BRISTOL MYERS SQUIBB CO
`
`FORM 10-Q
`
`(Quarterly Report)
`
`Filed 05/14/03 for the Period Ending 03/31/03
`
`
`Address
`
`
`345 PARK AVE
`NEW YORK, NY 10154
`2125464000
`Telephone
`0000014272
`CIK
`BMY
`Symbol
`2834 - Pharmaceutical Preparations
`SIC Code
`Biotechnology & Drugs
`Industry
`Sector Healthcare
`Fiscal Year
`12/31
`
`http://www.edgar-online.com
`© Copyright 2014, EDGAR Online, Inc. All Rights Reserved.
`Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.
`
`Roxane Labs., Inc.
`Exhibit 1023
`Page 001
`
`

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`Table of Contents
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`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  No 
`
`
`SECURITIES AND EXCHANGE COMMISSION
`WASHINGTON, D.C. 20549
`
`FORM 10-Q
`QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
`THE SECURITIES EXCHANGE ACT OF 1934
`
`FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
`
`Commission File Number 1-1136
`
`BRISTOL-MYERS SQUIBB COMPANY
`
`(Exact name of registrant as specified in its charter)
`
`Delaware
`(State or other jurisdiction of
`incorporation or organization)
`
`
`
`
`
`22-079-0350
`(IRS Employer
`Identification No.)
`
`345 Park Avenue, New York, N.Y. 10154
`(Address of principal executive offices)
`
`Telephone: (212) 546-4000
`
`Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes  No 
`
`At April 30, 2003, there were 1,938,328,170 shares outstanding of the Registrant’s $.10 par value Common Stock.
`
`Table of Contents
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`PART I – FINANCIAL INFORMATION
`
`BRISTOL-MYERS SQUIBB COMPANY
`INDEX TO FORM 10-Q
`March 31, 2003
`
`Item 1.
`Financial Statements (unaudited):
`Consolidated Balance Sheet at March 31, 2003 and December 31, 2002
`Consolidated Statement of Earnings, Comprehensive Income and Retained Earnings for the three months ended March 31, 2003
`and 2002
`Consolidated Statement of Cash Flows for the three months ended March 31, 2003 and 2002
`Notes to Consolidated Financial Statements
`Report of Independent Accountants
`Item 2.
`Management’s Discussion and Analysis of Financial Condition and Results of Operations
`Item 3.
`Quantitative and Qualitative Disclosures About Market Risk
`Item 4.
`Controls and Procedures
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`Page
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`3
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`4-5
`6
`7-21
`22
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`23-30
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`30
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`30-31
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`Roxane Labs., Inc.
`Exhibit 1023
`Page 002
`
`

`
`PART II – OTHER INFORMATION
`Item 1.
`Legal Proceedings
`Item 4.
`Submission of Matters to a Vote of Security Holders
`Item 6.
`Exhibits and Reports on Form 8-K
`Signatures
`Certifications
`
`
`2
`
`Table of Contents
`
`
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`PART I – FINANCIAL INFORMATION
`
`Item 1. FINANCIAL STATEMENTS
`
`
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`
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`BRISTOL-MYERS SQUIBB COMPANY
`CONSOLIDATED BALANCE SHEET
`(UNAUDITED)
`
`
`ASSETS
`Current Assets:
`Cash and cash equivalents
`Time deposits and marketable securities
`Receivables, net of allowances $154 and $129
`Inventories:
`Finished goods
`Work in process
`Raw and packaging materials
`Consignment inventory
`
`
`
`
`
`Total Inventories
`Prepaid expenses
`
`Total Current Assets
`
`
`Property, plant and equipment
`Less: Accumulated depreciation
`
`
`
`Goodwill
`Intangible assets, net
`Other assets
`
`
`Total Assets
`
`
`LIABILITIES
`Current Liabilities:
`Short-term borrowings
`Deferred revenue on consigned inventory
`Accounts payable
`Dividends payable
`Accrued litigation settlements
`Accrued expenses
`Accrued rebates and sales returns
`U.S. and foreign income taxes payable
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`31-36
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`36
`
`37
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`38
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`39-40
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`
`
`3,978
`11
`2,968
`
`884
`415
`216
`58
`
`1,573
`1,445
`
`9,975
`
`8,693
`3,372
`
`5,321
`
`4,864
`1,904
`2,810
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`December 31,
`March 31,
`2002
`2003
`
`(dollars in millions)
`
`
`
`
`
`
`$ 4,328
`$
`
`
`20
`
` 3,187
`
`
`
`
`
`841
`
`
`510
`
`
`157
`
`
`26
`
` 1,534
` 1,450
`
` 10,519
`
` 8,827
` 3,478
`
` 5,349
`
` 4,864
` 1,848
` 2,780
`
`$ 25,360
`
`
`
`
`
`$ 2,247
`
`174
` 1,509
`
`543
`
`32
` 2,248
`
`894
`
`651
`
`$ 24,874
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`
`
`$
`
`
`
`
`
`
`
`
`
`
`1,379
`470
`1,553
`542
`600
`2,374
`819
`483
`
`Roxane Labs., Inc.
`Exhibit 1023
`Page 003
`
`

`
`
`
`Total Current Liabilities
`Other liabilities
`Long-term debt
`
`
`Total Liabilities
`
`
`
`Commitments and contingencies
`STOCKHOLDERS’ EQUITY
`Preferred stock, $2 convertible series:
`Authorized 10 million shares; issued and outstanding 8,268 in 2003 and 8,308 in 2002,
`liquidation value of $50 per share
`Common stock, par value of $.10 per share:
`Authorized 4.5 billion shares; issued 2,200,856,808 in 2003 and 2,200,823,544 in 2002
`Capital in excess of par value of stock
`Other accumulated comprehensive loss
`Retained earnings
`
`
`
`
`
`
`
`
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`
`
`
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`Less cost of treasury stock 262,617,400 common shares in 2003 and 263,994,580 in 2002
`
`Total Stockholders’ Equity
`
`Total Liabilities and Stockholders’ Equity
`
`The accompanying notes are an integral part of these financial statements.
`
`3
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` 8,298
` 1,398
` 6,367
`
` 16,063
`
`
`
`
`
`
`
`
`
` —
`
`
`
`220
` 2,475
` (1,004 )
` 19,079
`
` 20,770
` 11,473
`
` 9,297
`
`$ 25,360
`
`
`
`
`
`
`8,220
`1,426
`6,261
`
` 15,907
`
`
`
`
`
`
`
`
`
`
`—
`
`
`
`220
`
`2,491
`
`(1,102 )
` 18,860
`
` 20,469
` 11,502
`
`
`
`8,967
`
`$ 24,874
`
`Table of Contents
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`BRISTOL-MYERS SQUIBB COMPANY
`CONSOLIDATED STATEMENT OF EARNINGS,
`COMPREHENSIVE INCOME AND RETAINED EARNINGS
`(UNAUDITED)
`
`Three Months Ended
`March 31,
`
`
`
`
`
`
`EARNINGS
`Net Sales
`
`Cost of products sold
`Marketing, selling and administrative
`Advertising and product promotion
`Research and development
`Acquired in-process research and development
`Gain on sales of businesses/product lines
`Provision for restructuring
`Litigation settlement
`Other (income)/expense, net
`
`
`
`Earnings from Continuing Operations Before Minority Interest and Income Taxes
`Provision for income taxes
`Minority interest, net of taxes (1)
`
`Earnings from Continuing Operations
`Discontinued Operations:
`Net gain on disposal
`
`
`
`2002
`2003
`
`
`
`(in millions, except per share data)
`
`
`
`
`
`
`
`
`4,711 $
` $
`4,661
`
`
`1,685
`
`1,032
`
`364
`
`476
`
`—
`
`—
`
`12
`
`(21 )
`
`88
`
`
`
`3,636
`
`
`
`1,075
`
`294
`
`20
`
`761
`
`—
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`1,502
`912
`259
`502
`160
`(30 )
`(1 )
`90
`39
`
`3,433
`
`1,228
`333
`53
`
`
`
`842
`
`14
`
`Roxane Labs., Inc.
`Exhibit 1023
`Page 004
`
`

`
`Net Earnings
`
`Earnings Per Common Share
`Basic
`Earnings from Continuing Operations
`Discontinued Operations:
`Net gain on disposal
`
`
`
`Net Earnings
`
`
`Diluted
`Earnings from Continuing Operations
`Discontinued Operations:
`Net gain on disposal
`
`
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`Net Earnings
`
`
`Average Common Shares Outstanding
`Basic
`Diluted
`Dividends declared per Common Share
`
` $
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` $
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` $
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` $
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` $
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` $
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`
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`761 $
`
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`
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`
`
`.39 $
`
`
`
`—
`
`
`.39 $
`
`
`
`
`.39 $
`
`
`
`—
`
`
`.39 $
`
`
`
`
`1,936
`
`1,940
`.280 $
`
`
`
`856
`
`
`
`.43
`
`.01
`
`.44
`
`
`.43
`
`.01
`
`.44
`
`
`1,935
`1,952
`.280
`
`(1)
`
`
`
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` Includes minority interest expense and income from unconsolidated affiliates.
`
`The accompanying notes are an integral part of these financial statements.
`
`4
`
`Table of Contents
`
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`BRISTOL-MYERS SQUIBB COMPANY
`CONSOLIDATED STATEMENT OF EARNINGS,
`COMPREHENSIVE INCOME AND RETAINED EARNINGS (Continued)
`(UNAUDITED)
`
`
`COMPREHENSIVE INCOME
`Net Earnings
`Other Comprehensive (Loss) Income:
`Foreign currency translation, net of tax benefit of $43 in 2003 and $10 in 2002
`Decline in market value of investments, net of tax benefit of $1 in 2003
`Deferred (loss) gain on derivatives qualifying as hedges, net of tax benefit of $30 in 2003 and $4 in 2002
`
`Total Other Comprehensive (Loss) Income
`
`Comprehensive Income
`
`
`RETAINED EARNINGS
`Retained Earnings, January 1
`Net Earnings
`Cash dividends declared
`
`Retained Earnings, March 31
`
`
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`
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`The accompanying notes are an integral part of these financial statements.
`
`5
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`(57 )
`
`Three Months Ended
`March 31,
`2003
`2002
`
`
`(dollars in millons)
`
`
`
`
`856
`761
`$
`
`
`
`(48 )
`150
`
`(2 )
` —
`(50 )
`
`(9 )
`
`98
`
`859
`
`
`
`$
`
`
`
`
`
`
`
`$
`
`$
`
`799
`
`
`
`$ 18,860
`
`761
`
`(542 )
`
`$ 19,079
`
`
`
`
`$ 18,958
`
`856
`
`(543 )
`
`$ 19,271
`
`Roxane Labs., Inc.
`Exhibit 1023
`Page 005
`
`

`
`Table of Contents
`
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`BRISTOL-MYERS SQUIBB COMPANY
`CONSOLIDATED STATEMENT OF CASH FLOWS
`(UNAUDITED)
`
`
`Cash Flows From Operating Activities:
`Net earnings
`Depreciation
`Amortization
`Litigation settlement charge
`Provision for restructuring
`Acquired in-process research and development
`Gain on sales of businesses/product lines (including discontinued operations)
`Other operating items
`Receivables
`Inventories
`Deferred revenue on consigned inventory
`Litigation settlement payments
`Accounts payable and accrued expenses
`Income taxes
`Pension contribution to the U.S. retirement income plan
`Other assets and liabilities
`
`
`
`Net Cash Provided by (Used In) Operating Activities
`
`
`Cash Flows From Investing Activities:
`Proceeds from sales of time deposits and marketable securities
`Purchases of time deposits and marketable securities
`Additions to property, plant and equipment
`Investment in ImClone
`Proceeds from product divestitures
`Business acquisitions (including purchase of trademarks/patents)
`DuPont acquisition costs and liabilities
`Other, net
`
`
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`Net Cash Used in Investing Activities
`
`
`Cash Flows From Financing Activities:
`Short-term borrowings
`Long-term debt borrowings
`Issuances of common stock under stock plans
`Purchases of treasury stock
`Dividends paid
`
`
`
`Net Cash Provided by (Used in) Financing Activities
`
`
`Effect of Exchange Rates on Cash
`
`Increase/(Decrease) in Cash and Cash Equivalents
`Cash and Cash Equivalents at Beginning of Period
`
`Cash and Cash Equivalents at End of Period
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`The accompanying notes are an integral part of these financial statements.
`
`6
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`
`Three Months Ended
`March 31,
`2003
`2002
`
`
`(dollars in millions)
`
`
`
`
`$ 761
`$ 856
` 105
`
`105
`
`73
`
`74
` —
`
`90
`
`12
`
`(1 )
` —
`
`160
` —
`
`(54 )
`
`13
`
`(17 )
` (197 )
`
`159
`
`60
`
`(28 )
` (296 )
`
`(353 )
` (565 )
` —
`
`17
`
`(434 )
`
`75
` (1,449 )
` —
`
`(150 )
` 105
`
`(44 )
`
` 163
`
`
`
`1
`
`(9 )
`
` (190 )
`
`(60 )
` —
`
`(2 )
`
`(3 )
` —
`
` (263 )
`
`
`
` 923
`
`52
`
`12
` —
` (542 )
`
` 445
`
`5
`
` 350
` 3,978
`
`$ 4,328
`
`
`
`
` (1,086 )
`
`
`
`83
`
`(123 )
`
`(211 )
`
` —
`
`40
`
`(186 )
`
`(242 )
`
`50
`
`
`
`(589 )
`
`
`
`
`
`
`
`
`
`
`
`
`
`87
`1
`83
`(67 )
`(542 )
`
`(438 )
`
`(5 )
`
` (2,118 )
` 5,500
`
`$ 3,382
`
`Roxane Labs., Inc.
`Exhibit 1023
`Page 006
`
`

`
`Table of Contents
`
`BRISTOL-MYERS SQUIBB COMPANY
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`(UNAUDITED)
`
`
`
`Note 1: Basis of Presentation and New Accounting Standards
`
`
`Bristol-Myers Squibb Company (the Company) prepared these unaudited consolidated financial statements following the requirements of the
`Securities and Exchange Commission (SEC) and U.S. generally accepted accounting principles (GAAP) for interim reporting. Under those rules,
`certain footnotes and other financial information that are normally required by GAAP for annual financial statements can be condensed or
`omitted. The Company is responsible for the consolidated financial statements included in this Form 10-Q. These consolidated financial
`statements include all normal and recurring adjustments necessary for a fair presentation of the Company’s financial position at March 31, 2003
`and December 31, 2002, and the results of its operations and cash flows for the three months ended March 31, 2003 and March 31, 2002. These
`consolidated financial statements should be read in conjunction with the consolidated financial statements and the related notes included in the
`Company’s Annual Report on Form 10-K for the year ended December 31, 2002 (2002 Form 10-K). PricewaterhouseCoopers LLP, the
`Company’s independent accountants, have performed a review of the unaudited consolidated financial statements included in this Form 10-Q,
`and their review report thereon accompanies this Form 10-Q.
`
`
`Revenues, expenses, assets and liabilities can vary during each quarter of the year. Accordingly, the results and trends in these unaudited
`consolidated interim financial statements may not be the same as those for the full year.
`
`
`The Company recognizes revenue for sales upon shipment of product to its customers, except in the case of certain transactions with its U.S.
`pharmaceuticals wholesalers which are accounted for using the consignment model. Under GAAP, revenue is recognized when substantially all
`the risks and rewards of ownership have transferred. In the case of sales made to wholesalers (1) as a result of incentives, (2) in excess of the
`wholesaler’s ordinary course of business inventory level, (3) at a time when there was an understanding, agreement, course of dealing or
`consistent business practice that the Company would extend incentives based on levels of excess inventory in connection with future purchases
`and (4) at a time when such incentives would cover substantially all, and vary directly with, the wholesaler’s cost of carrying inventory in excess
`of the wholesaler’s ordinary course of business inventory level, substantially all the risks and rewards of ownership do not transfer upon
`shipment and, accordingly, such sales should be accounted for using the consignment model. The determination of when, if at all, sales to a
`wholesaler meet the foregoing criteria involves evaluation of a variety of factors and a number of complex judgments. Under the consignment
`model, the Company does not recognize revenue upon shipment of product. Rather, upon shipment of product the Company invoices the
`wholesaler, records deferred revenue at gross invoice sales price and classifies the inventory held by the wholesalers as consignment inventory at
`the Company’s cost of such inventory. The Company recognizes revenue when the consignment inventory is no longer subject to incentive
`arrangements but not later than when such inventory is sold through to the wholesalers’ customers, on a first-in first-out (FIFO) basis.
`
`
`Revenues are reduced at the time of sale to reflect expected returns that are estimated based on historical experience. Additionally, provision is
`made at the time of sale for all discounts, rebates and estimated sales allowances based on historical experience updated for changes in facts and
`circumstances, as appropriate. Such provision is recorded as a reduction of revenue.
`
`In addition, the Company includes alliance revenue in net sales. The Company has agreements to promote pharmaceuticals discovered by other
`companies. Alliance revenue is based upon a percentage of the Company’s co-promotion partners’ net sales and is earned when the co-
`promotion partners ship the related product and title passes to their customer.
`
`
`The preparation of financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported amounts
`of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported
`amounts of revenues and expenses during the reporting period. The most significant assumptions are employed in estimates used in determining
`values of intangible assets, restructuring charges and accruals, sales rebate and return accruals, legal contingencies and tax assets and tax
`liabilities, as well as in estimates used in applying the revenue recognition policy and accounting for retirement and postretirement benefits
`(including the actuarial assumptions). Actual results could differ from the estimated results.
`
`
`7
`
`Table of Contents
`
`BRISTOL-MYERS SQUIBB COMPANY
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`(UNAUDITED)
`
`
`
`
`Note 1: Basis of Presentation and New Accounting Standards (Continued)
`
`
`Certain prior year amounts have been reclassified to conform to the current year presentation.
`
`In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, Consolidation of Variable Interest Entities
`(FIN 46). FIN 46 requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss
`from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. FIN 46 also requires
`disclosures about variable interest entities that a company is not required to consolidate but in which it has a significant variable interest. The
`consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and to existing entities in the
`
`Roxane Labs., Inc.
`Exhibit 1023
`Page 007
`
`

`
`(dollars in millions, except per share data)
`
`Net Earnings:
`As reported
`Deduct : Total stock-based employee compensation expense determined under fair value based method for all
` awards, net of related tax effects
`
`
`
`Pro forma
`
`
`Basic earnings per share:
`As reported
`Pro forma
`Diluted earnings per share:
`As reported
`Pro forma
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`March 31,
`
`2003
`2002
`
`
`
`
`
`
`$ 761
`$ 856
`
` (26 )
`
`$ 735
`
`
`
`$ .39
` .38
`
`
`$ .39
` .38
`
` (45 )
`
`$ 811
`
`
`
`$ .44
` .42
`
`
`$ .44
` .42
`
`first fiscal year or interim period beginning after June 15, 2003. Certain of the disclosure requirements apply to all financial statements issued
`after January 31, 2003, regardless of when the variable interest entity was established. Based on its assessment of FIN 46, the Company has
`concluded that ImClone Systems Incorporated (ImClone) does not meet the criteria to be considered a variable interest entity in relation to the
`Company.
`
`In accordance with SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, the following table summarizes the
`Company’s results on a pro forma basis as if it had recorded compensation expense based upon the fair value at the grant date for awards under
`these plans consistent with the methodology prescribed under SFAS No. 123, Accounting for Stock-Based Compensation , for the three months
`ended March 31, 2003 and 2002:
`
`
`
`
`In November 2002, the FASB issued Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including
`Indirect Guarantees of Indebtedness of Others (FIN 45). FIN 45 requires a guarantor to recognize a liability at the inception of the guarantee for
`the fair value of the obligation undertaken in issuing the guarantee and include more detailed disclosure with respect to guarantees. The types of
`contracts the Company enters into that meet the scope of this interpretation are financial and performance standby letters of credit on behalf of
`wholly-owned subsidiaries. FIN 45 is effective for guarantees issued or modified after December 31, 2002. The initial adoption of this
`accounting pronouncement did not have a material effect on the Company’s consolidated financial statements.
`
`
`8
`
`Table of Contents
`
`BRISTOL-MYERS SQUIBB COMPANY
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`(UNAUDITED)
`
`
`
`
`Note 1: Basis of Presentation and New Accounting Standards (Continued)
`
`In November 2002, the Emerging Issues Task Force (EITF) reached a consensus on EITF Issue No. 00-21, Accounting for Revenue
`Arrangements with Multiple Deliverables . EITF No. 00-21 provides guidance on how to determine when an arrangement that involves multiple
`revenue-generating activities or deliverables should be divided into separate units of accounting for revenue recognition purposes, and if this
`division is required, how the arrangement consideration should be allocated among the separate units of accounting. The guidance in the
`consensus is effective for revenue arrangements entered into in the fiscal periods beginning after June 15, 2003. The Company is currently
`waiting for the EITF to complete its deliberations on certain implementation provisions to finalize its evaluation of the effect that the adoption of
`EITF No. 00-21 will have on its consolidated financial statements.
`
`In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement Obligations. Under SFAS No. 143, the fair value of a liability
`for an asset retirement obligation must be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The
`associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. The provisions of SFAS No. 143 are
`effective for financial statements for fiscal years beginning after June 15, 2002. The initial adoption of this standard did not have a material
`impact on the Company’s consolidated financial statements.
`
`
`Note 2: Restructuring and Other Items
`
`In the first quarter of 2003, the Company recorded a pretax charge of $12 million, related to termination benefits for workforce reductions of 340
`manufacturing employees in the Pharmaceuticals segment and downsizing and streamlining of worldwide manufacturing operations. In addition,
`the Company recorded $10 million in cost of products sold for asset impairments and $4 million in other (income)/ expense for accelerated
`depreciation of certain manufacturing facilities in North America expected to be closed by the end of 2004.
`
`In the first quarter of 2002, an adjustment to prior year reserves of $1 million was made to reflect reduced estimates of separation costs.
`
`
`Roxane Labs., Inc.
`Exhibit 1023
`Page 008
`
`

`
`Restructuring charges and spending against accrued liabilities associated with prior and current actions are as follows:
`
`Employee
`Termination
`Liability
`
`
`
`
`Balance at December 31, 2001
`Charges
`Spending
`Changes in estimate
`
`Balance at December 31, 2002
`Charges
`Spending
`
`Balance at March 31, 2003
`
`
`
`Table of Contents
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`$
`
`
`
`
`
`
`
`
`$
`
`9
`
`Other Exit Cost
`Liability
`
`
`(dollars in millions)
`243 $
`41
`
`71
`38
`
`(155 )
`(29 )
`
`(92 )
`(8 )
`
`
`67
`42
`12
`—
`(23 )
`(17 )
`
`
`56 $
`25
`
`
`
`
`
`
`
`Total
`
`
`$ 284
` 109
` (184 )
` (100 )
`
` 109
` 12
` (40 )
`
`$ 81
`
`BRISTOL-MYERS SQUIBB COMPANY
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`(UNAUDITED)
`
`
`
`
`Note 3: Earnings Per Share
`
`Basic earnings per common share are computed using the weighted-average number of shares outstanding during the year. Diluted earnings per
`common share are computed using the weighted-average number of shares outstanding during the year, plus the incremental shares outstanding
`assuming the exercise of dilutive stock options. The computations for basic earnings per common share and diluted earnings per common share
`are as follows:
`
`
`
`
`
`
`
`Earnings from Continuing Operations
`Discontinued Operations:
`Net gain on disposal
`
`
`Net Earnings
`
`Basic:
`Average Common Shares Outstanding
`
`Earnings from Continuing Operations
`Discontinued Operations:
`Net gain on disposal
`
`
`Net Earnings
`
`Diluted:
`Average Common Shares Outstanding
`Incremental Shares Outstanding Assuming the Exercise of Dilutive Stock Options
`
`
`
`Earnings from Continuing Operations
`Discontinued Operations:
`Net gain on disposal
`
`
`Net Earnings
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Three Months Ended
`March 31,
`2003
`2002
`
`
`(in millions, except
`per share data)
`$ 761
`$ 842
`
`
`
` —
`
`
`$ 761
`
`
`
` 1,936
`
`.39
`$
`
`
` —
`
`.39
`
`
`
` 1,936
`
`4
`
` 1,940
`
`.39
`$
`
`
` —
`
`.39
`
`14
`
`$ 856
`
`
` 1,935
`
`$
`
`
`
`.43
`
`.01
`
`$
`
`.44
`
`
` 1,935
`
`17
`
` 1,952
`
`$
`
`
`
`.43
`
`.01
`
`$
`
`.44
`
`$
`
`$
`
`Roxane Labs., Inc.
`Exhibit 1023
`Page 009
`
`

`
`
`
`Weighted-average shares issuable upon the exercise of stock options, which were not included in the diluted earnings per share calculation
`because they were not dilutive, were 120 million for the three month period ended March 31, 2003 and 81 million for the three month period
`ended March 31, 2002.
`
`
`
`
`
`
`10
`
`Table of Contents
`
`BRISTOL-MYERS SQUIBB COMPANY
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`(UNAUDITED)
`
`
`
`
`Note 4: Goodwill
`
`The changes in the carrying amount of goodwill for the year ended December 31, 2002 and the three months ended March 31, 2003, were as
`follows:
`
`
`Pharmaceuticals
`Segment
`
`
`
` $
`
`
`
`
`
`
`
`
` $
`
`
`Total
`
`
`
`$ 5,119
`
`
` (165 )
`
`(90 )
`
`$ 4,864
`
`$
`
`Other
`Healthcare
`Nutritionals
`Segment
`Segment
`
`
`
`(dollars in millions)
`4,738 $
`$
`191
`190
`
`
`
`
`
`
`
` —
` —
`(165 )
`
` —
`(89 )
`(1 )
`
`
`
`4,484 $
`190
`190
`
`
`
`
`
`Balance as of December 31, 2002 and March 31, 2003
`
`
`In accordance with SFAS No. 142, which the Company adopted in January 2002, goodwill was tested for impairment upon adoption of the
`standard and is required to be tested annually thereafter. The Company completed the assessment upon adoption, which indicated no impairment
`of goodwill. The Company uses a two-step process in testing for goodwill impairment. The first step is to identify a potential impairment, and
`the second step measures the amount of the impairment loss, if any. Goodwill is deemed to be impaired if the carrying amount of a reporting
`unit’s goodwill exceeds its estimated fair value. The Company has completed its 2003 annual goodwill impairment assessment, which indicated
`no impairment of goodwill.
`
`
`Note 5: Intangible Assets
`
`As of March 31, 2003 and December 31, 2002, intangible assets consisted of the following:
`
`
`
`
`
`Balance as of December 31, 2001
`Purchase accounting adjustments related to recent acquisitions:
`Change in exit cost estimate
`Purchase price and allocation adjustments
`
`
`
`
`Patents / Trademarks
`Licenses
`Technology
`
`
`Accumulated Amortization
`
`Net Carrying Amount
`
`
`
`
`Table of Contents
`
`11
`
`December 31,
`March 31,
`2002
`2003
`
`(dollars in millions)
`209 $
`
`362
`
`1,783
`
`2,354
`506
`
`1,848 $
`
`
`
`
` $
`
`
`
`
`
`
`
`
` $
`
`
`
`
`
`214
`554
`1,783
`
`2,551
`647
`
`1,904
`
`
`
`
`BRISTOL-MYERS SQUIBB COMPANY
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
`(UNAUDITED)
`
`
`
`Note 5: Intangible Assets (Continued)
`
`
`Roxane Labs., Inc.
`Exhibit 1023
`Page 010
`
`

`
`Amortization expense for intangible assets (the majority of which is included in cost of products sold) for the three months ended March 31,
`2003 and 2002 was $59 million and $66 million, respectively. Expected amortization expense through 2008 related to the current balance of
`intangible assets is as follows:
`
`
`(dollars in millions)
`
`
`For the year ended December 31, 2003
`For the year ended December 31, 2004
`For the year ended December 31, 2005
`For the year ended December 31, 2006
`For the year ended December 31, 2007
`For the year ended December 31, 2008
`
`
` $
`
`
`
`
`
`
`
`
`
`
`
`221
`194
`194
`194
`193
`189
`
`
`
`Note 6: Alliances and Investments
`
`ImClone
`
`
`The Company has a commercialization agreement that expires in 2018 with ImClone, a biopharmaceutical company focused on developing
`targeted cancer treatments, for the codevelopment and copromotion of ERBITUX* in the U.S., Canada and Japan. In accordance with the terms
`of the agreement, the Company paid ImClone $200 million, of which $140 million was paid in March 2002 and $60 million was paid in March
`2003. The Company will also pay ImClone $500 million in milestone payments: $250 million upon approval of the initial indication and the
`remaining $250 million upon approval of a second indication. Under the agreement, ImClone will receive a distribution fee based on a flat rate
`of 39% of product revenues in North America.
`
`
`With respect to the $200 million of milestone payments the Company paid ImClone, $160 million (or 80.1%) was expensed in the first quarter of
`2002 as acquired in-process research and development, and $40 million (or 19.9%) was recorded as an additional equity investment to eliminate
`the income statement effect of the portion of the milestone payment for which the Company has an economic claim through its 19.9% ownership
`interest in ImClone.
`
`In the first quarter of 2003, the Company recorded a $23 million net loss for its share of ImClone’s losses, including $12 million reflecting the
`Company’s estimate of its share of ImClone’s net losses related to ImClone’s recent announcement that it will need to restate its 2001 and later
`financial statements and possibly certain of its earlier financial statements for certain withholding tax liabilities associated with the exercise of
`warrants and options held by its current and former officers, directors and employees.
`
`
`On April 9, 2003, ImClone stated that it expects that the total amount to be reflected on its balance sheet relating to the matters giving rise to the
`expected restatement could be up to $60 million, exclusive of penalties and interest, and that the amount ultimately charged against its earnings
`will be determined by the results of its ongoing review of these matters. As a result of