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 quarterly period ended September 30, 1994
Commission File Number 1-1136
BRISTOL-MYERS SQUIBB COMPANY
(Exact name of registrant as specified in its charter)
Delaware 22-079-0350
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
345 Park Avenue, New York, N.Y. 10154
(Address of principal executive offices)
Telephone: (212) 546-4000
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 [ ]
At September 30, 1994, there were 510,678,165 shares outstanding of the
Registrant's $.10 par value Common Stock.
BRISTOL-MYERS SQUIBB COMPANY
INDEX TO FORM 10-Q
SEPTEMBER 30, 1994
Page No.
--------
Part I - Financial Information:
Condensed Consolidated Balance Sheet - September 30, 1994
and December 31, 1993 2 - 3
Condensed Consolidated Statement of Earnings for the three
months and nine months ended September 30, 1994 and 1993 4
Condensed Consolidated Statement of Cash Flows for the nine
months ended September 30, 1994 and 1993 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 12
Part II - Other Information 13 - 17
Signatures 18
- 1 -
BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET - ASSETS
(Unaudited, in millions of dollars except share amounts)
September 30, December 31,
1994 1993
------------- ------------
Current Assets:
Cash and cash equivalents $ 1,843 $ 2,421
Time deposits and marketable securities 721 308
Receivables 1,972 1,859
Finished goods 768 741
Work in process 229 239
Raw and packaging materials 395 342
------- -------
Inventories 1,392 1,322
Prepaid expenses 747 660
------- -------
Total Current Assets 6,675 6,570
------- -------
Property, Plant and Equipment 5,623 5,236
Less: Accumulated depreciation 2,139 1,862
------- -------
3,484 3,374
------- -------
Insurance Recoverable 968 1,000
Other Assets 1,729 1,157
------- -------
Total Assets $12,856 $12,101
======= =======
- 2 -
BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET -
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited, in millions of dollars except share amounts)
September 30, December 31,
1994 1993
------------- ------------
Current Liabilities:
Short-term borrowings $ 755 $ 177
Accounts payable 578 649
Accrued expenses 1,631 1,550
U.S. and foreign income taxes payable 775 689
------- -------
Total Current Liabilities 3,739 3,065
Product Liability 1,190 1,370
Other Liabilities 1,127 1,138
Long-Term Debt 639 588
------- -------
Total Liabilities 6,695 6,161
------- -------
Stockholders' Equity:
Preferred stock, $2 convertible series:
Authorized 10 million shares; issued and
outstanding 22,214 in 1994 and 25,798 in
1993, liquidation value of $50 per share - -
Common stock, par value of $.10 per share:
Authorized 1.5 billion shares; issued
532,711,881 in 1994 and 532,688,458 in 1993 53 53
Capital in excess of par value of stock 342 353
Cumulative translation adjustments (258) (332)
Retained earnings 7,875 7,243
------- -------
8,012 7,317
Less cost of treasury stock -
22,033,716 common shares in 1994 and
20,782,281 in 1993 1,851 1,377
------- -------
Total Stockholders' Equity 6,161 5,940
------- -------
Total Liabilities and Stockholders' Equity $12,856 $12,101
======= =======
- 3 -
BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited, in millions of dollars except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1994 1993 1994 1993
------ ------ ------ ------
Net Sales $2,932 $2,862 $8,736 $8,420
------ ------ ------ ------
Expenses:
Cost of products sold 760 763 2,246 2,221
Marketing, selling, administrative
and other 706 707 2,239 2,137
Advertising and product promotion 318 302 972 957
Research and development 274 267 806 800
------ ------ ------ ------
2,058 2,039 6,263 6,115
------ ------ ------ ------
Earnings Before Income Taxes 874 823 2,473 2,305
Provision for Income Taxes 253 215 729 602
------ ------ ------ ------
Net Earnings $ 621 $ 608 $1,744 $1,703
====== ====== ====== ======
Earnings per share of common stock $ 1.22 $ 1.18 $3.43 $3.30
====== ====== ===== =====
Average common shares outstanding
(in millions) 509 514 509 516
=== === === ===
Dividends per share of common stock $.73 $.72 $2.19 $2.16
==== ==== ===== =====
- 4 -
BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions of dollars)
Nine Months Ended
September 30,
--------------------
1994 1993
------- --------
Cash Flows From Operating Activities:
Net earnings $1,744 $1,703
Depreciation and amortization 242 230
Other operating items 3 13
Receivables (65) 96
Inventories (55) 14
Accounts payable (85) 5
Product liability (230) 26
Income taxes 109 (64)
Other assets and liabilities (17) (207)
------ ------
Net Cash Provided by Operating Activities 1,646 1,816
------ ------
Cash Flows From Investing Activities:
Proceeds from sales of time deposits and
marketable securities 34 988
Purchases of time deposits and marketable securities (447) (1,019)
Additions to fixed assets (381) (357)
Proceeds from sales of businesses 285 -
Purchases of businesses and other investments (657) (60)
Other, net (6) (4)
------ ------
Net Cash Used in Investing Activities (1,172) (452)
------ ------
Cash Flows From Financing Activities:
Short-term borrowings 536 (164)
Long-term debt 31 405
Issuances of common stock under stock plans 21 22
Purchases of treasury stock (506) (315)
Dividends paid (1,112) (1,116)
------ ------
Net Cash Used in Financing Activities (1,030) (1,168)
------ ------
Effect of Exchange Rates on Cash (22) (5)
------ ------
(Decrease)/Increase in Cash and Cash Equivalents (578) 191
Cash and Cash Equivalents at Beginning of Period 2,421 2,137
------ ------
Cash and Cash Equivalents at End of Period $1,843 $2,328
====== ======
- 5 -
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments (consisting only
of normal adjustments) necessary for a fair presentation of the financial
position of Bristol-Myers Squibb Company (the "Company") at September 30,
1994 and December 31, 1993, the results of operations for the three and nine
months ended September 30, 1994 and 1993, and cash flows for the nine months
ended September 30, 1994 and 1993. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the related notes included in the Company's 1993 Annual
Report to Stockholders.
On August 5, 1994, the Company acquired Matrix Essentials, Inc., a leading
manufacturer in North America of professional hair care and beauty products
sold exclusively in beauty salons. In connection with the acquisition, the
Company issued 7,452,818 shares of common stock.
On September 20, 1994, the Company completed the acquisition of the
remaining ownership interest in the UPSA Group ("UPSA"), a privately owned,
research-based French pharmaceutical company which develops and markets a
wide range of pharmaceutical and nonprescription health products, including
analgesics and cardiovascular and gastrointestinal specialties. The Company
has held a minority stake in UPSA since 1990. A portion of the acquisition
cost consisted of a deferred payment of approximately $280 million payable
in September 1995 and borrowings undertaken to partially finance the
acquisition of approximately $225 million, which were recorded in Short-Term
Borrowings. The total investment in UPSA was recorded in Other Assets.
Effective July 31, 1994, the Company sold Squibb Diagnostics, its diagnostic
contrast media and radiopharmaceuticals businesses, to Bracco S.p.A. The
Company will continue manufacturing certain diagnostic products, including
Prohance and Isovue, and nuclear medicine products. The Company also will
act as Bracco's distributor in Canada.
On November 3, 1994, the Company entered into an agreement with
Merck & Co., Inc. to acquire the Calgon Vestal Laboratories business, a
skin care and infection control products business.
- 6 -
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
Third Quarter Results of Operations
- -----------------------------------
Sales
- -----
Worldwide sales for the third quarter of 1994 increased 2% over the prior
year to $2,932. The consolidated sales growth resulted from a 1% increase
due to volume and a 1% increase due to the favorable effect of foreign
currency translation. Changes in selling prices had no effect on sales
growth for the quarter. Domestic sales remained at prior year levels,
while international sales increased 6%. Worldwide sales for the third
quarter of 1993 decreased 3% compared to the third quarter of 1992
reflecting a 4% decrease due to the unfavorable effect of foreign currency
translation, a 2% decrease due to volume, partly offset by an increase of
3% due to selling prices.
Industry Segments
- -----------------
Net Sales % Change
------------------ ------------------
Three Months Ended Three Months Ended
------------------ ------------------
9/30/94 9/30/93 9/30/94 9/30/93
------- ------- ------- -------
Pharmaceutical Products $1,682 $1,644 2% (4%)
Medical Devices 407 415 (2%)(a) -
Nonprescription Health Products 492 488 1% (3%)
Toiletries and Beauty Aids 351 315 11% (1%)
------ ------
Total Company $2,932 $2,862 2% (3%)
====== ======
(a) Excluding the effect of businesses divested in the fourth quarter of 1993
and in 1994, sales increased 6%.
Sales of the pharmaceutical products segment, which is the largest segment at
57% of total company sales, increased 2% over the third quarter of 1993 to
$1,682. Sales growth resulted from a 2% increase due to volume, a 1% increase
due to the favorable effect of foreign currency translation, offset by a 1%
decrease in selling prices. International sales increased 6%, while domestic
sales decreased 1%. Sales of cardiovascular drugs, the largest product
group in the segment, increased 3% to $684. Captopril, an
angiotensin converting enzyme (ACE) inhibitor sold primarily under the
trademark CAPOTEN*, is the Company's largest selling product. Sales of
captopril increased 2% to $382 benefitting from new indications for the
treatment of diabetic nephropathy and left ventricular dysfunction. Strong
increases in sales of PRAVACHOL*, the Company's newer cholesterol-lowering
agent, and MONOPRIL*, a second generation ACE inhibitor with once-a-day dosage,
also contributed to the growth of cardiovascular drug sales. These increases
* Indicates brand names of products which are registered trademarks owned by
the Company.
- 7 -
were partially offset by decreases in sales of CORGARD*, the patent for
which expired in the U.S. in September 1993. Anti-infective drug sales
remained at prior year levels as increases in sales of CEFZIL*, an oral
cephalosporin used in the treatment of respiratory infections, and
introductory sales of ZERIT*, the Company's new antiretroviral drug
approved in the U.S. in June 1994, were offset by declines in sales of
AZACTAM*, VIDEX*, broad spectrum penicillins and in AMIKIN*, which is
experiencing generic competition. In the Company's line of anti-cancer
agents, sales of TAXOL* were very strong. In April 1994, TAXOL* received
approval for use in the treatment of breast cancer after failure of
combination chemotherapy for metastatic disease or relapse within six
months of adjuvant chemotherapy; in late 1992, TAXOL* was initially
approved for treatment of patients with ovarian cancer whose first-line or
subsequent chemotherapy has failed. Sales of PLATINOL* and PARAPLATIN*
also reported domestic growth. These increases were partially offset by
decreases in sales of VEPESID*, the patent for which expired in the U.S.
in November 1993. Sales of central nervous system drugs increased due to
STADOL NS*, a prescription nasal spray analgesic, and BUSPAR*, the
Company's novel anti-anxiety agent. Dermatological drug sales increased
due to the introductory sales of DOVONEX*, a vitamin D3 analogue for the
treatment of moderate psoriasis. Effective July 31, 1994, the Company
sold Squibb Diagnostics, its diagnostic contrast media and
radiopharmaceuticals businesses, to Bracco S.p.A. The Company will
continue manufacturing certain diagnostic products, including Prohance and
Isovue, and nuclear medicine products. The Company also will act as
Bracco's distributor in Canada. For the third quarter of 1993, sales of
the pharmaceutical products segment were 4% below prior year levels as
increases in sales of anti-cancer drugs were more than offset by decreases
in sales of cardiovascular, anti-infective and central nervous system
drugs.
In the medical devices segment, sales decreased 2% to $407. Excluding the
sales of Edward Weck Incorporated, which was divested in the fourth
quarter of 1993, and Xomed-Treace, Inc., which was divested in April 1994,
sales increased 6%, reflecting a 4% increase due to volume and a 2%
increase due to the favorable effect of foreign currency translation.
Changes in selling prices had no effect on sales growth for the quarter.
Sales of ostomy care products increased due to the growth of the ACTIVE
LIFE/COLODRESS* and the SUR-FIT/COMBIHESIVE* product lines. Sales of
prosthetic implants increased due to growth overseas, led by the continued
success of the Insall/Burstein II Modular Total Knee System, the MGII*
Total Knee System and the CENTRALIGN* Precoat Hip Prosthesis. In the
Company's line of wound care products, sales increased reflecting volume
growth of DUODERM* products. On November 3, 1994, the Company entered
into an agreement with Merck & Co., Inc. to acquire the Calgon Vestal
Laboratories business, a skin care and infection control products
business. For the third quarter of 1993, medical devices segment sales
remained at prior year levels as growth of prosthetic implants, ostomy and
wound care products was offset by the unfavorable effect of foreign
currency translation.
Sales of the nonprescription health products segment increased 1% to $492.
Sales growth resulted from a 2% increase due to selling prices, partially
offset by a 1% decrease due to volume. Exchange rate fluctuations had no
effect on sales growth for the quarter. Sales of infant formulas were
above prior year levels as increases in LACTOFREE*, a milk-based,
lactose-free infant formula, ENFAMIL*, NUTRAMIGEN* and
- 8 -
PROSOBEE* more than offset decreases in other brands. Introductory sales
of NEXT STEP* Toddler Formula also contributed to sales growth of infant
formulas. Sales of analgesics declined primarily due to increased
competition in the U.S., however, sales of EXCEDRIN*, the Company's
leading analgesic in the U.S., increased. On September 20, 1994, the
Company completed the acquisition of the remaining ownership interest in
the UPSA Group, a privately owned, research-based French pharmaceutical
company which develops and markets a wide range of pharmaceutical and
nonprescription health products, including analgesics and cardiovascular
and gastrointestinal specialties. The Company has held a minority stake
in UPSA since 1990. For the third quarter of 1993, nonprescription health
products segment sales decreased 3% compared to the third quarter of the
prior year primarily as a result of decreases in sales of ENFAMIL* and
PROSOBEE* infant formulas and analgesic products.
Sales of the toiletries and beauty aids segment increased 11% over the
prior year to $351 with a 10% increase due to volume and a 1% increase due
to selling prices. Exchange rate fluctuations had no effect on sales
growth for the quarter. The increase in volume primarily reflects sales
from Matrix Essentials, Inc., a leading manufacturer of professional hair
care and beauty products acquired in August 1994, offset in part by the
divestiture of the Clairol beauty appliance business in the fourth quarter
of 1993. Sales of the Company's haircoloring products increased primarily
due to growth of MISS CLAIROL* and NICE 'N EASY* and the introduction of
NATURAL INSTINCTS* in the U.S. Sales of hair care products increased
benefitting from the SYSTEME BIOLAGE*, VAVOOM* and MATRIX ESSENTIALS*
lines from Matrix Essentials, Inc. Increases in these products were
partially offset by decreases in sales of BAN* deodorants and
anti-perspirants primarily due to increased competition in the U.S. For
the third quarter of 1993, sales of the toiletries and beauty aids segment
decreased 1% compared to the third quarter of the prior year primarily due
to decreases in sales of haircoloring products.
Cost of Products Sold and Operating Expenses
- --------------------------------------------
In general, the business of the Company's industry segments is not seasonal.
Total costs and expenses for the quarter ended September 30, 1994 as a
percentage of sales decreased to 70.2% from 71.2% for the same period of
the prior year. Cost of products sold decreased to 25.9% of sales from
26.7% in 1993, principally due to favorable product mix and the
divestiture of businesses with higher cost of products sold. As a
percentage of sales, marketing, selling, administrative and other expenses
decreased to 24.1% compared to 24.7% in 1993 reflecting lower sales force
and general administrative expenses as a percentage of sales. Marketing,
selling, administrative and other expenses in the third quarter of 1994
decreased as a percentage of sales compared to the second quarter of 1994
reflecting a similar trend in timing of expenses as experienced in prior
years. Expenditures for advertising and promotion in support of new and
existing products increased to $318, or 10.8% of sales, compared to $302,
or 10.6% of sales, in 1993. Research and development expenses were $274
compared to $267 in 1993, and as a percentage of sales remained constant
with the prior year at 9.3%. Pharmaceutical research and development
spending increased from prior year levels and, as a percentage of
pharmaceutical sales, was 14.1% compared to 13.9% in 1993.
Earnings
- --------
Earnings before income taxes for the third quarter increased 6% to $874
- 9 -
from $823 in 1993, as pretax margins improved to 29.8% from 28.8%
reflecting the Company's ongoing commitment to contain costs. The
effective tax rate for the period increased to 28.9% from 26.1% in 1993
due to changes approved in the Omnibus Budget Reconciliation Act of 1993
which included curtailment of certain tax benefits from Puerto Rico
operations. As a result, net earnings increased 2% to $621 from $608.
Earnings per share increased 3% to $1.22 from $1.18 in 1993, in part the
result of average common shares outstanding of 509 million in 1994
compared to 514 million in 1993.
Year-to-Date Results of Operations
- ----------------------------------
Sales
- -----
Worldwide sales for the nine months ended September 30, 1994 increased 4%
over the prior year to $8,736. The consolidated sales growth resulted
from a 3% increase due to volume and a 1% increase due to selling prices.
Exchange rate fluctuations had no effect on sales growth for the nine
months. Domestic sales increased 4%, and international sales increased
3%. Worldwide sales for the first nine months of 1993 increased 1%
compared to the prior year, reflecting a 2% increase due to selling
prices, a 1% increase due to volume, offset in part by a 2% decrease due
to the unfavorable effect of foreign currency translation.
Industry Segments
- -----------------
Net Sales % Change
------------------ ------------------
Nine Months Ended Nine Months Ended
------------------ ------------------
9/30/94 9/30/93 9/30/94 9/30/93
------- ------- ------- -------
Pharmaceutical Products $5,114 $4,785 7% 1%
Medical Devices 1,237 1,253 (1%)(a) 2%
Nonprescription Health Products 1,425 1,436 (1%) -
Toiletries and Beauty Aids 960 946 1% 1%
------ ------
Total Company $8,736 $8,420 4% 1%
====== ======
(a) Excluding the effect of businesses divested in the fourth quarter of
1993 and in 1994, sales increased 5%.
Sales of the pharmaceutical products segment increased 7% to $5,114,
reflecting a 7% increase due to volume, a 1% increase due to selling prices
and a 1% decrease due to the unfavorable effect of foreign currency
translation. Domestic sales were strong, increasing 11% while
international sales increased 2%. Cardiovascular drug sales of $2,060 were
9% above prior year levels with growth primarily due to CAPOTEN*,
PRAVACHOL* and MONOPRIL*. Sales of anti-infectives decreased as growth of
CEFZIL* was more than offset by declines in broad spectrum penicillins and
in AZACTAM*, VIDEX* and AMIKIN*. Sales of anti-cancer drugs increased
primarily due to the continued growth of TAXOL*. Sales of the Company's
central nervous system drugs increased, reflecting growth of BUSPAR* and
STADOL NS*. For the first nine months of 1993, sales of the pharmaceutical
products segment increased 1% over the first nine months of the prior year
primarily as a result of increases in sales of anti-cancer and central
- 10 -
nervous system drugs, offset in part by declines in cardiovascular drugs.
Sales of the medical devices segment decreased 1% to $1,237. Excluding
the sales of divested businesses, sales increased 5% with a 3% increase
due to volume and a 2% increase due to selling prices. Exchange rate
fluctuations had no effect on sales growth for the nine months. Increases in
sales of the SUR-FIT/COMBIHESIVE* and the ACTIVE LIFE/COLODRESS* product
lines led to the increase in sales of ostomy care products. Sales of
prosthetic implants increased due to growth of the Insall/Burstein II
Modular Total Knee System, the MG II* Total Knee System and the
CENTRALIGN* Precoat Hip Prosthesis. Increased sales of wound care
products resulted from the success of the DUODERM* product line. For the
first nine months of 1993, medical devices segment sales increased 2% over
the first nine months of the prior year primarily as a result of sales
growth in prosthetic implants, ostomy and wound care products.
In the nonprescription health products segment, sales decreased 1% to
$1,425, reflecting a 3% decrease due to volume, offset in part by a 2%
increase due to selling prices. Exchange rate fluctuations had no effect
on sales growth for the nine months. Sales of infant formulas increased
primarily due to LACTOFREE*, ENFAMIL* and introductory sales of NEXT STEP*
Toddler Formula. These increases were more than offset by decreases in
sales of analgesics and cough/cold remedies, which were adversely affected
by increased competition in the U.S. For the first nine months of 1993,
nonprescription health products segment sales remained at prior year
levels primarily due to increased sales of infant formulas offset by
declines in analgesic products.
Sales of the toiletries and beauty aids segment increased 1% to $960,
reflecting a 3% increase due to selling prices, offset in part by a 1%
decrease due to volume and a 1% decrease due to the unfavorable effect of
foreign currency translation. Sales growth of the Company's haircoloring
products was led by NICE 'N EASY*, LASTING COLOR BY LOVING CARE* and
ULTRESS*. Introductory sales of NATURAL INSTINCTS* also contributed to
sales growth. Sales of hair care products increased with sales of the
SYSTEME BIOLAGE*, VAVOOM* and MATRIX ESSENTIALS* lines from Matrix
Essentials, Inc. Increases in sales of skin care products primarily
resulted from the introduction of several new products in the SEA BREEZE*
line in the U.S. These increases were offset in part by decreased sales
of BAN* anti-perspirants and deodorants, resulting from increased
competition in the U.S., and the divestiture of the Clairol beauty
appliance business in the fourth quarter of 1993. For the first nine
months of 1993, sales of the toiletries and beauty aids segment increased
1% over the first nine months of the prior year primarily due to increases
in sales of haircoloring and skin care products.
Cost of Products Sold and Operating Expenses
- --------------------------------------------
In general, the business of the Company's industry segments is not seasonal.
Total costs and expenses for the nine months ended September 30, 1994 as a
percentage of sales decreased to 71.7% from 72.6% for the same period of
1993. Cost of products sold decreased to 25.7% of sales from 26.4% in
1993 primarily as a result of favorable product mix and the divestiture of
businesses with higher cost of sales. Marketing, selling, administrative
and other expenses, as a percentage of sales, were 25.6% compared to 25.4%
in 1993. Expenditures for advertising and promotion in support of new and
existing products were 11.1% of sales compared to 11.4% in the prior year.
Research and development expenses were $806 in 1994 compared to
- 11 -
$800 in 1993, and as a percentage of sales were 9.2% in 1994 and 9.5% in
1993. Pharmaceutical research and development spending increased slightly
from 1993 levels, and as a percentage of pharmaceutical sales was 13.6% as
compared to 14.4% in 1993.
Earnings
- --------
Earnings before income taxes for the first nine months increased 7% to
$2,473 from $2,305 in 1993, and pretax margins increased to 28.3% from
27.4%. The effective tax rate for the period increased to 29.5% compared
to 26.1% in 1993 due to changes approved in the Omnibus Budget
Reconciliation Act of 1993. As a result, net earnings increased 2% to
$1,744 from $1,703. Earnings per share increased 4% to $3.43 from $3.30
in 1993.
Financial Position
- ------------------
The balance sheet at September 30, 1994 and the statement of cash flows
for the nine months then ended reflect the Company's strong financial
position. The Company continues to maintain a high level of working
capital totaling $2,936 at September 30, 1994 compared to $3,505 at
December 31, 1993. The decline in working capital primarily results from
the increase in short-term borrowings due to the UPSA acquisition.
Internally generated funds continue to be the Company's primary source for
financing expenditures for new plant and equipment. Additions to fixed
assets for the nine months ended September 30, 1994 were $381 compared to
$357 during the same period of 1993.
The Company has exposures to net foreign currency denominated assets and
liabilities (which approximated $1.5 billion at December 31, 1993) primarily
in the French Franc, Italian Lira, Deutsche Mark, Japanese Yen and in the
U.K. Pound. The Company mitigates the effect of foreign currency risk
through third party borrowings, forward foreign exchange contracts and
foreign exchange options.
During the nine months ended September 30, 1994, the Company repurchased
9,234,800 shares of its common stock at a total cost of $506.
The Company continues to receive information concerning the number and
nature of claims brought against it and certain subsidiaries by women who
have elected to opt out of the settlement entered into in March regarding
breast implant product liability claims. The Company believes that when
the total number of such claimants is known and their claims are analyzed
an additional charge to earnings may likely be required which would have a
material effect on the Company's results for the year, but not on the
Company's consolidated financial position.
Reference is made to Part II, Item 1 - Legal Proceedings in which
developments are described for various lawsuits, claims and proceedings in
which the Company is involved.
- 12 -
BRISTOL-MYERS SQUIBB COMPANY
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- --------------------------
Various lawsuits, claims and proceedings of a nature considered normal to
its business are pending against the Company and certain of its
subsidiaries. The most significant of these are reported in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993,
and material developments in such matters are described below. Reference
is also made to the Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1994 and June 30, 1994, respectively.
Breast Implant Litigation
- -------------------------
On September 1, 1994, the United States District Court gave its final
approval to a settlement entered into by the Company, its subsidiary
Medical Engineering Corporation ("MEC"), other defendants and certain
plaintiffs regarding all pending and future breast implant product
liability claims brought in the United States against certain defendants,
including the Company, MEC and certain other subsidiaries. The court's
approval excluded claimants from Quebec, Ontario and Australia from the
settlement but allowed voluntary participation by such women. A number of
appeals of the court's order approving the settlement have been filed,
primarily by health insurers, health care organizations, and foreign
claimants. A number of claimants have opted out of the settlement.
The settlement arises out of a substantial number of actions filed in
federal and state courts and in certain Canadian provincial courts by
recipients of polyurethane covered breast implants and smooth walled
breast implants which were formerly manufactured and sold by MEC or its
predecessors. A number of other manufacturers of breast implants, as well
as suppliers of component parts and other parties, are also defendants in
some of these cases. The number of breast implant recipients who have
brought lawsuits against the Company or its subsidiaries is now
approximately 19,000, most of whom are participants in the settlement.
Plaintiffs also include claimants who have opted out of the settlement and
certain foreign claimants who have been excluded from the settlement.
Some women have sued numerous manufacturers without specifying the
manufacturer of the implants involved. In such cases, the number of
claims against the Company is expected to be reduced when the manufacturer
of the implants is identified. The exact number of lawsuits that will
remain in the event the settlement becomes effective is unknown at this
time. The plaintiffs typically seek damages for alleged medical ailments
as well as punitive damages. The federal cases were consolidated for
pre-trial purposes in the Northern District of Alabama following the
certification of a federal class action of all breast implant recipients
and their spouses. On December 23, 1992, a jury verdict of $25 million in
compensatory and punitive damages was returned against MEC in Pamela Jean
Johnson v. Medical Engineering Corporation in state court, Harris County,
Texas. The case was subsequently settled. The Company's insurers have
been notified of the breast implant claims and the settlement and certain
insurers have reserved their rights or declined to confirm coverage. In
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1993, the Company commenced litigation in state court, Jefferson
County, Texas against most of the Company's insurers seeking damages and a
declaration of coverage.
In March 1994, the Company, other defendants and certain plaintiffs
entered into the above-mentioned settlement pursuant to which, among other
things, a series of claim funds would be created to which settling
defendants would contribute various amounts over approximately 30 years.
The aggregate contribution to be made by the Company and MEC is to be no
more than $1.154 billion. In the fourth quarter of 1993, in anticipation
of the settlement, the Company recorded a charge of $500 million before
taxes ($310 million after taxes). The charge consisted of $1.5 billion
for potential liabilities and expenses, offset by $1 billion of expected
insurance proceeds.
With respect to the settlement, the court reported that as of September
28, 1994, 7,450 United States women and 2,287 foreign women have elected
to opt out of the settlement as to all defendants. With respect to opt
outs by women from the United States, the Company has preliminarily
identified approximately 3,000 women who appear to have claims based upon
MEC implants, approximately 2,000 of whom reside in Texas. The Company
has at this time identified 220 of the foreign opt outs as having MEC
implants. A number of the opt outs cannot at this time be identified as
having implants of any particular manufacturer. The Company does not yet
know the number of opt outs who have received implants from more than one
company. With respect to many women who have opted out little is known
about the nature of their claims. Some women who have opted out and who
are said to have MEC implants have not yet sued the Company. At least
some women who have opted out appear uninterested in pursuing claims.
Some women have chosen to withdraw their opt outs and the court has set a
deadline of December 1, 1994 for women to withdraw their opt outs. The
number of United States and foreign women who will withdraw their opt outs
cannot be estimated.
The cost to the Company of resolving the opt out claims is subject to a
number of uncertainties in addition to the unknown quantity and quality of
such claims. The relatively few trials against breast implant
manufacturers have produced mixed results, and additional trials may
affect the outlook. The Company has maintained throughout this litigation
that breast implants do not cause disease and that reliance by plaintiffs'
experts upon case studies rather than epidemiological data is
insufficient. Recent epidemiological studies have supported the Company's
position and such studies and the results of continuing medical research
may affect the cost of resolving cases. A variety of additional factors,
including the success of other legal defenses, may substantially affect
the cost of resolving opt out cases.
The Company believes that when more information about the number and
nature of the initial opt out group and about additional contingencies
related to the litigation is known or can be reasonably estimated, an
additional charge to earnings may likely be required which would have a
material effect on the Company's operating results for the year, but not
on the Company's liquidity or consolidated financial position.
The success of the settlement depends, in part, upon the number and total
amount of claims filed and approved. The number of claimants who will
seek to participate in the settlement is unknown. A primary registration
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deadline is December 1, 1994, but registration will not necessarily
indicate the number of women who have filed or will file claims against
the settlement funds. The deadline for filing claims against the
settlement's current disease compensation fund passed on September 16,
1994. The court has advised that a substantial number of current disease
claims have been filed, but the number of such claims is not likely to be
known until late in 1994 or early in 1995. The court has further advised
that it cannot estimate at this time when the total dollar amount of
approved current disease compensation claims will be known but it is not
expected before June of 1995. If the total amount of approved current
disease compensation claims exceeds certain levels, the settlement
provides for a reduction of scheduled payments to women and the
opportunity for claimants to opt out of the settlement. If that occurs,
the settlement also provides that the parties shall consider changes in
the settlement's terms and each defendant will also have an opportunity to
withdraw from the settlement. Dependent upon these and other future
developments, additional charges may be required in respect of breast
implant product liability claims.
Patent Proceedings
- ------------------
The Company has filed a petition for a writ of certiorari with the United
States Supreme Court in the patent infringement suit pending against
Zenith Laboratories, Inc. with respect to the product cefadroxil. The
petition seeks to overturn the decision of the Court of Appeals for the
Federal Circuit holding that the United States District Court for the
District of New Jersey had erred in finding that the cefadroxil product of
Zenith would infringe the Company's patent for cefadroxil monohydrate.
Zenith has filed a response to the Company's petition for a writ of
certiorari. The United States Supreme Court has not yet rendered a
decision on the Company's petition.
The United States District Court for the Southern District of New York has
set December 15, 1994 as the trial date in the action brought by the
Company in 1992 against Danbury Pharmacal, Inc. for patent infringement
with respect to the product buspirone (sold under the brand name BUSPAR*).
This action was commenced following Danbury's filing of an Abbreviated New
Drug Application which asserted that one of the Company's patents for
buspirone (U.S. Patent No. 4,182,763) is invalid and unenforceable. The
District Court had granted Danbury's Summary Judgment motion invalidating
the patent. The Company appealed the District Court's decision to the
Court of Appeals for the Federal Circuit which reversed the grant of
summary judgment and remanded the case for trial on the issue of patent
infringement by Danbury.
While it is not possible to determine the outcome of the foregoing, the
Company believes that the ultimate disposition of these matters will not
have a material adverse effect on the Company's operating results,
liquidity or consolidated financial position.
Infant Formula Matters
- ----------------------
Certain indirect purchasers of infant formula have filed three additional
state court actions in Wisconsin, Kentucky and North Dakota, respectively,
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against the Company, its subsidiary, Mead Johnson & Company, and Abbott
Laboratories, alleging a price fixing conspiracy and seeking certification
of a statewide class, damages and other relief. This brings to 18 the
number of indirect purchaser actions pending in state court in 16 states,
in addition to the actions brought by the State of Texas and the Louisiana
Attorney General. The newly-filed Wisconsin case has been consolidated
with a prior-pending indirect purchaser action in that State. The Texas
Supreme Court has granted an application by the Company and the other
defendants seeking leave to appeal a Texas intermediate appellate court's
reversal of the trial court's dismissal of an amended class action
complaint. One of the indirect purchaser actions in Alabama has been
voluntarily dismissed by the plaintiffs. The action brought by The Nestle
Food Company against the Company, one of its subsidiaries and others in
federal court in the Central District of California alleging that
defendants conspired to restrain competition in and maintain artificial
barriers to entry into the United States infant formula market is
scheduled for trial on January 24, 1995. Plaintiff asserts single damages
of $257 million. While it is not possible to determine the outcome of the
foregoing and of other pending matters, the Company believes that the
ultimate disposition of such matters will not have a material adverse
effect on the Company's operating results, liquidity or consolidated
financial position.
Pharmaceutical Pricing Litigation
- ---------------------------------
Discovery is continuing in the federal multi-district litigation.
Additional complaints have been filed in several federal District Courts
on behalf of certain individual pharmacies against the Company and other
pharmaceutical manufacturers. These cases involve factual allegations
substantially similar to those made in the previously filed individual
federal actions and have been or presumably will be coordinated for
pretrial purposes with other actions in the multi-district proceeding.
Certain of these new complaints also allege that the Company and other
pharmaceutical manufacturers have misused their patent portfolios. One
action filed in Alabama state court against the Company, other
pharmaceutical manufacturers and drug wholesalers, on behalf of purported
classes of Alabama retail pharmacies and consumers, has been voluntarily
dismissed. While it is not possible to determine the outcome of the
foregoing and of other pending matters, the Company believes that their
ultimate disposition will not have a material adverse effect on the
Company's operating results, liquidity or consolidated financial position.
Securities Litigation
- ---------------------
The Company has entered into a settlement of a class action filed in the
United States District Court for the Southern District of New York
alleging violations of federal securities laws and regulations in
connection with, among other things, earnings projections. The settlement
is subject to approval by the Court. Neither the settlement, nor the
outcome of the action in the event the settlement is not finally approved,
will have a material adverse effect on the Company's operating results,
liquidity or consolidated financial position.
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Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits (listed by number corresponding to the Exhibit Table of Item
601 in Regulation S-K).
27. Bristol-Myers Squibb Company Financial Data Schedule (filed
herewith).
(b) Reports on Form 8-K.
The Registrant did not file any reports on Form 8-K during the
quarter ended September 30, 1994.
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BRISTOL-MYERS SQUIBB COMPANY
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 November 14, 1994 /s/ Harrison M. Bains, Jr.
------------------------ -----------------------------
Harrison M. Bains, Jr.
Vice President and Treasurer
Date November 14, 1994 /s/ Frederick S. Schiff
----------------------------- -----------------------------
Frederick S. Schiff
Vice President and Controller
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