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, 2002

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 March 31, 2002

Common Stock - $.25 par value

52,598,247

 

 

C. R. BARD, INC. AND SUBSIDIARIES

INDEX

 

 

 

PART I - FINANCIAL INFORMATION

PAGE NO.

Condensed Consolidated Balance Sheets - March 31, 2002 and December 31, 2001

3

 

 

Condensed Consolidated Statements of Income For The Three Months Ended March 31, 2002 and 2001

4

 

 

Condensed Consolidated Statements of Shareholders' Investment For The Three Months Ended March 31, 2002 and 2001

5

 

 

Condensed Consolidated Statements of Cash Flows For The Three Months Ended March 31, 2002 and 2001

6

 

 

Notes to Condensed Consolidated Financial Statements

7

 

 

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

10

 

 

PART II - OTHER INFORMATION

12

 

 

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, other than par values)

 

March 31, 2002

December 31,

2001

ASSETS

(unaudited)

 

Current Assets:

 

 

Cash and short-term investments

$302,800

$271,000

Accounts receivable, net

183,900

176,800

Inventories

171,000

182,000

Other current assets

13,200

17,600

Total current assets

670,900

647,400

Property, plant and equipment, net

156,400

157,900

Intangible assets, net of amortization

370,500

372,900

Other assets

50,500

52,900

$1,248,300

$1,231,100

LIABILITIES AND

SHAREHOLDERS' INVESTMENT

 

 

Current Liabilities:

 

 

Short-term borrowings and current

maturities of long-term debt

$800

$800

Accounts payable

41,100

43,600

Accrued expenses

141,700

157,200

Federal and foreign income taxes

44,200

32,900

Total current liabilities

227,800

234,500

Long-term debt

156,200

156,400

Other long-term liabilities

46,800

51,500

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

52,598,247 shares and 52,383,718 shares

 

13,100

 

13,100

Capital in excess of par value

271,200

261,700

Retained earnings

625,800

602,100

Accumulated other comprehensive loss

(82,300)

(76,400)

Unamortized expenses under stock plans

(10,300)

(11,800)

 

817,500

788,700

$1,248,300

$1,231,100

 

 

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

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands except per share amounts)

(unaudited)

For the Three Months Ended March 31,

2002

2001

Net sales

$301,900

$284,800

Costs and expenses:

Cost of goods sold

139,500

132,500

Marketing, selling and administrative expense

88,300

87,400

Research and development expense

14,300

13,600

Interest expense

3,200

4,000

Other (income) expense, net

8,200

(100)

Total costs and expenses

253,500

237,400

Income before taxes

48,400

47,400

Income tax provision

13,700

14,200

Net income

$34,700

$33,200

Basic earnings per share

$0.66

$0.65

Diluted earnings per share

$0.65

$0.65

Average common shares outstanding - basic

52,500

50,700

Average common shares outstanding - diluted

53,200

51,300

 

  

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

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, 2002

 

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, 2001

52,383,718

$13,100

$261,700

$602,100

$(76,400)

$(11,800)

$788,700

Net income

 

 

 

34,700

 

 

34,700

Currency translation adjustments/other

 

 

 

 

(5,900)

 

(5,900)

comprehensive income

 

 

 

 

 

 

28,800

Cash dividends ($.21 per share)

 

 

 

(11,000)

 

 

(11,000)

Treasury stock acquired

---

---

Employee stock plans

214,529

 

9,500

---

---

1,500

11,000

Balance at March 31, 2002

52,598,247

$13,100

$271,200

$625,800

$(82,300)

$(10,300)

$817,500

 

 

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

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

C. R. BARD, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

 

For The Three Months Ended

March 31,

 

2002

2001

Cash flows from operating activities:

 

 

Net income

$34,700

$33,200

 

 

 

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

Depreciation and amortization

10,400

13,600

Other noncash items

11,900

(4,400)

Changes in assets and liabilities:

 

 

Current assets

(4,400)

6,000

Current liabilities

(3,400)

(4,800)

Other

(4,700)

700

 

 

 

 

44,500

44,300

 

 

 

Cash flows from investing activities:

 

 

Capital expenditures

(5,200)

(7,100)

Other long-term investments, net

(2,000)

(5,200)

 

 

 

 

(7,200)

(12,300)

 

 

 

Cash flows from financing activities:

 

 

Purchase of common stock

---

(16,600)

Dividends paid

(11,000)

(10,700)

Other financing activities

5,600

3,300

 

 

 

 

(5,400)

(24,000)

 

 

 

 

 

 

Cash and cash equivalents:

 

 

Increase (decrease) during the period

31,900

8,000

 

 

 

Balance at January 1,

262,300

114,100

 

 

 

Balance at March 31,

$294,200

$122,100

 

 

 

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

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 2001 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 the 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 - Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("FAS 133") as amended, 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 company enters into foreign exchange forward contracts and options to help reduce the exposure to fluctuations between certain currencies. The notional amount of forward contracts outstanding was $500,000 and $200,000 at March 31, 2002 and December 31, 2001, respectively. These contracts create limited earnings volatility because gains and losses associated with exchange rate movements are generally offset by movements in the underlying hedged item.

Recently Issued Accounting Pronouncements - 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 changed 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 was effective for all business combinations initiated after June 30, 2001. FAS 142 specified 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 the company as of January 1, 2002.

 

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 shall 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.

The company has completed its review of existing intangible assets and is currently assessing the assignment of intangible assets to reporting units and transitional goodwill impairment tests. The company does not believe that the implementation of FAS 142 will have a material effect on its consolidated financial statements. Effective January 1, 2002, the company no longer amortizes goodwill. Total amortization of goodwill for the quarter ended March 31, 2001, was approximately $3,300,000 pretax ($0.06 diluted earnings per share.)

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 the judgments of management. 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 $150,500,000 at March 31, 2002.

Restructuring Charges - In the first quarter of 2002, the company recorded a pretax charge of $2,600,000 ($0.03 diluted earnings per share) related to divisional and manufacturing consolidation projects and a pretax charge of $6,500,000 ($0.08 diluted earnings per share) for corporate severance related costs.

 

 

 

 

 

 

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 net sales 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)

2002

2001

%

Chg.

Net sales:

 

 

 

Vascular

$59,900

$61,200

(2)

Urology

99,200

91,900

8

Oncology

70,900

65,000

9

Surgery

56,000

51,400

9

Other products

15,900

15,300

4

Total net sales

$301,900

$284,800

6

 

 

 

 

Income before taxes

$48,400

$47,400

 

 

 

 

 

Total assets

$1,248,300

$1,231,100

 

 

 

 

 

Capital expenditures

$5,200

$7,100

 

 

 

 

 

Depreciation and amortization

$10,400

$13,600

 

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)

 

2002

2001

%

Chg.

United States

$223,300

$208,900

7

Europe

48,500

45,600

6

Japan

15,700

15,300

3

Rest of World

14,400

15,000

(4)

Total

$301,900

$284,800

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 2002 of $301,900,000 increased 6 percent from the first quarter of 2001 net sales of $284,800,000. Net sales in the U.S. for the first quarter of 2002 were $223,300,000, an increase of 7 percent from the first quarter of 2001. International net sales for the first quarter of 2002 were $78,600,000, an increase of 4 percent from the first quarter of 2001. Total net sales for the quarter were negatively affected by 1 percent due to foreign currency translation, with international sales being negatively affected by 3 percent.

Vascular net sales declined 2 percent for the quarter ended March 31, 2002, compared to the prior-year period, due primarily due to OEM business and graft sales partially offset by growth in peripheral technology biopsy and stent products. Urological net sales increased by 8 percent for the quarter compared to the same period in 2001 with drainage, continence and urological specialty products all contributing. Oncology net sales increased 9 percent for the quarter compared to the same period in 2001, due to growth in specialty access and forcep products. Surgical net sales increased by 9 percent for the quarter compared to the same periods in 2001, due primarily to growth in net sales of soft tissue repair products.

The company's gross profit margin for the three months ended March 31, 2002 of 53.8 percent, increased from the gross profit margin for the quarter ended March 31, 2001 of 53.5 percent. This increase is primarily due to favorable sales mix and cost improvements.

Other (income) expense, net includes interest income and the impact of foreign exchange. In addition, other (income) expense, net in the first quarter of 2002, includes costs related to the termination of the Tyco merger ($6.2 million pretax, $0.08 diluted earnings per share), divisional and manufacturing consolidation projects ($2.6 million pretax, $0.03 diluted earnings per share) and corporate severance related costs ($6.5 million pretax, $0.08 diluted earnings per share). These costs are offset with the reversal of certain legal accruals ($5.0 million pretax, $0.06 diluted earnings per share.)

During the first three months of 2002, the company did not purchase any common shares. During the first three months of 2001, the company acquired 381,400 of its common shares.

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, including the risks of expropriation, war, political instability, terrorism, lack of reliable supply of raw materials; 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.

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 17, 2002.
  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 three Class III Directors elected for a term of three years to serve until the 2005 Annual Meeting were as follows:
  3. T. Kevin Dunnigan

    For

    46,739,592

    Withheld

    692,373

    Regina E. Herzlinger

    For

    46,673,410

     

    Withheld

    758,555

    William H. Longfield

    For

    46,697,357

     

    Withheld

    734,608

  4. Described below is the other matter voted upon at the Annual Meeting and the number of affirmative votes, negative votes and abstentions and broker nonvotes.

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

For

43,855,720

Against

3,258,034

Abstain and Broker Nonvotes

318,211

 

C. R. BARD, INC. AND SUBSIDIARIES

Item 6. Exhibits and Reports on Form 8-K

  1. Exhibit 12.1 - Computation of Ratio of Earnings to Fixed Charges
  2. Exhibit 10q - 1993 Long Term Incentive Plan of C. R. Bard, Inc., as amended effective April 17, 2002.

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 1, 2002

 

C. R. BARD, INC. AND SUBSIDIARIES

Exhibit 12.1 Computation of Ratio of Earnings to Fixed Charges

 

3/31/2002

2001

2000

 

 

1999

 

 

1998

 

 

1997

 

 

 

 

 

 

 

Earnings before taxes

$48,400

$204,900

$154,000

$173,300

$464,400

$104,900

Add(Deduct)

 

 

 

 

 

 

Fixed charges

$4,400

19,100

24,500

24,200

31,400

38,200

Undistributed earnings of less than 50% owned

companies carried at equity

(300)

(2,000)

(2,900)

(2,700)

(800)

(500)

Earnings available for fixed charges

$52,500

$222,000

$175,600

$194,800

$495,000

$142,600

 

 

 

 

 

 

 

Fixed charges:

 

 

 

 

 

 

Interest, including amounts capitalized

$3,200

$14,200

$19,300

$19,300

$26,400

$32,900

Proportion of rent expense deemed to represent

interest factor

1,200

4,900

5,200

4,900

5,000

5,300

Fixed charges

$4,400

$19,100

$24,500

$24,200

$31,400

$38,200

 

 

 

 

 

 

 

Ratio of earnings to fixed charges

11.93

11.62

7.17

8.05

15.76

3.73