Item 1. Business
General Development of Business
The Company was started by Charles Russell Bard in 1907. One of its first medical products was the silk urethral catheter imported from France. In 1923, the Company was incorporated as C. R. Bard, Inc. and distributed an assortment of urological and surgical products. Bard became a publicly-traded company in 1963 and five years later was traded on the New York Stock Exchange.
In 1966, Bard acquired its supplier of urological and cardiovascular specialty products - the United States Catheter & Instrument Co. In 1980 Bard acquired its major source of the Foley catheter - Davol Inc. Numerous other acquisitions were made over the last thirty-five years broadening Bard's product lines. Today, C. R. Bard, Inc. is a leading multinational developer, manufacturer and marketer of health care products.
1994 sales of $1.018 billion increased 5% from 1993. Net income for 1994 totaled $74.9 million or $1.44 per share, and increased 34% and 35%, respectively against 1993.
Acquisitions
During 1994 the Company spent $118.2 million acquiring new businesses. Angiomed AG, a German company with products marketed in the areas of urology, radiology, vascular surgery and gastroenterology was purchased in October 1994. VasCath, Inc., a Canadian company with a strong position in specialty catheter products was acquired in December 1994.
In 1993 acquisition spending totalled $70 million. Pilot Cardiovascular, Inc., a California company with deflectable tipped angioplasty guidewire technology, was purchased in September 1993. Bainbridge Sciences, Inc., a Washington company, was purchased in October 1993 while in its developmental stages. Bainbridge was renamed Bard Diagnostic Sciences early in 1995. Bard Diagnostic Sciences is an "in vitro" diagnostics company with products focused on cancer detection.
Product Group Information
Bard is engaged in the design, manufacture, packaging, distribution and sale of medical, surgical, diagnostic and patient care devices. Hospitals, physicians and nursing homes purchase approximately 90% of the Company's products, most of which are used once and discarded. I-1
The following table sets forth for the last three years ended December 31, 1994, the approximate percentage contribution by product line to Bard's consolidated net sales. The figures are on a worldwide basis.
Years Ended December 31, 1994 1993 1992
Cardiovascular 36% 40% 41% Urological 29% 26% 25% Surgical 35% 34% 34%
Total 100% 100% 100%
Narrative Description of Business
General
Historically, Bard has been known for its products in the urological field, where its Foley catheter is the leading device for bladder drainage. Today, Bard's largest product group is in cardiovascular care devices, contributing approximately 36% of consolidated net sales, with a wide range of products, including USCI balloon angioplasty catheters used for nonsurgical treatment of obstructed arteries. Additionally, Bard has important positions in the area of surgical products.
Bard continually expands its research toward the improvement of existing products and the development of new ones. It has pioneered in the development of disposable medical products for standardized procedures.
Bard's domestic sales may be grouped into three principal product lines: cardiovascular, urological and surgical. International sales include most of the same products manufactured and sold by Bard's domestic operations. Domestic and international sales are combined for product group sales presentation.
Cardiovascular - Bard's line of cardiovascular products includes balloon angioplasty catheters, steerable guidewires, guide catheters and inflation devices; angiography catheters and accessories; introducer sheaths; electrophysiology products including cardiac mapping and electrophysiology laboratory systems, and diagnostic and temporary pacing electrode catheters; cardiopulmonary support systems; and blood oxygenators and related products used in open-heart surgery.
In February 1990 the Mini-Profile and Probe balloon angioplasty catheters were withdrawn from the U.S. market due to claims from the FDA that the Company had failed to follow appropriate legal and regulatory procedures. In March 1990, the Company voluntarily I-2
withdrew its Sprint and Solo angioplasty catheters from the U.S. market after an internal investigation revealed the commercial versions had not received proper regulatory approval. These withdrawals, accompanied with the withdrawal in 1989 of the New Probe angioplasty catheter, had effectively withdrawn the Company from the U.S. balloon angioplasty market. In 1991 the Company received approval from the FDA to market the New Probe, Force and Sprint balloon angioplasty catheters in the U.S. During the fourth quarter of 1992 the Solo balloon angioplasty catheter was approved for U.S. marketing. See Item 3. Legal Proceedings for additional information.
Urological - Bard offers a complete line of urological products including Foley catheters, procedural kits and trays and related urine monitoring and collection systems; biopsy and other cancer detection products; ureteral stents; and specialty devices for incontinence, endoscopic procedures and stone removal.
Surgical - Bard's surgical products include specialty access catheters and ports; implantable blood vessel replacements; fabrics and meshes for vessel and hernia repair; surgical suction and irrigation devices; wound and chest drainage systems; devices for endoscopic, orthopaedic and laparoscopic surgery; blood management devices; products for wound management and skin care; and percutaneous feeding devices.
International - Bard markets cardiovascular, urological and surgical products throughout the world. Principal markets are Japan, Canada, the United Kingdom and Continental Europe. Approximately two-thirds of the sales in this segment are of products manufactured by Bard in its facilities in Canada, France, Germany, Ireland, Malaysia and the United Kingdom. The balance of the sales are from products manufactured in the United States, Puerto Rico or Mexico for export. Bard's foreign operations are subject to the usual risks of doing business abroad, including restrictions on currency transfer, exchange fluctuations and possible adverse government regulations. See footnote 10 in the Notes to Consolidated Financial Statements for additional information.
Competition
The Company knows of no published statistics permitting a general industry classification which would be meaningful as applied to the Company's variety of products. However, products sold by the Company are in substantial competition with those of many other firms, including a number of larger well-established companies. The Company depends more on its consistently reliable product quality and dependable service and its ability to develop products to meet market needs than on patent protection, although some of its products are patented or are the subject of patent applications. I-3
Marketing
The Company's products are distributed domestically directly to hospitals and other institutions as well as through numerous hospital/surgical supply and other medical specialty distributors with whom the Company has distributor agreements. In international markets, products are distributed either directly or through distributors with the practice varying by country. Sales promotion is carried on by full-time representatives of the Company in domestic and international markets.
In 1994 no commercial customer accounted for more than 8% of the Company's sales and the five largest commercial customers combined accounted for approximately 24% of such sales. Combined sales to federal agencies accounted for approximately 1% of sales in 1994.
In order to service its customers, both in the U.S. and outside the U.S., the Company maintains inventories at distribution facilities in most of its principal marketing areas. Orders are normally shipped within a matter of days after receipt of customer orders, except for items temporarily out of stock, and backlog is normally not significant in the business of the Company.
Most of the products sold by the Company, whether manufactured by it or by others, are sold under the BARD trade name or trademark or other trademarks owned by the Company. Such products manufactured for the Company by outside suppliers are produced according to the Company's specifications.
Regulation
The development, manufacture, sale and distribution of the Company's products are subject to comprehensive government regulation. Government regulation by various federal, state and local agencies, which includes detailed inspection of and controls over research and laboratory procedures, clinical investigations, manufacturing, marketing, sampling, distribution, recordkeeping, storage and disposal practices, substantially increases the time, difficulty, and costs incurred in obtaining and maintaining the approval to market newly developed and existing products. Government regulatory actions can result in the seizure or recall of products, suspension or revocation of the authority necessary for their production and sale, and other civil or criminal sanctions. I-4
Raw Materials
The Company uses a wide variety of readily available plastic, textiles, alloys and rubbers for conversion into its devices. Two large, U.S.-based chemical suppliers have sought to restrict the sale of certain of their materials to the device industry for use in implantable products. Although one guiding principle in the adoption of this policy is the avoidance of negative economic effect on the health care industry, a small portion of our product lines may face a short-term threat to the continuity of their raw material supply. The companies have indicated that their action is based on product liability concerns. Bard and the medical device industry are working to resolve this problem in general and with these suppliers to assure a continuing supply of necessary raw materials. Bard is working to maintain a supply of qualified materials by developing new supplies and increasing inventories of important stocks.
Environment
The Company continues to address current and pending environmental regulations relating to its use of Ethylene Oxide and CFC's for the sterilization of some of its products. The Company is complying with regulations reducing permitted EtO emissions by installing scrubbing equipment and adjusting its processes. The Company recognizes the Montreal Protocol Treaty which plans for the reduction of CFC use worldwide, and the Company has reduced its own use of CFC's for sterilization more rapidly than is required by this treaty. Facilities, processes and equipment are required to achieve these goals and meet these regulations. The Company has eliminated over 95% of CFC use for sterilization. The Company intends to continue to reduce this use of CFC's. Capital expenditures required will not significantly adversely affect the Company's earnings or competitive position.
Employees
The Company employs approximately 8,650 persons.
Seasonality
The Company's business is not affected to any material extent by seasonal factors.
Research and Development
The Company's research and development expenditures amounted to approximately $69,800,000 in 1994, $66,300,000 in 1993 and $60,500,000 in 1992. I-5
Item 2.
Item 2. Properties
The executive offices of the Company are located in Murray Hill, New Jersey in facilities which the Company owns. Domestic manufacturing and development units are located in California, Georgia, Kansas, Massachusetts, New Jersey, New York, Ohio, Puerto Rico, Rhode Island, South Carolina, Utah, Washington and Wisconsin. Sales offices and distribution points are in these locations as well as others.
Outside the U.S., the Company has plants or offices in Australia, Austria, Belgium, Canada, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Malaysia, Mexico, Netherlands, Portugal, Singapore, Spain and the United Kingdom.
The Company owns approximately 2,500,000 square feet in 24 locations and leases approximately 1,393,000 square feet of space in 57 locations.
All these facilities are well maintained and suitable for the operations conducted in them.
Item 3.
Item 3. Legal Proceedings
On October 14, 1993, the Company entered into a Plea Agreement with the Department of Justice in connection with charges stemming from violations, primarily during the 1980s by the Company's USCI division, of the Federal Food, Drug and Cosmetic Act and other statutes. On April 5, 1994, the U.S. District Court in Boston approved the plea agreement. In connection with such violations, the Company received notice of suspension by the Defense Logistics Agency (the "DLA") relative to new federal government contracts. In December 1994, the DLA reinstated all of the Company's subsidiaries and divisions, except the Company's USCI division, as federal contractors, making them eligible to bid on and obtain government contracts. Also in December 1994, the DLA issued a notice of proposed debarment to the Company's USCI division, which continues the government-wide suspension of that division as a government contractor. Pursuant to the notice and a subsequent revision, in February 1995, the Company submitted materials to the DLA in order to demonstrate that the USCI division has undertaken substantial remedial programs and certain administrative changes in order to support a finding by the DLA that the USCI division is a responsible contractor and that it is in the public interest to resume contracting with the USCI division. If the DLA does not so find, the Company's USCI division may be debarred for a period of time from serving as a government contractor. In January 1994 the Company received notification that the FDA had determined that provisions of the Applications Integrity Policy should be applied to the USCI division. Consequently, the Food and Drug Administration (the "FDA") suspended its review of pending pre- market applications that have been submitted by the USCI division. I-6
Item 3. Legal Proceedings (continued)
Based upon regulatory compliance audits which the Company commenced in April 1994, the FDA will assess the validity of data and information in USCI's pending pre-market applications. The Company is unable to estimate how long the audit process will take and cannot predict how long the FDA's suspension of the USCI division's pre-market applications from review will last or the extent of the impact such suspension could have on USCI's competitive position. The Company is continuing discussions in certain related areas raised by the FDA to finally conclude this matter.
In December 1994, a suit was filed against the Company in the United States District Court for the Southern District of New York in which the plaintiff alleges that the Company has breached its obligations under a royalty agreement between the plaintiff and the Company relating to the sale of infusion balloon catheters. The plaintiff seeks $84 million in damages. Although the litigation is at a preliminary stage, the Company believes it has meritorious defenses to this action.
In January 1992 a civil complaint was filed in federal court regarding the Company's efforts to obtain FDA approval for and market an atherectomy device. In December 1994 this case was settled.
On November 21, 1994 an action was commenced against the Company by Surgical Laser Technologies, Inc. in the United States District Court for the Eastern District of Pennsylvania. The Amended Complaint alleged that the Company has repudiated, refused to perform and breached an alleged contract with SLT, and further alleges a breach of the duty of good faith and fair dealing in the conduct of contract negotiations between the parties and unfair competition. Damages of an unspecified amount are sought together with injunctive relief. The Company has answered the Amended Complaint, denying that there was ever agreement to the alleged contract, or that the Company otherwise breached any duty owed to SLT. Discovery has recently commenced and no trial date has yet been set. The Company believes it has meritorious defenses to this action.
During 1993, the United States Environmental Protection Agency (the "EPA") notified the Company's Urological division that it may be a potentially responsible party relative to clean-up of the Frontier Chemical site in Niagara Falls, New York. In September, 1993, the Company entered into a consent order concerning the first phase of the clean-up, which was a drum removal action. The Company currently estimates its liability for the first phase at $119,000.
During 1992, the EPA notified the Company that it had been identified as a potentially responsible party in connection with an ongoing investigation of the Solvents Recovery Service of New I-7
Item 3. Legal Proceedings (continued)
England site in Southington, Connecticut. Although the full extent of liability in this case is unknown, the Company has been identified with less than one-half percent of the total gallonage of waste materials. The final resolution of this matter is not expected to have a material adverse financial impact on the Company.
The Company is also subject to other legal proceedings and claims which arise in the ordinary course of business.
Item 4.
Item 4. Results of Votes of Security Holders
Not applicable. I-8
Executive Officers of the Registrant
Set forth below is the name, age, position, five year business history and other information with respect to each executive officer of the Company as of February 28, 1995. No family relationships exist among the officers of the Company.
Name Age Position
William H. Longfield 56 President and Chief Executive Officer and Director
Benson F. Smith 47 Executive Vice President and Chief Operating Officer and Director
William C. Bopp 51 Senior Vice President and Chief Financial Officer
Timothy M. Ring 37 Group Vice President
Richard J. Thomas 45 Group Vice President
William T. Tumber 60 Group Vice President
Terence C. Brady, Jr. 63 Senior Vice President
Gerald L. Messerschmidt, M.D. 44 Senior Vice President Scientific Affairs
E. Robert Ernest 54 Vice President - Planning and Development
Richard A. Flink 60 Vice President, General Counsel and Secretary
Mark W. Sickles 41 Vice President - Human Resources
Christopher D. Ganser 42 Vice President - Quality Assurance
Earle L. Parker 51 Vice President and Treasurer
Charles P. Grom 47 Corporate Controller
All officers of the Company are elected annually by the Board of Directors. Mr. Longfield has been delegated the duties and responsibilities of Chairman by the Board of Directors.
I-9
Mr. Longfield joined the Company in 1989 and was elected executive vice president and chief operating officer. In 1991 he was elected president. In June 1994 he was elected to his present position. Prior to joining the Company, he was chief executive officer since 1984 of the Cambridge Group, Inc., a provider of long term health services for the elderly. Prior to joining Cambridge, he was employed by Lifemark, Inc., a health care management company, and for over 20 years with American Hospital Supply Corporation.
Mr. Smith joined Bard in 1980. Subsequently he was appointed general manager of Bard Electro Medical Systems, Inc. and in 1986 became vice president and general manager of Bard Home Health division. In 1987, he was promoted to president of Bard Urological division. In 1990, he was appointed to the position of group executive. In 1991, he was elected group vice president. In 1993, he was elected to the position of executive vice president with worldwide responsibility for operations. In July 1994 he was elected to his present position.
Mr. Bopp joined the Company in 1980 as controller of Bard International, Inc., was promoted to assistant corporate controller in 1983 and was elected to the position of treasurer later that year. He was named vice president and treasurer in 1989. In 1992 he was elected to his present position.
Mr. Ring joined the Company in 1992 and was elected vice president- human resources. Prior to joining the Company he had been with Abbott Laboratories Inc., a pharmaceutical company, since 1982 and his last position with their Hospital Products division had been director of personnel. In December 1993, he was elected to the position of group vice president.
Mr. Thomas joined Bard in 1984. In 1986 he was promoted to vice president and general manager of the Bard Cardiovascular Ventures division. In 1990 he was appointed to the position of group executive. In October 1991, he was elected to his present position.
Mr. Tumber joined Bard in 1980. In 1988 he was promoted to vice president and general manager of Davol Inc. In 1990 he was promoted to president of Davol Inc. and subsequently appointed to the position of group executive. In September 1991, he was elected to his present position.
Mr. Brady joined the Company in 1969, was elected corporate controller in 1973 and vice president and controller in 1979. He was elected to his present position in 1987. I-10
Dr. Messerschmidt joined the Company in January 1994 as Vice President-Scientific Affairs and was elected to his present position in February 1995. Prior to joining the Company he had been with DNX Corporation, a molecular engineering company, where he was vice president of medical and regulatory affairs. Prior to DNX he held various positions with the Pharmaceuticals Division of Ciba Geigy Corporation, the University of Michigan Medical Center, Wilford Hall U.S.A.F. Medical Center and the National Cancer Institute of the National Institutes of Health.
Mr. Ernest joined the Company in 1977 and was elected to his present position in 1979.
Mr. Flink joined the Company in 1970, was elected vice president and general counsel in 1973 and was elected to his present position in 1985.
Mr. Parker joined the Company in 1979. In 1985 he was promoted to vice president and controller of the USCI division. In December 1990 he was promoted to vice president-operations for the USCI division and, later that year, was promoted to vice president and general manager of the USCI Angiography division. In 1992 he was elected Treasurer and effective January 1, 1995 he was elected to his present position.
Mr. Sickles joined the Company in March 1994 and was elected to his current position. Prior to joining the Company he had been with A.L. Laboratories, a pharmaceutical company, where he was Vice President, Human Resources. Prior to that he was Vice President, Human Resources and Total Quality Management for A.W. Chesterton, Inc., a ceiling and specialty chemical manufacturer.
Mr. Ganser joined the Company in 1989 as Manager, Quality Assurance in the Moncks Corner facility. In April, 1994 he was elected to his present position.
Mr. Grom joined the Company in 1977. In 1989 he was promoted to assistant corporate controller and in May 1994 was elected to his present position. I-11
PART II
Item 5.
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
Market and Market Prices of Common Stock
The Company's common stock is traded on the New York Stock Exchange using the symbol: BCR. The following table illustrates the high and low sales prices as traded on the New York Stock Exchange for each quarter during the last two years.
Quarters
1st 2nd 3rd 4th Year
High 30-1/2 26-1/4 28-1/4 27-1/2 30-1/2 Low 23-7/8 22-3/8 22-1/4 23-5/8 22-1/4
High 35-1/4 28 27-5/8 26-7/8 35-1/4 Low 22-7/8 21-1/4 20-1/2 21-3/4 20-1/2
Approximate Number of Equity Security Holders
Approximate Number of Record Holders Title of Class as of February 28, 1995 Common Stock - $.25 par value 7,985*
*Included in the number of shareholders of record are shares held in "nominee" name.
Dividends
The Company paid cash dividends of $30,100,000 or $.58 per share in 1994 and $28,200,000 or $.54 per share in 1993. The following table illustrates the quarterly rate of dividends paid per share.
Quarters 1st 2nd 3rd 4th Year
1994 $ .14 $ .14 $ .15 $ .15 $ .58 1993 $ .13 $ .13 $ .14 $ .14 $ .54
In January 1995, the first quarter dividend of $.15 per share was declared, indicating an annual rate of $.60 per share. The first quarter dividend was paid on February 3, 1995 to shareholders of record on January 23. II-1
II-2
Item 7.
Item 7. Management's Discussion and Analysis of Results of Operations and of Financial Conditions
General
Bard is a leading multinational developer, manufacturer and marketer of products for the large and growing health care industry. Worldwide health care expenditures approximated $2 trillion in 1994 with about half that amount spent in the United States. Bard's segment of this industry, itself a multi-billion dollar market, is primarily specialized products used mainly in hospitals, in outpatient centers and in physician's offices to meet the needs of the medical profession in caring for their patients. The Company seeks to focus and concentrate on selected markets with cost-effective, innovative products and specialized sales forces to maximize our opportunities in these markets.
Operating Results
Consolidated net sales increased 5% in 1994, helped by good growth in many product areas. Net income increased 34%, while earnings per share increased 35%. The income figures for both 1993 and 1994 were significantly impacted by unusual or nonrecurring charges, described starting on page II-5 in this financial review.
Sales
Consolidated net sales totaled $1,018.2 million in 1994, a 5% increase over 1993. Significant factors in this growth were good increases in sales of Foley catheters and related procedure trays, specialty access catheters, vascular fabric and mesh products and gastroenterological specialty devices as well as a substantial increase in sales of Bard's Contigen implant. These areas, along with sales from our 1994 acquisitions and an increase of less than 1% from the effects of foreign currency translations, more than offset some continued weakness in certain cardiovascular product lines and price reductions which totaled 2.6% on a worldwide basis.
Consolidated net sales totaled $970.8 million in 1993, a decrease of $19.4 million or 2% for the year. Sales were lowered 3% as a result of the sale of the Bard MedSystems division in February 1993 and 1% by the negative impact of generally lower foreign currency values. Sales in 1993 were also negatively impacted by a slowdown in U.S. procedural rates, consolidations of health care providers, limited FDA approvals, increasingly conservative medical practices fostered by the growth of managed care and weaker European economies.
Consolidated net sales in 1992 totaled $990.2 million, an increase of $114.2 million or 13% for the year, primarily from higher volume, including new and improved products. The slightly favorable effect from changes in foreign currency values resulted in less than 1% of the 1992 consolidated net sales increase. II-3
Worldwide sales in 1994 increased 16% in the urological product group, with a majority of the increase a result of sales of the Contigen implant. 1993 urological sales increased 1%. Good increases in several relatively new specialty devices were partially offset by declines in other areas. Urological sales rose 12% in 1992. This product group benefited in 1992 from a full year of OEM sales of private label urological products compared with nine months of sales in 1991. Sales growth from Foley catheter procedure trays and biopsy devices also contributed.
Sales in 1994 of the surgical product group increased 6% with the areas of specialty access, vascular fabrics and mesh and gastroenterology showing good gains. Adjusting for the sale of the MedSystems division in February 1993, sales in this group increased 7% in 1994. Sales of surgical products in 1993 decreased 1% but increased 8% after adjusting for the sale of the MedSystems division. Specialty access, endoscopic, laparoscopic and blood management products contributed significantly to this increase. In 1992, gains in endoscopic, specialty access, orthopaedic irrigation, vascular fabric and laparoscopic products contributed to a 15% increase in surgical sales.
Continued weakness in certain cardiovascular product areas resulted in a decline in sales in this group of 3% in 1994. Increased sales outside the U.S. were more than offset by declines in the U.S. which continue to be impacted by the lack of approvals by the Food and Drug Administration of new products from the USCI division. Cardiovascular product sales decreased 5% worldwide in 1993 with most product areas in this group showing declines. In 1992 cardiovascular sales increased 12% as the Company gained market share in balloon angioplasty catheters. Sales increases in guide catheters and electrophysiology and radiology products helped the growth in this area.
Sales in the United States increased 3% in 1994 and represented 70% of total sales. Sales of Contigen were the most important contributor to this growth. U.S. sales decreased 1% in 1993 and represented 71% of total sales. Urological product sales increased while sales of surgical products (due to the sale of MedSystems) and cardiovascular products decreased. In 1992, U.S. sales increased 13% and represented 70% of total sales. Surgical product sales showed the highest rate of increase.
Sales outside the U.S. increased 9% in 1994 with a little more than 1% of that growth the result of higher foreign currency values. The growth was broad-based throughout our product areas and major geographic markets. Acquisitions accounted for 3% of this growth. In 1993 sales outside the U.S. declined 3%. Changes in foreign currency values in 1993 lowered these sales by nearly 5%. Growth in sales of surgical products were more than offset by decreases in urological and cardiovascular sales. 1992 sales outside the U.S. increased 12% with nearly 2% of that growth the result of changes in foreign currency values. Sales of urological and cardiovascular products led the way. II-4
The geographic breakdown of sales outside the U.S. for the last three years is: 1994 1993 1992 Europe, Middle East and Africa 57% 56% 58% Japan, Asia/Pacific 35 37 33 Western hemisphere, excluding U.S. 8 7 9 100% 100% 100%
Operating Income
Gross profit margins have increased in each of the last three years. The rates were 51.2% in 1994, 50.9% in 1993 and 48.4% in 1992. Productivity gains, cost reductions and a favorable product mix in many product areas contributed to this improvement in the last three years.
Bard uses the LIFO method of valuing substantially all U.S. inventories, which results in current costs (higher in a period of inflation) being charged to cost of goods sold. Bard generally has been able to recover these costs through its strong product position in its markets. The Company also strives to offset the effect of inflation through its cost reduction programs.
Marketing, selling and administrative expenses have been controlled tightly as indicated by increases of less than 1% in total spending in this category in each of the last two years. As a percent of sales, these expenses represented 29.5% in 1994 compared with 30.8% in 1993 and 29.9% in 1992.
Research and development spending continues to increase as the Company focuses on new technologies and applications for the future. The Company's 1994 spending of $69.8 million was not as much as originally planned. The Company continued to focus on opportunities which improve outcomes and/or lower costs.
As a result of the improvements in gross profit margins and tight control of expenses, operating income has improved to 14.8% of sales in 1994 from 13.2% in 1993 and 12.4% in 1992.
Other Expense, Net
Please refer to Note 9, Other Expense, Net, of the Notes to Consolidated Financial Statements on page II-22 of this report for a summary of items in this category in the last three years. In 1994 there was a fourth quarter charge of $28.2 million. This covered the settlement of a 1992 lawsuit by the inventor of an atherectomy device which Bard is developing and provided for the anticipated future legal costs associated with the ongoing prosecution of the six individuals indicted in October 1993 plus other costs related to the USCI division (please refer to Note 5 of the Notes to Consolidated Financial Statements on page II-17 of this report). II-5
Other expense, net in 1993 included a third quarter provision for the Justice Department settlement of $61 million, a fourth quarter gain of $32.7 million from the sale of shares of the common stock of Ventritex, Inc. and a first quarter gain of $10.9 million from the sale of the MedSystems division net of nonrecurring charges. The 1992 results included a first quarter gain from the sale of common stock of Ventritex.
Income Tax
The effective income tax rate was 27% in 1994, 37% in 1993 and 30% in 1992. The lower tax rate in 1994 is primarily due to the fourth quarter charge which is tax effected at U.S. rates. The higher 1993 rate was primarily due to the $61 million Justice Department settlement, which was not fully deductible. The tax benefit from operations in Puerto Rico and Ireland favorably affected the tax rate in each year, even though the benefit from operations in Puerto Rico was reduced slightly in 1994.
Net Income
Net income increased 34% in 1994 after a 25% decline in 1993 and a 31% increase in 1992. The net income effect of the 1994 and 1993 unusual or nonrecurring items discussed above in Other Expense, Net plus the after-tax charge of $6.1 million in the first quarter of 1993 for postretirement benefits were (in millions except per share amounts):
Fourth quarter charge for legal fees and settlement $(16.9)
Equivalent per share $ (.33)
Gain on sale of Ventritex stock $ 19.4 Gain on sale of MedSystems net of nonrecurring charges 6.0 Effect of accounting change for postretirement benefits (6.1) Justice Department settlement (45.4)
Total 1993 $(26.1)
Equivalent per share $ (.50)
After adjusting for the unusual or nonrecurring items above for the last two years, income would have been $91.8 million in 1994 and $82.1 million in 1993 while earnings per share would have been $1.77 in 1994 and $1.57 in 1993. II-6
Financial Condition
Bard's financial condition remains strong. Although total debt increased by $121 million in 1994 to $274 million and the ratio of total debt to total capitalization increased to 38%, we believe this level continues to give the Company sufficient financing flexibility, should the need arise.
Bard maintains credit lines with banks for short-term cash needs and the total amount of these lines was increased substantially in 1994. These facilities were used as needed during the last three years. The current unused lines of credit total $241 million. As now structured, the Company expects cash flow from operating activities to exceed capital expenditures and dividend payments. The Company believes it could borrow adequate funds at competitive terms and rates, should it be necessary.
Total cash outlays made for purchases of businesses, patents, trademarks and other related items and long-term investments were $143 million in 1994, $101 million in 1993 and $46 million in 1992 for a total over the last three years of $290 million. The majority of these investments were for intangible items. About half of this total was financed with additional debt ($146 million) with the balance coming from cash from operations and proceeds from sales of assets. Cash from operations contributed to an increase in short-term investments in 1992 and 1993, a substantial portion of which was used in 1994, primarily for acquisitions.
The Company annually purchases an amount of its common stock in the open market large enough at least to replace shares issued under various employee stock plans. Net shares issued under the plans were 299,400 in 1994; 259,443 in 1993 and 319,480 in 1992. Total shares purchased were 350,000 in 1994, 1,000,000 in 1993 and 500,000 in 1992. In January 1993 the Board of Directors authorized the purchase from time to time of up to 2 million shares of which 1,350,000 had been purchased as of December 31, 1994.
Foreign Currency Risk
The Company periodically enters into foreign exchange contracts to reduce its exposure to fluctuations in currency values. Contracts have been exclusively for the forward purchase of currencies in which the Company has known or anticipated payments. These are primarily for intercompany transactions, resulting in a high degree of confidence that the anticipated transactions will take place. Monetary assets of the Company held in foreign currencies have relatively short maturities and are denominated in currencies that have not experienced wide short-term fluctuations in their equivalent U.S. dollar values. Please refer to Note 4 of the Notes to Consolidated Financial Statements on page II-16 of this report for current details of the Company's foreign exchange contracts. II-7
Legal Proceedings
For a discussion of pending legal proceedings and related matters, please see Note 5, Commitments and Contingencies, of the Notes to Consolidated Financial Statements on page II-17.
Acquisitions
For information on the Company's acquisitions of businesses, please see Note 2 of the Notes to Consolidated Financial Statements on page II-14. II-8
Item 8.
Item 8. Financial Statements and Supplementary Data
Report of Independent Public Accountants
We have audited the accompanying consolidated balance sheets of C. R. Bard, Inc. (a New Jersey corporation) and subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of income, retained earnings and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of C. R. Bard, Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements, effective January 1, 1993 the Company changed its method for accounting for postretirement benefits other than pensions.
ARTHUR ANDERSEN LLP
Roseland, New Jersey February 8, 1995 II-9
The accompanying notes to consolidated financial statements are an integral part of these statements. II-10
The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
II-11
The accompanying notes to consolidated financial statements are an integral part of these statements. II-12
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Consolidation All subsidiaries are consolidated and intercompany transactions have been eliminated.
Income Per Share The computations of income per share are based on the weighted average number of shares outstanding: 52,004,575 in 1994, 52,196,645 in 1993 and 52,909,360 in 1992. The effect of outstanding stock options and stock awards is not material and has been excluded from the computations.
Reserve for Doubtful Accounts Reserve for doubtful accounts was $7,900,000, $7,100,000 and $5,300,000 at December 31, 1994, 1993 and 1992, respectively. The Company charged to income $1,600,000, $2,100,000 and $2,000,000 for additional reserves against doubtful accounts during 1994, 1993 and 1992, respectively. Write-offs, net of recoveries were $1,400,000, $300,000 and $1,700,000 during 1994, 1993 and 1992, respectively. The 1994 reserve was increased by $600,000 as a result of acquisitions during the year.
Inventories Inventories are stated at the lower of cost or market. Substantially all domestic inventories are accounted for using the LIFO method of determining costs. All other inventories are accounted for using the FIFO method. Inventories valued under the LIFO method were $138,000,000 in 1994, $127,000,000 in 1993 and $127,000,000 in 1992; under the FIFO method such inventories would have been higher by $13,300,000, $15,800,000 and $13,000,000, respectively. The following is a summary of inventories at December 31:
(Thousands of dollars) 1994 1993
Finished goods $111,800 $101,300 Work in process 57,300 51,400 Raw materials 30,100 20,800 $199,200 $173,500
Depreciation Property, plant and equipment are depreciated on a straight-line basis over the useful lives of the various classes of assets.
Investments Long-term investments include long-term bonds and equity securities accounted for on the cost basis net of allowances where appropriate. The fair value of such investments, determined primarily by market quotes, approximated their carrying value at December 31, 1994 and 1993. For purposes of the Consolidated Statements of Cash Flows all short-term investments which have a maturity of ninety days or less are considered cash equivalents. Such investments are stated at cost which approximates their fair value. II-13
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies (continued)
Intangible Assets Intangible assets are recorded at cost and are amortized using the straight-line method over appropriate periods not exceeding 40 years. As of December 31, 1994 and 1993, intangible assets include the following:
(Thousands of dollars) 1994 1993
Goodwill $209,200 $ 91,500 Other intangibles (primarily patents) 117,100 102,000 Less accumulated amortization (60,900) (44,400)
Intangible assets, net $265,400 $149,100
Federal Income Taxes The Company has not provided for federal income taxes on the undistributed earnings of its foreign operations (primarily in Ireland) as it is the Company's intention to permanently reinvest undistributed earnings (approximately $185,000,000 as of December 31, 1994).
Research and Development Research and development costs are charged to income as incurred.
New Accounting Pronouncements Effective January 1, 1994, the Company adopted SFAS No. 112 "Employers' Accounting for Postemployment Benefits" and SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities." Adoption of these statements did not have a significant effect on the Company's financial position or results of operations.
2. Acquisitions
During 1994 the Company acquired several companies which are primarily located outside the United States. These acquisitions, along with the acquisitions made in 1993 have been accounted for under the purchase method of accounting and enhance or expand the Company's existing product lines and further develop international markets.
The cost of these acquisitions amounted to $118,200,000 in 1994 and $70,000,000 in 1993 and were financed through internally generated cash and available credit lines. These acquisitions did not have a significant effect on the Company's results of operations. The acquisition of Angiomed AG in October 1994 resulted in a dilution in earnings of $.03 per share. II-14
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Income Tax Expense
Income tax expense consists of the following: (Thousands of dollars) 1994 1993 1992 Currently payable: Federal $21,800 $31,900 $20,300 Foreign 8,100 8,100 9,500 State 2,500 3,900 4,100 32,400 43,900 33,900 Deferred: Federal (3,200) (6,600) (1,700) Foreign (1,100) (500) (200) (4,300) (7,100) (1,900)
$28,100 $36,800 $32,000
Deferred income taxes are recognized for tax consequences of "temporary differences" by applying enacted statutory tax rates, applicable to future years, to differences between the financial reporting and the tax basis of assets and liabilities. At December 31, 1994, the Company's net deferred tax asset amounted to approximately $13,000,000 which is recorded in other assets. This amount principally comprises the tax effects of the differences between tax and financial accounting treatment of employee benefits of $14,000,000 and other temporary differences offset by the effect of accelerated depreciation ($6,000,000).
The following is a reconciliation between the effective tax rates and the statutory rates: 1994 1993 1992
U.S. federal statutory rate 35% 35% 34% State income taxes net of federal income tax benefits 2 3 2 Operations taxed at less than statutory rate, primarily Ireland and Puerto Rico (10) (11) (10) Justice Department settlement -- 7 -- Other, net -- 3 4
Effective tax rate 27% 37% 30%
Cash payments for income taxes were $45,500,000, $31,400,000 and $28,600,000 in 1994, 1993 and 1992, respectively. II-15
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Short-Term Borrowings and Long-Term Debt
Short-term bank borrowings amounted to $195,800,000 and $84,400,000 at December 31, 1994 and 1993, respectively. The maximum amount outstanding during 1994 was approximately $199,800,000 with an average outstanding balance of $144,700,000. The effective interest rate was 4.8% in 1994 and 3.7% in 1993. Unused lines of credit amounted to $241,000,000 at December 31, 1994.
The following is a summary of long-term debt:
(Thousands of dollars) 1994 1993
8.69% Unsecured Notes due 1999 $ 60,000 $ 60,000 7.8% Mortgage Loan 8,400 --- Other, primarily 5.75% to 11.75% industrial development revenue bonds 10,000 8,600 78,400 68,600 Less: amounts classified as current 100 100
$ 78,300 $ 68,500
Under three deposit loan agreements with a bank, $55,000,000 has been borrowed at floating rates (7.23% at December 31, 1994) with maturity dates of September 1996, December 1999 and December 2002. At maturity, the loans are to be repaid through matured certificates of deposit held by the Company at the same bank. Since the Company has the right of offset under these agreements and it is the Company's intention to present certain certificates of deposit for repayment of these loans at their maturity, these borrowings have been offset against these certificates of deposit in the accompanying consolidated balance sheets at December 31, 1994 and 1993. The related interest income has been offset against the interest expense.
The Company enters into foreign exchange contracts to help reduce the exposure to fluctuations between certain currencies. As of December 31, 1994 the contracts relate to the anticipated normal purchases by a subsidiary in Japan from a subsidiary in Ireland. At December 31, 1994, there were Irish pound contracts outstanding payable in Japanese yen on a monthly basis throughout 1995 totaling 18,000,000 Irish pounds. Gains and losses which are required to be reflected on a mark-to-market basis are not significant.
The Company's long-term debt agreements contain restrictions which, among other things, require the maintenance of minimum net worth levels and limitations on the amounts of debt. II-16
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Short-Term Borrowings and Long-Term Debt (continued)
As of December 31, 1994, the aggregate maturities of long-term debt were as follows: 1995-$100,000; 1996-$200,000; 1997-$2,000,000; 1998-$1,300,000; 1999-$61,200,000; 2000 and thereafter-$13,600,000. The fair value of the Company's long-term debt is not significantly different from its recorded value. Interest expense in 1994, 1993 and 1992 approximated the cash outlay in each year.
5. Commitments and Contingencies
On April 5, 1994, the U.S. District Court in Boston approved the Plea Agreement previously agreed to by the Company and the Department of Justice on October 14, 1993. The Agreement related to charges stemming from violations, primarily during the 1980's by the Company's USCI division, of the Federal Food, Drug and Cosmetic Act and other statutes. Under the Agreement, the Company is required to pay a fine and civil damages totaling $61 million. In accordance with the terms of the Agreement, a provision was made for this amount in the quarter ended September 30, 1993. As of December 31, 1994, the Company has paid $30.5 million of this amount. During 1994 the Defense Logistics Agency (DLA) reinstated the Company as a federal contractor with the exception of the USCI division. Furthermore, the Company is continuing discussions with the DLA to explore a possible resolution of this matter relative to the USCI division. In January 1994 the Company announced that the Food and Drug Administration's (FDA) Applications Integrity Policy had been applied to current applications from Bard's USCI division, and that based upon audits to be conducted by the Company, the FDA would assess the validity of data and information in USCI's pending premarket applications. The Company is unable to estimate how long the audit process will take or how long the suspension of FDA review of USCI's pending premarket applications will last. The Company is continuing discussions in certain related areas raised by the FDA to finally conclude this matter.
During the fourth quarter of 1994 the Company recorded a $28.2 million pretax charge ($16.9 million or 33 cents per share charge after taxes). This charge related to the settlement of a 1992 lawsuit by the inventor of an atherectomy device and includes a provision for the anticipated future legal costs associated with the ongoing criminal prosecution of individuals indicted as a result of the Justice Department's prior investigation into Bard's USCI division and for other costs related to the USCI division. II-17
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Commitments and Contingencies (continued)
The Company is involved in two lawsuits which allege breaches of agreements where substantial amounts have been claimed. The Company is also subject to other legal proceedings and claims involving product liability and disputes on agreements which arise in the ordinary course of business.
Although some amounts claimed are substantial, the Company believes that the pending legal proceedings and other matters discussed in this Note will likely be disposed of over an extended period of time and should not have a material adverse impact on the Company's financial position or results of operations.
The Company is committed under noncancelable operating leases involving certain facilities and equipment. The minimum annual rentals under the terms of these leases are as follows: 1995 - $19,000,000; 1996 - $13,400,000; 1997 - $9,000,000; 1998 - $5,400,000; 1999 -$3,200,000; and thereafter - $4,600,000. Total rental expense for all leases amounted to $28,800,000 in 1994, $26,500,000 in 1993 and $26,600,000 in 1992.
6. Stock Rights
In 1985 the Board of Directors declared a dividend distribution of one Common Share Purchase Right for each outstanding share of Bard common stock. These Rights will expire in October 1995 and trade with the common stock. They are not presently exercisable and have no voting power. In the event a person acquires 20% or more, or makes a tender or exchange offer for 30% or more of the common stock, the Rights detach from the common stock and become exercisable and entitle a holder to buy one share of common stock at $31.25 (adjustable to prevent dilution). If, after the Rights become exercisable, Bard is acquired or merged, each Right will entitle its holder to purchase $62.50 market value of the surviving company's stock for $31.25, based upon the current exercise price of the Rights. The Company may redeem the Rights, at its option, at $.025 per Right, prior to a public announcement that any person has acquired beneficial ownership of at least 20% of the common stock. These Rights are designed primarily to encourage anyone interested in acquiring Bard to negotiate with the Board of Directors. II-18
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Shareholders' Investment
The Company has stock option, stock award and restricted stock plans under which certain directors, officers and employees are participants. At December 31, 1994, 1,175,323 shares were reserved for future issuance under these plans.
Under the Company's stock option plans, options have been granted to certain directors, officers and employees at prices equal to the market value of the shares at the date of grant, become exercisable in four annual installments and expire not more than 10 years after the date of grant. A summary of option transactions follows:
Number Option Of Price Range Shares Per Share Options outstanding, December 31, 1991 2,273,791 $ 5.63 - 27.56
Granted 434,310 25.63 - 32.63
Exercised (384,301) 5.63 - 26.88
Cancelled (32,631) --- - ---
Options outstanding, December 31, 1992 2,291,169 5.63 - 32.63
Granted 558,822 22.75 - 33.56
Exercised (187,291) 5.63 - 26.88
Cancelled (75,508) --- ---
Options outstanding, December 31, 1993 2,587,192 5.63 - 33.56
Granted 695,594 22.56 - 29.44
Exercised (195,200) 5.63 - 26.88
Cancelled (111,125) --- ---
Options outstanding, December 31, 1994 2,976,461 $ 8.92 - 33.56
There were 1,645,397 shares exercisable at December 31, 1994 under these option plans. II-19
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Shareholders' Investment (continued)
Under the Company's stock award plans for key employees and directors, shares are granted at no cost to the recipients and distributed in three separate installments. During 1994 awards for 29,668 shares (net of cancellations) were granted and 36,532 shares were issued. Awards are charged to income over the vesting period. At December 31, 1994, 36,341 awarded shares (aggregate market price at date of grant $872,000) have not been issued.
Under the Company's restricted stock plan which was established in 1993, common stock may be granted at no cost to certain officers and key employees. Shares are issued to the participants at the date of grant entitling the participants to cash dividends and the right to vote their respective shares. Restrictions limit the sale or transfer of these shares during a five year period from the grant date. Upon issuance of stock under the plan, unearned compensation ($2,800,000 at December 31, 1994) equivalent to the market value of the stock at the date of grant is reflected as a reduction in Shareholders' Investment and subsequently amortized to expense over the five year restriction period. During 1994, 96,279 restricted shares were granted, net of forfeitures.
Additions to capital in excess of par value of $5,300,000 in 1994 and $4,800,000 in 1993 relates to shares issued under these plans in excess of the related par value of the shares.
For shares purchased by the Company, common stock is charged for the par value of the shares retired and retained earnings is charged for the excess of the cost over the par value of shares retired.
Cumulative foreign currency translation included in Other Shareholders' Investment amounted to $5,800,000 at December 31, 1994, and increased by $16,900,000 during the year.
8. Postretirement Benefits
The Company has defined benefit pension plans which cover substantially all domestic and certain foreign employees and its policy is to fund accrued pension expense for these plans up to the full funding limitations. These plans provide for benefits based upon individual participants' compensation and years of service. The Company also has a supplemental defined contribution plan for certain officers and key employees. Individual participant accounts under the supplemental plan are credited annually based upon a percentage of compensation. The amounts charged to income for these plans amounted to $9,900,000 in 1994, $7,800,000 in 1993 and $5,400,000 in 1992. II - 20
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Postretirement Benefits (continued)
The following table sets forth the funded status of the defined benefit pension plans as of September 30, 1994 and 1993 and amounts recognized in the Company's consolidated balance sheets at December 31, 1994 and 1993:
(Thousands of dollars) 1994 1993
Actuarial present value of accumulated benefit obligation, including vested benefits of $66,800 in 1994 and $67,700 in 1993 $ 74,700 $ 76,300
Plan assets at fair value, primarily investment securities $ 73,400 $ 71,900
Less: Actuarial present value of projected benefit obligation for service rendered to date 91,200 95,400
Projected benefit obligation in excess of plan assets (17,800) (23,500)
Unrecognized loss 8,300 14,400 Unrecognized prior service cost 7,000 7,200 Unrecognized net asset at transition amortized over 12 years (5,300) (6,400)
Accrued pension cost included in other liabilities $ (7,800) $ (8,300)
Pension costs related to the defined benefit pension plans for the years ended December 31, 1994, 1993 and 1992 are as follows: (Thousands of dollars) 1994 1993 1992 Net pension cost includes: Service cost $ 8,000 $ 6,300 $ 5,400 Interest cost 6,700 5,800 4,700 Actual return on plan assets (2,600) (8,200) (3,900) Net amortization and deferral (3,500) 2,100 (2,300) Net pension cost $ 8,600 $ 6,000 $ 3,900
The range of assumed discount rates used was 6% to 9% with the rate on domestic plans at 8% in 1994, 7% in 1993 and 8% in 1992. The rate of increase in future salary levels ranged from 4% to 7% in determining the projected benefit obligation. The expected long- term rate of return on assets used in determining net pension cost ranged from 8.5% to 9.0%. II-21
C. R. BARD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Postretirement Benefits (continued)
The Company also provides postretirement health care benefits and life insurance coverage to a limited number of employees at a subsidiary. The health care benefits include cost-sharing features based on years of service for future retirees. Effective January 1, 1993, the Company adopted the provisions of SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions." SFAS 106 requires the Company to recognize expense as employees earn postretirement benefits, rather than on the cash basis as paid. The Company elected to recognize the accumulated postretirement benefit obligation as a cumulative catch-up adjustment in the first quarter of 1993. This resulted in a one-time charge of approximately $10,000,000 pretax or $6,100,000 net of taxes.
The amounts charged to income for this plan amounted to $800,000 in 1994 ($100,000 of service cost and $700,000 of interest cost), $850,000 in 1993 ($100,000 of service cost and $750,000 of interest cost) and $400,000 in 1992.
Actuarial assumptions included a discount rate of 8%. Health care cost trends have been projected at annual rates beginning at 13% for 1994 decreasing gradually down to 6% in 2001 and later years. The effect of a 1% annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obligation at December 31, 1994, by $900,000 and postretirement benefit cost by $100,000.
9. Other Expense, Net
Other expense, net in the Statements of Consolidated Income is summarized as follows:
(Thousands of dollars) 1994 1993 1992 Interest income $(4,600) $(4,600) $(3,900) Foreign exchange (gains) losses (400) (1,700) 4,100 Legal fees and settlements (Note 5) 28,200 --- --- Justice Department settlement --- 61,000 --- Gain on sale of MedSystems division --- (15,900) --- Gain on sale of Ventritex stock --- (32,700) (5,900) Other, net 9,400 12,100 8,500 Total other expense, net $32,600 $18,200 $ 2,800 II-22
10. Segment Information
The Company is engaged in the design, manufacture, packaging, distribution and sale of medical, surgical, diagnostic and patient care devices. Hospitals, physicians and nursing homes purchase approximately 90% of the Company's products, most of which are used once and discarded. Information pertaining to domestic and foreign operations as of December 31, 1994, 1993 and 1992 and for the years then ended is given below.
II-23
Note: Reflected in the fourth quarter of 1994 is a pretax charge of $28,200 ($16,900 or 33 cents per share charge after taxes) for the settlement of a lawsuit and for other costs related to the USCI division which affected the fourth quarter tax provision.
Note: During the first quarter of 1993 a pretax gain of $10,900 was recognized from the sale of the MedSystems division net of nonrecurring charges. Included in the third quarter of 1993 is a pretax charge of $61,000 for the settlement reached with the Justice Department. During the fourth quarter of 1993 the Company recognized a $32,700 pretax gain from the sale of its Ventritex, Inc. stock. II-24
C. R. BARD, INC. AND SUBSIDIARIES
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable. II-25
C. R. BARD, INC. AND SUBSIDIARIES
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Directors of the Registrant
Information with respect to Directors of the Company is incorporated herein by reference to the material contained under the heading "Proposal No. 1 - Election of Directors" appearing on pages 1 through 3 of the Company's definitive Proxy Statement dated March 10, 1995.
Executive Officers of the Registrant
Information with respect to Executive Officers of the Registrant are on pages I-9 through I-11 of this filing.
Item 11.
Item 11. Executive Compensation
The information contained under the caption "Executive Compensation" appearing on Pages 5 through 14 of the Company's definitive Proxy Statement dated March 10, 1995 is incorporated herein by reference.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information contained under the captions "Securities Ownership of Certain Beneficial Owners" and "Securities Ownership of Management" on pages 3 and 4 of the Company's definitive Proxy Statement dated March 10, 1995 is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
The information contained under the caption "Compensation of Outside Directors - Related Transactions" on page 11 of the Company's definitive Proxy Statement dated March 10, 1995 is incorporated herein by reference.
III-1
C. R. BARD, INC. AND SUBSIDIARIES PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) l. Financial Statements and Supplementary Data
Included in Part II Item 8 of this report:
Page II- 9 Report of Independent Public Accountants.
II-10 Statements of Consolidated Income and Statements of Consolidated Retained Earnings for the three years ended December 31, 1994.
II-11 Consolidated Balance Sheets at December 31, 1994 and 1993.
II-12 Consolidated Statements of Cash Flows for the three years ended December 31, 1994.
II-13 Notes to Consolidated Financial Statements.
II-24 Quarterly Financial Data.
2. Financial Statement Schedules
Schedules are omitted because they are not applicable, are not required or the information required is included in the financial statements or notes thereto.
3. Exhibits, No.
3a Registrant's Restated Certificate of Incorporation, as amended, as of April 19, 1989, filed as Exhibit 3a to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
3b Registrant's Bylaws revised as of April 18, 1990, filed as Exhibit 3b to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
4 Rights Agreement dated as of October 9, 1985 between C. R. Bard, Inc. and Morgan Guaranty Trust Company of New York as Rights Agent, filed as Exhibit 4 to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. IV-1
C. R. BARD, INC. AND SUBSIDIARIES
3. Exhibits, No. (Continued)
10 Plea Agreement with attachments and Civil Settlement Agreement between United States of America and C. R. Bard, Inc. dated October 14, 1993, filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993, File No. 1-6926 is incorporated herein by reference.
10a* Benson F. Smith Severance Agreement dated as of June 29, 1994. (p. IV-7)
10b* William H. Longfield Severance Agreement as amended dated as of July 13, 1994. (p. IV-21)
10c* William C. Bopp Severance Agreement as amended dated as of August 31, 1994. (p. IV-25)
10d* Terence C. Brady, Jr. Severance Agreement as amended dated as of July 19, 1994. (p. IV-29)
10e* Richard A. Flink Severance Agreement as amended dated as of July 22, 1994. (p. IV-33)
10f* E. Robert Ernest Severance Agreement as amended dated as of July 19, 1994. (p. IV-37)
10g* William H. Longfield Supplemental Executive Retirement Agreement dated as of January 12, 1994, filed as Exhibit 10g to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10h* 1990 Stock Option Plan, filed as Exhibit 10h to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10i* 1989 Employee Stock Appreciation Rights Plan, filed as Exhibit 10i to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10j* C. R. Bard, Inc. Agreement and Plans Trust, filed as Exhibit 10j to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10k* Supplemental Insurance/Retirement Plan, Plan I - For new corporate officer when previous agreement as non- officer exists, Plan II - For new corporate officer when no previous agreement exists, filed as Exhibit 10k to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10l* Retirement Plan for Outside Directors of C. R. Bard, Inc, filed as Exhibit 10l to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference. IV-2
C. R. BARD, INC. AND SUBSIDIARIES
3. Exhibits, No. (Continued)
10m* Deferred Compensation Contract Deferral of Directors' Fees, as amended entered into with directors William T. Butler, M.D., Regina E. Herzlinger, and Robert P. Luciano, filed as Exhibit 10m to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10n* 1988 Directors Stock Award Plan, as amended in October 1991, filed as Exhibit 10n to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10o* Excess Benefit Plan, filed as Exhibit 10o to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10p* Supplemental Executive Retirement Plan, filed as Exhibit 10p to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10q* 1994 Executive Bonus Plan, filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994, File No. 1-6926 is incorporated herein by reference.
10r* Long Term Performance Incentive Plan, filed as Exhibit 10r to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10s* Deferred Compensation Contract Deferral of Discretionary Bonus, filed as Exhibit 10s to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10t* Deferred Compensation Contract Deferral of Salary, filed as Exhibit 10t to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10u* 1993 Long Term Incentive Plan, filed as Exhibit 10u to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
10v* Earle L. Parker Severance Agreement dated as of June 29, 1994. (pIV-41).
10w* Mark W. Sickles Severance Agreement dated as of June 29, 1994. (p.IV-55). IV-3
C. R. BARD, INC. AND SUBSIDIARIES
3. Exhibits, No. (Continued)
21 Parents and subsidiaries of registrant. (p. IV-69)
23 Arthur Andersen LLP consent to the incorporation by reference of their report on Form 10-K as amended into previously filed Forms S-8. (p. IV-70)
27 Financial data schedule
99 Indemnity agreement between the Company and each of its directors and officers, filed as Exhibit 99 to the Company's 1993 Annual Report on Form 10-K is incorporated herein by reference.
* Each of these exhibits listed under the number 10 constitutes a management contract or a compensatory plan or arrangement.
All other exhibits are not applicable.
(b) Reports on Form 8-K
Registrant filed a Current Report on Form 8-K dated December 29, 1994 announcing that the Company plans to take an after-tax charge in the fourth quarter of 1994 for the settlement of a lawsuit and for legal and related expenses.
Registrant filed a Current Report on Form 8-K dated December 29, 1994 announcing that it had been notified by the Defense Logistics Agency that it has been reinstated as a federal contractor. IV-4
C. R. BARD, INC. AND SUBSIDIARIES
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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)
By: William C. Bopp /s/ William C. Bopp Senior Vice President and Chief Financial Officer
Date: March 17, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signatures Title Date
William H. Longfield /s/ President and March 17, 1995 William H. Longfield Chief Executive Officer and Director (Principal Executive Officer)
William C. Bopp /s/ Senior Vice President March 17, 1995 William C. Bopp and Chief Financial Officer (Principal Financial Officer)
Charles P. Grom /s/ Corporate Controller March 17, 1995 Charles P. Grom (Principal Accounting Officer)
Benson F. Smith /s/ Executive Vice President March 17, 1995 Benson F. Smith and Chief Operating Officer and Director
IV-5
C. R. BARD, INC. AND SUBSIDIARIES
Signatures Title Date
Joseph F. Abely, Jr. /s/ Director March 8, 1995 Joseph F. Abely, Jr.
William T. Butler, M.D. /s/ Director March 8, 1995 William T. Butler, M.D.
Raymond B. Carey, Jr. /s/ Director March 8, 1995 Raymond B. Carey, Jr.
Daniel A. Cronin, Jr. /s/ Director March 7, 1995 Daniel A. Cronin, Jr.
T. Kevin Dunnigan /s/ Director March 17, 1995 T. Kevin Dunnigan
Regina E. Herzlinger /s/ Director March 17, 1995 Regina E. Herzlinger
Robert P. Luciano /s/ Director March 8, 1995 Robert P. Luciano
Robert H. McCaffrey /s/ Director March 17, 1995 Robert H. McCaffrey IV-6