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The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, in the opinion of the management of Becton, Dickinson and Company (the "Company" or "BD"), include all adjustments which are of a normal recurring nature, necessary for a fair presentation of the financial position and the results of operations and cash flows for the periods presented. However, the financial statements do not include all information and accompanying notes required for a presentation in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s 2019 Annual Report on Form 10-K. Within the financial statements and tables presented, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages and earnings per share amounts presented are calculated from the underlying amounts. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

New Accounting Principle Adopted

In February 2016, the Financial Accounting Standards Board ("FASB") issued a new lease accounting standard which requires lessees to recognize lease assets and lease liabilities on the balance sheet, as well as requires expanded disclosures regarding leasing arrangements. The Company adopted this standard on October 1, 2019 and elected certain practical expedients permitted under the transition guidance, including a transition method which allows application of the new standard at its adoption date, rather than at the earliest comparative period presented in the financial statements. The Company also elected not to perform any reassessments relative to its expired and existing leases upon its adoption of the new requirements. The Company's adoption of this standard did not materially impact its condensed consolidated financial statements. Additional disclosures regarding the Company’s lease arrangements are provided in Note 14.

New Accounting Principles Not Yet Adopted

In June 2016, the FASB issued a new accounting standard which requires earlier recognition of credit losses on loans and other financial instruments held by entities, including trade receivables. The new standard requires entities to measure all expected credit losses for financial assets held at each reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The Company is currently evaluating the impact that this new accounting standard will have on its consolidated financial statements upon its adoption on October 1, 2020.

In August 2018, the FASB issued a new accounting standard to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The standard is effective for the Company on October 1, 2020, but early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the impact that this new accounting standard will have on its consolidated financial statements upon its adoption.

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Changes in certain components of shareholders' equity for the first quarters of fiscal years 2020 and 2019 were as follows:

	Common Stock  Issued at Par Value				Capital in Excess of Par Value				Retained Earnings				Deferred Compensation				Treasury Stock
(Millions of dollars)																	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	)

	Common Stock  Issued at Par Value				Capital in Excess of Par Value				Retained Earnings				Deferred Compensation				Treasury Stock
(Millions of dollars)																	Shares (in thousands)			Amount
Balance at September 30, 2018	$	347			$	16,179			$	12,596			$	22			(78,463	)		$	(6,243	)
Net income	—				—				599				—				—			—
Common dividends ($0.77 per share)	—				—				(207		)		—				—			—
Preferred dividends	—				—				(38		)		—				—			—
Common stock issued for share-based compensation and other plans, net	—				(97		)		—				2				851			9
Share-based compensation	—				92				—				—				—			—
Common stock held in trusts, net (a)	—				—				—				—				(12	)		—
Effect of change in accounting principles	—				—				68				—				—			—
Balance at December 31, 2018	$	347			$	16,174			$	13,018			$	24			(77,624	)		$	(6,235	)

(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.

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The components and changes of Accumulated other comprehensive income (loss) for the first quarters of fiscal years 2020 and 2019 were as follows:

(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

(Millions of dollars)	Total				Foreign Currency Translation				Benefit Plans				Cash Flow Hedges
Balance at September 30, 2018	$	(1,909	)		$	(1,162	)		$	(729	)		$	(17	)
Other comprehensive (loss) income before reclassifications, net of taxes	(32		)		(35		)		3				(1		)
Amounts reclassified into income, net of taxes	14				—				13				1
Balance at December 31, 2018	$	(1,927	)		$	(1,197	)		$	(714	)		$	(16	)

The weighted average common shares used in the computations of basic and diluted earnings per share (shares in thousands) were as follows:

	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

Given the uncertain nature of litigation generally, the Company is not able, in all cases, to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which the Company is a party. In accordance with U.S. GAAP, the Company establishes accruals to the extent probable future losses are estimable (in the case of environmental matters, without considering possible third-party recoveries). With respect to putative class action lawsuits in the United States and certain of the Canadian lawsuits described below relating to product liability matters, the Company is unable to estimate a range of reasonably possible losses for the following reasons: (i) all or certain of the proceedings are in early stages; (ii) the Company has not received and reviewed complete information regarding all or certain of the plaintiffs and their medical conditions; and/or (iii) there are significant factual issues to be resolved. In addition, there is uncertainty as to the likelihood of a class being certified or the ultimate size of the class. With respect to the civil investigative demand served by the Department of Justice, as discussed below, the Company is unable to estimate a range of reasonably possible losses for the following reasons: (i) all or certain of the proceedings are in early stages; and/or (ii) there are significant factual and legal issues to be resolved.

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In view of the uncertainties discussed below, the Company could incur charges in excess of any currently established accruals and, to the extent available, liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on the Company’s consolidated results of operations and consolidated cash flows.

Product Liability Matters

The Company believes that certain settlements and judgments, as well as legal defense costs, relating to product liability matters are or may be covered in whole or in part under its product liability insurance policies with a limited number of insurance carriers, or, in some circumstances, indemnification obligations to the Company from other parties, which if disputed, the Company intends to vigorously contest. Amounts recovered under the Company’s product liability insurance policies or indemnification arrangements may be less than the stated coverage limits or less than otherwise expected and may not be adequate to cover damages and/or costs relating to claims. In addition, there is no guarantee that insurers or other parties will pay claims or that coverage or indemnity will be otherwise available.

Hernia Product Claims

As of December 31, 2019, the Company is defending approximately 14,330 product liability claims involving the Company’s line of hernia repair devices (collectively, the “Hernia Product Claims”). The majority of those claims are currently pending in a coordinated proceeding in Rhode Island State Court, but claims are also pending in other state and/or federal court jurisdictions. In addition, those claims include multiple putative class actions in Canada. Generally, the Hernia Product Claims seek damages for personal injury allegedly resulting from use of the products. From time to time, the Company engages in resolution discussions with plaintiffs’ law firms regarding certain of the Hernia Product Claims, but the Company also intends to vigorously defend Hernia Product Claims that do not settle, including through litigation. Trials are scheduled throughout 2020 in various state and/or federal courts. The Company expects additional trials of Hernia Product Claims to take place over the next 12 months. In August 2018, a new hernia multi-district litigation (“MDL”) was ordered to be established in the Southern District of Ohio. The Company cannot give any assurances that the resolution of the Hernia Product Claims that have not settled, including asserted and unasserted claims and the putative class action lawsuits, will not have a material adverse effect on the Company’s business, results of operations, financial condition and/or liquidity.

Women’s Health Product Claims

As of December 31, 2019, the Company is defending approximately 750 product liability claims involving the Company’s line of pelvic mesh devices. The majority of those claims are currently pending in various federal court jurisdictions, and a coordinated proceeding in New Jersey State Court, but claims are also pending in other state court jurisdictions. In addition, those claims include putative class actions filed in the United States. Not included in the figures above are approximately 1,010 filed and unfiled claims that have been asserted or threatened against the Company but lack sufficient information to determine whether a pelvic mesh device of the Company is actually at issue.

The claims identified above also include products manufactured by both the Company and two subsidiaries of Medtronic plc (as successor in interest to Covidien plc) (“Medtronic”), each a supplier of the Company. Medtronic has an obligation to defend and indemnify the Company with respect to any product defect liability relating to products its subsidiaries had manufactured. In July 2015, the Company reached an agreement with Medtronic in which Medtronic agreed to take responsibility for pursuing settlement of certain of the Women’s Health Product Claims that relate to products distributed by the Company under supply agreements with Medtronic. In June 2017, the Company amended the agreement with Medtronic to transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on terms similar to the July 2015 agreement, including with respect to the obligation to make payments to Medtronic towards these potential settlements. As of December 31, 2019, the Company has paid Medtronic $141 million towards these potential settlements. The Company also may, in its sole discretion, transfer responsibility for settlement of additional Women’s Health Product Claims to Medtronic on similar terms. The agreements do not resolve the dispute between the Company and Medtronic with respect to Women’s Health Product Claims that do not settle, if any. The foregoing lawsuits, unfiled claims, putative class actions, and other claims, together with claims that have settled or are the subject of agreements or agreements in principle to settle, are referred to collectively as the “Women’s Health Product Claims.” The Women’s Health Product Claims generally seek damages for personal injury allegedly resulting from use of the products.

As of December 31, 2019, the Company has reached agreements or agreements in principle with various plaintiffs’ law firms to settle their respective inventories of cases totaling approximately 15,165 of the Women’s Health Product Claims. The Company believes that these Women’s Health Product Claims are not the subject of Medtronic’s indemnification obligation. These settlement agreements and agreements in principle include unfiled and previously unknown claims held by various plaintiffs’ law firms, which are not included in the approximate number of lawsuits set forth in the first paragraph of this section. Each agreement is subject to certain conditions, including requirements for participation in the proposed settlements by a certain

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minimum number of plaintiffs. The Company continues to engage in discussions with other plaintiffs’ law firms regarding potential resolution of unsettled Women’s Health Product Claims, which may include additional inventory settlements.

Starting in 2014 in the MDL, the court entered certain pre-trial orders requiring trial work up and remand of a significant number of Women’s Health Product Claims, including an order entered in the MDL on January 30, 2018, that requires the work up and remand of all remaining unsettled cases (the “WHP Pre-Trial Orders”). The WHP Pre-Trial Orders may result in material additional costs or trial verdicts in future periods in defending Women’s Health Product Claims. Trials are anticipated throughout 2020 in state and federal courts. A trial in the New Jersey coordinated proceeding began in March 2018, and in April 2018 a jury entered a verdict against the Company in the total amount of $68 million ($33 million compensatory; $35 million punitive). The Company is in the process of appealing that verdict. The Company expects additional trials of Women’s Health Product Claims to take place over the next 12 months, which may potentially include consolidated trials.

During the course of engaging in settlement discussions with plaintiffs’ law firms, the Company has learned, and may in future periods learn, additional information regarding these and other unfiled claims, or other lawsuits, which could materially impact the Company’s estimate of the number of claims or lawsuits against the Company.

Filter Product Claims

As of December 31, 2019, the Company is defending approximately 2,650 product liability claims involving the Company’s line of inferior vena cava filters (collectively, the “Filter Product Claims”). The majority of those claims are currently pending in an MDL in the United States District Court for the District of Arizona, but those MDL claims either have been, or are in the process of being, remanded to various federal jurisdictions. Filter Product Claims are also pending in various state court jurisdictions, including a coordinated proceeding in Arizona State Court. In addition, those claims include putative class actions filed in the United States and Canada. The Filter Product Claims generally seek damages for personal injury allegedly resulting from use of the products. The Company has limited information regarding the nature and quantity of certain of the Filter Product Claims. The Company continues to receive claims and lawsuits and may in future periods learn additional information regarding other unfiled or unknown claims, or other lawsuits, which could materially impact the Company’s estimate of the number of claims or lawsuits against the Company. On May 31, 2019, the MDL Court ceased accepting direct filings or transfers into the Filter Product Claims MDL and, as noted above, remands for non-settled cases have begun and are expected to continue over the next three months. Federal and state court trials are scheduled throughout 2020. As of December 31, 2019, the Company entered into settlement agreements and/or settlement agreements in principle for approximately 6,400 cases. On March 30, 2018, a jury in the first MDL trial found the Company liable for negligent failure to warn and entered a verdict in favor of plaintiffs. The jury found the Company was not liable for (a) strict liability design defect; (b) strict liability failure to warn; and (c) negligent design. The Company has appealed that verdict. On June 1, 2018, a jury in the second MDL trial unanimously found in favor of the Company on all claims. On August 17, 2018, the Court entered summary judgment in favor of the Company on all claims in the third MDL trial. On October 5, 2018, a jury in the fourth MDL trial unanimously found in favor of the Company on all claims. The Company expects additional trials of Filter Product Claims may take place over the next 12 months.

In most product liability litigations (like those described above), plaintiffs allege a wide variety of claims, ranging from allegations of serious injury caused by the products to efforts to obtain compensation notwithstanding the absence of any injury. In many of these cases, the Company has not yet received and reviewed complete information regarding the plaintiffs and their medical conditions and, consequently, is unable to fully evaluate the claims. The Company expects that it will receive and review additional information regarding any remaining unsettled product liability matters.

In connection with the settlement of a prior litigation with certain of the Company's insurance carriers, an agreement with the Company's insurance carriers was reached to reimburse the Company for certain future costs incurred in connection with Filter Product Claims up to an agreed amount. For certain product liability claims or lawsuits, the Company does not maintain or has limited remaining insurance coverage.

Other Legal Matters

Since early 2013, the Company has received subpoenas or Civil Investigative Demands from a number of State Attorneys General seeking information related to the sales and marketing of certain of the Company’s products that are the subject of the Hernia Product Claims and the Women’s Health Product Claims. The Company is cooperating with these requests. Although the Company has had, and continues to have, discussions with the State Attorneys General with respect to overall potential resolution of this matter, there can be no assurance that a resolution will be reached or what the terms of any such resolution may be.

In July 2017, a civil investigative demand was served by the Department of Justice seeking documents and information relating to an investigation into possible violations of the False Claims Act in connection with the sales and marketing of FloChec^® and

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QuantaFlo^TM devices. The Company is cooperating with these requests. Since it is not feasible to predict the outcome of these matters, the Company cannot give any assurances that the resolution of these matters will not have a material adverse effect on the Company’s business, results of operations, financial condition and/or liquidity.

The Company is a potentially responsible party to a number of federal administrative proceedings in the United States brought under the Comprehensive Environment Response, Compensation and Liability Act, also known as “Superfund,” and similar state laws. The affected sites are in varying stages of development. In some instances, the remedy has been completed, while in others, environmental studies are underway or commencing. For several sites, there are other potentially responsible parties that may be jointly or severally liable to pay all or part of cleanup costs. While it is not feasible to predict the outcome of these proceedings, based upon the Company’s experience, current information and applicable law, the Company does not expect these proceedings to have a material adverse effect on its financial condition and/or liquidity. However, one or more of the proceedings could be material to the Company’s business and/or results of operations.

The Company is also involved both as a plaintiff and a defendant in other legal proceedings and claims that arise in the ordinary course of business. The Company believes that it has meritorious defenses to these suits pending against the Company and is engaged in a vigorous defense of each of these matters.

Litigation Reserves

The Company regularly monitors and evaluates the status of product liability and other legal matters, and may, from time-to-time, engage in settlement and mediation discussions taking into consideration developments in the matters and the risks and uncertainties surrounding litigation. These discussions could result in settlements of one or more of these claims at any time.

In the second and fourth quarters of fiscal year 2019, the Company recorded pre-tax charges to Other operating expense, net, of approximately $331 million and $582 million, respectively, related to certain of the product liability matters discussed above under the heading “Product Liability Matters,” including the related legal defense costs. The Company recorded these charges based on additional information obtained during the second and fourth quarters of fiscal year 2019, including but not limited to: the nature and quantity of unfiled and filed claims and the continued rate of claims being filed in certain product liability matters; the status of certain settlement discussions with plaintiffs’ counsel; the allegations and documentation supporting or refuting such allegations; publicly available information regarding similar medical device mass tort settlements; historical information regarding other product liability settlements involving the Company; and the stage of litigation.

The Company’s policies for recognizing sales have not changed from those described in the Company’s 2019 Annual Report on Form 10-K. The Company sells a broad range of medical supplies, devices, laboratory equipment and diagnostic products which are distributed through independent distribution channels and directly by BD through sales representatives. End-users of the Company's products include healthcare institutions, physicians, life science researchers, clinical laboratories, the pharmaceutical industry and the general public.

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Measurement of Revenues

The Company’s estimate of probable credit losses relating to trade receivables is determined based on historical experience and other specific account data. Amounts are written off against the allowances for doubtful accounts when the Company determines that a customer account is uncollectible. Such amounts are not material to the Company's consolidated financial results.

The Company's gross revenues are subject to a variety of deductions which are recorded in the same period that the underlying revenues are recognized. Such variable consideration includes rebates, sales discounts and sales returns. The impact of variable consideration, including sales discounts and sales returns, is not material to the Company's revenues.

Effects of Revenue Arrangements on Consolidated Balance Sheets

Capitalized contract costs associated with the costs to fulfill contracts for certain products in the Medication Management Solutions organizational unit are immaterial to the Company's condensed consolidated balance sheets. Commissions relating to revenues recognized over a period longer than one year are recorded as assets which are amortized over the period over which the revenues underlying the commissions are recognized. Capitalized contract costs related to such commissions are immaterial to the Company's condensed consolidated balance sheets.

Contract liabilities for unearned revenue that is allocable to performance obligations, such as extended warranty and software maintenance contracts, which are performed over time are immaterial to the Company's consolidated financial results. The Company's liability for product warranties provided under its agreements with customers is not material to its condensed consolidated balance sheets.

Remaining Performance Obligations

The Company's obligations relative to service contracts and pending installations of equipment, primarily in the Company's Medication Management Solutions unit, represent unsatisfied performance obligations of the Company. The revenues under existing contracts with original expected durations of more than one year, which are attributable to products and/or services that have not yet been installed or provided are estimated to be approximately $1.8 billion at December 31, 2019. The Company expects to recognize the majority of this revenue over the next three years.

Within the Company's Medication Management Solutions, Medication Delivery Solutions, Integrated Diagnostic Solutions, and Biosciences units, some contracts also contain minimum purchase commitments of reagents or other consumables and the future sales of these consumables represent additional unsatisfied performance obligations of the Company. The revenue attributable to the unsatisfied minimum purchase commitment-related performance obligations, for contracts with original expected durations of more than one year, is estimated to be approximately $2.7 billion at December 31, 2019.  This revenue will be recognized over the customer relationship period.

Disaggregation of Revenues

A disaggregation of the Company's revenues by segment, organizational unit and geographic region is provided in Note 7.

The Company's organizational structure is based upon three principal business segments: BD Medical (“Medical”), BD Life Sciences (“Life Sciences”) and BD Interventional ("Interventional"). The Company's segments are strategic businesses that are managed separately because each one develops, manufactures and markets distinct products and services. Segment disclosures are on a performance basis consistent with internal management reporting. The Company evaluates performance of its business segments and allocates resources to them primarily based upon segment operating income, which represents revenues reduced by product costs and operating expenses.

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Effective October 1, 2019, Life Sciences joined its former Preanalytical Systems and Diagnostic Systems organizational units to create a new Integrated Diagnostic Solutions organizational unit which focuses on driving growth and innovation around integrated specimen management to diagnostic solutions. The Integrated Diagnostic Solutions organizational unit consists of the following principal product lines:

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.

Revenues by segment, organizational unit and geographical areas for the three-month periods are detailed below. The Company has no material intersegment revenues.

	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.

(b)Prior-period amounts reflect the total reclassifications of $31 million of U.S. revenues and $14 million of international revenues associated with the movement, effective on October 1, 2019, of certain products from the Surgery unit and the Urology and Critical Care unit to the Peripheral Intervention unit.

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Segment income for the three-month periods was as follows:

	Three Months Ended December 31,
(Millions of dollars)	2019				2018
Income Before Income Taxes
Medical (a)	$	564			$	665
Life Sciences	361				305
Interventional	243				209
Total Segment Operating Income	1,167				1,180
Acquisitions and other restructurings	(86		)		(91		)
Net interest expense	(134		)		(183		)
Other unallocated items (b)	(553		)		(192		)
Total Income Before Income Taxes	$	394			$	714

(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.

(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.

The Company has defined benefit pension plans covering certain employees in the United States and certain international locations. The measurement date used for these plans is September 30.

Net pension cost included the following components for the three months ended December 31:

	Three Months Ended December 31,
(Millions of dollars)	2019				2018
Service cost	$	40			$	35
Interest cost	22				28
Expected return on plan assets	(49		)		(47		)
Amortization of prior service credit	(3		)		(3		)
Amortization of loss	25				20
Net pension cost	$	35			$	32

The amounts provided above for amortization of prior service credit and amortization of loss represent the reclassifications of prior service credits and net actuarial losses that were recognized in Accumulated other comprehensive income (loss) in prior periods. All components of the Company’s net periodic pension cost, aside from service cost, are recorded to Other income (expense), net on its condensed consolidated statements of income.

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The Company incurred restructuring costs during the three months ended December 31, 2019, in connection with the Company's acquisition of C.R. Bard, Inc. ("Bard") and portfolio rationalization initiatives, which were largely recorded within Acquisitions and other restructurings. Restructuring liability activity for the three months ended December 31, 2019 was as follows:

(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)	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.

Intangible assets consisted of:

	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

Intangible amortization expense for the three months ended December 31, 2019 and 2018 was $345 million and $378 million, respectively.

The following is a reconciliation of goodwill by business segment:

(Millions of dollars)	Medical				Life Sciences				Interventional				Total
Goodwill as of September 30, 2019	$	9,989			$	772			$	12,615			$	23,376
Acquisitions (a)	10				—				—				10
Currency translation	17				2				30				49
Goodwill as of December 31, 2019	$	10,016			$	774			$	12,645			$	23,435

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

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The Company uses derivative instruments to mitigate certain exposures. The Company does not enter into derivative financial instruments for trading or speculative purposes. The effects these derivative instruments and hedged items have on financial position, financial performance, and cash flows are provided below.

Foreign Currency Risks and Related Strategies

The Company has foreign currency exposures throughout Europe, Greater Asia, Canada and Latin America. Transactional currency exposures that arise from entering into transactions, generally on an intercompany basis, in non-hyperinflationary countries that are denominated in currencies other than the functional currency are mitigated primarily through the use of forward contracts. In order to mitigate foreign currency exposure relating to its investments in certain foreign subsidiaries, the Company has hedged the currency risk associated with those investments with instruments, such as foreign currency-denominated debt, cross-currency swaps and currency exchange contracts, which are designated as net investment hedges.

Hedges of the transactional foreign exchange exposures resulting primarily from intercompany payables and receivables are undesignated hedges. As such, the gains or losses on these instruments are recognized immediately in income. These gains and losses are largely offset by gains and losses on the underlying hedged items, as well as the hedging costs associated with the derivative instruments. The net amounts recognized in Other income, net, during the three months ended December 31, 2019 and 2018 were immaterial to the Company's consolidated financial results. The total notional amounts of the Company’s outstanding foreign exchange contracts as of December 31, 2019 and September 30, 2019 were $1.2 billion and $2.3 billion, respectively.

Certain of the Company's foreign currency-denominated long-term notes outstanding, which had a total carrying value of $1.4 billion as of December 31, 2019 and September 30, 2019, were designated as, and were effective as, economic hedges of net investments in certain of the Company's foreign subsidiaries. The Company has entered into cross-currency swaps, all of which are designated and effective as economic hedges of net investments in certain of the Company's foreign subsidiaries. The notional amounts of the cross-currency swaps were $3.0 billion and $2.3 billion as of December 31, 2019 and September 30, 2019, respectively.

Net gains or losses relating to the net investment hedges, which are attributable to changes in the foreign currencies to U.S. dollar spot exchange rates, are recorded as accumulated foreign currency translation in Other comprehensive income (loss). Upon the termination of a net investment hedge, any net gain or loss included in Accumulated other comprehensive income (loss) relative to the investment hedge remains until the foreign subsidiary investment is disposed of or is substantially liquidated.

Net (losses) gains recorded to Accumulated other comprehensive income (loss) relating to the Company's net investment hedges for the three-month periods were as follows:

	Three Months Ended December 31,
(Millions of dollars)	2019				2018
Foreign currency-denominated debt	$	(34	)		$	59
Cross-currency swaps	$	(52	)		$	—

Interest Rate Risks and Related Strategies

The Company’s policy is to manage interest rate exposure using a mix of fixed and variable rate debt. The Company periodically uses interest rate swaps to manage such exposures. Under these interest rate swaps, the Company exchanges, at specified intervals, the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated as either fair value or cash flow hedges.

For interest rate swaps designated as fair value hedges (i.e., hedges against the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt due to changes in market interest rates.

The total notional amount of the Company’s outstanding interest rate swaps designated as fair value hedges was $375 million at December 31, 2019 and September 30, 2019. The outstanding swaps represent fixed-to-floating interest rate swap agreements the Company entered into to convert the interest payments on certain long-term notes from the fixed rate to a floating interest rate based on LIBOR. Changes in the fair value of the interest rate swaps offset changes in the fair value of the fixed rate debt. The amounts recorded during the three months ended December 31, 2019 and 2018 for changes in the fair value of these hedges were immaterial to the Company's consolidated financial results.

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Changes in the fair value of the interest rate swaps designated as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk) are recorded in Other comprehensive income (loss). If interest rate derivatives designated as cash flow hedges are terminated, the balance in Accumulated other comprehensive income (loss) attributable to those derivatives is reclassified into earnings over the remaining life of the hedged debt. The net realized loss related to terminated interest rate swaps expected to be reclassified and recorded in Interest expense within the next 12 months is $6 million, net of tax.

The total notional amount of the Company's outstanding forward starting interest rate swaps was $1.5 billion at December 31, 2019 and September 30, 2019. The Company entered into these contracts in the fourth quarter of fiscal year 2019 to mitigate its exposure to interest rate risk. The Company recognized an after-tax gain of $37 million in other comprehensive income relating to these interest rate hedges during the three months ended December 31, 2019.

Other Risk Exposures

The Company purchases resins, which are oil-based components used in the manufacture of certain products. Significant increases in world oil prices that lead to increases in resin purchase costs could impact future operating results. From time to time, the Company has managed price risks associated with these commodity purchases through commodity derivative forward contracts. The Company's outstanding commodity derivative forward contracts at December 31, 2019 and September 30, 2019 were immaterial to the Company's consolidated financial results.

Financial Statement Effects

The fair values of derivative instruments outstanding at December 31, 2019 and September 30, 2019 were not material to the Company's consolidated balance sheets.

The following reconciles cash and equivalents and restricted cash reported within the Company's consolidated balance sheets at December 31, 2019 and September 30, 2019 to the total of these amounts shown on the Company's consolidated statements of cash flows:

(Millions of dollars)	December 31, 2019				September 30, 2019
Cash and equivalents	$	560			$	536
Restricted cash	49				54
Cash and equivalents and restricted cash	$	609			$	590

Cash equivalents consist of all highly liquid investments with a maturity of three months or less at time of purchase. Restricted cash consists of cash restricted from withdrawal and usage except for certain product liability matters.

The Company’s cash and equivalents include institutional money market accounts which permit daily redemption and the fair values of these investments are based upon the quoted prices in active markets provided by the holding financial institutions, which are considered Level 1 inputs in the fair value hierarchy. The fair value of these accounts was immaterial at December 31, 2019 and the fair value of these accounts at September 30, 2019 was $39 million. The Company’s remaining cash and equivalents, excluding restricted cash, were $560 million and $497 million at December 31, 2019 and September 30, 2019, respectively.

Short-term investments are held to their maturities and are carried at cost, which approximates fair value. The short-term investments consist of instruments with maturities greater than three months and less than one year.

Long-term debt is recorded at amortized cost. The fair value of long-term debt is measured based upon quoted prices in active markets for similar instruments, which are considered Level 2 inputs in the fair value hierarchy. The fair value of long-term debt was $18.1 billion and $19.2 billion at December 31, 2019 and September 30, 2019, respectively. The fair value of the current portion of long-term debt was $2.5 billion and $1.3 billion at December 31, 2019 and September 30, 2019, respectively.

All other instruments measured by the Company at fair value, including derivatives and contingent consideration liabilities, are immaterial to the Company's consolidated balance sheets.

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Transfers of trade receivables

Over the normal course of its business activities, the Company transfers certain trade receivable assets to third parties under factoring agreements. Per the terms of these agreements, the Company surrenders control over its trade receivables upon transfer.  Accordingly, the Company accounts for the transfers as sales of trade receivables by recognizing an increase to Cash and equivalents and a decrease to Trade receivables, net when proceeds from the transactions are received.  The Company’s balance of Trade receivables, net at December 31, 2019 excludes trade receivables of $328 million that have been transferred to third parties under factoring arrangements.  The costs incurred by the Company in connection with factoring activities were not material to its consolidated financial results.  The Company’s transfers of trade receivables during the three months ended December 31, 2018 were not material to its consolidated financial results.

The Company leases real estate, vehicles and other equipment which are used in the Company’s manufacturing, administrative and research and development activities. The Company identifies a contract that contains a lease as one which conveys a right, either explicitly or implicitly, to control the use of an identified asset in exchange for consideration. The Company’s lease arrangements are generally classified as operating leases. These arrangements have remaining terms ranging from less than one year to approximately 25 years and the weighted-average remaining lease term of the Company’s leases is approximately 7.5 years. An option to renew or terminate the current term of a lease arrangement is included in the lease term if the Company is reasonably certain to exercise that option.

The Company does not recognize a right-of-use asset and lease liability for short-term leases, which have terms of 12 months or less, on its consolidated balance sheet. For the longer-term lease arrangements that are recognized on the Company’s consolidated balance sheet, the right-of-use asset and lease liability is initially measured at the commencement date based upon the present value of the lease payments due under the lease. These payments represent the combination of the fixed lease and fixed non-lease components that are due under the arrangement. The costs associated with the Company’s short-term leases, as well as variable costs relating to the Company’s lease arrangements, are not material to its consolidated financial results.

The implicit interest rates of the Company’s lease arrangements are generally not readily determinable and as such, the Company applies an incremental borrowing rate, which is established based upon the information available at the lease commencement date, to determine the present value of lease payments due under an arrangement. The weighted-average incremental borrowing rate that has been applied to measure the Company’s lease liabilities is 2.3%.

The Company’s lease costs recorded in its consolidated statement of income for the three months ended December 31, 2019 were $34 million. Cash payments arising from the Company’s lease arrangements are reflected on its condensed consolidated statement of cash flows as outflows used for operating activities. The right-of-use assets and lease liabilities recognized on the Company’s condensed consolidated balance sheet as of December 31, 2019 were as follows:

(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

The Company’s payments due under its operating leases are as follows:

(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

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The Company’s future minimum rental commitments on non-cancelable leases at September 30, 2019, as disclosed in the Company’s 2019 Annual Report on Form 10-K, were as follows:

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

On February 4, 2020, the Company initiated a voluntary recall of certain Alaris^TM pump systems in order to address software errors and other alarm prioritization matters. The estimated cost of this recall of $59 million was recorded to Cost of products sold during the three months ended December 31, 2019. The Company may record incremental charges in future periods associated with this recall.

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