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TO OUR SHAREHOLDERS
Living up to commitments: Two years ago, we initiated a series of actions that have enabled us to better utilize our resources and improve our financial performance. We reengineered critical business processes and implemented tighter fiscal discipline. More specif-ically, we reduced our G&A infrastructure, restructured manufacturing operations affecting 10 sites, eliminated certain sales promotions, undertook efforts to reduce inventories, invested in new products, and implemented rigorous spending controls. We will complete a major phase of our enterprise resource planning (Genesis) implementation in early 2003. These actions have made us more efficient today. These investments will benefit our future. We have delivered consistent, improved financial performance for nine consecutive quarters. Our associates around the world stand ready to continue this consistent track record of improvement in 2003 and beyond.
Positioning for sustainable higher revenue growth: At the same time, we laid the foundation for sustainable higher revenue growth. We began to realize this higher revenue growth in 2002 and look to continuing this success in 2003 and beyond. Specifically:
All three worldwide businesses made progress during the year. Our safety-engineered products continued to drive revenue growth in BD Medical Systems and BD Clinical Laboratory Solutions. With more than 300 individual catalog items, BD has the industry’s broadest and deepest product array of safety-engineered products. We continued to expand this array with two new injection products in 2002, and we plan to introduce new blood collection and infusion products in 2003. U.S. revenues from safety-engineered products increased by 38 percent in 2002 to $573 million. We look for approximately 15 percent of additional growth in this area for 2003, resulting from continued conversion to safety-engineered products and expansion of our product line. Looking forward, we see Europe, Canada, Australia, Japan and certain countries in Asia and Latin America as the next stages in the growth of safetyengineered products. Our Pharmaceutical Systems unit continues to be a strong performer. For the past four years, we have seen impressive growth in this area, which supplies prefillable drug delivery devices to pharmaceutical companies. Today, it is a $326 million worldwide enterprise serving pharmaceutical companies in the U.S., Europe and Asia. In addition to its safety-engineered products, the BD Clinical Laboratory Solutions segment holds a leadership position in microbiology and infectious disease diagnosis, with our instrument platforms driving the growth. The BD ProbeTec ET System, our molecular diagnostic platform, has become well-established as a key solution for the identification of pathogens involved in certain sexually transmitted diseases. In Europe, the BD Phoenix Automated System for Identification and Susceptibility Testing has enjoyed an encouraging reception, and we expect to introduce it to the U.S. market in 2004. We are very excited about expanding our commitment to help people with diabetes live healthier lives. We recently introduced our new blood glucose monitor in Canada, with its U.S. launch set for early 2003. The worldwide blood glucose testing market is estimated to be in excess of $4 billion. Our glucose monitoring products feature market-leading performance in the areas that matter most to people with diabetes: tiny blood sample size, fast test results, high accuracy, thinnest lancet, unique product ergonomics and data management for both patient and healthcare provider. BD Biosciences is one of the world’s largest life sciences businesses, generating close to $650 million in annual revenues through innovative tools, systems and solutions for accelerating the pace of global biomedical research and discovery. In a challenging environment for the life sciences industry, BD Biosciences grew 9 percent in fiscal 2002. This growth was driven by strong sales of Immunocytometry instruments and reagents, Pharmingen immunology and cell biology reagents, and Discovery Labware products. Softness in pharmaceutical/biotech research and development spending, as well as a shift in pharmaceutical focus from early-stage drug target identification to later-stage drug development, affected the Clontech molecular biology product line, a situation we are addressing.
We believe prospects are bright for BD Biosciences, which continues to be a critical component of our strategy as it offers a clear opportunity for a double-digit growth rate for the foreseeable future. For example, it enhanced BD FACS line of flow cytometers with automated sample preparation and handling instruments, and it maintained its pace of about two new products per day by bringing more than BD Biosciences Pharmingen products to market during the year. In addition, the BD FACS line received a major boost with the announcement of a new high-speed instrument, the BD FACSAria cell sorter. This entirely new instrument platform draws on BD’s more than 25 years of experience in flow cytometry instrumentation. We continue to commit our talents and resources to support important global health initiatives. Two examples are our relationships with UNICEF to eliminate maternal and neonatal tetanus (MNT) and with the International AIDS Vaccine Initiative (IAVI) to discover an effective AIDS vaccine. BD extended its ongoing four-year effort with UNICEF through the first use of BD Uniject non-reusable, prefilled injection devices to deliver tetanus vaccine in Mali in July. BD has pledged nine million of these devices for this use as part of its pledge to donate one-half of all devices required for global tetanus elimination under the UNICEF program (immunizations for an estimated 240 million women). BD committed $1 million to IAVI to help outfit an AIDS laboratory with state-of-the-art vaccine testing tools, together with a BD FACSCalibur Automated Cell Analysis System. We also are collaborating with IAVI to help monitor immune responses to the vaccines under study. BD is proud to support global biodefense efforts. BD Medical Systems’ bifurcated needle and our recently announced mobile smallpox immunization registry system, the BD Bio-Terror Preparedness Network, should enhance the public health community’s preparedness. BD Technologies is working with the U.S. military to develop new vaccine delivery systems to expand our ability to conduct large-scale immunizations. These biodefense initiatives are an important contribution to global security, and we are pleased to perform a role that helps protect the public interest. The revenue growth initiatives I have enumerated in this letter provide compelling evidence that BD is steadily progressing from being a medical supply company to becoming a fastergrowing provider of higher technology devices and system solutions that have a greater impact on patient care, healthcare worker safety and life sciences research productivity. Our ongoing drive to innovate is taking our business to a higher level in the healthcare arena. Turning to operations, two major process improvement initiatives– Genesis and Six Sigma–continue to progress. In January 2003, our Genesis enterprise resource planning system will go “live” at our headquarters in Franklin Lakes, New Jersey–a milestone that marks a four-year global implementation linking the entire Company. We plan to substantially complete implementation by the end of the year with launches in Mexico, Japan and a few remaining locations in Europe. Our Six Sigma quality program has completed its second year with more than 150 “Black Belt” experts and an active “Green Belt” training program. We continue in our efforts to make BD a great place to work. Our BD Diversity process is having greater impact in all parts of the Company, as we implement a plan for all of our associates to participate in diversity training and awareness programs. BD University (BDU), our in-house leadership development resource, continues to provide a broad range of formal development experiences to associates throughout the Company. Three thousand associates have now participated in BDU programs. Our best leaders also serve as faculty members for BDU. In the past year, we experienced the untimely passing of a valued member of our Board of Directors, Albert J. Costello, retired Chairman and CEO of W. R. Grace & Co. Al was not only a source of great insight and leadership, he was a warm human being with a wonderful wit and sense of humor. We all will miss Al very much. Also in the past year, we were pleased to welcome a new Director, Bertram L. Scott, to the Board. Bert is President of TIAA-CREF Life Insurance Company and Executive Vice President of TIAA-CREF. Prior to joining TIAA-CREF, he served as President and Chief Executive Officer of Horizon/Mercy, a joint Medicaid managed care program between Mercy Health Plan of Pennsylvania and Blue Cross/Blue Shield of New Jersey. Clateo Castellini, our former Chairman, President and Chief Executive Officer, has announced his intention to retire from our Board after his current term expires in February 2003. I would like to personally thank Clateo for his counsel and support over the past three years. The Board and I appreciate the significant contribution Clateo made to our Board governance practices during this time, bringing foresight and vision to this important area. We will be pleased to welcome him as a Director Emeritus and look forward to continuing to benefit from his guidance and wisdom in the future. It is clear to me that BD is making progress on its journey to greatness, which we define as having three interrelated measures: achieving great performance, making great contributions to society and being a great place to work. Be assured that we keep this vision before us every day and never lose sight of where we’re going over the long term. As I have said before, we will not be the only ones to determine when, or whether, we achieve our objective of being a great company–our many constituents will. In that regard, I invite you to read our special section– “Issues and answers: contributions that count,” beginning on page five– to discover some of the ways we are actively–even passionately–pursuing our mission of “helping all people live healthy lives.” The challenges are formidable, but our resolve is firm and we have much to offer in the ongoing campaign for healthier, happier lives for all people. I want to thank our associates for their ongoing contributions and dedication to achieving our objectives; our shareholders and customers for their confidence in us; and our Board of Directors for its counsel. We pledge to all of them that we will stay focused on our commitment to deliver steady operating improvements and continued growth while creating and delivering healthcare solutions that make a difference in peoples’ lives.  Edward J. Ludwig Chairman, President and Chief Executive Officer | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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