 975 | 865 | 988 | 961 | 3,789 |
Net earnings from Discontinued Operations | 91 | 87 | 109 | 91 | 378 |
Net earnings | 1,066 | 952 | 1,097 | 1,052 | 4,167 |
Earnings Per Common Share | |||||
Basic | |||||
Earnings from Continuing Operations | .49 | .44 | .50 | .48 | 1.91 |
Discontinued Operations | .05 | .04 | .05 | .05 | .19 |
Net Earnings | .54 | .48 | .55 | .53 | 2.10 |
Diluted | |||||
Earnings from Continuing Operations | .48 | .43 | .49 | .47 | 1.87 |
Discontinued Operations | .05 | .04 | .05 | .05 | .19 |
Net Earnings | .53 | .47 | .54 | .52 | 2.06 |
1998: | |||||
Net Sales | $3,670 | $3,589 | $3,718 | $4,084 | $15,061 |
Gross Profit | 2,756 | 2,630 | 2,767 | 3,012 | 11,165 |
Net earnings from Continuing Operations (a) | 858 | 732 | 859 | 301 | 2,750 |
Net earnings from Discontinued Operations | 69 | 103 | 107 | 112 | 391 |
Net earnings | 927 | 835 | 966 | 413 | 3,141 |
Earnings Per Common Share | |||||
Basic | |||||
Earnings from Continued Operations(a) | .43 | .37 | .43 | .15 | 1.38 |
Discontinued Operations(b) | .04 | .05 | .06 | .06 | .20 |
Net Earnings | .47 | .42 | .49 | .21 | 1.58 |
Diluted | |||||
Earnings from Continuing Operations(a) | .42 | .36 | .42 | .15 | 1.36 |
Discontinued Operations(b) | .04 | .05 | .05 | .05 | .20 |
Net Earnings | .46 | .41 | .47 | .20 | 1.55 |
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in millions)
per common share - basic and $.24 per common share - diluted) for litigation of breast implant and prescription drug pricing cases, offset by expected insurance recoveries.
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.
BRISTOL-MYERS SQUIBB COMPANY | |
(Registrant) |
Date: January 24, 2001 | By: /s/ Frederick S. Schiff ---------------------------------------------- |
Frederick S. Schiff Senior Vice President - Financial Operations and Controller | |
SCHEDULE II
BRISTOL-MYERS SQUIBB COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(dollars in millions)
Description | Balance at beginningof period | Additions charged tocosts and expenses | Deductions - baddebts written off | Balance at end ofperiod | |
Allowances for discounts and doubtful accounts: |
|
|
|
For the year ended December 31, 1999
$147
$65
$44
$168
For the year ended December 31, 1998
$109
$57
$19
$147
For the year ended December 31, 1997
$107
$19
$17
$109
Allowances for discounts and doubtful accounts, charges during the period and amounts written off related to discontinued operations and included in the above amounts are not material.
