01—Abstract
Summary
Summary of the 10-K/A filed March 19, 2003. Cited figures are marked; the original filing is the authoritative source.
Bristol-Myers Squibb Company (BMY) filed an amendment to its 2001 Annual Report on Form 10-K, primarily to restate its financial statements for the years ended December 31, 2001, 2000, and 1999.
The restatement was necessitated by a substantial buildup of wholesaler inventories in its U.S. pharmaceuticals business, driven by sales incentives offered to meet quarterly sales projections. This led to a determination that certain sales to two major wholesalers should have been accounted for under the consignment model, correcting errors in revenue recognition timing. The company also corrected other historical accounting policies and identified known errors previously deemed immaterial.
These restatements reduced net earnings for 2001, 2000, and 1999 by approximately $411 milliona, $240 million, and $366 million, respectively. The company has implemented significant internal control improvements, including hiring a new CFO, restructuring its accounting department, and enhancing monitoring processes to prevent future recurrences.
02—Key points
Key Highlights
- The company restated its financial statements for fiscal years 2001, 2000, and 1999 due to errors in revenue recognition timing related to wholesaler inventory build-ups and sales incentives.
- Certain sales to two major U.S. pharmaceuticals wholesalers were reclassified to the consignment model, impacting revenue recognition and net sales figures.
- The restatement reduced reported net earnings by $411 million (2001), $240 million (2000), and $366 million (1999).
- The company identified two material weaknesses in its internal controls related to accounting and financial reporting.
- Significant management changes and control enhancements were implemented, including hiring a new CFO, restaffing the controller position, and creating a chief compliance officer role.
- The company completed the divestiture of its Clairol business and the spin-off of Zimmer Holdings, Inc. in 2001, and acquired the DuPont Pharmaceuticals business for $7.8 billion.
- The company is facing significant litigation, including antitrust cases related to TAXOL® and BUSPAR, with proposed settlements totaling $135 million and $535 million, respectively.
03—Questions
Frequently Asked Questions
Why did Bristol-Myers Squibb need to restate its financial statements?
Bristol-Myers Squibb restated its financial statements primarily because of errors in the timing of revenue recognition for certain sales to U.S. pharmaceuticals wholesalers. These sales involved incentives that led to a significant build-up of inventory at wholesalers, requiring the company to adopt a consignment model for accounting these transactions. Additionally, other historical accounting policies and known errors were corrected.
What was the impact of the restatement on the company's financial performance?
The restatement had a significant impact, reducing reported net earnings by approximately $411 million in 2001, $240 million in 2000, and $366 million in 1999. This also affected earnings per share for those periods. The company also identified material weaknesses in its internal controls.
What major corporate actions occurred in 2001 besides the restatement?
In 2001, Bristol-Myers Squibb completed significant strategic transactions. It divested its Clairol business and spun off Zimmer Holdings, Inc. Concurrently, it acquired the DuPont Pharmaceuticals business for $7.8 billion and made a substantial investment in ImClone Systems Incorporated.
What is the status of the litigation mentioned in the filing?
The company is involved in several significant legal proceedings, including antitrust litigation concerning TAXOL® and BUSPAR, for which settlement agreements in principle have been reached. There are also ongoing investigations by the SEC and the U.S. Attorney's Office regarding wholesaler inventory issues and accounting practices. The outcomes of these litigations and investigations are uncertain and could be material.
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