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 JUNE 30, 1998
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 June 30, 1998, there were 994,708,607 shares outstanding of the
Registrant's $.10 par value Common Stock.
BRISTOL-MYERS SQUIBB COMPANY
INDEX TO FORM 10-Q
June 30, 1998
Page No.
-----------
Part I - Financial Information:
Financial Statements (Unaudited):
Consolidated Balance Sheet - June 30, 1998
and December 31, 1997 2 - 3
Consolidated Statement of Earnings and Comprehensive Income
for the three and six months ended June 30, 1998 and 1997 4
Consolidated Statement of Cash Flows for the six
months ended June 30, 1998 and 1997 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 13
Part II - Other Information 14
Signatures 15
-1-
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEET - ASSETS
(Unaudited, in millions except share amounts)
June 30, December 31,
1998 1997
------------ ------------
Current Assets:
Cash and cash equivalents $ 1,005 $ 1,456
Time deposits and marketable
securities 308 338
Receivables, net of allowances 3,122 2,973
Finished goods 1,151 1,153
Work in process 206 197
Raw and packaging materials 455 449
---------- ----------
Inventories 1,812 1,799
Prepaid expenses 1,066 1,170
---------- ----------
Total Current Assets 7,313 7,736
---------- ----------
Property, Plant and Equipment 7,134 7,001
Less: Accumulated depreciation 2,929 2,845
---------- ----------
4,205 4,156
---------- ----------
Insurance Recoverable 594 619
Excess of cost over net tangible assets
received in business acquisitions 1,611 1,625
Other Assets 870 841
---------- ----------
Total Assets $14,593 $14,977
========== ==========
-2-
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEET -
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited, in millions except share amounts)
June 30, December 31,
1998 1997
----------- ------------
Current Liabilities:
Short-term borrowings $ 453 $ 543
Accounts payable 1,071 1,017
Accrued expenses 2,070 1,939
Product liability 459 865
U.S. and foreign income taxes payable 548 668
---------- ----------
Total Current Liabilities 4,601 5,032
Other Liabilities 1,412 1,447
Long-Term Debt 1,336 1,279
---------- ----------
Total Liabilities 7,349 7,758
---------- ----------
Stockholders' Equity:
Preferred stock, $2 convertible series:
Authorized 10 million shares; issued and
outstanding 12,128 in 1998 and 12,936 in
1997, liquidation value of $50 per share - -
Common stock, par value of $.10 per share:
Authorized 2.25 billion shares; issued
1,092,385,064 in 1998 and 1,083,253,703
in 1997 109 108
Capital in excess of par value of stock 957 544
Cumulative translation adjustments (615) (533)
Retained earnings 11,936 10,950
---------- ----------
12,387 11,069
Less cost of treasury stock - 97,676,457
common shares in 1998 and 90,069,383 in 1997 5,143 3,850
---------- ----------
Total Stockholders' Equity 7,244 7,219
---------- ----------
Total Liabilities and Stockholders' Equity $14,593 $14,977
========== ==========
-3-
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF EARNINGS
AND COMPREHENSIVE INCOME
(Unaudited, in millions of dollars except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1998 1997 1998 1997
EARNINGS -------- -------- -------- --------
- ---------------
Net Sales $4,430 $4,064 $8,876 $8,109
-------- -------- -------- --------
Cost of products sold 1,206 1,097 2,358 2,175
Marketing, selling, administrative
and other 1,034 1,057 2,082 2,068
Advertising and product promotion 642 557 1,213 1,054
Research and development 384 321 767 647
Provision for restructuring 76 - 201 -
Gain on sale of businesses (76) - (201) -
-------- -------- -------- --------
3,266 3,032 6,420 5,944
-------- -------- -------- --------
Earnings Before Income Taxes 1,164 1,032 2,456 2,165
Provision for income taxes 329 294 694 617
-------- -------- -------- --------
Net Earnings $ 835 $ 738 $1,762 $1,548
======== ======== ======== ========
Earnings Per Common Share
Basic $.84 $.74 $1.77 $1.55
Diluted $.82 $.73 $1.73 $1.52
Average Common Shares Outstanding (in millions)
Basic 993 996 993 998
Diluted 1,016 1,019 1,016 1,018
Dividends Per Common Share $.39 $.38 $.78 $.76
COMPREHENSIVE INCOME
- --------------------
Net Earnings $835 $738 $1,762 $1,548
Other Comprehensive Income:
Foreign currency translation 17 (18) (87) (114)
Tax effect (11) 6 5 21
-------- -------- -------- --------
Total Other Comprehensive Income 6 (13) (82) (93)
-------- -------- -------- --------
Comprehensive Income $841 $725 1,680 1,455
======== ======== ======== ========
-4-
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions of dollars)
Six Months Ended
June 30,
---------------------------
1998 1997
--------- ---------
Cash Flows From Operating Activities:
Net earnings $ 1,762 $ 1,548
Depreciation and amortization 301 269
Provision for restructuring 201 0
Gain on sale of businesses (201) 0
Other operating items 22 6
Receivables (215) (204)
Inventories (84) (206)
Accounts payable 79 (69)
Accrued expenses (271) (133)
Product liability (381) (240)
Insurance recoverable 25 162
Income taxes 187 (1)
Other assets and liabilities (67) (74)
-------- --------
Net Cash Provided by Operating Activities 1,358 1,058
-------- --------
Cash Flows From Investing Activities:
Proceeds from sales of time deposits and
marketable securities 167 274
Purchases of time deposits and marketable
securities (137) (152)
Additions to fixed assets (365) (269)
Proceeds from sale of business 406 0
Acquisition of businesses (67) (37)
Other, net 16 8
-------- --------
Net Cash Provided by /(Used in) Investing
Activities 20 (176)
-------- --------
Cash Flows From Financing Activities:
Short-term borrowings (89) 141
Long-term debt 70 6
Issuances of common stock under stock plans 98 179
Purchases of treasury stock (1,126) (627)
Dividends paid (776) (760)
-------- --------
Net Cash Used in Financing Activities (1,823) (1,061)
-------- --------
Effect of Exchange Rates on Cash (6) (9)
-------- --------
Decrease in Cash and Cash Equivalents (451) (188)
Cash and Cash Equivalents at Beginning of Period 1,456 1,681
-------- --------
Cash and Cash Equivalents at End of Period $1,005 $1,493
======== ========
-5-
BRISTOL-MYERS SQUIBB COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in millions, except per share amounts)
Basis of Presentation
- ---------------------
In the opinion of management, the accompanying unaudited 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 June 30, 1998 and
December 31, 1997, the results of operations for the three and six months
ended June 30, 1998 and 1997, and cash flows for the six months ended
June 30, 1998 and 1997. These consolidated financial statements should be
read in conjunction with the consolidated financial statements and the
related notes included in the Company's 1997 Annual Report on Form 10-K.
Second Quarter Results of Operations
- ------------------------------------
Sales
- -----
Worldwide sales for the second quarter of 1998 increased 9% (13% excluding
the effect of foreign exchange) over the prior year to $4,430. The
consolidated sales growth resulted from an 11% increase due to volume, a
4% decrease due to the effect of foreign exchange and a 2% increase due
to changes in selling prices. Domestic sales increased 12% and international
sales increased 5% (13% excluding the effect of foreign exchange). Worldwide
sales for the second quarter of 1997 increased 10% compared to the second
quarter of 1996.
Industry Segments
- ----------------- Three Months Ended June 30,
------------------------------------------------
Net Sales % Change
----------------------- --------------------
1998 1997 1998 1997
------- ------- ------ -------
Pharmaceutical Products $2,691 $2,345 15 % 13 %
Consumer Medicines 295 320 (8)% 14 %
Medical Devices 417 455 (8)% (2)%
Nutritional Products 424 432 (2)% 1 %
Beauty Care Products 603 512 18 % 13 %
------- -------
Total Company $4,430 $4,064 9 % 10 %
======= =======
-6-
Sales in the pharmaceutical products segment, which is the largest segment at
61% of total company sales, increased 15% (18% excluding foreign exchange)
over the second quarter of 1997 to $2,691. Sales growth resulted from a 16%
increase in volume, a 3% decrease due to the effect of foreign exchange and
a 2% increase in selling prices. Domestic pharmaceutical sales increased 21%
and international sales increased 14% excluding foreign exchange.
Sales of cardiovascular drugs, the largest product group in the segment,
increased 9% to $732 (12% excluding foreign exchange). Sales of PRAVACHOL*,
the Company's largest selling product, increased 18% to $362. Domestic sales
of PRAVACHOL* increased 16% to $202 and international sales increased 20%
to $160 (26% excluding foreign exchange). In June 1998, the U.S. Food and
Drug Administration (FDA) cleared enhanced drug interaction labeling for
PRAVACHOL*, which is metabolized differently than other drugs in its class
and thus has reduced potential to interact with some commonly-prescribed
medications. In March 1998, the FDA cleared PRAVACHOL* for use in reducing
the risk of stroke in patients who have had a heart attack and have normal
cholesterol levels. PRAVACHOL* is the only drug of its type indicated to
reduce the risk of a heart attack in patients with and without established
coronary heart disease. Sales of the anti-hypertensive MONOPRIL*, a second
generation angiotensin converting enzyme (ACE) inhibitor with once-a-day
dosing, increased 31% to $106. Sales growth for these products was partially
offset by a 25% decline in CAPOTEN* sales due to the loss of patent
exclusivity in Europe.
AVAPRO and PLAVIX, recently launched products from the Bristol-Myers Squibb
and Sanofi S.A. joint venture, contributed $31 to sales in the second quarter.
AVAPRO is an angiotensin II receptor blocker for the treatment of hypertension
and PLAVIX is a platelet aggregation inhibitor for the reduction of stroke,
heart attack and vascular disease.
Sales of anti-cancer drugs increased 22% to $714. Sales of TAXOL* (R)
(paclitaxel), the Company's leading anti-cancer agent, increased 35% to $304.
In May 1998, a U.S. based cooperative group study sponsored under the
Bristol-Myers Squibb Cooperative Research and Development Agreement with the
National Cancer Institute showed that by adding TAXOL* to other commonly used
chemotherapy drugs, the risk of death for women with early-stage breast
cancer was decreased by 26%. This study, which enrolled over 3,000 women,
was the first to show such a significant survival benefit in early-stage
breast cancer in over twenty years. In April 1998, TAXOL*, in combination
with cisplatin, was approved by the FDA for first line treatment of ovarian
cancer. TAXOL's* five year Hatch-Waxman exclusivity period in the U.S.
expired in December 1997. Sales of PARAPLATIN*, an anti-cancer agent used
in combination with other chemotherapy agents, increased 18% to $124.
Sales in the Oncology Therapeutics Network increased 36% to $155.
Anti-infective drug sales of $585 increased 10% over the prior year. ZERIT*
and VIDEX*, the Company's two antiretroviral agents, increased 39% to $127
and 34% to $39, respectively. ZERIT* is now the most commonly prescribed
thymidine nucleoside reverse transcriptase inhibitor in HIV therapy. In June
1998, the Company announced a large phase III study to evaluate the safety
and efficacy of once-daily dosing of VIDEX*, as Bristol-Myers Squibb seeks
to develop a more convenient dosing regimen for HIV patients. Sales of
* Indicates brand names of products which are registered trademarks owned
by the Company.
-7-
CEFZIL*, used in the treatment of respiratory infections and the treatment
of sinusitis, increased 19% to $78. Sales of MAXIPIME*, a fourth generation
injectable cephalosporin, were $31, an increase of 28% over the prior year.
Central nervous system drug sales of $229 increased 9% over the prior year,
primarily as a result of SERZONE*, an anti-depressant, and BUSPAR*, an
anti-anxiety agent, which recorded growth of 53% to $71 and 3% to $84,
respectively.
GLUCOPHAGE, the leading oral medication for the treatment of non-insulin
dependent diabetes, continued its strong growth rate with sales increasing
64% to $238. The Company has partnered with the American Diabetes
Association, Prevention Magazine and Wal*Mart to launch Operation Detect
Diabetes, a nationwide program to help people assess their risk of developing
type 2 diabetes.
For the second quarter of 1997, sales of the pharmaceutical products segment
increased 13% over the second quarter of 1996 to $2,345 as a result of
increases in sales of PRAVACHOL*, TAXOL*, GLUCOPHAGE, MONOPRIL*, SERZONE*,
ZERIT*, CEFZIL* and MAXIPIME*.
Sales in the consumer medicines segment decreased 8% from second quarter 1997
levels to $295, reflecting a 4% decrease in volume, a 6% decrease due to the
effect of foreign exchange and a 2% increase due to changes in selling prices.
Excluding the March 1998 divestiture of the Company's BAN* brand of
antiperspirants and deodorants, consumer medicines sales increased 1%.
International consumer medicines sales increased 4% (13% excluding foreign
exchange). EFFERALGAN*, an analgesic product from the Company's UPSA group,
increased 6% to $36. Sales of EXCEDRIN* increased 9% to $50 following
clearance by the FDA in January 1998 to market EXCEDRIN* MIGRAINE, the first
and only migraine medication available to consumers without a prescription.
For the second quarter of 1997, consumer medicines segment sales increased
14% to $320, compared to the second quarter of 1996 due to increased sales of
analgesics.
In the medical devices segment, second quarter sales of $417 were 8% below
prior year levels, reflecting decreases of 5% due to volume and 3% due to
the effect of foreign exchange. Changes in selling prices had no effect on
sales for the quarter. Excluding the December 1997 divestiture of Zimmer's
arthroscopy and surgical powered instrument business, medical device sales
increased 7% (11% excluding the effect of foreign exchange). ConvaTec's
sales increased 8% to $179, excluding the effect of foreign exchange, as
sales of wound care and ostomy products increased 14% to $58 and 4% to $114,
respectively, excluding foreign exchange. Zimmer sales decreased 16% from
prior year levels to $238. Excluding the December 1997 divestiture, Zimmer
sales increased 10% (14% excluding the effect of foreign exchange rate
fluctuations). The 1998 increase is due primarily to the inclusion of revenue
under a distribution agreement with the acquirer of the divested business.
Knee prosthetic joint replacement sales decreased 2% to $85 and hip
replacement sales decreased 2% to $66, both excluding foreign exchange. For
the second quarter of 1997, medical devices segment sales of $455 were 2%
below 1996 levels as decreases in hip and knee replacement sales were offset
in part by increases in wound care and ostomy products.
-8-
Sales in the nutritional products segment decreased 2% from the second
quarter of 1997 to $424 (an increase of 4% excluding the effect of foreign
exchange), reflecting a 1% increase due to volume, a 6% decrease due to the
effect of foreign exchange and a 3% increase in selling prices. The Company's
Mead Johnson subsidiary maintains its worldwide leadership position in the
infant formula market. Total infant formula sales were $286 for the second
quarter of 1998, a decrease of 3% from prior year levels. LACTOFREE*, and
NUTRAMIGEN* special infant formulas increased 13% to $29 and 10% to $30,
respectively. BOOST* an adult nutritional supplement also contributed to
sales growth, increasing 18% to $20. For the second quarter of 1997,
nutritional products segment sales increased 1% to $432, compared to the
second quarter of 1996.
Sales in the beauty care products segment increased 18% over the second
quarter of 1997 to $603, reflecting a 19% increase due to volume, a 2%
increase due to changes in selling prices and a 3% decrease due to the effect
of foreign exchange. Clairol continues to be the number one hair products
company in the U.S., increasing its market share following the January 1998
acquisition of Redmond Products, Inc. The Redmond AUSSIE brand has added $27
to Beauty Care sales in the quarter. HERBAL ESSENCES*, complete lines of
shampoos and conditioners experienced strong volume growth, increasing 72%
to $137. Clairol's HYDRIENCE* haircolor grew 24% during the quarter to $23.
Sales of DAILY DEFENSE*, launched in September 1997, contributed $15 to
second quarter sales. In June 1998, the Company introduced REVITALIQUE*, a
new permanent haircolor. In May 1998, the Company acquired the Phytoervas
hair care business from a privately held Brazilian company. Phytoervas
manufactures and markets premium retail shampoos and conditioners with
natural ingredients. For the second quarter of 1997, sales of the beauty
care products segment were $512, an increase of 13% over the second quarter
of 1996 due to increased sales in hair care and haircoloring products.
Cost of Products Sold and Operating Expenses
- --------------------------------------------
Total costs and expenses for the quarter ended June 30, 1998, as a percentage
of sales, decreased to 73.7% from 74.6%. Cost of products sold increased to
27.2% of sales from 27.0% in 1997 due to a greater percentage of
pharmaceutical sales coming from lower margin products. Expenditures for
advertising and promotion in support of new and existing products increased
15% to $642 from $557 in 1997 and, as a percentage of sales, increased to
14.5% from 13.7% in 1997. This increase is primarily due to increased
spending on the Company's promoted pharmaceutical and beauty care products.
Marketing, selling, administrative and other expenses decreased 2% to $1,034.
Research and development expenditures increased 20% to $384 from $321 in 1997.
Pharmaceutical research and development spending increased 22% over the prior
year, and as a percentage of pharmaceutical sales, was 12.6% compared to
11.9% in the second quarter of 1997.
-9-
Earnings
- --------
Earnings before income taxes for the second quarter increased 13% to $1,164
from $1,032 in 1997. The effective tax rate on earnings before income taxes
decreased to 28.3% in 1998 from 28.5% in 1997. Net earnings increased 13% to
$835 from $738. Basic earnings per share increased 14% to $.84 from $.74 in
1997 and diluted earnings per share increased 12% to $.82 from $.73 in 1997.
Year-To-Date Results of Operations
- ----------------------------------
Sales
- ------
Worldwide sales for the first six months of 1998 increased 9% (13% excluding
the effect of foreign exchange) over the prior year to $8,876. The
consolidated sales growth resulted from an 11% increase due to volume, a 4%
decrease due to the effect of foreign exchange and a 2% increase due to
changes in selling prices. Domestic sales increased 14% and international
sales increased 3% (12% excluding the effect of foreign exchange). Worldwide
sales for the first six months of 1997 increased 10% compared to the first
six months of 1996.
Industry Segments
- ----------------- Six Months Ended June 30,
-----------------------------------------------
Net Sales % Change
-------------------- --------------------
1998 1997 1998 1997
-------- -------- ------- -------
Pharmaceutical Products $5,404 $4,724 14 % 12 %
Consumer Medicines 639 677 (6)% 14 %
Medical Devices 825 890 (7)% (2)%
Nutritional Products 872 886 (2)% 6 %
Beauty Care Products 1,136 932 22 % 13 %
-------- --------
Total Company $8,876 $8,109 9 % 10 %
======== ========
Pharmaceutical products segment sales were $5,404, an increase of 14% over
the prior year, reflecting a 16% increase due to volume, a 3% decrease due to
the effect of foreign exchange and a 1% increase due to changes in selling
prices.
Domestic and international sales increased 22% and 5%, respectively.
Excluding the unfavorable effect of foreign exchange, international sales
increased 12% for the six months. Cardiovascular drug sales of $1,534
increased 9% from the prior year (excluding the effect of foreign exchange,
sales increased 13%). PRAVACHOL* and MONOPRIL* sales grew 18% and 29%,
respectively. Sales growth for these products was partially offset by a 22%
decline in CAPOTEN* sales, due to the loss of its patent exclusivity in
certain countries in Europe during 1997. Sales of anti-cancer drugs
increased 18% to $1,364 due to strong sales of TAXOL* and PARAPLATIN*, up
25% and 24%, respectively, as well as OTN sales which increased 34%.
-10-
Anti-infective drug sales increased 10% to $1,191. Gains were recorded for
ZERIT* and VIDEX*, increasing 53% and 7%, respectively, as well as CEFZIL*
and MAXIPIME*, up 19% and 28%, respectively. Sales of central nervous system
drugs continued to experience growth, increasing 16% to $493. Sales of
SERZONE* and BUSPAR* increased 63% and 14%, respectively. GLUCOPHAGE
continued its growth, increasing 55% to $419. For the first six months of
1997, sales of the pharmaceutical products segment increased 12% over the
prior year primarily as a result of increases in sales of PRAVACHOL*,
MONOPRIL*, GLUCOPHAGE, anti-cancer, anti-infective and central nervous system
drugs, partially offset by the decline in CAPOTEN* sales.
In the consumer medicines segment, sales decreased 6% to $639, reflecting a
2% decrease due to volume, a 5% decrease due to the effect of foreign
exchange and a 1% increase due to changes in selling prices. Domestic sales
decreased 13% primarily due to the divestiture of the BAN* brand of anti-
perspirants and deodorants, and international sales decreased 1% (an increase
of 7% excluding the effect of foreign exchange). Excluding the divestiture
of BAN*, consumer medicines sales decreased 2% (an increase of 3% excluding
foreign exchange). Sales of EXCEDRIN* increased 23% to $116. For the first
six months of 1997, consumer medicines segment sales increased 14% over the
prior year, primarily due to the strong performance of analgesics from the
UPSA Group.
Sales in the medical devices segment decreased 7% from prior year levels to
$825, reflecting a 3% decrease due to volume, a 4% decrease due to the effect
of foreign exchange, and no effect from changes in selling prices. Excluding
the December 1997 divestiture, domestic sales increased 12% and international
sales increased 7% (14% excluding the effect of foreign exchange). Sales of
ostomy and wound care products from the Company's ConvaTec subsidiary
increased 6% and 10% respectively, excluding foreign exchange. Zimmer sales
decreased 14% from prior year levels (11% excluding the effect of foreign
exchange rate fluctuations) due to the 1997 divestiture. Knee prosthetic
joint replacement and hip replacement sales both increased 1% excluding
foreign exchange. For the first six months of 1997, medical devices segment
sales decreased 2% from the prior year as decreases in hip and knee
replacement sales were offset in part by increases in wound care and ostomy
products.
In the nutritional products segment, sales decreased 2% to $872, reflecting a
1% increase due to volume, a 6% decrease due to the effect of foreign
exchange and a 3% increase due to changes in selling prices. Domestic sales
decreased 1% and international sales decreased 3% (an increase of 13%
excluding the effect of foreign exchange). Total infant formula sales
decreased 4% (sales remained constant excluding foreign exchange). ENFAMIL*,
the Company's largest selling infant formula had sales of $320, a decrease of
8% (5% excluding foreign exchange). Gains were recorded for LACTOFREE*,
NUTRAMIGEN* and BOOST*, up 11%, 10% and 25%, respectively. For the first six
months of 1997, nutritional products segment sales increased 6% over the
prior year, primarily due to increased sales of LACTOFREE*, ENFAPRO* and BOOST*.
-11-
Sales in the beauty care products segment increased 22% over the prior year,
to $1,136 reflecting a 23% increase due to volume, a 2% increase in selling
prices, and a 3% decrease due to the effect of foreign exchange. Both
domestic and international sales increased 22%. Sales of hair care products
increased 59% due to market growth of the HERBAL ESSENCES* complete line of
shampoos and conditioners, which increased 90%, initial sales of the Redmond
AUSSIE brand of $50, and introductory sales of DAILY DEFENSE* of $32. Sales
of HYDRIENCE* haircolor grew 34% to $46 and introductory sales of
REVITALIQUE*, a new permanent haircolor, were $17. For the first six months
of 1997, sales in the beauty care products segment increased 13% over the
prior year primarily due to increased sales of haircoloring and hair care
products.
Cost of Products Sold and Operating Expenses
- --------------------------------------------
Total costs and expenses for the six months ended June 30, 1998, as a
percentage of sales, decreased to 72.3% from 73.3%. Cost of products sold
decreased to 26.6% of sales from 26.8% in 1997 due to increased sales in the
higher margin pharmaceutical segment. Expenditures for advertising and
promotion in support of new and existing products increased 15% to $1,213 from
$1,054 in 1997 and, as a percentage of sales, increased to 13.7% from 13.0%
in 1997. This increase is primarily due to increased spending on the
Company's promoted pharmaceutical and beauty care products. Marketing,
selling, administrative and other expenses increased 1% to $2,082. Research
and development expenditures increased 19% to $767 from $647 in 1997.
Pharmaceutical research and development spending increased 21% over the prior
year, and as a percentage of pharmaceutical sales, was 12.6% compared to
11.9% in the same period of 1997.
Earnings
- --------
Earnings before income taxes for the six months increased 13% to $2,456 from
$2,165 in 1997. The effective tax rate on earnings before income taxes
decreased to 28.3% in 1998 from 28.5% in 1997. Net earnings increased 14% to
$1,762 from $1,548. Basic earnings per share increased 14% to $1.77 from
$1.55 in 1997 and diluted earnings per share increased 14% to $1.73 from $1.52
in 1997.
Financial Position
- ------------------
The balance sheet at June 30, 1998 and the statement of cash flows for the
six months then ended reflect the Company's strong financial position. The
Company continues to maintain a high level of working capital totaling $2.7
billion at June 30, 1998.
Long-Term Debt increased to $1,336 from $1,279 at December 1997 due to the
issuance of $100 million principal 2.14% and 1.73% Yen denominated notes due
in 2003 and 2005.
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 six months ended June 30, 1998 were $365 compared to $269
during the same period of 1997.
-12-
During the six months ended June 30, 1998, the Company purchased 11.2 million
shares of its common stock at a total cost of $1,126. In 1998, 2.4 million
shares were issued in connection with an acquisition.
During the second quarter of 1998, the Company sold GEA, a Denmark based
generic drug business, and Hexachimie, a fine chemical manufacturer based in
France. A pretax gain of $76 million was recorded on these sales. The
Company also recorded a provision for restructuring of $76 million before
taxes. The restructuring charge primarily relates to the consolidation and
closure of plants and facilities as part of the Company's on-going
productivity programs.
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.
-13-
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, 1997, and material
developments in such matters described in the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1998, and below.
Prescription Drug Litigation
- ----------------------------
As previously reported in the Company's Forms 10-K and 10-Q referred to above,
the Company is a defendant in numerous antitrust actions brought by retailers
and purported consumer classes against the Company and other pharmaceutical
manufacturers, drug wholesalers and pharmacy benefit managers. Most of the
retailer cases have been coordinated for pretrial purposes in the United
States District Court for the Northern District of Illinois. On May 21,
1998, the Company settled claims asserted by American Drug Stores, Inc., and
Eckerd Corp.
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
- ------------------------------ -------
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
June 30, 1998.
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SIGNATURES
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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
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(Registrant)
Date: August 14, 1998 /s/ Harrison M. Bains, Jr.
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Harrison M. Bains, Jr.
Vice President and Treasurer
Date: August 14, 1998 /s/ Frederick S. Schiff
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Frederick S. Schiff
Vice President Financial Operations
and Controller
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