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, 1999
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, 1999, there were 1,983,692,284 shares outstanding of the
Registrant's $.10 par value Common Stock.
BRISTOL-MYERS SQUIBB COMPANY
INDEX TO FORM 10-Q
September 30, 1999
Part I - Financial Information: Page
Item 1.
Financial Statements (Unaudited):
Consolidated Balance Sheet - September 30, 1999 and December 2 - 3
31, 1998
Consolidated Statement of Earnings and Comprehensive Income
for the three and nine months ended September 30, 1999 and 4
1998
Consolidated Statement of Cash Flows for the nine months
ended September 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6 - 7
Report of Independent Accountants 8
Item 2.
Management's Discussion and Analysis of Financial 9 - 17
Condition and Results of Operations
Part II - Other Information
Item 1.
Legal Proceedings 18 - 19
Item 6.
Exhibits and Reports on Form 8-K 20
Signatures 21
PART I FINANCIAL INFORMATION
- ------------------------------
Item 1. Financial Statements
- -----------------------------
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEET - ASSETS
(Unaudited, in millions except share amounts)
September December
30, 1999 31, 1998
---------- ----------
Current Assets:
Cash and cash equivalents $2,455 $2,244
Time deposits and marketable securities 235 285
Receivables, net of allowances 3,306 3,190
Inventories 2,052 1,873
Prepaid expenses 909 1,190
--------- ---------
Total Current Assets 8,957 8,782
--------- ---------
Property, Plant and Equipment, net 4,489 4,429
Insurance Recoverable 466 523
Excess of cost over net tangible assets arising
from business acquisitions 1,550 1,587
Other Assets 1,150 951
--------- ---------
Total Assets $16,612 $16,272
========= =========
-2-
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED BALANCE SHEET -
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited, in millions except share amounts)
September December
30, 1999 31, 1998
--------- ---------
Current Liabilities:
Short-term borrowings $ 512 $ 482
Accounts payable 1,506 1,380
Accrued expenses 2,309 2,302
Product liability 378 877
U.S. and foreign income taxes payable 696 750
------ --------
Total Current Liabilities 5,401 5,791
Other Liabilities 1,439 1,541
Long-Term Debt 1,331 1,364
------ --------
Total Liabilities 8,171 8,696
------ --------
Stockholders' Equity:
Preferred stock, $2 convertible series:
Authorized 10 million shares; issued and
outstanding 11,153 in 1999 and 11,684 in - -
1998, liquidation value of $50 per share
Common stock, par value of $.10 per share:
Authorized 4.5 billion shares; issued
2,190,910,985 in 1999 and 2,188,316,808 in 219 219
1998
Capital in excess of par value of stock 1,394 1,075
Other Comprehensive Income (796) (622)
Retained earnings 14,374 12,540
------ --------
15,191 13,212
Less cost of treasury stock - 207,218,701
common shares in 1999 and 199,550,532 in 1998 6,750 5,636
------ --------
Total Stockholders' Equity 8,441 7,576
------ --------
Total Liabilities and Stockholders' Equity $16,612 $16,272
======= =======
-3-
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF EARNINGS
AND COMPREHENSIVE INCOME
(Unaudited, in millions except per share amounts)
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- ----------------
EARNINGS 1999 1998 1999 1998
- -------- ------- ------- ------- -------
Net Sales $5,040 $4,523 $14,814 $13,399
------ ------ ------- -------
Expenses:
Cost of products sold 1,402 1,191 4,068 3,549
Marketing,selling, administrative 1,095 1,034 3,338 3,116
and other
Advertising and product promotion 573 554 1,768 1,767
Research and development 452 398 1,328 1,165
Provision for restructuring - - - 201
Gain on sale of businesses - - - (201)
------ ------ ------- -------
3,522 3,177 10,502 9,597
------ ------ ------- -------
Earnings Before Income Taxes 1,518 1,346 4,312 3,802
Provision for income taxes 421 380 1,197 1,074
------ ------ ------- -------
Net Earnings $1,097 $966 $3,115 $2,728
====== ====== ====== ======
Earnings Per Common Share
Basic $.55 $.49 $1.57 $1.37
Diluted $.54 $.47 $1.54 $1.34
Average Common Shares Oustanding
Basic 1,984 1,988 1,985 1,987
Diluted 2,028 2,030 2,027 2,032
Dividends Per Common Share $.215 $.195 $.645 $.585
COMPREHENSIVE INCOME
- --------------------
Net Earnings $1,097 $966 $3,115 $2,728
Other Comprehensive Income:
Foreign currency translation (18) (68) (187) (155)
Tax effect 5 6 13 11
------ ------ ------- -------
Total Other Comprehensive Income (13) (62) (174) (144)
------- ------- ------- -------
Comprehensive Income $1,084 $904 $2,941 $2,584
====== ====== ====== ======
-4-
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in millions)
Nine Months Ended
September 30,
-----------------
1999 1998
------ ------
Cash Flows From Operating Activities:
Net earnings $3,115 $2,728
Depreciation and amortization 489 457
Provision for restructuring - 201
Gain on sale of businesses - (201)
Other operating items (59) 27
Receivables (208) (262)
Inventories (245) (81)
Accounts payable (21) 89
Accrued expenses (53) (242)
Product liability (622) (493)
Insurance recoverable 57 89
Income taxes 478 468
Other assets and liabilities (79) (103)
--------- ---------
Net Cash Provided by Operating Activities 2,852 2,677
--------- ---------
Cash Flows From Investing Activities:
Proceeds from sales of time deposits and 51 225
marketable securities
Purchases of time deposits and marketable (1) (195)
securities
Additions to fixed assets (455) (537)
Proceeds from sale of business - 413
Acquisition of businesses - (67)
Other, net (9) 10
--------- ---------
Net Cash Used in Investing Activities (414) (151)
--------- ---------
Cash Flows From Financing Activities:
Short-term borrowings 27 (30)
Long-term debt (12) 69
Issuances of common stock under stock plans (7) 129
Purchases of treasury stock (915) (1,448)
Dividends paid (1,281) (1,163)
--------- ---------
Net Cash Used in Financing Activities (2,188) (2,443)
--------- ---------
Effect of Exchange Rates on Cash (39) (8)
--------- ---------
Increase in Cash and Cash Equivalents 211 75
Cash and Cash Equivalents at Beginning of 2,244 1,456
Period --------- ---------
Cash and Cash Equivalents at End of Period $2,455 $1,531
========= =========
-5-
BRISTOL-MYERS SQUIBB COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in millions except per share amounts)
Note 1: 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 September 30, 1999 and December 31,
1998, the results of operations for the three and nine months
ended September 30, 1999 and 1998, and cash flows for the nine
months ended September 30, 1999 and 1998. These consolidated
financial statements should be read in conjunction with the
consolidated financial statements and the related notes included
in the Company's 1998 Annual Report on Form 10-K.
PricewaterhouseCoopers LLP, the Company's independent auditors,
have performed a review of the unaudited consolidated financial
statements included herein, and their review report thereon
accompanies this filing.
Note 2: Accounting Policies
- -----------------------------
Basis of Consolidation - The consolidated financial statements
include the accounts of Bristol-Myers Squibb Company and all of
its subsidiaries.
Cash and Cash Equivalents - Cash and cash equivalents primarily
include securities with a maturity of three months or less at
the time of purchase, recorded at cost, which approximates
market.
Time Deposits and Marketable Securities - Time deposits and
marketable securities are available for sale and are recorded at
fair value, which approximates cost.
Inventory Valuation - Inventories are generally stated at
average cost, not in excess of market. As of September 30, 1999,
the amounts of finished goods, work in process, and raw and
packaging materials were $1,362, $340 and $350, respectively.
These amounts as of December 31, 1998 were $1,209, $236 and
$428, respectively.
Capital Assets and Depreciation - Expenditures for additions,
renewals and betterments are capitalized at cost. Depreciation
is generally computed by the straight-line method based on the
estimated useful lives of the related assets. The estimated
useful lives of the major classes of depreciable assets are 50
years for buildings and 3 to 40 years for machinery, equipment
and fixtures. Accumulated depreciation as of September 30, 1999
and December 31, 1998 amounted to $3,234 and $3,079,
respectively.
Excess of Cost over Net Tangible Assets - The excess of cost
over net tangible assets arising from business acquisitions is
amortized on a straight-line basis over periods ranging from 15
to 40 years. The excess of cost over net tangible assets is
periodically reviewed for impairment based on an assessment of
future operations (including cash flows) to ensure the excess of
cost over net tangible assets is appropriately valued.
-6-
Product Liability - Accruals for product liability are
recorded, on an undiscounted basis, when it is probable that a
liability has been incurred and the amount of the liability can
be reasonably estimated, based on existing information. These
accruals are adjusted periodically as assessment efforts
progress or as additional information becomes available.
Receivables for related insurance or other third party
recoveries for product liabilities are recorded, on an
undiscounted basis, when it is probable that a recovery will be
realized. Insurance recoverable recorded on the balance sheet
has, in general, payment terms of three years or less.
Revenue Recognition - Revenue from product sales is recognized
upon shipment to customers.
Note 3: Earnings Per Share
- --------------------------
Basic earnings per common share are computed using the weighted
average number of shares outstanding during the year. Diluted
earnings per common share are computed using the weighted
average number of shares outstanding during the year, plus the
incremental shares outstanding assuming the exercise of dilutive
stock options. The computations for basic earnings per common
share and diluted earnings per common share are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
1999 1998 1999 1998
------- ------- ------- -------
Earnings per Common Share -
Basic:
Net Earnings $1,097 $ 966 $3,115 $2,728
Average Common Shares 1,984 1,988 1,985 1,987
Outstanding
Earnings Per Common Share -
Basic $ 0.55 $ 0.49 $ 1.57 $ 1.37
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- ------------------
1999 1998 1999 1998
------- ------- ------- -------
Earnings per Common Share -
Diluted:
Net Earnings $1,097 $ 966 $3,115 $2,728
Average Common Shares 1,984 1,988 1,985 1,987
Outstanding
Incremental Shares Outstanding
Assuming the Exercise of 44 42 42 45
Dilutive Stock Options
Average Common Shares 2,028 2,030 2,027 2,032
Outstanding
Earnings Per Common Share -
Diluted $ 0.54 $ 0.47 $ 1.54 $ 1.34
-7-
Report of Independent Accountants
To the Board of Directors
and Stockholders of
Bristol-Myers Squibb Company
We have reviewed the accompanying consolidated balance sheet of
Bristol-Myers Squibb Company and its subsidiaries as of
September 30, 1999, and the related consolidated statement of
earnings and comprehensive income for each of the three-month
and nine-month periods ended September 30, 1999 and 1998 and the
consolidated statement of cash flows for the nine-month periods
ended September 30, 1999 and 1998. These financial statements
are the responsibility of the Company's management.
We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the accompanying
consolidated interim financial statements for them to be in
conformity with generally accepted accounting principles.
We previously audited in accordance with generally accepted
auditing standards, the consolidated balance sheet as of
December 31, 1998, and the related consolidated statements of
earnings, comprehensive income and retained earnings and of cash
flows for the year then ended (not presented herein), and in our
report dated January 20, 1999 we expressed an unqualified
opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1998 is fairly
stated in all material respects in relation to the consolidated
balance sheet from which it has been derived.
PricewaterhouseCoopers LLP
New York, New York
November 9, 1999
-8-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Third Quarter Results of Operations
- -----------------------------------
Worldwide sales for the third quarter of 1999 increased 11% over
the prior year to $5,040 million. The consolidated sales growth
resulted from a 10% increase due to volume, a 2% increase due to
changes in selling prices and a 1% decrease due to foreign
exchange rate fluctuations. U.S. sales increased 15% and
international sales increased 5% (7% excluding the effect of
foreign exchange).
Sales in the medicines products segment, which is the largest
segment at 70% of total Company sales, increased 14% over the
third quarter of 1998 to $3,548 million. Sales growth resulted
from a 13% increase in volume, a 3% increase in selling prices
and a 2% decrease due to foreign exchange rate fluctuations.
Worldwide pharmaceutical sales increased 15% with U.S.
pharmaceutical sales up 22% over the prior year.
Sales of cardiovascular drugs increased 12% to $871 million (14%
excluding foreign exchange). Sales of PRAVACHOL*, the Company's
largest selling product, decreased 1% to $386 million. Sales of
the anti-hypertensive MONOPRIL*, a second generation angiotensin
converting enzyme (ACE) inhibitor, increased 9% to $94 million.
PLAVIX(R), a platelet aggregation inhibitor for the reduction of
stroke, heart attack and vascular death in atherosclerotic
patients with recent stroke, heart attack or peripheral arterial
disease, had sales of $148 million compared to $45 million for
the same quarter last year. AVAPRO(r), an angiotensin II receptor
blocker for the treatment of hypertension, increased 55% to $62
million. AVAPRO(r) and PLAVIX(r) are cardiovascular products that
were launched from the Bristol-Myers Squibb and Sanofi S.A.
joint venture. Sales growth for these cardiovascular products
was partially offset by a 23% decline in CAPOTEN* sales due to
the loss of patent exclusivity in international markets.
Sales of anti-cancer drugs, the largest product group in the
segment, increased 16% to $898 million. Sales of TAXOL*
(paclitaxel), the Company's leading anti-cancer agent, increased
23% to $375 million as the product continues to benefit from
increased use in ovarian, breast and non-small cell lung cancer.
Sales from Oncology Therapeutics Network (OTN), a specialty
distributor of anti-cancer medicines and related products,
increased 38% to $236 million.
Anti-infective drug sales of $602 million increased 3% over the
prior year. Sales of ZERIT* and VIDEX*, the Company's two anti-
retroviral agents, increased 17% to $155 million and 14%
to $49 million, respectively. International sales of MAXIPIME*,
a fourth generation injectable cephalosporin, increased 35% to
$31 million in the quarter.
Central nervous system drug sales of $314 million increased 16%
with sales of BUSPAR*, an anti-anxiety agent, and SERZONE*, a
novel anti-depressant, increasing 12% to $155 million, and 41%
to $86 million, respectively.
* Indicates brand names of products which are trademarks of
the Company.
-9-
GLUCOPHAGE(r), the leading branded oral medication for the
treatment of non-insulin dependent (type 2) diabetes, continued
its strong growth rate with sales increasing 57% to $349
million.
Analgesic sales increased 11% to $180 million. EXCEDRIN* sales
increased 5% to $61 million, BUFFERIN* sales increased 19% to
$32 million and sales of EFFERALGAN*, an effervescent analgesic
sold primarily in France, increased 3% to $33 million. In
October 1999, the U.S. Food and Drug Administration expanded the
EXCEDRIN* migraine indication from just the treatment of mild
to moderate migraine pain to encompass even the severe pain
and associated symptoms of the full migraine syndrome. Also
in October, the Company introduced THERAGRAN HEART RIGHT*, a
complete multivitamin with a formula specially created to help
support a healthy heart.
Earnings before taxes for the medicines products segment
increased 20% to $1,049 million in 1999. As a percentage of
sales, earnings before taxes for this segment improved to 29.6%
in 1999 from 28.2% in 1998. Advertising and promotion, sales
force and general administrative expenses improved, as a
percentage of sales, partially offset by increases in cost of
goods sold, as a percentage of sales.
Sales in the beauty care products segment increased 5% (4%
excluding the effect of foreign exchange) to $624 million.
Sales growth resulted from a 2% increase in volume, a 2%
increase in selling prices and a 1% increase due to foreign
exchange rate fluctuations. Clairol continues to be the number
one hair products company in the U.S. The introduction of a
demand management manufacturing system slowed shipments during
the quarter. HERBAL ESSENCES*, the number two brand in the U.S.
shampoo/conditioner category and number three in the body wash
category, continued its strong growth, increasing 6% to $163
million. AUSSIE* products contributed $32 million to third
quarter sales, an increase of 7%. Sales of DAILY DEFENSE*
increased 12% to $29 million, following its launch into
international markets. Haircolor sales increased 12% due to
increases in NICE 'N EASY* of 24% to $56 million and NATURAL
INSTINCTS* of 24% to $26 million. Earnings before taxes for the
beauty care products segment decreased to $92 million in 1999
from $96 million in 1998, primarily due to the introduction of a
demand management manufacturing system.
Sales in the nutritional products segment increased 6% to $466
million. Sales growth resulted from an 8% increase in volume, a
2% decrease in selling prices and no effect due to foreign
exchange rate fluctuations. The Company's Mead Johnson
subsidiary continues to build on its U.S. and worldwide
leadership position in the infant formula market. ENFAMIL*, the
Company's largest-selling infant formula, recorded sales of $176
million, an increase of 1% over the prior year. BOOST*, an adult
nutritional supplement, also contributed to sales growth,
increasing 38% to $33 million and sales of VIACTIV* Calcium
Chews reached $10 million. Earnings before taxes for the
nutritional segment increased to $96 million in 1999 from $91
million in 1998, and as a percentage of sales, remained at prior
year levels of approximately 20.6%. Sales force and general
administrative expenses improved as a percentage of sales,
offset by increases in cost of goods sold and advertising and
promotion expenses, as a percentage of sales.
-10-
Medical device segment sales increased 4% to $402 million, due
to volume increases of 3% and increases due to changes in
selling prices of 1%. Fluctuations in foreign exchange had no
effect on medical devices sales. Zimmer sales increased 8% to
$226 million (5% excluding foreign exchange). Knee joint
replacement sales increased 13% to $88 million and hip
replacement sales increased 14% to $67 million. ConvaTec sales
remained at prior year levels at $176 million (a 1% increase
excluding foreign exchange). Sales of modern wound care
products increased 5% to $62 million while sales of ostomy
products decreased 11% to $100 million. Earnings before taxes
for the medical device segment increased 15% to $91 million in
1999 from $79 million in 1998 and, as a percentage of sales,
increased to 22.6% in 1999 from 20.5% in 1998, primarily due to
improved manufacturing processes.
Operating Expenses
- ------------------
Total expenses, as a percentage of sales, decreased to 69.9%
from 70.2% in 1998. Cost of products sold, as a percentage of
sales, increased to 27.8% from 26.3% in 1998 due to revenue
growth of Oncology Therapeutics Network (OTN) which carries
significantly lower margins. Excluding OTN, cost of products
sold, as a percentage of sales, increased to 24.5% in 1999 from
23.6% in 1998 due primarily to decreased sales of CAPOTEN* and a
product mix shift to lower margin pharmaceutical products.
Expenditures for advertising and promotion in support of new and
existing products increased 3% to $573 million from $554
million.
Marketing, selling administrative and other expenses, as a
percentage of sales, decreased to 21.7% in the third quarter of
1999 from 22.9% in the third quarter of 1998, primarily due to
sales force effectiveness and reductions in general
administrative expenses as a percentage of sales. Research and
development expenditures increased 14% to $452 million from $398
million in 1998. Pharmaceutical research and development
spending increased 13% over the prior year, and as a percentage
of pharmaceutical sales, was 12.5% in the third quarter of 1999
and 12.6% in the third quarter of 1998.
In research and development highlights this quarter, the Company
and Otsuka Pharmaceutical Co., Ltd., announced a development,
commercialization and collaboration agreement for aripiprazole,
a novel drug under study in Phase III trials as a treatment for
schizophrenia. This new compound has a unique mechanism of
action and has the potential to expand the options for safely
and effectively treating schizophrenia and, possibly, other
forms of mental illness. In October, the U.S. Food and Drug
Administration (FDA) approved the use of TAXOL* injection for
adjuvant treatment of node-positive breast cancer. In
September, the Oncologic Drugs Advisory Committee recommended
that the FDA approve UFT(r) capsules in combination with
leucovorin calcium tablets for treatment of metastatic
colorectal cancer. Also in September, ZERIT* and VIDEX* were
both approved by the FDA for use as a first-line component of a
combination antiretroviral therapy regimen for HIV-infected
patients.
The Company also submitted a regulatory application to the FDA
in September to gain marketing approval for a new oral
antidiabetic combination drug. The new drug, which is the first
fixed combination product of its kind to be developed in the
United States, leverages the benefits of two widely prescribed
oral antidiabetic medications, GLUCOPHAGE(r) (metformin) and
glyburide, a well established sulfonylurea antidiabetic. A
regulatory application was filed with the FDA in September to
gain marketing approval for VANIQA*, a topical treatment for
excessive facial hair in women.
-11-
The Company is awaiting marketing approval from the FDA for
TEQUIN* (gatifloxacin), a broad-spectrum quinolone antibiotic
for the treatment of multiple common infections, including those
of the respiratory tract. The Company also plans to file for
regulatory approval with the FDA for a new hypertension drug,
VANLEV*, by the end of the year with worldwide regulatory
filings to follow. A research agreement between the Company and
Exelixis Pharmaceuticals was recently announced to identify
novel, validated targets for new medicines using the genetics of
yeast, worms and fruit flies.
Earnings
- --------
Earnings before income taxes increased 13% to $1,518 million
from $1,346 million in 1998. The effective tax rate on earnings
before income taxes decreased to 27.7% in 1999 from 28.2% in
1998. The decrease in the effective tax rate is due to increased
earnings from lower tax rate jurisdictions. Net earnings
increased 14% to $1,097 million from $966 million in 1998. Basic
earnings per share increased 12% to $.55 from $.49 in 1998 and
diluted earnings per share increased 15% to $.54 from $.47 in
1998.
Nine Months Results of Operations
- ---------------------------------
Worldwide sales for the first nine months of 1999 increased 11%
over the prior year to $14,814 million. The consolidated sales
growth resulted from a 9% increase due to volume and a 2%
increase due to changes in selling prices. Foreign exchange had
no effect on sales for the nine months. U.S. sales increased
16% and international sales increased 3% (4% excluding the
effect of foreign exchange).
Sales in the medicines products segment increased 14% over the
prior year to $10,413 million. Sales growth for the nine months
resulted from a 13% increase in volume, a 2% increase in selling
prices and a 1% decrease due to foreign exchange rate
fluctuations. Worldwide pharmaceutical sales increased 15% with
U.S. pharmaceutical sales up 23% over the prior year.
Cardiovascular drug sales of $2,673 million increased 15% from
the prior year. PRAVACHOL* increased 5% to $1,252 million and
MONOPRIL* increased 10% to $316 million. PLAVIX(r) had sales of
$364 million for the nine months and AVAPRO(r) had sales of $176
million. Sales growth for these products was partially offset
by a 22% decline in CAPOTEN* sales, due to the loss of patent
exclusivity in international markets. Sales of anti-cancer
drugs increased 21% to $2,585 million due to strong sales of
TAXOL* and OTN which increased 24% to $1,067 million and 41% to
$656 million, respectively. Anti-infective drug sales increased
4% to $1,819 million as ZERIT* and VIDEX* recorded gains of 17%
to $458 million and 26% to $148 million, respectively.
International sales of MAXIPIME* increased 26% to $92 million
for the nine months and sales of CEFZIL* increased 11% to $329
million. Sales of central nervous system drugs increased 13% to
$888 million as BUSPAR* and SERZONE* increased 14% to $418
million and 19% to $233 million, respectively. GLUCOPHAGE(r)
continued its strong growth and increased 53% to $980 million.
Analgesic sales of $540 million increased 6% primarily due to
increases in EFFERALGAN* of 9% to $118 million and BUFFERIN* of
14% to $97 million. Sales of EXCEDRIN* decreased 1% to $173
million, coming off significant increases in 1998 due to the
launch of EXCEDRIN MIGRAINE*.
-12-
Earnings before taxes for the medicines products segment
increased 17% to $2,943 million in 1999. As a percentage of
sales, earnings before taxes for this segment improved to 28.3%
in 1999 from 27.5% in 1998. Advertising and promotion, sales
force and general administrative expenses improved, as a
percentage of sales, partially offset by an increase in cost of
goods sold, as a percentage of sales.
Sales in the beauty care products segment increased 5% (6%
excluding the effect of foreign exchange) to $1,822 million.
Sales growth resulted from a 4% increase in volume, a 2%
increase in selling prices and a 1% decrease due to foreign
exchange rate fluctuations. HERBAL ESSENCES* continued its
strong growth, increasing 16% to $486 million. HERBAL ESSENCES
FACIAL CARE* contributed $15 million in nine month sales.
AUSSIE* products contributed $93 million, an increase of 15%,
and sales of DAILY DEFENSE* increased 60% to $93 million for the
nine months. Earnings before taxes for the beauty care segment
decreased to $202 million in 1999 from $257 million in 1998,
primarily due to the introduction of a demand management
manufacturing system.
Sales in the nutritional products segment increased 3% to $1,354
million (4% excluding the effect of foreign exchange). Sales
growth for the nine months resulted from a 4% increase in
volume, and a 1% decrease due to foreign exchange rate
fluctuations. Changes in selling prices had no effect on sales
for the nine months. Total infant formula sales of $896 million
were at prior year levels. ENFAMIL* recorded sales of $525
million, a 4% increase over the prior year. BOOST*, an adult
nutritional supplement, increased 29% to $84 million. Nine
month sales of VIACTIV* were $19 million. Earnings before taxes
for the nutritional products segment were $268 million in 1999
compared to $260 million in 1998 and, as a percentage of sales,
earnings before taxes were 19.8% in both 1999 and 1998.
Increases, as a percentage of sales, in cost of products sold
and advertising and promotion expenses were offset by decreases,
as a percentage of sales, in sales force and general and
administrative expenses.
Medical device segment sales increased 4% to $1,225 million,
excluding sales from a 1998 distribution agreement with the
acquirer of Zimmer's divested arthroscopy and powered surgical
instrument business. On this basis, medical device sales
increased 3% due to volume and 1% due to foreign exchange with
no effect from price changes. Zimmer sales on the same basis
increased 7% to $704 million. Knee joint replacement sales
increased 11% to $277 million and hip replacement sales
increased 9% to $209 million. ConvaTec remained at prior year
levels of $521 million as sales of ostomy products decreased 2%
to $324 million and wound care products increased 1% to $173
million. Earnings before taxes for the medical devices segment
increased 11% to $253 million in 1999 from $227 million in 1998
and, as a percentage of sales, improved to 20.7% in 1999 from
18.8% in 1998, resulting from a decrease, as a percentage of
sales, in cost of products sold.
-13-
Operating Expenses
- ------------------
Total expenses for the nine months ended September 30, 1999, as
a percentage of sales, decreased to 70.9% from 71.6% in 1998.
Cost of products sold increased to 27.5% of sales from 26.5% in
1998 primarily due to revenue growth of OTN which carries
significantly lower margins. Excluding OTN, cost of products
sold, as a percentage of sales, increased to 24.3% in 1999 from
24.0% in 1998 due to decreased sales of CAPOTEN*. Expenditures
for advertising and promotion in support of new and existing
products remained at prior year levels of $1,768 million.
Marketing, selling, administrative and other expenses increased
7% to $3,338 million from $3,116 million in 1998. Research and
development expenditures increased 14% to $1,328 million from
$1,165 million in 1998. Pharmaceutical research and development
spending increased 14% over the prior year, and as a percentage
of pharmaceutical sales, was 12.4% compared to 12.6% in the same
period of 1998.
Earnings
- --------
Earnings before income taxes for the nine months increased 13%
to $4,312 million from $3,802 million in 1998. The effective tax
rate on earnings before income taxes decreased to 27.8% in 1999
from 28.2% in 1998. Net earnings increased 14% to $3,115 million
from $2,728 million in 1998. Basic earnings per share increased
15% to $1.57 from $1.37 in 1998 and diluted earnings per share
increased 15% to $1.54 from $1.34 in 1998.
Financial Position
- ------------------
The balance sheet at September 30, 1999 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, increasing to $3.6 billion at
September 30, 1999, from $3.0 billion at December 31, 1998.
Long-Term Debt decreased to $1,331 million from $1,364 million
at December 1998.
Internally generated funds continue to be the Company's primary
source for financing expenditures for new plant and equipment.
Net Cash Provided by Operating Activities increased 7% to $2,852
million in 1999. Additions to fixed assets for the nine months
ended September 30, 1999 were $455 million compared to $537
million during the same period of 1998.
During the nine months ended September 30, 1999, the Company
purchased 15.2 million shares of its common stock.
The Company is exposed to market risk, including changes in
currency exchange rates. To reduce these risks, the Company
enters into certain derivative financial instruments where
available on a cost-effective basis to hedge its underlying
economic exposure. These instruments also are managed on a
consolidated basis to efficiently net exposures and thus take
advantage of any natural offsets.
-14-
It is the Company's policy to hedge certain underlying economic
exposures to reduce foreign exchange risk. Derivative financial
instruments are not used for trading purposes. Gains and losses
on hedging transactions are offset by gains and losses on the
underlying exposures being hedged. Foreign exchange option
contracts and, to a lesser extent, forward contracts are used to
hedge anticipated transactions.
During the first quarter of 1998, the Company divested its BANr
brand of anti-perspirants and deodorants for $165 million,
resulting in a gain of $125 million before taxes. During the
second quarter, the Company divested A/S GEA, a Denmark-based
generic drug business, and Hexachimie, a fine chemical
manufacturer based in France, resulting in a combined gain of
$76 million before taxes. The Company recorded provisions for
restructuring of $201 million before taxes in the first nine
months of 1998.
Business Segments
- -----------------
Three Months Ended September 30,
------------------------------------------
Earnings
Net Sales Before Taxes
-------------------- -------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(in millions)
Medicines Products $3,548 $3,101 $1,049 $ 873
Beauty Care Products 624 597 92 96
Nutritional Products 466 440 96 91
Medical Devices 402 385 91 79
Other - - 190 207
--------- --------- --------- ---------
Total Company $5,040 $4,523 $1,518 $1,346
========= ========= ========= =========
Nine Months Ended September 30,
------------------------------------------
Earnings
Net Sales Before Taxes
-------------------- -------------------
1999 1998 1999 1998
--------- --------- --------- ---------
(in millions)
Medicines Products $10,413 $ 9,145 $2,943 $2,519
Beauty Care Products 1,822 1,733 202 257
Nutritional Products 1,354 1,311 268 260
Medical Devices 1,225 1,210 253 227
Other - - 646 539
-------- --------- --------- ---------
Total Company $14,814 $13,399 $4,312 $3,802
======== ========= ========= =========
-15-
Included in earnings before taxes of each segment is a cost of
capital charge. The offset to the cost of capital charge is
included in Other. In addition, Other principally consists of
interest income, interest expense, certain administrative
expenses and allocations to the industry segments for certain
corporate programs. For the first nine months of 1998, Other
also includes the gain on sale of businesses of $201 million and
a provision for restructuring of $201 million. In addition, the
segment information reflects certain internal organizational
changes made in 1999. Prior year data have been restated
accordingly.
Year 2000
- ---------
The Company has reviewed its information, manufacturing, and
research and development systems for Year 2000 compliance. The
Year 2000 problem arises because many computer systems use only
two digits to represent the year. These programs may not
process dates beyond 1999, which may cause miscalculations or
system failures.
The Company has completed a comprehensive compliance program
used to assess the Year 2000 problem in the processing of data
in the Company's information technology (IT) and non-IT systems,
including manufacturing, and research and development systems.
This program was executed in five phases which included:
Assessment, Planning, Execution, Testing and Certification, and
Implementation.
In connection with this compliance program, the Company also has
asked critically important vendors, customers, suppliers,
governmental regulatory authorities and financial institutions,
whose incomplete or untimely resolution of the Year 2000 problem
could potentially have a significant impact on the Company's
operations, to assess their Year 2000 readiness. This assessment
has been completed. The follow-up phase of this work (which
includes ongoing monitoring of Year 2000 readiness of the third
parties and developing contingency plans relating to those third
parties whose responses raise issues or who did not respond) is
being undertaken by the business continuity and contingency
planning committees referred to below.
Contingency plans are in place to minimize any significant
exposures from the failures of third parties to be Year 2000
compliant. The contingency plans include backup procedures,
identification of alternate suppliers, and increases in
inventory levels where appropriate. The contingency plans are
complete and will continue to be tested during the rest of the
year. In addition, the Company has formed business steering
committees to monitor contingency planning activities at various
business-unit and corporate levels. These committees proactively
monitor critical internal systems as well as the external
environment. The Company has set up procedures to receive
relevant information regarding any Year 2000 related events from
all of the markets during the year-end change. This information
will be collected by these committees, who will initiate the
implementation of contingency plans in a timely manner, as
necessary.
-16-
As a result of the comprehensive compliance program, information
received from critically important third parties regarding their
Year 2000 readiness, and the contingency plans in place, the
Company does not expect the Year 2000 problem, as well as the
cost of the compliance program, to have a material impact on the
Company's results of operations, financial condition or cash
flows. However, there can be no assurance that third parties
will convert their systems in a timely manner and in a way that
is compatible with the Company's systems.
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.
-17-
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, 1998 and any subsequent material
developments in such matters are described below.
Breast Implant Litigation
- -------------------------
As previously reported in the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1998, the Company,
together with its subsidiary, Medical Engineering Corporation
(MEC), and certain other companies, has been named as a defendant
in a number of claims and lawsuits alleging damages for personal
injuries of various types resulting from breast implants formerly
manufactured by MEC or a related company.
Of the more than 90,000 claims or potential claims against the
Company in direct lawsuits or through registration in the
national class action Revised Settlement Program, most have been
dealt with through the Revised Settlement, other settlements, or
trial. Since December 31, 1998, the Company has settled, reached
agreements to settle, or otherwise disposed of large numbers of
claims of persons with breast implants made by MEC. As of
November 1, 1999, the Company's contingent liability in respect
of breast implant claims was limited to residual unpaid Revised
Settlement Program obligations and to roughly 2,200 remaining opt-
outs who have pursued or may pursue their claims in court.
As of November 1, 1999, approximately 7,400 United States and 200
foreign breast implant recipients were plaintiffs in lawsuits
pending in federal and state courts in the United States and in
certain courts in Canada and Australia. These figures include
the claims of plaintiffs that are in the process of being settled
and/or dismissed. In these lawsuits, about 4,200 U.S. plaintiffs
and 50 foreign plaintiffs opted out of the Revised Settlement.
The lawsuits of approximately 3,200 U.S. plaintiffs who did not
opt out are expected to be dismissed as these plaintiffs are
among the estimated 74,000 women with MEC implants who chose to
participate in the nationwide settlement. Of the 4,200 opt-out
plaintiffs, an estimated 2,000 plaintiffs have claims based upon
products that were not manufactured and sold by MEC or that have
been or are in the process of being settled and/or dismissed.
Accordingly, the number of remaining plaintiffs who have pursued
or may pursue their claims in court against the Company is
roughly 2,200 as stated in the preceding paragraph.
Under the terms of the Revised Settlement Program, additional opt-
outs are expected to be minimal since the deadline for U.S. class
members to opt out has passed. In addition, the Company's
remaining obligations under the Revised Settlement Program are
limited because most payments to "Current Claimants" have already
been made, no additional "Current Claims" may be filed without
court approval, and because payments of claims to so-called
"Other Registrants" and "Late Registrants" are limited by the
terms of the Revised Settlement Program. The Company believes it
will be able to address remaining opt-out claims as well as
remaining obligations under the Revised Settlement Program within
its reserves as described in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998.
-18-
Prescription Drug Litigation
- ----------------------------
The Company remains a defendant in several actions challenging
pricing on brand name prescription drugs. These actions include
several currently consolidated antitrust actions brought against
the Company and more than thirty other pharmaceutical
manufacturers, drug wholesalers and pharmacy benefit managers by
certain chain drugstores, supermarket chains and independent
drugstores; state pharmaceutical actions; and purported class
actions on behalf of consumers. The Company will continue to
defend vigorously its position in this ongoing litigation and
believes it will be able to address all remaining claims within
its reserves as described in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998.
Infant Formula Matters
- ----------------------
As previously reported in the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1998, the Company, one
of its subsidiaries, and others have been defendants in a number
of antitrust actions in various states filed on behalf of
purported statewide classes of indirect purchasers of infant
formula products and by the Attorneys General of Louisiana,
Minnesota and Mississippi, alleging a price fixing conspiracy and
other violations of state antitrust or deceptive trade practice
laws and seeking penalties and other relief. The Company has
resolved all of these actions except for a purported statewide
class action of indirect purchasers in Louisiana in which the
plaintiffs filed a petition for certiorari in the United States
Supreme Court on jurisdictional grounds following the United
States Court of Appeals' affirmation of the district court's
dismissal of such action.
-19-
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
- ------------------------------- --------
10q. Form of Agreement, effective June 1, 1999,
entered into between the Registrant and each E-10q-1
of the following officers on the following
dates: Hamed M. Abdou, Ph.D., August 9, 1999;
Peter R. Dolan, July 29, 1999; Donald J. Hayden,
Jr., July 30, 1999; Richard J. Lane, August 6,
1999; John L. McGoldrick, August 10, 1999;
Michael F. Mee, July 28, 1999; Christine A.
Poon, July 29, 1999; Peter S. Ringrose, Ph.D.,
August 5, 1999; Stephen I. Sadove, July 29, 1999;
Frederick S. Schiff, July 29, 1999; John L. Skule,
August 5, 1999; Charles G. Tharp, Ph.D., July 28,
1999; and Kenneth E. Weg, July 29, 1999.
15. Independent Accountants' Awareness Letter E-15-1
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, 1999.
-20-
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 12, 1999 By: /s/ Harrison M. Bains, Jr.
---------------------------
Harrison M. Bains, Jr.
Vice President and Treasurer
Date: November 12, 1999 By: /s/ Frederick S. Schiff
---------------------------
Frederick S. Schiff
Vice President -
Financial Operations and Controller
-21-