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, 1996
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, 1996, there were 500,793,513 shares outstanding of the
Registrant's $.10 par value Common Stock.
BRISTOL-MYERS SQUIBB COMPANY
INDEX TO FORM 10-Q
September 30, 1996
Page No.
--------
Part I - Financial Information:
Condensed Financial Statements (Unaudited):
Consolidated Balance Sheet - September 30, 1996
and December 31, 1995 2 - 3
Consolidated Statement of Earnings for the three and
nine months ended September 30, 1996 and 1995 4
Consolidated Statement of Cash Flows for the nine
months ended September 30, 1996 and 1995 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 14
Part II - Other Information 15 - 16
Signatures 17
-1-
BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET - ASSETS
(Unaudited, in millions of dollars except share amounts)
September 30, December 31,
1996 1995
------------- ------------
Current Assets:
Cash and cash equivalents $ 1,368 $ 1,645
Time deposits and marketable securities 520 533
Receivables, net of allowances 2,451 2,356
Finished goods 913 892
Work in process 190 180
Raw and packaging materials 441 379
------- -------
Inventories 1,544 1,451
Prepaid expenses 1,052 1,033
------- -------
Total Current Assets 6,935 7,018
------- -------
Property, Plant and Equipment 6,563 6,264
Less: Accumulated depreciation 2,686 2,504
------- -------
3,877 3,760
------- -------
Insurance Recoverable 873 959
Excess of cost over net tangible assets
received in business acquisitions 1,434 1,219
Other Assets 886 973
------- -------
Total Assets $14,005 $13,929
======= =======
-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,
1996 1995
------------- ------------
Current Liabilities:
Short-term borrowings $ 530 $ 575
Accounts payable 794 848
Accrued expenses 2,046 1,939
U.S. and foreign income taxes payable 745 744
Product liability 700 700
------- -------
Total Current Liabilities 4,815 4,806
Product Liability 1,251 1,645
Other Liabilities 964 1,021
Long-Term Debt 626 635
------- -------
Total Liabilities 7,656 8,107
------- -------
Stockholders' Equity:
Preferred stock, $2 convertible series:
Authorized 10 million shares; issued and
outstanding 16,106 in 1996 and 19,023 in
1995, liquidation value of $50 per share - -
Common stock, par value of $.10 per share:
Authorized 1.5 billion shares;
issued 540,245,523 in 1996 and
540,185,639 in 1995 54 54
Capital in excess of par value of stock 355 375
Cumulative translation adjustments (350) (327)
Retained earnings 8,919 7,917
------- -------
8,978 8,019
Less cost of treasury stock -
39,452,010 common shares in 1996 and
34,953,311 in 1995 2,629 2,197
------- -------
Total Stockholders' Equity 6,349 5,822
------- -------
Total Liabilities and Stockholders' Equity $14,005 $13,929
======= =======
-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,
------------------ -------------------
1996 1995 1996 1995
-------- -------- ------- -------
Net Sales $3,745 $3,413 $11,110 $10,159
------ ------ ------- -------
Expenses:
Cost of products sold 1,003 930 2,899 2,716
Marketing, selling, administrative
and other 858 826 2,857 2,633
Advertising and product promotion 488 406 1,401 1,182
Research and development 336 293 948 876
------ ----- ------- -------
2,685 2,455 8,105 7,407
------ ----- ------- -------
Earnings Before Income Taxes 1,060 958 3,005 2,752
Provision for income taxes 307 269 871 798
------ ----- ------- -------
Net Earnings $ 753 $ 689 $ 2,134 $ 1,954
====== ====== ======= =======
Earnings Per Common Share $1.50 $1.36 $4.25 $3.86
====== ====== ======= =======
Average Common Shares
Outstanding (in millions) 501 506 502 507
====== ====== ======= =======
Dividends Per Common Share $.75 $.74 $2.25 $2.22
====== ====== ======= =======
-4-
BRISTOL-MYERS SQUIBB COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions of dollars)
Nine Months Ended
September 30,
------------------
1996 1995
------ -------
Cash Flows From Operating Activities:
Net earnings $2,134 $1,954
Depreciation and amortization 380 259
Other operating items (22) 34
Receivables (126) (147)
Inventories (104) (33)
Accounts payable (52) 69
Accrued expenses 126 162
Product liability (394) (316)
Income taxes 124 91
Other assets and liabilities (83) (216)
------ ------
Net Cash Provided by Operating Activities 1,983 1,857
------ ------
Cash Flows From Investing Activities:
Proceeds from sales of time deposits
and marketable securities 334 336
Purchases of time deposits and
marketable securities (309) (66)
Additions to fixed assets (388) (332)
Acquisition of businesses (298) (361)
Other, net 10 (23)
------ ------
Net Cash Used in Investing Activities (651) (446)
------ ------
Cash Flows From Financing Activities:
Short-term borrowings (28) (43)
Long-term debt 4 (7)
Issuances of common stock under stock plans 134 41
Purchases of treasury stock (586) (244)
Dividends paid (1,132) (1,123)
------ ------
Net Cash Used in Financing Activities (1,608) (1,376)
------ ------
Effect of Exchange Rates on Cash (1) (3)
------ ------
(Decrease) Increase in Cash and Cash Equivalents (277) 32
Cash and Cash Equivalents at Beginning of Period 1,645 1,642
------ ------
Cash and Cash Equivalents at End of Period $1,368 $1,674
====== ======
-5-
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
Basis of Presentation
- ---------------------
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, 1996 and
December 31, 1995, the results of operations for the three and nine months
ended September 30, 1996 and 1995, and cash flows for the nine months ended
September 30, 1996 and 1995. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the related notes included in the Company's 1995 Annual Report
on Form 10-K. In general, the business of the Company's industry segments is
not seasonal.
Third Quarter Results of Operations
- -----------------------------------
Sales
- -----
Worldwide sales for the third quarter of 1996 were $3,745, an increase of 10%
over the third quarter of 1995. The consolidated sales growth resulted from
a 12% increase due to volume and a 2% decrease due to the unfavorable effect
of foreign exchange rate fluctuations. Changes in selling prices had no effect
on total sales growth. Domestic sales increased 12% and international sales
increased 7%. Excluding the unfavorable effect of foreign exchange rate
fluctuations, international sales increased 12% over the same period in 1995.
Worldwide sales for the third quarter of 1995 increased 16% compared to the
prior year, reflecting a 14% increase due to volume, a 1% increase due to the
favorable effect of foreign exchange rate fluctuations, and a 1% increase in
selling prices. Excluding the acquisitions made in 1995 and in 1994, sales
for the quarter increased 11%.
-6-
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Industry Segments
- ----------------- Three Months Ended September 30,
---------------------------------------
Net Sales % Change
---------------- ----------------
1996 1995 1996 1995(a)
------ ------ ----- ------
Pharmaceutical Products $2,152 $1,932 11% 15%
Nonprescription Health Products 661 623 6% 27%
Medical Devices 456 458 - 13%
Toiletries and Beauty Aids 476 400 19% 14%
------ ------
Total Company $3,745 $3,413 10% 16%
====== ======
(a) Excluding the acquisitions made in 1995 and in 1994, nonprescription
health products, medical devices and toiletries and beauty aids segment
sales increased 14%, 5% and 7%, respectively.
Sales in the pharmaceutical products segment, which is the largest segment
at 57% of total Company sales, were $2,152, an increase of 11% over the third
quarter of 1995. Sales growth resulted from a 13% increase in volume offset
by a 2% decrease due to the unfavorable effect of foreign exchange rate
fluctuations. Changes in selling prices had no effect on sales growth.
Excluding the sales of CAPOTEN* (which experienced significant decreases due
to the loss of its patent exclusivity in the U.S. in February 1996),
pharmaceutical product sales increased 21% in the quarter (23% before the
effect of foreign exchange).
Sales of cardiovascular drugs, the largest product group in the segment,
decreased 6% to $677. Excluding the sales of CAPOTEN*, cardiovascular drugs,
increased 20%. Sales of PRAVACHOL*, a cholesterol-lowering agent, increased
35%, benefiting from the results of studies demonstrating clinical benefits,
including the landmark five-year Pravastatin Primary Prevention Study and the
five-year Cholesterol and Recurrent Events (CARE) trial, and by expanded
labeling granted by the U.S. Food and Drug Administration (FDA). In July, the
FDA cleared PRAVACHOL* for use with diet to help reduce the risk of first
heart attack in people who have elevated cholesterol but no history of heart
disease. PRAVACHOL* is the first and only cholesterol-lowering drug of its
kind proven to reduce the risk of a first heart attack. With this new
indication, in September the Company announced a nationwide program, the
PRAVACHOL* Public Awareness Program on First Heart Attack Prevention, to raise
awareness about the risks of a first heart attack and to help motivate people
to take action with their physicians to reduce their risks. The program
* Indicates brand names of products which are registered trademarks owned
by the Company.
-7-
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
focuses on the millions of Americans with high cholesterol who are considered
at risk of a first heart attack. MONOPRIL*, a second generation angiotensin
converting enzyme (ACE) inhibitor with once-a-day dosage, also contributed to
the increase in cardiovascular sales with strong international growth,
primarily in Italy. Increases in sales of these products were offset by the
domestic decline of 72% in sales of captopril, an ACE inhibitor sold primarily
under the trademark CAPOTEN*. This decrease is attributable to the loss of its
patent exclusivity in the U.S. in February 1996.
Sales of anti-cancer drugs increased 25% to $511. Sales of TAXOL* (paclitaxel),
the Company's leading anti-cancer agent, increased 34%. In October 1996,
TAXOL* was approved for first line use in the treatment of ovarian cancer in
the United Kingdom. Sales of PARAPLATIN*, used in the treatment of ovarian
cancer, also increased. These increases were partially offset by decreases
in sales of VEPESID* due to increased generic competition. In October,
the Company completed its acquisition of Axion Inc.'s share of Oncology
Therapeutics Network, a specialty distributor of anti-cancer medicines
and related products, which had been jointly owned by Axion and the Company.
Anti-infective drug sales were $449, an increase of 14% over the prior year.
Strong growth was recorded for VIDEX* and ZERIT*, the Company's two
antiretroviral agents, both of which benefited from positive regulatory agency
actions in the U.S. and Europe, and from ongoing clinical trials showing the
efficacy of combination therapy. During the quarter, VIDEX* received clearance
from the FDA to be used for first line treatment of HIV. These actions are
expanding markets for both products. Sales of CEFZIL*, an oral cephalosporin
used in the treatment of respiratory infections, and MAXIPIME*, a fourth
generation injectable cephalosporin introduced in some international markets
in 1995, also contributed to the growth of anti-infectives. In October
1996, CEFZIL* received clearance from the FDA to be used for treatment of
acute bacterial sinusitis in adult and pediatric patients. Growth of these
products was partially offset by a sales decrease in DURICEF*, due to
increased generic competition. Sales of central nervous system drugs
increased 28% to $193, due to the strong growth of BUSPAR*, the Company's novel
anti-anxiety agent, SERZONE*, an anti-depressant which offers a low incidence
of side effects, and STADOL NS*, a prescription nasal spray analgesic.
Dermatological drug sales increased due to strong sales of DOVONEX*, a vitamin
D3 analog for the treatment of moderate psoriasis. Glucophage, an oral
medication for non-insulin dependent diabetes launched in April 1995 in the
U.S., continued to experience strong growth. For the third quarter of 1995,
sales of the pharmaceutical products segment increased 15%, primarily as a
result of increases in sales of cardiovascular, anti-cancer, anti-infective,
central nervous system and dermatological drugs.
Sales of the nonprescription health products segment increased 6% to $661,
reflecting a 10% increase due to volume, a 2% decrease due to the unfavorable
effect of foreign exchange rate fluctuations, and a 2% decrease in selling
prices primarily on nutritional products. Nutritional product sales increased
10%. Sales of ENFAMIL*, the Company's largest selling infant formula, as well
as NUTRAMIGEN* and LACTOFREE*, special infant formulas, performed well in both
the U.S. and international markets. Contributing to infant formula sales in the
U.S. were several sole-source contracts awarded to the Company during the past
year under the Women, Infants and Children (WIC) Program. The Company's
-8-
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
Mead Johnson Nutritional Group, increased its infant formula market share and
continues to be the U.S. market share leader in infant formula. BOOST* and
SUSTACAL* to consumers in the fourth quarter of 1995, and ALACTA NF*,
a nutritious beverage for pre-school age children, sold outside the U.S., also
contributed to sales growth. Sales of analgesic products were at prior year
levels and excluding the unfavorable effect of foreign exchange rate
fluctuations, increased 5%. Strong sales of EFFERALGAN*, DAFALGAN* and ASPIRINE
UPSA* were offset by declines in BUFFERIN*. For the third quarter of 1995, the
nonprescription health products segment sales increased 27% over the prior
year (an increase of 14% excluding the effect of the acquisition of the UPSA
Group in September 1994), primarily due to increased sales of infant formulas
and analgesics.
Medical devices segment sales were at prior year levels of $456. Volume gains
of 6% in the quarter were achieved despite a 4% decrease due to changes in
selling prices. Sales were also impacted by a 2% decrease due to the
unfavorable effect of foreign exchange rate fluctuations. The Company
continues to be the world market share leader in knee and hip replacements
as well as ostomy and modern wound care products and is developing a number
of new products in each of these categories. Sales of ostomy care products
increased 1% in the third quarter (excluding the unfavorable effect of foreign
exchange, sales increased 3%). The ACTIVE/LIFE/COLODRESS* and the
SUR-FIT/COMBIHESIVE* product lines contributed to sales growth.
Prosthetic implant sales decreased 3% (excluding the unfavorable effect of
foreign exchange, sales increased 1%). Sales of knee implants increased
2% in the third quarter,(excluding the unfavorable effect of foreign exchange,
sales increased 5%) due to the continued worldwide acceptance of the NEXGEN*
Complete Knee Solution. The Company expects to launch a major new hip
replacement device, the VERSYS* Hip System, in the fourth quarter. For the
third quarter of 1995, medical devices segment sales increased 13% (5%
excluding the effect of the acquisition of Calgon Vestal Laboratories)
due to increased sales of prosthetic implants, ostomy and wound care products.
Sales of the toiletries and beauty aids segment increased 19% over the prior
year to $476,reflecting a 20% increase due to volume, a 2% increase due to
selling prices, and a 3% decrease due to the unfavorable effect of foreign
exchange rate fluctuations. Haircoloring and hair care products experienced
strong growth in the third quarter, increasing 23% and 20%, respectively,
over the prior year. Among the products contributing to this performance were:
NICE`N EASY*, NATURAL INSTINCTS*, LASTING COLOR BY LOVING CARE*, ULTRESS*
and salon haircolorings as well as HERBAL ESSENCES* and INFUSIUM 23* complete
lines of shampoos and conditioners. CLAIROL HYDRIENCE*, a unique water-based
permanent haircolor with sea proteins and minerals, introduced at the end of
the second quarter, is finding growing acceptance in the marketplace and is
contributing to the growth of the haircoloring segment. The Company's Clairol
division increased its domestic haircoloring market share and continues to be
the U.S. market share leader in haircolorings. The Company's anti-perspirant
products, BAN* and MUM* also contributed to sales growth. For the third
quarter of 1995, sales of the toiletries and beauty aids segment increased 14%
over the prior year, (a 7% increase excluding the acquisition of Matrix
Essentials, Inc.) primarily due to increases in sales of haircoloring and
hair care products.
-9-
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
Cost of Products Sold and Other Operating Expenses
- --------------------------------------------------
Total costs and expenses for the quarter ended September 30, 1996, as a
percentage of sales were 71.7%, and remained at prior year levels. Cost of
products sold decreased to 26.8% of sales from 27.2%, in 1995 due to a
favorable product mix. Expenditures for advertising and of new and existing
products increased 20% to $488 from $406 in 1995 and, as a percentage of sales,
were 13.0% compared to 11.9% in 1995. The increase is primarily due to the
incremental spending over the prior year in support of pharmaceutical products
and toiletries and beauty aids. Marketing, selling, administrative and other
expenses, as a percentage of sales, decreased to 22.9% in 1996 from 24.2% in
the third quarter of 1995. Research and development expenses increased 15% to
$336 from $293 in 1995 and, as a percentage of sales, were 9.0% compared to
8.6%. Pharmaceutical research and development spending increased 17% over the
prior year, and as a percentage of pharmaceutical sales, was 13.1% compared to
12.5% in the third quarter of 1995. In October 1996, regulatory applications
for irbesartan, a new drug for hypertension that was co-developed with Sanofi,
were submitted in the U.S. and the European Union member states. Irbesartan
belongs to a relatively new class of drugs known as angiotensin II receptor
antagonists.
Earnings
- --------
Earnings before income taxes for the third quarter were $1,060, an increase of
11% from $958 in 1995. Net earnings increased 9% to $753 from $689. The
quarter's effective tax rate on earnings of 29.0% was higher than the year-ago
quarter rate of 28.1%, which benefitted from a retroactive decrease in the
Company's tax rate for the first six months of that year. Earnings per share
increased 10% to $1.50 from $1.36 in the third quarter of 1995. The growth
in earnings per share exceeded the growth in net earnings by 1% as a result of
the Company's share repurchase program.
-10-
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
Year-to-Date Results of Operations
- ----------------------------------
Sales
- -----
Worldwide sales for the first nine months of 1996 increased 9% over the prior
year to $11,110. The consolidated sales growth resulted from an 11% increase
due to volume offset by a 2% decrease due to the unfavorable effect of foreign
exchange rate fluctuations. Overall price changes had no effect on sales
growth for the nine months. Domestic sales increased 10%, and international
sales increased 9% (13% excluding the unfavorable effect of foreign exchange
rate fluctuations). Worldwide sales for the first nine months of 1995
increased 16% compared to the prior year, reflecting a 14% increase due to
volume and a 2% increase due to the favorable effect of foreign exchange rate
fluctuations. Changes in selling prices had no effect on sales growth.
Excluding the acquisitions in 1995 and 1994, sales increased 10% for the nine
months.
Industry Segments
- ----------------- Nine Months Ended September 30,
----------------------------------------
Net Sales % Change
----------------- -----------------
1996 1995 1996 1995(a)
------- ------- ---- -------
Pharmaceutical Products $ 6,399 $ 5,773 11 % 13%
Nonprescription Health Products 2,003 1,801 11 % 26%
Medical Devices 1,360 1,394 (2)% 13%
Toiletries and Beauty Aids 1,348 1,191 13 % 24%
------- -------
Total Company $11,110 $10,159 9 % 16%
======= =======
(a) Excluding the acquisitions made in 1995 and in 1994, nonprescription
health products, medical devices and toiletries and beauty aids segment
sales increased 11%, 7% and 8%,respectively.
Pharmaceutical products segment sales were $6,399, an increase of 11% over
the prior year, reflecting a 12% increase due to volume, a 1% decrease due
to the unfavorable effect of foreign exchange rate fluctuations and no effect
due to overall changes in selling prices. Domestic and international sales
experienced strong growth with increases for both of 11%. Excluding the
unfavorable effect of foreign exchange rate fluctuations, international sales
increased 14% for the nine months. Excluding the sales of CAPOTEN*,
pharmaceutical sales increased 20%. Sales of cardiovascular drugs decreased
3% to $2,101 (a 2% decrease excluding the effect of unfavorable foreign
exchange). PRAVACHOL* and MONOPRIL* sales grew 38% and 35%, respectively.
Increases in sales of these products were offset by a decline of 27% in sales
-11-
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
of CAPOTEN*. This decrease is primarily due to the loss of its patent
exclusivity in the U.S. in February 1996 and in Germany in February 1995.
Excluding the sales of CAPOTEN*, cardiovascular sales increased 25%.
Sales of anti-cancer drugs increased 20% to $1,414 due to strong sales of
TAXOL* and PARAPLATIN*. These increases were partially offset by decreases
in sales of VEPESID*. Anti-infective drug sales increased 8% to $1,331.
Strong gains were recorded for VIDEX*, ZERIT*, MAXIPIME* and CEFZIL*.
Growth in these products was partially offset by decreases in sales of
DURICEF*. Sales of central nervous system drugs including BUSPAR*, the
Company's novel anti-anxiety agent, SERZONE* and STADOL NS*, continued to
experience strong growth. Dermatological drug sales increased due to strong
sales of DOVONEX*, a vitamin D3 analog for the treatment of moderate
psoriasis. Sales of ESTRACE* continued to perform well. Glucophage
continued to experience strong growth. For the first nine months of 1995,
sales of the pharmaceutical products segment increased 13% over the prior
year primarily as a result of increases in sales of cardiovascular,
anti-cancer, anti-infective and central nervous system drugs.
In the nonprescription health products segment, sales increased 11% to $2,003,
reflecting a 14% increase due to volume, a 2% decrease due to the unfavorable
effect of foreign exchange rate fluctuations and a 1% decrease in selling
prices. Domestic sales and international sales both increased 11%.
Excluding the unfavorable effect of foreign exchange rate fluctuations,
international sales increased 16%. Nutritional product sales increased 15%,
due to increased sales of ENFAMIL*, NUTRAMIGEN*, LACTOFREE*, BOOST*,
ALACTA NF*, SUSTACAL* and ENFAPRO*. Sales of analgesics increased 5%,
primarily due to the strong performance of the UPSA Group, driven by sales of
EFFERALGAN*, DAFALGAN* and ASPIRINE UPSA*. For the first nine months of 1995,
nonprescription health products segment sales increased 26% (11% excluding
the acquisition of the UPSA Group) over the prior year, primarily due to
increased sales of infant formulas and analgesics.
Sales of the medical devices segment decreased 2% to $1,360. Domestic sales
decreased 2% and international sales decreased 3% (an increase of 2% excluding
the unfavorable effect of foreign exchange rate fluctuations). Volume gains of
3% were more than offset by a 2% decrease due to the unfavorable effect of
foreign exchange and a 3% decrease in selling prices. Prosthetic implant sales
decreased 3% (excluding the unfavorable effect of foreign exchange, sales
remained at prior year levels). Sales of knee implants remained at prior year
levels. Excluding the unfavorable effect of foreign exchange, knee implant
sales increased 3% led by sales of the NEXGEN* Complete Knee Solution. For
the first nine months of 1995, medical devices segment sales increased 13%
over the prior year (7% excluding the acquisition of Calgon Vestal Laboratories
and the sales of a divested business) as a result of sales growth in prosthetic
implants, ostomy and wound care products.
-12-
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
Sales of the toiletries and beauty aids segment increased 13% to $1,348,
reflecting a 14% increase due to volume, a 2% increase in selling prices, and
a 3% decrease due to unfavorable foreign exchange rate fluctuations. Domestic
sales and international sales both increased 13%. Excluding the unfavorable
effect of foreign exchange rate fluctuations, international sales increased 22%.
Hair care product sales increased due to strong market growth of the HERBAL
ESSENCES*, INFUSIUM 23* and SYSTEME BIOLAGE* complete lines of shampoos and
conditioners. Sales of haircoloring products experienced double-digit growth
due to strong sales of NICE N' EASY*, NATURAL INSTINCTS*, ULTRESS*, salon
haircolorings and introductory sales of CLAIROL HYDRIENCE*. For the first nine
months of 1995, sales of the toiletries and beauty aids segment increased 24%
over the prior year. Excluding the acquisition of Matrix Essentials, Inc.,
sales increased 8% primarily due to increased sales of haircoloring and hair
care products.
Cost of Products Sold and Other Operating Expenses
- --------------------------------------------------
Total costs and expenses as a percentage of sales were 73.0% for the
nine months ended September 30, 1996 and remained at prior year levels.
Cost of products sold decreased to 26.1% of sales from 26.7% in 1995
due to a favorable product mix and improved manufacturing efficiencies.
Marketing, selling, administrative and other expenses, as a percentage of
sales, were 25.7% compared to 25.9% in 1995. Expenditures for advertising
and promotion in support of new and existing products were $1,401 compared
to $1,182 in the prior year, an increase of 19%. The increase is due to
incremental spending over the prior year in support of pharmaceutical products,
nonprescription health products and toiletries and beauty aids. Research and
development expenditures increased 8% to $948 compared to $876 in the prior
year, and as a percentage of sales were 8.5% in 1996 compared to 8.6% in 1995.
Pharmaceutical research and development spending increased 8% over prior year
levels, and, as a percentage of pharmaceutical sales, was 12.4% compared to
12.8% in 1995.
Earnings
- --------
Earnings before income taxes for the nine months increased 9% to $3,005 from
$2,752 in 1995. Net earnings increased 9% to $2,134 from $1,954 and earnings
per share increased 10% to $4.25 from $3.86 in 1995. The growth in earnings
per share exceeded the growth in net earnings by 1% as a result of the
Company's share repurchase program. Average shares outstanding for the nine
months were reduced to 502 million from 507 million in the prior year. The
effective tax rate on earnings before income taxes was 29.0% in 1996 and 1995.
-13-
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions of dollars, except per share amounts)
Financial Position
- ------------------
The balance sheet at September 30, 1996 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
over $2 billion at September 30, 1996.
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, 1996 were $388 compared
to $332 during the same period of 1995.
In January 1996, the Company acquired control of Pharmavit, one of Hungary's
leading manufacturers of over-the-counter medicines, nutritional products
and generic pharmaceuticals.
In March 1996, the Company acquired Argentia SA, one of Argentina's largest
manufacturers and marketers of ethical pharmaceuticals.
In October 1996, the Company completed the acquisition of Oncology Therapeutics
Network, a specialty distributor of anti-cancer medicines and related products
and services.
On November 12, 1996, the Company announced the offering of $350 million
principal amount of 6.80% Debentures due November 15, 2026.
During the nine months ended September 30, 1996, the Company purchased
6,809,700 shares of its common stock at a total cost of $586.
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.
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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, 1995, and material developments
in such matters are described in the Company's Quarterly Reports on Form 10-Q
for the quarters ended March 30, 1996 and June 30, 1996, and below.
Breast Implant Litigation
- -------------------------
As previously reported in the Company's Form 10-K referred to above, the
Company, its subsidiary, Medical Engineering Corporation ("MEC"), and certain
other companies are defendants in a number of cases in federal and state
courts and in certain foreign courts alleging damages for personal injuries
of various types resulting from breast implants formerly manufactured by MEC
or its predecessors. As of October 21, 1996, approximately 21,500 plaintiffs
were parties in suits filed against the Company, MEC and certain other
companies. The majority of the suits are presently stayed except for those
filed by plaintiffs who have opted out of the revised settlement, as described
below.
On December 22, 1995, a revised settlement program was approved by Federal
Judge Sam C. Pointer, Jr., before whom all federal breast implant cases have
been consolidated for pre-trial purposes. In addition to providing benefits
to those class members wishing to participate in the settlement, the revised
settlement affords registered class members the right to opt out. This right
terminates 45 days after the date of such a class member's Notification of
Status letter, which advises of her settlement status.
The claims office sends Notification of Status letters to class members on an
ongoing basis, and it is expected that such letters will continue to be mailed
to class members at least through the second quarter of 1997. Although it is
not possible on any reliable basis to estimate with any precision how many
class members will participate in or opt out of the settlement, preliminary
reports indicate that over 42,000 Notification of Status letters were sent
to class members having implants made by all settling defendants by mid-October
1996. Of these, over 29,000 chose to participate in the settlement by
accepting an advance payment, and 2,146 class members with implants associated
with defendants participating in the revised settlement opted out. The
remaining recipients of Notification of Status letters had not as of then been
reported to have yet decided whether or not to participate in or opt out of
the revised settlement. An additional 7,096 domestic class members with
implants of all manufacturers (including Dow Corning, which has filed for
protection under the bankruptcy laws and which is not a settling defendant
in the revised settlement) opted out of the global settlement approved by
Judge Pointer in 1994. In October 1996, it was reported that 6,215 domestic
class members (with implants of all manufacturers) opted out after receiving
the initial notice of the revised settlement program. Because the process
of sending Notification of Status letters is incomplete, it is still not
possible at this time to estimate either the number of women who will opt out
of the revised settlement or, of those that opt out, the number that will file
lawsuits against the Company.
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BRISTOL-MYERS SQUIBB COMPANY
PART II - OTHER INFORMATION
-----------------------------
Pharmaceutical Pricing Litigation
- ---------------------------------
As previously reported in the Company's Form 10-K and its Forms 10-Q referred
to above, the Company is a defendant in numerous antitrust actions brought by
retailers against the Company and other pharmaceutical manufacturers, drug
wholesalers and pharmacy benefit managers that have been coordinated for
pretrial purposes in the United States District Court for the Northern
District of Illinois. On July 16, 1996, defendant Ciba-Geigy Corporation
filed a petition for a writ of mandamus in the United States Court of Appeals
for the Seventh Circuit, seeking to vacate the District Court's order
declining to approve the original settlement by some defendants in the class
action case. On July 30 and July 31, 1996, certain retail pharmacies that
are members of the class purported to appeal from the ruling of the District
Court approving the amended settlement reached by the Company and ten other
manufacturer defendants with the class plaintiffs; the class plaintiffs and
the settling defendants, including the Company, have moved to dismiss those
appeals. In the suit brought by retailers in Minnesota state court, the
plaintiffs have filed a second amended complaint, and the defendants have
moved to dismiss it. The suits brought by retailers and consumers in California
have been stayed. In the consumer case brought in Arizona state court, a
petition for special action to review the denial of the motion to dismiss made
by the Company and other defendants was denied by the Court of Appeals on
August 28, 1996. In July 1996, the Company received a subpoena from the
Federal Trade Commission in an investigation it is conducting to determine
whether U.S. pharmaceutical manufacturers have engaged in unfair methods
of competition by engaging in unlawful concerted activities on prices of
pharmaceutical products.
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).
Exhibit Number and Description Page
- ------------------------------ -------
3b. Bylaws of Bristol-Myers Squibb Company, as amended E-3
effective November 5, 1996.
27. Bristol-Myers Squibb Company Financial Data Schedule. E-27-1
(b) Reports on Form 8-K.
The Registrant did not file any reports on Form 8-K during the quarter
ended September 30, 1996.
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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 13, 1996 /s/ Harrison M. Bains, Jr.
-----------------------------
Harrison M. Bains, Jr.
Vice President and Treasurer
Date: November 13, 1996 /s/ Frederick S. Schiff
-----------------------------
Frederick S. Schiff
Vice President and Controller
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