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To our shareholders:
is focused on creating a brighter future-just as it
has been for 106 years. We continue to be an engine
of change for better healthcare, from today's safety-engineered
products and sophisticated instruments to tomorrow's
advanced drug delivery systems. BD's increasing pace of innovation
is moving us toward higher growth.
This Annual Report brings to
life a central focus of today's BD: the use of higher-value
technology to build on decades of continuous improvement and
industry leadership, enabling our drive for sustainable higher
revenue growth. We choose the word "continuum" to describe
our steady march of progress and the way our past has shaped
the forward-looking company of today.
The strong product launches, revenue growth and financial
performance that we demonstrated in fiscal 2003 build upon
our legacy of continuous improvement-reinforced by a disciplined
approach to every aspect of our business and successful
implementation of our three core strategies. These strategies are:
- To aggressively increase revenue growth by focusing on
products that deliver greater benefits to patients, healthcare
workers and researchers.
- To improve our operating effectiveness and balance
sheet productivity.
- To strengthen organizational and associate capabilities
so we can prosper in the ever-changing healthcare
environment.
Our strategies and actions continue to be highly effective,
as our 2003 performance demonstrates. Reported revenues
increased 12 percent to $4.528 billion. Excluding the effects
of foreign currency translation, revenues rose 8 percent. Net
income increased 14 percent to $547 million and our gross
profit margin increased again this year. We reduced our capital
expenditures by over $110 million in 2002 compared with
2001, and we maintained that level at $261 million in 2003.
Cash flow from operations reached $900 million-more than
twice that of 1999-and inventory turns rose in 2002 and again
in 2003 to 3.15, reversing a decline of the previous four years.
We further reduced our debt-to-capitalization ratio to 30.4
percent, and we repurchased approximately 10 million shares
under our share repurchase programs.
To gain a deeper insight into the past year-and how we
continue to gain momentum-it's helpful to look at the factors
behind the results, once again from the perspective of our
three core strategies.
Fulfilling the promise of higher-value products
We made excellent progress toward our goal of marketing
differentiated products that deliver higher benefits to patients,
healthcare workers and researchers, while earning higher, sustainable
profit margins. In that regard, 2003 was a notable year.
- U.S. revenues from safety-engineered devices increased
19 percent to $680 million, keeping this category our largest
single driver of revenue growth for both BD Medical
(formerly BD Medical Systems) and BD Diagnostics
(formerly BD Clinical Laboratory Solutions).
As the U.S. market continues to transition to advanced
protection devices, we expect this portion of our business
to continue to grow in the range of 10 to 15 percent a
year over the next several years based upon continued
conversion of several product categories, innovation and
expansion of our product line. Additional future growth
is anticipated in countries where healthcare worker safety
is moving to the forefront of the public policy agenda,
including Canada, Australia, Japan, the United Kingdom,
Germany, Spain and France.
We continue to introduce several new generations
of safety-engineered products. Recent introductions
include the BD Integra syringe (see page 12),
the BD Vacutainer Push Button
Blood Collection Set and the
BD Autoguard Pro shielded IV
catheter. As BD expanded the
industry's most extensive array
of safety-engineered devices, we
announced plans to discontinue
U.S. sales of many conventional
sharps products across a range
of categories, without disrupting
patient care or clinical practice.
- In our Diabetes Care unit
(formerly Consumer Healthcare),
we had one of our most active
years ever. We introduced new
blood glucose monitoring
(BGM) products, the BD Logic
blood glucose monitor and
the BD Latitude Diabetes
Management System, to the
market. These products have a
combination of cutting-edge features that deliver
convenience and value to individuals managing
diabetes. We have also formed strategic relationships
with Medtronic MiniMed, the leading insulin pump
maker, and Eli Lilly and Company, the world's leading
insulin manufacturer. We collaborated with Medtronic
MiniMed to introduce the first integrated BGM/insulin
pump system-the Paradigm® 512 insulin pump and
Paradigm LinkTM blood glucose monitor (see page 7).
We also introduced BD Diabetes software to help patients
and professionals better manage diabetes. We are wellpositioned
for a solid future in the growing $4 billion
BGM market, although we encountered some timing
delays as we launched our BGM products.
| Edward J. Ludwig
Chairman, President and
Chief Executive Officer |
Our Pharmaceutical Systems unit achieved very strong
results, with revenues increasing to $436 million.
Pharmaceutical companies are increasingly recognizing
the value of devices that are prefilled with medication.
Our prefillable products enable drug companies to better
differentiate themselves in the marketplace, and they
reduce the potential for medication error and contribute
to lowering the cost of therapy and increasing patient
compliance. During the year, we ramped-up volume
following the 2002 opening of a new manufacturing
plant in Nebraska and a plant expansion in Japan, which
enabled us to keep pace with the growing demand for
prefillable devices.
Our repertoire of products includes devices that we
prefill ourselves. The BD PosiFlush syringe, filled by
BD with heparin or saline solution to flush intravenous
catheter lines, has achieved good market penetration in
hospitals, where this is a major syringe application.
- BD Biosciences introduced the BD FACSAria cell sorter,which has set new standards for performance and ease
of use-and perhaps a new standard for rapid acceptance
by the market as we generated over $48 million in revenue.
The BD FACSArray bioanalyzer system is another
new platform that brings multiplexed testing to a broader
range of researchers.
- BD Diagnostics reported a very strong year. Revenues
exceeded our plan for the BD ProbeTec ET system, our
DNA amplification assay system for sexually transmitted
diseases. In the new product arena, BD Diagnostics
brought the BD Viper sample processor (see page 16) to
market for automated sample handling in high-volume
environments. Meanwhile, the BD Phoenix system for
rapid identification of bacterial pathogens has been
well-received in Europe, based on independent surveys
of customer satisfaction. We expect to introduce it to
the U.S. and Japanese markets in 2004.
Major process improvements gain momentum
We continued to make good progress in improving operational
effectiveness during 2003. Greater productivity funds the
product innovations I just discussed, while supply chain quality
and efficiency lead directly to greater customer satisfaction.
- The implementation of Genesis, our enterprise resource
planning system, is now largely complete. With the
deployment of this information backbone, BD, for the
first time, has access to data on a worldwide basis and
real global operational visibility.
- Genesis provides the platform for the ever-tighter integration
of what we call the “power alley”-consisting of our
procurement, manufacturing, distribution and customerfacing
organizations-enabling them to manufacture and
deliver the right products at the right times to meet customer
needs.
- We created a new organization to leverage the capabilities
that Genesis gives us. The organization is called Business
Processes, and it is charged with responsibility for driving
continuous improvement in supply chain management,
procurement and customer service.
- We expanded our Six Sigma quality program to transaction
processing, with a goal of transferring our
manufacturing and operations excellence to our administrative
processes.
- At manufacturing sites around the world, we continue
to develop strong leaders who use tools such as Genesis,
Six Sigma, lean manufacturing and process validation
to drive higher quality, lower costs and superior customer
satisfaction.
- We began to realize the fruits of the manufacturing
restructuring program that we undertook in fiscal 2002
in our BD Medical segment, which contributed to an
improvement in our gross profit margin.
- In Europe, we implemented a new program called
Customer Value Added to reduce supply chain costs for
both BD and our largest customers, while improving
our service levels.
These improvements are supporting better financial
performance, and they are also impacting customer service
and satisfaction. For the first time in BD's history, our U.S.
distribution center inventory accuracy is at 99 percent or
higher, while shipping accuracy improved from 91 percent
to 98 percent. We have reduced our backorders in North
America by 70 percent in just a year's time. Customers are
recognizing the difference, too. We were recently presented
with distinction awards by two of the country's largest
medical products distributors.
Strengthening organizational and associate capabilities
We continue to invest to build a stronger organization and
enhance the individual skills of our associates. The Company's
principal program for broadening the skills and knowledge
of BD associates is BD University (BDU), our internal leadership
development resource. BDU's great strength lies in the fact
that about 90 percent of all courses are taught by Company
leaders. This strongly reinforces BD as a teaching, coaching
and learning organization.
We continue to make progress in another priority area for
the Company, our commitment to provide an inclusive environment
that welcomes people from different backgrounds
and that values their diverse ideas and perspectives. Active
strategies, developed in large part by a broad group of BD
associates, were implemented during the year to help us foster this culture of inclusion.
Reflections as we close the year
There are four additional comments of note to pass along
regarding 2003. First, we are pleased that BD has been named
one of the “100 Best Corporate Citizens” in the U.S. by
Business Ethics magazine, reflecting our longstanding and
very active support of organizations such as UNICEF, the
International AIDS Vaccine Initiative (IAVI) and the American
Red Cross. Second, with a goal of raising visibility for our
ongoing contributions to society and the health of people
everywhere, we launched our first-ever corporate image campaign
under the banner “Trusted Partners.” Advertisements
have appeared in publications such as Time, The Economist
and Scientific American, and we expect the scope and frequency
of our placements to increase over time. Third, we
welcomed a new director to our Board, Edward F. DeGraan.
Mr. DeGraan is Vice Chairman of the Board of The Gillette
Company and brings in-depth experience in manufacturing,
operations and general management, all with a global perspective.
Finally, it is important to observe that many people have
contributed to our progress this year-most of all, BD associates
around the world-and to them we express our sincere thanks.
A continuum of growth
Returning to the theme of our Annual Report, in the following
pages “A continuum of growth” will take you back
through time and then bring you forward to today-connecting
BD's past, present and future. Many of the featured products
are new in the past year alone-blood glucose monitors, two
new instrument platforms, a new presence in specimen management
and extensions to our leadership in safety-engineered
products. You will discover what we at BD have always known
about our Company, and that is our pursuit of continuous
improvement. This applied to the BD of yesterday-brought to
life in our opening interview with Henry Becton-and it applies
to the BD of today, as represented by the array of new products.
Surely, it will apply to the BD of the future-as you will
see in a closing glimpse at the work being done today at
BD Technologies.
| Over the course of our
history, BD has made
important contributions
to better health the world
over.over. Yet, it is the way we
have gone about our business
that brings to life a
key BD character trait: We
are never satisfied with
our accomplishments. The
belief that we can always
do a better job-no matter
what the task-has and
will continue to drive us
forward. As the timeline
that follows shows, each
step forward inspires
another…and another…
and over time, our
progress can be traced as A continuum of growth. |
Where the concept of continuum ultimately receives its
truest expression is in our purpose and vision. BD’s purpose
is “Helping all people live healthy lives.” Our vision for the
future is rooted in becoming a great company, one recognized
for great performance, great contributions to society and
being a great place to work. We have built a strong foundation
on which to fulfill our purpose and capture the promise of
our vision.
In summary, we are not only progressing along our continuum,
we are, in fact, accelerating the pace of our progress. BD is
a company that is proud of its past, energized by the present
and confident about its future.
Edward J. Ludwig
Chairman, President
and Chief Executive Officer
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