Cash provided by operations continued to be our primary source of funds to finance operating needs and capital expenditures. In 1999, net cash provided by operating activities was $432 million, compared to $501 million in 1998.

Capital expenditures were $312 million in 1999, compared to $181 million in the prior year. Medical capital spending, which totaled $188 million in 1999, included spending for capacity expansion for advanced protection devices and continued spending on a new syringe manufacturing facility in India. Funds also were expended for capacity expansion for prefillable syringes in Mexico and France. Biosciences capital spending, which totaled $42 million in 1999, included spending on new manufacturing facilities. Preanalytical spending, which totaled $54 million, included spending on additional capacity for advanced protection devices. Funds expended outside of the above segments included amounts related to Genesis. We expect capital expenditures to increase about 10 to 15% in 2000, primarily to fund increased capacity expansion for advanced protection devices.

Over the last three years, we have expended approximately $1.1 billion for business acquisitions. We expect our acquisition activity to slow considerably in 2000 as we focus on integrating recently acquired businesses into existing operations.

Net cash provided by financing activities was $365 million during 1999, as compared to $242 million during 1998. This change was primarily due to the elimination of common share repurchases and to increased issuance of commercial paper in 1999, compared with 1998, offset by the repayment of long-term debt.

In 1999, we did not repurchase any of our common shares, compared with repurchases totaling $44 million in 1998. This reduction in share repurchases was consistent with our long-standing strategy of allocating funds to meet the needs of businesses and to finance strategic acquisitions before funding share repurchases. In April 1999, the Executive Committee of our Board of Directors rescinded a March 24, 1998 resolution which had authorized repurchase of our stock, under which 21.3 million shares remained to be repurchased.

During 1999, total debt increased $435 million, primarily as a result of increased spending on acquisitions. Short-term debt was 40% of total debt at year end, compared to 33% at the end of 1998. The change in this percentage was principally attributable to the use of short-term debt to finance a portion of our acquisition activities. Our weighted average cost of total debt at the end of 1999 was 6.5%, compared to 7.3% at the end of last year. Debt to capitalization at year end increased to 47.2%, from 41.4% last year, due to additional borrowings related to acquisitions. We anticipate generating excess cash in 2000 which we expect to use to repay debt.

In 1999, we negotiated a new 364-day $300 million syndicated line of credit to supplement both our existing five-year, $500 million syndicated and committed revolving credit facility and an additional $100 million credit line. There were no borrowings outstanding under any of these facilities at September 30, 1999. These facilities can be used to support our commercial paper program, under which $573 million was outstanding at September 30, 1999, and for other general corporate purposes. In addition, we have informal lines of credit outside the United States. In September 1999, we issued to the public $200 million of 10-year 7.15% notes at an effective yield of 7.34%. We utilized the proceeds to repay commercial paper issued in connection with the Clontech acquisition. In September 1999, Moody’s adjusted our long-term debt rating from “A1” to “A2,” while reaffirming our “P-1” commercial paper rating, and characterized our ratings outlook as stable. Standard and Poor’s reaffirmed our “A+” long-term debt rating and our “A-1” commercial paper rating, while changing our rating outlook to negative. We continue to have a high degree of confidence in our ability to refinance maturing short-term and long-term debt, as well as to incur substantial additional debt, if required.

Return on equity increased to 16.3% in 1999, from 15.8% in 1998.

General

We designed and implemented a company-wide Year 2000 plan to ensure that our computer equipment and software and devices with date-sensitive embedded technology would be Year 2000-compliant. In other words, we wanted to ensure that this equipment and software and these devices would be able to distinguish between the year 1900 and the year 2000 and would function properly with respect to all dates, whether in the twentieth or twenty-first centuries.

Our plan included a series of initiatives to ensure that all of our computer equipment and software will function properly into the next millennium. Computer equipment (or hardware) and software includes systems generally thought to depend on information technology, such as accounting, data processing and telephone equipment. It also includes systems that do not obviously depend on information technology, such as manufacturing equipment, telecopier machines and security systems. Since these systems may contain embedded technology, our plan included broad identification, assessment, remediation and testing efforts.

Based upon our identification, assessment, remediation and testing efforts to date, we believe we have completed all modifications to and replacements of our computer equipment and software that are necessary to avoid any of the potential Year 2000-related disruptions or malfunctions that have been identified.