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 quarter ended March 31, 2001

 

Commission File Number 1-6926

 

C. R. BARD, INC.

 

(Exact name of registrant as specified in its charter)

New Jersey

22-1454160

(State of incorporation)

(I.R.S. Employer Identification No.)

730 Central Avenue, Murray Hill, New Jersey 07974

(Address of principal executive offices)

Registrant's telephone number,

Including area code:

(908) 277-8000

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

 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class

Outstanding at April 30, 2001

Common Stock - $.25 par value

50,678,321

 

 

C. R. BARD, INC. AND SUBSIDIARIES

INDEX

 

PAGE NO.

PART I - FINANCIAL INFORMATION

 

Condensed Consolidated Balance Sheets - March 31, 2001 and December 31, 2000

1

 

 

Condensed Consolidated Statements of Income For The Three Months Ended March 31, 2001 and 2000

2

 

 

Condensed Consolidated Statements of Shareholders' Investment For The Three Months Ended March 31, 2001 and 2000

3

 

 

Condensed Consolidated Statements of Cash Flows For The Three Months Ended March 31, 2001 and 2000

4

 

 

Notes to Condensed Consolidated Financial Statements

5

 

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

7

 

 

PART II - OTHER INFORMATION

9

 

 

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

March 31,

2001

December 31,

2000

ASSETS

(unaudited)

 

Current Assets:

 

 

Cash and short-term investments

$ 128,400

$ 119,700

Accounts receivable, net

192,200

195,800

Inventories

200,500

193,500

Other current assets

18,000

17,600

Total current assets

539,100

526,600

Property, plant and equipment, net

156,800

155,500

Intangible assets, net of amortization

354,800

356,200

Other assets

54,100

50,900

$1,104,800

$1,089,200

LIABILITIES AND

SHAREHOLDERS' INVESTMENT

 

 

Current Liabilities:

 

 

Short-term borrowings and current

maturities of long-term debt

$ 800

$ 800

Accounts payable

52,600

56,000

Accrued expenses

126,700

136,200

Federal and foreign income taxes

39,700

31,500

Total current liabilities

219,800

224,500

Long-term debt

200,500

204,300

Other long-term liabilities

47,000

46,500

Shareholders' Investment

 

 

Preferred stock, $1 par value, authorized

5,000,000 shares; none issued

- - -

- - -

Common stock, $.25 par value, authorized

300,000,000 shares; issued and outstanding

50,693,597 shares and 50,908,614 shares

 

12,700

 

12,700

Capital in excess of par value

183,500

177,300

Retained earnings

525,400

519,400

Accumulated other comprehensive income

(71,000)

(80,200)

Unamortized expenses under stock plans

(13,100)

(15,300)

 

637,500

613,900

$1,104,800

$1,089,200

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

 

 

-1-

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(thousands except per share amounts)

(unaudited)

 

 

 

For Three Months Ended

March 31,

 

2001

2000

 

 

 

Net sales

$ 284,800

$ 268,500

 

 

 

Costs and Expenses:

 

 

Cost of goods sold

132,500

120,300

Marketing, selling and administrative

87,400

85,500

Research & development

13,600

13,600

Interest expense

4,000

5,300

Gain from dispositions of cardiology businesses

0

(15,400)

Other (income) expense, net

(100)

13,700

 

 

 

Total costs and expenses

237,400

223,000

 

 

 

Income before taxes

47,400

45,500

 

 

 

Provision for income taxes

14,200

14,000

 

 

 

Net income

$ 33,200

$ 31,500

 

 

 

Basic earnings per share

$ 0.65

$ 0.62

 

 

 

Diluted earnings per share

$ 0.65

$ 0.62

 

 

 

Cash dividends per share

$ 0.21

$ 0.20

 

 

 

Average common shares outstanding - basic

50,740

50,609

 

 

 

Average common shares outstanding - diluted

51,256

51,061

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

 

 

- 2 -

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT

(dollars in thousands except per share amounts)

(unaudited)

 

 

Three Months Ended March 31, 2001

 

Common Stock

 

Capital in

Excess of Par

 

Retained

Earnings

Accumulated

Other

Comprehensive

Income

Unamor-

tized

Expenses

Under

Stock Plan

 

 

Total

Shares

 

 

Amount

Balance at December 31, 2000

50,908,614

$ 12,700

$ 177,300

$ 519,400

$ (80,200)

$ (15,300)

$ 613,900

Net income

 

 

 

33,200

 

 

33,200

Currency translation adjustments/other

 

 

 

 

9,200

 

9,200

comprehensive income

 

 

 

 

 

 

42,400

Cash dividends ($.21 per share)

 

 

 

(10,700)

 

 

(10,700)

Treasury stock acquired

(381,400)

(100)

(16,500)

(16,600)

Employee stock plans

166,383

100

6,200

---

---

2,200

8,500

Balance at March 31, 2001

50,693,597

$ 12,700

$ 183,500

$ 525,400

$ (71,000)

$ (13,100)

$ 637,500

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2000

Common Stock

 

Capital in

Excess of Par

 

Retained

Earnings

Accumulated

Other

Comprehensive

Income

Unamor-tized

Expenses Under

Stock Plan

 

 

Total

 

 

Shares

 

 

Amount

Balance at December 31, 1999

50,781,857

$ 12,700

$ 153,500

$ 473,500

$ (48,600)

$ (16,800)

$ 574,300

Net income

 

 

 

31,500

 

 

31,500

Currency translation adjustments/other

 

 

 

 

(6,100)

 

(6,100)

comprehensive income

 

 

 

 

 

 

25,400

Cash dividends ($.20 per share)

 

 

 

(10,200)

 

 

(10,200)

Treasury stock acquired

(420,300)

(100)

 

(17,700)

 

 

(17,800)

Employee stock plans

100,648

---

(300)

5,600

---

300

5,600

Balance at March 31, 2000

50,462,205

$ 12,600

$ 153,200

$ 482,700

$ (54,700)

$ (16,500)

$ 577,300

The accompanying notes to condensed consolidated financial statements are an integral part of these statements.

- 3 -

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

 

For The Three Months Ended

March 31,

 

2001

2000

Cash flows from operating activities:

 

 

Net income

$ 33,200

$ 31,500

 

 

 

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

13,600

12,200

Other noncash items

(4,400)

(1,500)

Changes in assets and liabilities:

 

 

Current assets

6,000

3,900

Current liabilities

(4,800)

2,600

Other

700

(2,200)

 

 

 

 

44,300

46,500

 

 

 

Cash flows from investing activities:

 

 

Capital expenditures

(7,100)

(4,500)

Other long-term investments, net

(5,200)

(27,500)

 

 

 

 

(12,300)

(32,000)

 

 

 

Cash flows from financing activities:

 

 

Purchase of common stock

(16,600)

(17,800)

Dividends paid

(10,700)

(10,200)

Other financing activities

3,300

(31,500)

 

 

 

 

(24,000)

(59,500)

 

 

 

 

 

 

Cash and cash equivalents:

 

 

Increase (decrease) during the period

8,000

(45,000)

 

 

 

Balance at January 1,

114,100

92,700

 

 

 

Balance at March 31,

$ 122,100

$ 47,700

The accompanying notes to consolidated financial statements are an integral part of these statements.

 

- 4 -

C. R. BARD, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The financial statements contained in this filing have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and have not been audited. However, C. R. Bard, Inc. ("Bard" or the "company") believes that it has included all adjustments to the interim financial statements, consisting only of normal recurring adjustments, that are necessary to present fairly Bard's financial condition and results of operations at the dates and for the periods presented. The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements as filed by the company in its 2000 Annual Report on Form 10-K.

Consolidation

 

The consolidated financial statements include the accounts of the company and its majority-owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation.

Earnings Per Share

"Basic earnings per share" represents net income divided by the weighted average shares outstanding. "Diluted earnings per share" represents net income divided by weighted average shares outstanding adjusted for the incremental dilution of outstanding employee stock options and awards. Unless indicated otherwise per share amounts are calculated on a diluted basis.

Derivative Instruments

The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" as amended by Statement of Financial Accounting Standards No. 138, ("FAS 133"). FAS 133 was effective for Bard as of January 1, 2001. FAS 133 establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. FAS 133 requires that changes in the derivative's fair value be recognized in either income or other comprehensive income, depending on the designated purpose of the derivative. The application of FAS 133 did not have a material effect on the financial statements presented herein. In the first quarter 0f 2001, Accumulated Other Comprehensive Income included approximately $200,000 related to the intrinsic value of options.

Use of Estimates

The financial statements and related disclosures have been prepared in conformity with generally accepted accounting principles and, accordingly, include amounts based on estimates and judgments of management with consideration given to materiality. Actual results could differ from those estimates.

Long-Term Debt

In December 1996, the company issued $150,000,000 of 6.70% notes due 2026. These notes may be redeemed at the option of the note holders on December 1, 2006, at a redemption price equal to the principal amount. The market value of these notes was approximately $143,400,000 at March 31, 2001.

 

-5-

C. R. BARD, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Segment Information

The company's management considers its business to be a single segment entity - the manufacture and sale of medical devices. The company's products generally share similar distribution channels and customers. The company designs, manufactures, packages, distributes and sells medical, surgical, diagnostic and patient care devices that are purchased by hospitals, physicians and nursing homes, many of which are used once and discarded. Management evaluates its various global product portfolios on a revenue basis, which is presented below. Management generally evaluates profitability and associated investment on an enterprise-wide basis due to shared infrastructures.

 

 

Three Months Ended

March 31,

(dollars in thousands)

 

2001

2000

%

Chg.

Net sales:

 

 

 

 

Vascular

 

$ 61,200

$ 58,500

5

Urology

 

91,900

89,100

3

Oncology

 

65,000

60,900

7

Surgery

 

51,400

44,200

16

Other products

 

15,300

15,800

(3)

Total net sales

$ 284,800

$ 268,500

6

 

 

 

 

 

Income before taxes

 

$ 47,400

$ 45,500

 

 

 

 

 

 

Total assets

 

$1,104,800

$1,089,200

 

 

 

 

 

 

Capital expenditures

 

$ 7,100

$ 4,500

 

 

 

 

 

 

Depreciation and amortization

 

$ 13,600

$ 12,200

 

The following table represents net sales by geographic region based on the location of the external customer.

 

 

Three Months Ended

March 31,

(dollars in thousands)

 

 

2001

2000

%

Chg.

United States

 

$208,900

$191,900

9

Europe

 

45,600

46,900

(3)

Japan

 

15,300

13,900

10

Rest of World

 

15,000

15,800

(5)

Total

$284,800

$268,500

6

 

 

 

-6-

C. R. BARD, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Consolidated net sales for the first quarter of 2001 of $284,800,000 increased 6 percent from the first quarter of 2000 net sales of $268,500,000. Net sales in the U.S. for the first quarter of 2001 were $208,900,000, an increase of 9 percent from the first quarter of 2000. International net sales for the first quarter of 2001 were $75,900,000, a decrease of 1 percent from the first quarter of 2000. Total net sales for the quarter were negatively affected by 2 percent due to foreign currency translation, with international sales being negatively affected by 7 percent.

Vascular net sales for the quarter ended March 31, 2001 increased 5 percent as compared to the same period in 2000, due primarily to growth in net sales of electrophysiology and peripheral technology products. Urological net sales increased by 3 percent for the quarter as compared to the same period in 2000, due primarily to growth in net sales of infection control catheters and brachytheraphy products. Oncology net sales increased 7 percent for the quarter as compared to the same periods in 2000, due primarily to growth in net sales of specialty access products. Surgical net sales increased by 16 percent for the quarter as compared to the same period in 2000, due primarily to growth in net sales of hemostasis and soft tissue repair products.

The company's gross profit margin for the quarter ended March 31, 2001 of 53.5 percent declined from the gross profit margin for the quarter ended March 31, 2000 of 55.2 percent. This decline is primarily due to the impact of foreign currency translation, product mix and manufacturing variances.

In the first quarter of 2001, other (income) expense, net is comprised of interest income and the impact of foreign exchange. In addition to interest income and the impact of foreign exchange, other (income) expense, net in the first quarter of 2000, includes charges of $9,300,000 ($0.11 per share after tax) related to product line acquisitions and $5,400,000 ($0.07 per share after tax) related to legal settlements and research grants. In the first quarter of 2000, the company settled all remaining open issues related to the 1998 dispositions of its cardiology businesses and recorded a gain of $15,400,000 ($.19 diluted per share after tax).

During the first three months of 2001 the company purchased 381,400 of its common shares. During the first three months of 2000, the company acquired 420,300 of its common shares.

Restructuring Charges

In January 2001, the company announced a series of strategic initiatives aimed at providing greater operating efficiencies, enhancing future funding of research and development and accelerating long-term revenue growth. These initiatives include the consolidation of all U.S. nonmanufacturing operations into a single location in central New Jersey. In addition, the company will begin a multiyear project to substantially reduce the number of manufacturing facilities worldwide. Finally, the company is exploring alternatives for the consolidation of international administrative functions.

The company expects that the New Jersey consolidation and the manufacturing restructuring will require up to three years to complete and will require a net cash investment of between $140 and $150 million for facilities, software and related infrastructure, including personnel costs. The majority of these investments will occur in 2002 and 2003. The company anticipates both one-time charges and incremental operating expenses of approximately $21 million, or $0.30 per share after tax, in 2001 associated with the first phase of the company's manufacturing consolidation project.

-7-

 

C. R. BARD, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS (continued)

 

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained herein or in other company documents and certain statements that may be made by management of the company orally may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historic or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" and other words and terms of similar meaning in connection with any discussion of future operating or financial performance.

In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. Because actual results are affected by risks and uncertainties, the company cautions investors that actual results may differ materially from those expressed or implied. It is not possible to predict or identify all such risks and uncertainties, but factors that could cause the actual results to differ materially from expected and historical results include, but are not limited to: health care industry consolidation resulting in customer demands for price concessions and contracts that are more complex and have longer terms; competitive factors, including competitors' attempts to gain market share through aggressive marketing programs, the development of new products or technologies by competitors and technological obsolescence; reduction in medical procedures performed in a cost-conscious environment; the lengthy approval time by the FDA or other government authorities to clear medical devices for commercial release; unanticipated product failures; legislative or administrative reforms to the U.S. Medicare and Medicaid systems or other U.S. or non-U.S. reimbursement systems in a manner that would significantly reduce reimbursements for procedures using the company's medical devices; the acquisition of key patents by competitors that would have the effect of excluding the company from new market segments; the uncertainty of whether increased research and development expenditures will result in increased sales; unpredictability of existing and future litigation including litigation regarding product liability such as claims of alleged personal injuries as a result of exposure to natural rubber latex gloves distributed by the company as well as other product liability matters, and intellectual property matters and disputes on agreements which arise in the ordinary course of business; government actions or investigations affecting the industry in general or the company in particular; future difficulties obtaining product liability insurance on reasonable terms; efficacy or safety concerns with respect to marketed products, whether scientifically justified or not, that may lead to product recalls, withdrawals or declining sales; uncertainty related to tax appeals and litigation; future difficulties obtaining necessary components used in the company's products and/or price increases from the company's suppliers of critical components; economic factors that the company has no control over, including changes in inflation, foreign currency exchange rates and interest rates; other factors that the company has no control over, including earthquakes, floods, fires and explosions; risks associated with maintaining and expanding international operations; and the risk that the company may not achieve manufacturing or administrative efficiencies as a result of the company's consolidation and restructuring initiatives, the integration of acquired businesses or divestitures. The company assumes no obligation to update forward-looking statements as circumstances change. You are advised, however, to consult any further disclosures we make on related subjects in our 10-Q, 8-K and 10-K reports.

 

 

-8-

C. R. BARD, INC. AND SUBSIDIARIES

 

PART II - OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders.

  1. The registrant held its Annual Meeting of Shareholders on April 18, 2001.
  2. Proxies for the meeting were solicited pursuant to Regulation 14; there was no solicitation in opposition to management's nominees for directors as listed in the Proxy Statement and all such nominees were elected. The results of voting for the two Class II Directors elected for a term of three years to serve until the 2004 Annual Meeting were as follows:
  3. Anthony Welters

    For

    46,109,330

    Withheld

    594,619

    Tony L. White

    For

    46,110,466

     

    Withheld

    593,483

  4. Briefly described below are each other matter voted upon at the Annual Meeting and the number of affirmative votes, negative votes and abstentions and broker nonvotes with respect to each matter.

    1. To approve an amendment to, and reapprove certain provisions of, the 1993 Long-Term Incentive Plan of C. R. Bard, Inc.

For

41,855,951

Against

4,588,394

Abstain and Broker Nonvotes

259,604

 

  1. To approve an amendment to the 1998 Directors' Stock Award Plan.
  2. For

    40,525,495

    Against

    5,881,851

    Abstain and Broker Nonvotes

    296,603

     

  3. Ratification of appointment of Arthur Andersen LLP as independent public accountants for the year 2001.

For

46,273,702

Against

231,961

Abstain and Broker Nonvotes

198,286

 

-9-

C. R. BARD, INC. AND SUBSIDIARIES

 

Item 6. Exhibits and Reports on Form 8-K

  1. Exhibit 10j - Amended and Restated 1988 Directors Stock Award Plan of C. R. Bard, Inc. dated April 18, 2001.
  2. Exhibit 10q - Amended and Restated 1993 Long Term Incentive Plan of C. R. Bard, Inc. dated as April 18, 2001.
  3. Exhibit 12.1 - Computation of Ratio of Earnings to Fixed Charges
  4. On March 14, 2001 the registrant filed a current report on Form 8-K Item 9 affirming previous revenue and earnings guidance.

 

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.

 

C. R. BARD, INC.

 

(Registrant)

 

Charles P. Slacik /s/

Charles P. Slacik

 

Senior Vice President and Chief Financial Officer

 

 

 

Charles P. Grom /s/

 

Charles P. Grom

 

Vice President and Controller

Date: May 15, 2001

 

 

 

 

 

 

 

- 10 -