Becton Dickinson & Co 10-Q for FY2020 Q1

Becton Dickinson & Co (BDX)

10-Q 2020-02-06 For: 2019-12-31

Added on April 12, 2026

About this 10-Q

Becton Dickinson & Co filed this 10-Q on February 6, 2020, covering the quarter ended December 31, 2019 (FY2020 Q1).

Headline figures

Quarter ended December 31, 2019, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $4.23B; up 1.6% from $4.16B a year earlier
Net income: $278M; down 53.6% from net income of $599M a year earlier
Diluted EPS: $0.87; down 57.6% from $2.05 a year earlier

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New Jersey				22-0760120
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

1 Becton Drive,	Franklin Lakes,	New Jersey	07417-1880	(201)	847-6800
(Address of principal executive offices) (Zip Code)				(Registrant’s telephone number, including area code)



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common stock, par value $1.00	BDX	New York Stock Exchange
Depositary Shares, each representing 1/20th of a share of 6.125% Cumulative Preferred Stock Series A	BDXA	New York Stock Exchange
1.000% Notes due December 15, 2022	BDX22A	New York Stock Exchange
1.900% Notes due December 15, 2026	BDX26	New York Stock Exchange
1.401% Notes due May 24, 2023	BDX23A	New York Stock Exchange
3.020% Notes due May 24, 2025	BDX25	New York Stock Exchange
0.174% Notes due June 4, 2021	BDX/21	New York Stock Exchange
0.632% Notes due June 4, 2023	BDX/23A	New York Stock Exchange
1.208% Notes due June 4, 2026	BDX/26A	New York Stock Exchange



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			☐



		Page Number
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	33
Item 4.	Controls and Procedures	33

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	36

Signatures		37



	December 31, 2019			September 30, 2019
Assets	(Unaudited)
Current Assets:
Cash and equivalents	$	560		$	536
Restricted cash	49			54
Short-term investments	8			30
Trade receivables, net	2,074			2,345
Inventories:
Materials	599			544
Work in process	350			318
Finished products	1,811			1,717
	2,760			2,579
Prepaid expenses and other	987			1,119
Total Current Assets	6,438			6,664
Property, Plant and Equipment	11,425			11,128
Less allowances for depreciation and amortization	5,643			5,469
Property, Plant and Equipment, Net	5,782			5,659
Goodwill	23,435			23,376
Developed Technology, Net	10,848			11,054
Customer Relationships, Net	3,345			3,424
Other Intangibles, Net	532			500
Other Assets	1,573			1,088
Total Assets	$	51,952		$	51,765
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt	$	2,456		$	1,309
Payables, accrued expenses and other current liabilities	4,269			4,345
Total Current Liabilities	6,726			5,655
Long-Term Debt	16,949			18,081
Long-Term Employee Benefit Obligations	1,290			1,272
Deferred Income Taxes and Other Liabilities	5,785			5,676
Commitments and Contingencies (See Note 5)
Shareholders’ Equity
Preferred stock	2			2
Common stock	347			347
Capital in excess of par value	16,320			16,270
Retained earnings	12,938			12,913
Deferred compensation	24			23
Common stock in treasury - at cost	(6,228		)	(6,190		)
Accumulated other comprehensive loss	(2,202		)	(2,283		)
Total Shareholders’ Equity	21,202			21,081
Total Liabilities and Shareholders’ Equity	$	51,952		$	51,765



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



	Three Months Ended December 31,
	2019			2018
Revenues	$	4,225		$	4,160
Cost of products sold	2,247			2,187
Selling and administrative expense	1,121			1,073
Research and development expense	270			258
Acquisitions and other restructurings	86			91
Other operating income, net	—			(335		)
Total Operating Costs and Expenses	3,724			3,273
Operating Income	501			888
Interest expense	(136		)	(171		)
Interest income, net	1			(12		)
Other income, net	27			10
Income Before Income Taxes	394			714
Income tax provision	117			115
Net Income	278			599
Preferred stock dividends	(38		)	(38		)
Net income applicable to common shareholders	$	240		$	562


Basic Earnings per Share	$	0.88		$	2.09
Diluted Earnings per Share	$	0.87		$	2.05
Dividends per Common Share	$	0.79		$	0.77



	Common Stock Issued at Par Value		Capital in Excess of Par Value			Retained Earnings			Deferred Compensation		Treasury Stock
(Millions of dollars)	Common Stock Issued at Par Value		Capital in Excess of Par Value			Retained Earnings			Deferred Compensation		Shares (in thousands)		Amount
Balance at September 30, 2019	$	347	$	16,270		$	12,913		$	23	(76,260	)	$	(6,190	)
Net income	—		—			278			—		—		—
Common dividends ($0.79 per share)	—		—			(215		)	—		—		—
Preferred dividends	—		—			(38		)	—		—		—
Common stock issued for share-based compensation and other plans, net	—		(32		)	—			1		758		(38		)
Share-based compensation	—		82			—			—		—		—
Common stock held in trusts, net (a)	—		—			—			—		(12	)	—
Balance at December 31, 2019	$	347	$	16,320		$	12,938		$	24	(75,514	)	$	(6,228	)


(a)	Common stock held in trusts represents rabbi trusts in connection with deferred compensation under the Company’s employee salary and bonus deferral plan and directors’ deferral plan.



(Millions of dollars)	Total			Foreign Currency Translation			Benefit Plans			Cash Flow Hedges
Balance at September 30, 2019	$	(2,283	)	$	(1,256	)	$	(1,005	)	$	(23	)
Other comprehensive income before reclassifications, net of taxes	63			26			—			37
Amounts reclassified into income, net of taxes	19			—			17			2
Balance at December 31, 2019	$	(2,202	)	$	(1,230	)	$	(988	)	$	16



Organizational Unit		Principal Product Lines
Integrated Diagnostic Solutions		Integrated systems for specimen collection; safety-engineered blood collection products and systems; automated blood culturing and tuberculosis culturing systems; molecular testing systems for infectious diseases and women’s health; microorganism identification and drug susceptibility systems; liquid-based cytology systems for cervical cancer screening; rapid diagnostic assays for testing of respiratory infections; microbiology laboratory automation and plated media for clinical and industrial applications.



	Three Months Ended December 31,
(Millions of dollars)	2019						2018
	United States		International		Total		United States		International		Total
Medical
Medication Delivery Solutions (a)	$	520	$	428	$	948	$	519	$	438	$	956
Medication Management Solutions (a)	462		113		575		508		118		625
Diabetes Care	139		129		268		145		129		274
Pharmaceutical Systems	84		215		299		68		212		280
Total segment revenues	$	1,204	$	886	$	2,090	$	1,239	$	896	$	2,135

Life Sciences
Integrated Diagnostic Solutions
Preanalytical Systems	$	202	$	196	$	398	$	201	$	192	$	393
Diagnostic Systems	184		218		402		175		207		382
Total Integrated Diagnostic Solutions	386		414		800		376		399		774
Biosciences	152		171		323		108		173		281
Total segment revenues	$	538	$	585	$	1,123	$	484	$	572	$	1,056

Interventional
Surgery (b)	$	256	$	70	$	326	$	246	$	64	$	310
Peripheral Intervention (b)	225		170		395		223		160		382
Urology and Critical Care (b)	206		85		291		195		83		277
Total segment revenues	$	688	$	325	$	1,012	$	664	$	306	$	970

Total Company revenues	$	2,430	$	1,795	$	4,225	$	2,387	$	1,773	$	4,160


(a)	Prior-period amounts reflect the reclassification of U.S. revenues of $2 million associated with the movement, effective on October 1, 2019, of certain products from the Medication Delivery Solutions unit to the Medication Management Solutions unit.


(a)	The amount for the three months ended December 31, 2019 included the estimated cost of a product recall of $59 million which was recorded to Cost of products sold and is further discussed in Note 15.



	Three Months Ended December 31,
	2019			2018
Operating Activities
Net income	$	278		$	599
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization	530			563
Share-based compensation	82			93
Deferred income taxes	(71		)	(28		)
Change in operating assets and liabilities	102			(473		)
Pension obligation	24			(225		)
Gain on sale of business	—			(335		)
Other, net	(231		)	52
Net Cash Provided by Operating Activities	713			245
Investing Activities
Capital expenditures	(173		)	(167		)
Proceeds from divestitures, net	—			476
Other, net	(114		)	(9		)
Net Cash (Used for) Provided by Investing Activities	(287		)	299
Financing Activities
Change in credit facility borrowings	210			50
Payments of debt and term loans	(303		)	(453		)
Dividends paid	(252		)	(245		)
Other, net	(68		)	(86		)
Net Cash Used for Financing Activities	(413		)	(734		)
Effect of exchange rate changes on cash and equivalents and restricted cash	6			(5		)
Net increase (decrease) in cash and equivalents and restricted cash	18			(195		)
Opening Cash and Equivalents and Restricted Cash	590			1,236
Closing Cash and Equivalents and Restricted Cash	$	609		$	1,042



	Three Months Ended December 31,
	2019	2018
Average common shares outstanding	271,102	269,035
Dilutive share equivalents from share-based plans	3,850	5,221
Average common and common equivalent shares outstanding – assuming dilution	274,952	274,256

Share equivalents excluded from the diluted shares outstanding calculation because the result would have been antidilutive:
Mandatory convertible preferred stock	11,685	11,685


(a)	Largely represents the cost associated with certain pre-acquisition equity awards of Bard which, to encourage post-acquisition employee retention, were converted to BD equity awards with substantially the same terms and conditions as were applicable under such Bard awards immediately prior to the acquisition date.



	December 31, 2019				September 30, 2019
(Millions of dollars)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Amortized intangible assets
Developed technology	$	14,010	$	3,161	$	13,960	$	2,906
Customer relationships	4,610		1,265		4,608		1,183
Product rights	115		65		110		60
Trademarks	407		106		407		102
Patents and other	488		311		445		305
Amortized intangible assets	$	19,630	$	4,908	$	19,530	$	4,555
Unamortized intangible assets
Acquired in-process research and development	$	1			$	1
Trademarks	2				2
Unamortized intangible assets	$	3			$	3


(b)	Primarily comprised of foreign exchange, certain general and administrative expenses and share-based compensation expense. The amount for the three months ended December 31, 2018 included the pre-tax gain recognized on the Company's sale of its Advanced Bioprocessing business of approximately $335 million, which is further discussed in Note 9.



(Millions of dollars)	Employee Termination						Other						Total
	Bard			Other Initiatives			Bard (a)			Other Initiatives			Bard			Other Initiatives
Balance at September 30, 2019	$	22		$	31		$	1		$	3		$	23		$	34
Charged to expense	4			2			13			4			17			6
Cash payments	(7		)	(12		)	(6		)	(4		)	(13		)	(16		)
Non-cash settlements	—			—			(7		)	—			(7		)	—
Balance at December 31, 2019	$	19		$	21		1			$	3		$	20		$	24


(a)	Represents goodwill recognized relative to certain acquisitions which were not material individually or in the aggregate.



(Millions of dollars)	December 31, 2019
Right-use-assets recorded in Other Assets	$	426
Current lease liabilities recorded in Payables, accrued expenses and other current liabilities	$	105
Non-current lease liabilities recorded in Deferred Income Taxes and Other Liabilities	$	340



(Millions of dollars)
Remaining for 2020	$	86
2021	95
2022	74
2023	49
2024	33
Thereafter	158
Total payments due	494
Less: imputed interest	49
Total	$	445



(Millions of dollars)
2020	$	122
2021	103
2022	83
2023	57
2024	56
Thereafter	123
Total	$	546


•	Medical segment revenues in the first quarter reflected strong growth in the Pharmaceutical Systems unit.


•	Life Sciences segment revenues in the first quarter reflected growth in both of the segment's units, particularly in the Biosciences unit.


•	Interventional segment revenues in the first quarter reflected sales growth in all units.


(a)	The presentation of prior-period amounts reflects the reclassification of $2 million associated with the movement, effective on October 1, 2019, of certain products from the Medication Delivery Solutions unit to the Medication Management Solutions unit.


•	Gross profit margin was lower in the first quarter of 2020 as compared with the first quarter of 2019 primarily due to the recognition of the estimated cost of a product recall, as noted below, and pricing pressures. These unfavorable impacts were partially offset by lower manufacturing costs resulting from continuous improvement projects which enhanced the efficiency of our operations.


•	Selling and administrative expense as a percentage of revenues was relatively flat in the first quarter of 2020 compared with the first quarter of 2019.


•	Research and development expense as a percentage of revenues was relatively flat in the first quarter of 2020 compared with the first quarter of 2019.


(a)	Effective October 1, 2019, the Preanalytical Systems and Diagnostic Systems units were joined to create the new Integrated Diagnostic Solutions unit. Additional disclosures regarding this change are provided in Note 7 in the Notes to Condensed Consolidated Financial Statements.


•	Gross margin in the first quarter of 2020 was higher as compared with the first quarter of 2019 which primarily reflected the impact of licensing revenues recognized by the Biosciences unit in the quarter, as noted above.


•	Gross profit margin was higher in the first quarter of 2020 as compared with the first quarter of 2019 primarily due to favorable product mix, which was partially offset by pricing pressures.


(a)	Represents integration and restructuring costs which are primarily recorded in Acquisitions and other restructurings and are further discussed below.


(b)	Includes amortization and other adjustments related to the purchase accounting for acquisitions impacting identified intangible assets and valuation of fixed assets and debt. BD’s amortization expense is primarily recorded in Cost of products sold.


(c)	The current-year period amount represents the estimated cost of a product recall which was recorded by the Medical segment in Cost of products sold. The amount in the prior-year period represents the pre-tax gain recognized in Other operating income, net on BD's sale of its Advanced Bioprocessing business.


(d)	Represents initial costs required to develop processes and systems to comply with emerging regulations such as the European Union Medical Device Regulation ("EUMDR") and General Data Protection Regulation ("GDPR"). These costs were recorded in Cost of products sold and Research and development expense.