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 September 30, 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 October 31, 2001

Common Stock - $.25 par value

51,104,931

 

 

C. R. BARD, INC. AND SUBSIDIARIES

INDEX

 

PAGE NO.

PART I - FINANCIAL INFORMATION

 

Condensed Consolidated Balance Sheets - September 30, 2001 and December 31, 2000

1

 

 

Condensed Consolidated Statements of Income For The Quarter and Nine Months Ended September 30, 2001 and 2000

2

 

 

Condensed Consolidated Statements of Shareholders' Investment For The Nine Months Ended September 30, 2001 and 2000

3

 

 

Condensed Consolidated Statements of Cash Flows For The Nine Months Ended September 30, 2001 and 2000

4

 

 

Notes to Condensed Consolidated Financial Statements

5

 

 

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

8

 

 

PART II - OTHER INFORMATION

10

 

 

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

 

September 30,

2001

December 31,

2000

ASSETS

(unaudited)

 

Current Assets:

 

 

Cash and short-term investments

$ 193,700

$ 119,700

Accounts receivable, net

194,600

195,800

Inventories

194,300

193,500

Other current assets

18,800

17,600

Total current assets

601,400

526,600

Property, plant and equipment, net

156,900

155,500

Intangible assets, net of amortization

352,600

356,200

Other assets

54,400

50,900

$1,165,300

$1,089,200

LIABILITIES AND

SHAREHOLDERS' INVESTMENT

 

 

Current Liabilities:

 

 

Short-term borrowings and current

maturities of long-term debt

$ 800

$ 800

Accounts payable

40,200

56,000

Accrued expenses

149,500

136,200

Federal and foreign income taxes

45,200

31,500

Total current liabilities

235,700

224,500

Long-term debt

156,700

204,300

Other long-term liabilities

48,300

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

51,563,305 shares and 50,908,614 shares

 

12,900

 

12,700

Capital in excess of par value

221,900

177,300

Retained earnings

573,700

519,400

Accumulated other comprehensive loss

(70,400)

(80,200)

Unamortized expenses under stock plans

(13,500)

(15,300)

 

724,600

613,900

$1,165,300

$1,089,200

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

 

 

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C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(thousands except per share amounts)

(unaudited)

For the Quarter Ended

September 30,

For the Nine Months Ended September 30,

2001

2000

2001

2000

Net sales

$ 297,800

$ 275,400

$ 878,500

$ 818,500

Costs and expenses:

Cost of goods sold

139,500

126,100

410,200

370,900

Marketing, selling and administrative expense

91,200

87,900

272,300

261,800

Research and development expense

13,100

13,000

40,300

40,700

Interest expense

3,500

4,900

11,200

15,400

Gain from dispositions of cardiology businesses

0

0

0

(15,400)

Other (income) expense, net

(700)

(5,800)

(4,100)

1,900

Total costs and expenses

246,600

226,100

729,900

675,300

Income before taxes

51,200

49,300

148,600

143,200

Income tax provision

15,500

15,300

44,700

44,600

Net income

$ 35,700

$ 34,000

$ 103,900

$ 98,600

Basic earnings per share

$ 0.70

$ 0.67

$ 2.04

$ 1.95

Diluted earnings per share

$ 0.68

$ 0.66

$ 2.01

$ 1.93

Average common shares outstanding - basic

51,324

50,767

50,966

50,648

Average common shares outstanding - diluted

52,276

51,324

51,669

51,169

 

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

 

 

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C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT

(dollars in thousands except per share amounts)

 

 

Nine Months Ended September 30, 2001

 

Common Stock

(unaudited)

 

 

 

 

Capital in

Excess of Par

 

Retained

Earnings

Accumulated

Other

Comprehensive

Loss

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

 

 

 

103,900

 

 

103,900

Currency translation adjustments/other

 

 

 

 

9,800

 

9,800

comprehensive income

 

 

 

 

 

 

113,700

Cash dividends ($.63 per share)

 

 

 

(32,200)

 

 

(32,200)

Treasury stock acquired

(401,500)

(100)

(17,400)

(17,500)

Employee stock plans

1,056,191

300

44,600

---

---

1,800

46,700

Balance at September 30, 2001

51,563,305

$ 12,900

$ 221,900

$ 573,700

$ (70,400)

$ (13,500)

$ 724,600

 

 

Nine Months Ended September 30, 2000

Common Stock

 

Capital in

Excess of Par

 

Retained

Earnings

Accumulated

Other

Comprehensive

Loss

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

 

 

 

98,600

 

 

98,600

Currency translation adjustments/other

 

 

 

 

(27,500)

 

(27,500)

comprehensive income

 

 

 

 

 

 

71,100

Cash dividends ($.61 per share)

 

 

 

(31,100)

 

 

(31,100)

Treasury stock acquired

(420,300)

(100)

 

(17,700)

 

 

(17,800)

Employee stock plans

461,019

100

20,700

(1,600)

---

(200)

19,000

Balance at September 30, 2000

50,822,576

$ 12,700

$ 174,200

$ 521,700

$ (76,100)

$ (17,000)

$ 615,500

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 Nine Months Ended

September 30,

 

2001

2000

Cash flows from operating activities:

 

 

Net income

$ 103,900

$ 98,600

 

 

 

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

Depreciation and amortization

40,700

37,500

Other noncash items

6,400

800

Changes in assets and liabilities:

 

 

Current assets

(100)

(20,800)

Current liabilities

10,000

15,100

Other

2,200

(2,100)

 

 

 

 

163,100

129,100

 

 

 

Cash flows from investing activities:

 

 

Capital expenditures

(20,300)

(12,000)

Other long-term investments, net

(17,200)

(27,800)

 

 

 

 

(37,500)

(39,800)

 

 

 

Cash flows from financing activities:

 

 

Common stock issued for options and benefit plans

43,200

15,200

Purchase of common stock

(17,500)

(17,800)

Repayments of borrowings, net

(47,500)

(62,400)

Dividends paid

(32,200)

(31,100)

 

 

 

 

(54,000)

(96,100)

 

 

 

 

 

 

Cash and cash equivalents:

 

 

Increase (decrease) during the period

71,600

(6,800)

 

 

 

Balance at January 1,

114,100

92,700

 

 

 

Balance at September 30,

$ 185,700

$ 85,900

The accompanying notes to condensed 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.

Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") 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 June 2001, the FASB issued Statements of Financial Accounting Standards No. 141, "Business Combinations" ("FAS 141"), and No. 142, "Goodwill and Other Intangible Assets" ("FAS 142"). FAS 141 changes the accounting for business combinations, requiring that all business combinations be accounted for using the purchase method and that intangible assets be recognized as assets apart from goodwill if they arise from contractual or other legal rights, or if they are separable or capable of being separated from the acquired entity and sold, transferred, licensed, rented, or exchanged. FAS 141 is effective for all business combinations initiated after June 30, 2001. FAS 142 specifies the financial accounting and reporting for acquired goodwill and other intangible assets. Goodwill and intangible assets that have indefinite useful lives will not be amortized but rather will be tested at least annually for impairment. FAS 142 is effective for fiscal years beginning after December 15, 2001.

-5-

C. R. BARD, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

FAS 142 requires that the useful lives of intangible assets acquired on or before June 30, 2001 be reassessed and the remaining amortization periods adjusted accordingly. Previously recognized intangible assets deemed to have indefinite lives should be tested for impairment. Goodwill recognized on or before June 30, 2001, shall be assigned to one or more reporting units and shall be tested for impairment as of the beginning of the fiscal year in which FAS 142 is initially applied in its entirety.

The Company has not fully assessed the potential impact of the adoption of FAS 142, which is effective for the Company as of January 1, 2002. The reassessment of intangible assets must be completed during the first quarter of 2002 and the assignment of goodwill to reporting units, along with completion of the first step of the transitional goodwill impairment tests, must be completed during the first six months of 2002. The Company anticipates that the majority of the goodwill recognized prior to July 1, 2001 will no longer be amortized effective January 1, 2002. Total amortization of goodwill for the year ended December 31, 2000, was approximately $13,400,000.

Use of Estimates

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

Recent Developments

On May 29, 2001, Bard entered into a definitive agreement that provides for the merger of Bard with a subsidiary of Tyco International Ltd. ("Tyco"), as a result of which Bard will become an indirect Tyco subsidiary and holders of Bard common stock will become Tyco shareholders. Upon the closing of the merger, Bard shareholders will receive 1.1280 Tyco common shares for each Bard common share. The merger transaction is expected to be tax-free for holders of Bard common stock. On August 7, 2001, Bard shareholders approved the merger. The closing of the merger is subject to customary United States and foreign regulatory review. As a result of continuing discussions with the United States Federal Trade Commission, the transaction is not expected to close before the first quarter of 2002.

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 $148,100,000 at September 30, 2001.

 

 

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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.

 

Quarter Ended September 30,

 

Nine Months Ended

September 30,

(dollars in thousands)

2001

2000

%

Chg.

 

2001

2000

%

Chg.

Net sales:

 

 

 

 

 

 

 

Vascular

$ 62,600

$ 59,100

6

 

$ 185,700

$ 181,100

3

Urology

100,000

91,300

10

 

291,300

269,000

8

Oncology

70,700

65,300

8

 

204,000

187,100

9

Surgery

49,700

44,900

11

 

151,900

135,300

12

Other products

14,800

14,800

--

 

45,600

46,000

(1)

Total net sales

$ 297,800

$ 275,400

8

$ 878,500

$ 818,500

7

 

 

 

 

 

 

 

 

Income before taxes

$ 51,200

$ 49,300

 

 

$ 148,600

$ 143,200

 

 

 

 

 

 

 

 

 

Total assets

$ 1,165,300

$1,122,700

 

 

$1,165,300

$1,122,700

 

 

 

 

 

 

 

 

 

Capital expenditures

$ 5,100

$ 3,600

 

 

$ 20,300

$ 12,000

 

 

 

 

 

 

 

 

 

Depreciation and amortization

$ 13,300

$ 12,800

 

 

$ 40,700

$ 37,500

 

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

 

Quarter Ended September 30,

 

Nine Months Ended September 30,

(dollars in thousands)

2001

2000

%

Chg.

 

 

2001

2000

%

Chg.

United States

$ 218,200

$ 197,800

10

 

$ 642,300

$ 585,800

10

Europe

47,400

44,800

6

 

142,300

140,000

2

Japan

16,500

16,500

--

 

47,500

44,600

7

Rest of World

15,700

16,300

(4)

 

46,400

48,100

(4)

Total

$ 297,800

$ 275,400

8

$ 878,500

$ 818,500

7

 

 

 

-7-

C. R. BARD, INC. AND SUBSIDIARIES

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

Consolidated net sales for the third quarter of 2001 of $297,800,000 increased 8 percent from the third quarter of 2000 net sales of $275,400,000. Net sales in the U.S. for the third quarter of 2001 were $218,200,000, an increase of 10 percent from the third quarter of 2000. International net sales for the third quarter of 2001 were $79,600,000, an increase of 3 percent from the third quarter of 2000. Total net sales for the quarter were negatively affected by 1 percent due to foreign currency translation, with international sales being negatively affected by 5 percent. For the first nine months of 2001, U.S net sales totaled $642,300,000, up 10 percent as compared to the same period in 2000, while international net sales increased 2 percent to $236,200,000 as compared to the same period in 2000. Adjusting for currency translation, net sales outside the U.S. would have increased 7 percent for the first nine months of 2001, as compared to the prior-year period.

 Vascular net sales increased 6 percent for the quarter and increased 3 percent for the nine-month period ended September 30, 2001, compared to the prior-year periods, due primarily to electrophysiology product sales. Urological net sales increased by 10 percent for the quarter and 8 percent for the nine-month period as compared to the same periods in 2000, due primarily to growth in brachytheraphy products. Oncology net sales increased 8 percent for the quarter and 9 percent for the nine-month period as compared to the same periods in 2000, due primarily to growth in net sales of specialty access products and interventional products. Surgical net sales increased by 11 percent for the quarter and 12 percent for the nine-month period as compared to the same periods in 2000, due primarily to growth in net sales of soft tissue repair products.

The company's gross profit margin for the quarter and nine-month period ended September 30, 2001 of 53.2 percent and 53.3 percent, respectively, declined from the gross profit margin for the quarter and nine-month period ended September 30, 2000 of 54.2 percent and 54.7 percent, respectively. This decline is primarily due to the impact of foreign currency translation, product mix and cost increases.

Other (income) expense, net in all periods, includes interest income and the impact of foreign exchange. In addition, 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). Other (income) expense, net for the second quarter of 2000 includes a legal settlement and a gain from asset dispositions amounting to $5,000,000 ($.06 diluted per share after-tax). Other (income) expense, net for the third quarter of 2000 includes a net pretax gain of $4,100,000 ($.04 diluted per share after-tax) resulting primarily from asset dispositions and legal settlements.

During the first nine months of 2001, the company purchased 401,500 of its common shares. During the first nine months of 2000, the company acquired 420,300 of its common shares.

 

-8-

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.

 

-9-

C. R. BARD, INC. AND SUBSIDIARIES

 

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

  1. Exhibit 12.1 - Computation of Ratio of Earnings to Fixed Charges
  2. On July 24, 2001 the registrant filed a current report on Form 8-K Item 5 containing the registrant's second quarter earnings press release.
  3. On August 3, 2001 the registrant filed a current report on Form 8-K Item 5 containing the exchange ratio established by the Agreement and Plan of Merger dated May 29, 2001.
  4. On August 7, 2001 the registrant filed a current report on Form 8-K Item 5 indicating that Bard shareholders had approved the Agreement and Plan of Merger dated May 29, 2001.

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: November 8, 2001

 

 

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