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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 15.

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 two 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	)
Net income	—				—				183				—				—			—
Common dividends ($0.79 per share)	—				—				(215		)		—				—			—
Preferred dividends	—				—				(38		)		—				—			—
Common stock issued for share-based compensation and other plans, net	—				(91		)		—				(1		)		573			70
Share-based compensation	—				58				—				—				—			—
Common stock held in trusts, net (a)	—				—				—				—				30			—
Balance at March 31, 2020	$	347			$	16,288			$	12,868			$	23			(74,911	)		$	(6,158	)

	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	)
Net income	—				—				20				—				—			—
Common dividends ($0.77 per share)	—				—				(208		)		—				—			—
Preferred dividends	—				—				(38		)		—				—			—
Common stock issued for share-based compensation and other plans, net	—				(57		)		(1		)		(1		)		618			42
Share-based compensation	—				60				—				—				—			—
Common stock held in trusts, net (a)	—				—				—				—				50			—
Balance at March 31, 2019	$	347			$	16,177			$	12,792			$	23			(76,955	)		$	(6,192	)

(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 two 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
Other comprehensive loss before reclassifications, net of taxes	(237		)		(125		)		—				(111		)
Amounts reclassified into income, net of taxes	19				—				17				2
Balance at March 31, 2020	$	(2,419	)		$	(1,355	)		$	(971	)		$	(93	)

(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	)
Other comprehensive income (loss) before reclassifications, net of taxes	74				76				—				(2		)
Amounts reclassified into income, net of taxes	14				—				13				1
Balance at March 31, 2019	$	(1,839	)		$	(1,121	)		$	(701	)		$	(17	)

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 March 31,						Six Months Ended March 31,
	2020			2019			2020			2019
Average common shares outstanding	272,014			269,882			271,555			269,454
Dilutive share equivalents from share-based plans	3,023			—			3,618			4,975
Average common and common equivalent shares outstanding – assuming dilution	275,037			269,882			275,173			274,429
Share equivalents excluded from the diluted shares outstanding calculation because the result would have been antidilutive:
Mandatory convertible preferred stock	11,685			11,685			11,685			11,685
Share-based plans	—			4,405			—			—

In accordance with the terms of the Company's mandatory convertible preferred stock, on the mandatory conversion date of May 1, 2020, the 2.475 million mandatory convertible preferred shares that were issued in May 2017 in connection with the Company's acquisition of C.R. Bard, Inc. ("Bard") were converted into 11.703 million shares of BD common stock.

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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.

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 March 31, 2020, the Company is defending approximately 16,815 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, with the first trial currently scheduled for June 2020 in Rhode Island. 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 March 31, 2020, the Company is defending approximately 580 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 1,005 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

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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 March 31, 2020, 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 March 31, 2020, the Company has reached agreements or agreements in principle with various plaintiffs’ law firms to settle their respective inventories of cases totaling approximately 15,220 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 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 March 31, 2020, the Company is defending approximately 1,785 product liability claims involving the Company’s line of inferior vena cava filters (collectively, the “Filter Product Claims”). The majority of those claims were previously 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 March 31, 2020, the Company entered into settlement agreements and/or settlement agreements in principle for approximately 7,300 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

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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 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.

On February 27, 2020, a putative class action captioned Kabak v. Becton, Dickinson and Company, et al., Civ. No. 2:20-cv-02155 (SRC) (CLW), was filed in the U.S. District Court for the District of New Jersey against the Company and certain of its officers. The complaint, which purports to be brought on behalf of all persons (other than defendants) who purchased or otherwise acquired the Company's common stock from November 5, 2019 through February 5, 2020, asserts claims for purported violations of Sections 10 and 20 of the Securities Exchange Act of 1934 and SEC Rule 10b-5 promulgated thereunder, and seeks, among other things, damages and costs. The complaint alleges that defendants concealed material information regarding Alaris^TM infusion pumps, including that (1) certain pumps exhibited software errors, (2) the Company was investing in remediation efforts as opposed to other enhancements and (3) the Company was thus reasonably likely to recall certain pumps and/or experience regulatory delays. These alleged omissions, the complaint asserts, rendered certain public statements about the Company’s business, operations and prospects false or misleading, causing investors to purchase stock at an inflated price. The Company believes these claims are without merit and intends to vigorously defend this action.

On April 27, 2020, three putative stockholders, including the named plaintiff in the Kabak complaint, filed motions to be appointed lead plaintiff and for their counsel to be appointed lead counsel pursuant to the Private Securities Litigation Reform Act of 1995. Those motions remain pending.

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.

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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.

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 uncollectable. 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 $1.7 billion at March 31, 2020. 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 March 31, 2020.  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.

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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.

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 and six-month periods are detailed below. The Company has no material intersegment revenues.

	Three Months Ended March 31,
(Millions of dollars)	2020												2019
	United States				International				Total				United States				International				Total
Medical
Medication Delivery Solutions (a)	$	518			$	386			$	904			$	482			$	446			$	928
Medication Management Solutions (a)	449				119				568				499				118				617
Diabetes Care	142				137				278				137				133				270
Pharmaceutical Systems	91				309				400				93				273				366
Total segment revenues	$	1,200			$	951			$	2,151			$	1,211			$	969			$	2,180
Life Sciences
Integrated Diagnostic Solutions
Preanalytical Systems	$	208			$	192			$	400			$	171			$	195			$	366
Diagnostic Systems	206				228				434				180				209				389
Total Integrated Diagnostic Solutions	413				420				833				350				404				755
Biosciences	108				172				280				120				177				297
Total segment revenues	$	522			$	591			$	1,113			$	470			$	582			$	1,052
Interventional
Surgery (b)	$	249			$	63			$	312			$	242			$	66			$	308
Peripheral Intervention (b)	242				157				399				225				162				387
Urology and Critical Care (b)	202				76				279				193				75				268
Total segment revenues	$	693			$	297			$	990			$	659			$	303			$	963
Total Company revenues	$	2,415			$	1,839			$	4,253			$	2,341			$	1,854			$	4,195

(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.

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(b)	Prior-period amounts reflect the total reclassifications of $31 million of U.S. revenues and $13 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.

	Six Months Ended March 31,
(Millions of dollars)	2020												2019
	United States				International				Total				United States				International				Total
Medical
Medication Delivery Solutions (a)	$	1,038			$	814			$	1,852			$	1,000			$	883			$	1,884
Medication Management Solutions (a)	912				231				1,143				1,007				236				1,242
Diabetes Care	281				266				547				282				261				544
Pharmaceutical Systems	174				525				699				161				485				646
Total segment revenues	$	2,404			$	1,836			$	4,241			$	2,450			$	1,865			$	4,316
Life Sciences
Integrated Diagnostic Solutions
Preanalytical Systems	$	410			$	388			$	798			$	371			$	387			$	758
Diagnostic Systems	390				446				835				355				416				771
Total Integrated Diagnostic Solutions	799				834				1,633				726				803				1,529
Biosciences	260				342				603				228				350				579
Total segment revenues	$	1,060			$	1,176			$	2,236			$	954			$	1,153			$	2,108
Interventional
Surgery (b)	$	505			$	133			$	638			$	488			$	130			$	618
Peripheral Intervention (b)	467				327				794				448				321				769
Urology and Critical Care (b)	409				161				570				388				158				545
Total segment revenues	$	1,381			$	621			$	2,002			$	1,323			$	609			$	1,932
Total Company revenues	$	4,845			$	3,634			$	8,479			$	4,728			$	3,628			$	8,355

(a)	Prior-period amounts reflect the reclassification of U.S. revenues of $3 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 $63 million of U.S. revenues and $28 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 and six-month periods was as follows:

	Three Months Ended March 31,								Six Months Ended March 31,
(Millions of dollars)	2020				2019				2020				2019
Income Before Income Taxes
Medical (a) (b)	$	443			$	599			$	1,007			$	1,265
Life Sciences (c)	285				293				646				598
Interventional	213				231				455				441
Total Segment Operating Income	941				1,123				2,109				2,303
Acquisitions and other restructurings	(75		)		(101		)		(161		)		(191		)
Net interest expense	(132		)		(153		)		(266		)		(336		)
Other unallocated items (d)	(534		)		(866		)		(1,087		)		(1,058		)
Total Income Before Income Taxes	$	200			$	3			$	594			$	718

(a)

The amounts for the three and six months ended March 31, 2020 include a probable estimate of future costs within the Medication Management Solutions unit associated with remediation efforts related to AlarisTM infusion pumps of $199 million and $258 million, respectively, which were recorded to Cost of products sold. Based on the course of remediation efforts, it is possible that the estimate of future costs could increase over time.

(b)	The amounts for the three and six-month periods in 2019 included $65 million of estimated remediation costs recorded to Other operating expense, net relating to a recall of a product component, which generally pre-dated the Company's acquisition of CareFusion in fiscal year 2015, within the Medication Management Solutions unit's infusion systems platform.

(c)	The amounts for the three and six-month periods in 2020 include a charge of $39 million recorded to Cost of products sold to write down the carrying value of certain intangible assets in the Biosciences unit.

(d)

Primarily comprised of foreign exchange, certain general and administrative expenses and share-based compensation expense. The amounts for the three and six-month periods in 2019 include a pre-tax charge of $331 million related to certain product liability matters, which is further discussed in Note 5. In addition, the amount for the six months ended March 31, 2019 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 and six months ended March 31:

	Three Months Ended March 31,								Six Months Ended March 31,
(Millions of dollars)	2020				2019				2020				2019
Service cost	$	39			$	33			$	79			$	68
Interest cost	21				26				43				54
Expected return on plan assets	(48		)		(45		)		(97		)		(91		)
Amortization of prior service credit	(3		)		(3		)		(7		)		(7		)
Amortization of loss	25				19				50				39
Net pension cost	$	34			$	31			$	68			$	63

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 six months ended March 31, 2020, in connection with the Company's acquisition of Bard and portfolio rationalization initiatives, which were largely recorded within Acquisitions and other restructurings. Restructuring liability activity for the six months ended March 31, 2020 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	6				(2		)		23				14				29				12
Cash payments	(12		)		(23		)		(5		)		(12		)		(17		)		(35		)
Non-cash settlements	—				—				(16		)		(2		)		(16		)		(2		)
Balance at March 31, 2020	$	16			$	6			3				$	3			$	19			$	9

(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:

	March 31, 2020								September 30, 2019
(Millions of dollars)	Gross Carrying Amount				Accumulated Amortization				Gross Carrying Amount				Accumulated Amortization
Amortized intangible assets
Developed technology	$	13,985			$	3,440			$	13,960			$	2,906
Customer relationships	4,606				1,345				4,608				1,183
Product rights	106				61				110				60
Trademarks	407				110				407				102
Patents and other	493				315				445				305
Amortized intangible assets	$	19,597			$	5,271			$	19,530			$	4,555
Unamortized intangible assets
Acquired in-process research and development (a)	$	46							$	1
Trademarks	2								2
Unamortized intangible assets	$	48							$	3

(a)	The increase in the carrying value of assets in 2020 was attributable to an immaterial acquisition which occurred during the second quarter of fiscal year 2020.

Intangible amortization expense for the three months ended March 31, 2020 and 2019 was $347 million and $376 million, respectively. Intangible amortization expense for the six months ended March 31, 2020 and 2019 was $693 million and $754 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				58				—				68
Currency translation	(2		)		(1		)		(26		)		(29		)
Goodwill as of March 31, 2020	$	9,997			$	828			$	12,589			$	23,415

(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 (expense) income, net, during the three and six months ended March 31, 2020 and 2019 were immaterial to the Company's consolidated financial results. The total notional amounts of the Company’s outstanding foreign exchange contracts as of March 31, 2020 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 March 31, 2020 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 March 31, 2020 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 gains (losses) recorded to Accumulated other comprehensive income (loss) relating to the Company's net investment hedges for the three and six-month periods were as follows:

	Three Months Ended March 31,								Six Months Ended March 31,
(Millions of dollars)	2020				2019				2020				2019
Foreign currency-denominated debt	$	44			$	(18	)		$	10			$	41
Cross-currency swaps	$	193			$	—			$	141			$	—

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 March 31, 2020 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 and six months ended March 31, 2020 and 2019 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 March 31, 2020 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 recorded after-tax losses of $111 million and $74 million in Other comprehensive income (loss) relating to these interest rate hedges during the three and six months ended March 31, 2020, respectively.

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 had no outstanding commodity derivative forward contracts at March 31, 2020 and the amount outstanding as of September 30, 2019 was immaterial to the Company's consolidated financial results.

Financial Statement Effects

The fair values of derivative instruments outstanding at March 31, 2020 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 March 31, 2020 and September 30, 2019 to the total of these amounts shown on the Company's consolidated statements of cash flows:

(Millions of dollars)	March 31, 2020				September 30, 2019
Cash and equivalents	$	2,351			$	536
Restricted cash	88				54
Cash and equivalents and restricted cash	$	2,439			$	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 values of these accounts were $1.8 billion and $39 million at March 31, 2020 and September 30, 2019, respectively. The Company’s remaining cash and equivalents, excluding restricted cash, were $516 million and $497 million at March 31, 2020 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 $17.2 billion and $19.2 billion at March 31, 2020 and September 30, 2019, respectively. The fair value of the current portion of long-term debt was $2.4 billion and $1.3 billion at March 31, 2020 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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Nonrecurring Fair Value Measurements

In the second quarter of fiscal year 2020, the Company recorded a charge to Cost of products sold of $39 million to write down the carrying value of certain intangible assets in the Biosciences unit. The amount recognized in the second quarter of 2020 was recorded to adjust the carrying amount of assets to the assets' fair values, which were estimated, based upon a market participant's perspective, using Level 3 inputs, as values were estimated using the income approach.

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 March 31, 2020 excludes trade receivables of $246 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 six months ended March 31, 2019 were not material to its consolidated financial results.

While the Company deemed its liquidity sufficient to fund its operations and meet its obligations, the Company has taken steps, as a precautionary measure, to preserve its financial flexibility in light of the uncertainty in the global markets resulting from the COVID-19 pandemic. In March 2020, the Company entered into a 364-day $1.4 billion senior unsecured term loan facility and later in March 2020, this agreement was amended to increase the borrowing capacity available under the facility to $2.0 billion. Borrowings outstanding under the term loan facility were $1.9 billion at March 31, 2020 and these proceeds are included in the Company's balance of Cash and equivalents at March 31, 2020.

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%.

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The Company’s lease costs recorded in its consolidated statements of income for the three and six months ended March 31, 2020 were $32 million and $65 million, respectively. 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 March 31, 2020 were as follows:

(Millions of dollars)	March 31, 2020
Right-of-use assets recorded in Other Assets	$	427
Current lease liabilities recorded in Payables, accrued expenses and other current liabilities	$	103
Non-current lease liabilities recorded in Deferred Income Taxes and Other Liabilities	$	345

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

(Millions of dollars)
Remaining for 2020	$	58
2021	102
2022	83
2023	55
2024	36
Thereafter	164
Total payments due	499
Less: imputed interest	50
Total	$	448

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

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•	The timing and extent of recovery in the global demand for our products, particularly those sold by our Surgery and Peripheral Interventional units which are used in elective medical procedures;

•	The pace at which hospitals resume patient care that is not related to the COVID-19 pandemic;

•	The progress of development for our point-of-care test, which was previously discussed above, and the degree to which COVID-19 testing solutions are made available and utilized by governments;

•	The timing of when research performed by research laboratories and institutions will resume to normal operations; and

•	The degree of pressure that the weaker macroeconomic environment will put on future healthcare utilization.

•

Medical segment revenues in the second quarter reflected strong growth in the Pharmaceutical Systems. Revenues in the Diabetes Care unit benefited from COVID-19 due to increased orders from retailers and distributors in the United States. Medical segment revenues in the second quarter were unfavorably impacted by declines in the Medication Management Solutions and Medication Delivery Solutions units, as is further discussed below.

•	Life Sciences segment revenues in the second quarter reflected growth in the Integrated Diagnostic Solutions unit that was partially offset by declines in the Biosciences unit due to the COVID-19 pandemic and an unfavorable comparison to the prior-year period due to the timing of licensing revenues.

•	Interventional segment revenues in the second quarter reflected sales growth in all units. Revenues in the Surgery and Peripheral Intervention units were negatively impacted by the deferral of elective medical procedures as a result of the COVID-19 pandemic.

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(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.

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•

Gross profit margin was lower in the second quarter of 2020 as compared with the second quarter of 2019 which primarily reflected a charge to record a probable estimate of future costs associated with incremental remediation efforts relating to AlarisTM infusion pumps, as further discussed below. This unfavorable impact to the Medical segment's gross margin was partially offset by lower manufacturing costs resulting from continuous improvement projects which enhanced the efficiency of our operations and favorable foreign currency translation.

•	Selling and administrative expense as a percentage of revenues was slightly lower in the second quarter of 2020 compared with the second quarter of 2019 primarily due to lower expenses resulting from recently enacted cost containment measures.

•	Research and development expense as a percentage of revenues was higher in the second quarter of 2020 compared with the second quarter of 2019 primarily due to the timing of project spending.

•	The Medical segment's income in the second quarter of 2019 additionally reflected the estimated cumulative costs of a product recall of $65 million recorded within Other operating expense, net.  The recall related to a product component, which generally pre-dated our acquisition of CareFusion in fiscal year 2015, within the Medication Management Solutions unit's infusion systems platform.

(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.

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•

Gross margin in the second quarter of 2020 was lower compared with the second quarter of 2019 which primarily reflected a $39 million charge to write down the carrying value of certain intangible assets in the Biosciences unit, as well as unfavorable product mix and increased tariffs. These unfavorable impacts to the Life Sciences segment's gross margin were partially offset by favorable impacts from pricing and lower manufacturing costs resulting from continuous improvement projects which enhanced the efficiency of our operations.

•	Selling and administrative expense as a percentage of revenues in the second quarter of 2020 was lower compared with the prior-year period primarily due to expense synergies realized from the combination of the Preanalytical Systems and Diagnostic Systems units, as noted above, and lower expenses resulting from recently enacted cost containment measures.

•	Research and development expense as a percentage of revenues was lower in the second quarter of 2020 compared with the second quarter of 2019 primarily due to the timing of project spending.

(a)	The presentation of prior-period amounts reflects the total reclassifications of $45 million 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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•	Gross profit margin was lower in the second quarter of 2020 as compared with the second quarter of 2019 primarily due to the amortization of recently acquired intangible assets, which was partially offset by favorable product mix and favorable foreign currency translation.

•	Selling and administrative expense as a percentage of revenues in the second quarter of 2020 was lower compared with the prior-year period primarily due to lower expenses resulting from recently enacted cost containment measures.

•	Research and development expense as a percentage of revenues was lower in the second quarter of 2020 compared with the second quarter of 2019 primarily due to the timing of project spending.

•	The Interventional segment's lower income in the second quarter of 2020 additionally reflected the expiration in 2019 of a royalty income stream acquired in the C.R. Bard, Inc. ("Bard") transaction.

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(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 amounts in the three and six-month periods of fiscal year 2020 included a $199 million charge recognized by the Medical segment in Cost of products sold to record a probable estimate of future costs associated with incremental remediation efforts, as further discussed below. The amount in the six-month period of fiscal year 2020 additionally included a $59 million charge recognized in the first quarter by the Medical segment in Cost of products sold to record estimated remediation costs. The amounts in the prior-year periods included a charge relating to certain product liability matters and the estimated cost of a product recall, as noted above in the discussion regarding the Medical segment's income. These amounts were recorded to Other operating expense, net. The amount in the prior-year six-month period also included the pre-tax gain recognized in Other operating expense, 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.

(e)	The amounts in 2020 primarily represented a charge of $39 million recorded in Cost of products sold to write down the carrying value of certain intangible assets in the Biosciences unit.

(f)	The amount in the six-month period of fiscal year 2019 included additional tax expense, net, of $20 million relating to new U.S. tax legislation, as further discussed below.

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•

The impacts in the three and six-month periods include a charge of $199 million to record a probable estimate of future costs within the Medication Management Solutions unit associated with incremental remediation efforts related to AlarisTM infusion pumps.  Based on the course of our remediation efforts, it is possible that this estimate could increase over time.  Any remediation actions will continue to be guided by our proactive commitment to patient safety and we will work closely with our customers to minimize the disruption of patient care.

•	The impacts in the three and six-month periods also include a $39 million charge to write down the carrying value of certain intangible assets in the Biosciences unit.

•	The impact in the six-month period additionally includes a $59 million charge recognized in the first quarter by the Medical segment to record estimated product remediation costs related to the AlarisTM infusion pumps.

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•	We are required to maintain an interest expense coverage ratio of not less than 4-to-1 as of the last day of each fiscal quarter.

•	We are required to have a leverage coverage ratio of no more than:

◦	6-to-1 from the closing date of the Bard acquisition until and including the first fiscal quarter-end thereafter;

◦	5.75-to-1 for the subsequent four fiscal quarters thereafter;

◦	5.25-to-1 for the subsequent four fiscal quarters thereafter;

◦	4.5-to-1 for the subsequent four fiscal quarters thereafter;

◦	4-to-1 for the subsequent four fiscal quarters thereafter;

◦	3.75-to-1 thereafter.

•	We are required to maintain an interest expense coverage ratio of not less than 4-to-1 as of the last day of any fiscal quarter.

•	We are required to have a leverage ratio of not greater than:

◦	5.25-to-1 from the effectiveness of the Term Loan Agreement until and including the last day of the fiscal quarter ending March 31, 2020;

◦	4.5-to-1 as of the last day of any fiscal quarter thereafter.

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•	Any negative impact of the COVID-19 pandemic on our business, including, without limitation, decreases in the demand for our products or disruptions to our operations and our supply chain.

•	The current weakness in the global economy and financial markets, which could increase the cost of operating our business, weaken demand for our products and services, negatively impact the prices we can charge for our products and services, or impair our ability to produce our products.

•

Competitive factors that could adversely affect our operations, including new product introductions and technologies (for example, new forms of drug delivery) by our current or future competitors, consolidation or strategic alliances among healthcare companies, distributors and/or payers of healthcare to improve their competitive position or develop new models for the delivery of healthcare, increased pricing pressure due to the impact of low-cost manufacturers, patents attained by competitors (particularly as patents on our products expire), new entrants into our markets and changes in the practice of medicine.

•	Risks relating to our acquisition of Bard, including our ability to successfully combine and integrate the Bard operations in order to obtain the anticipated benefits and costs savings from the transaction, and the significant additional indebtedness we incurred in connection with the financing of the acquisition and the impact it may have on our ability to operate the combined company.

•	The adverse financial impact resulting from unfavorable changes in foreign currency exchange rates.

•	Regional, national and foreign economic factors, including inflation, deflation, and fluctuations in interest rates, and their potential effect on our operating performance.

•	Our ability to achieve our projected level or mix of product sales, as our earnings forecasts are based on projected sales volumes and pricing of many product types, some of which are more profitable than others.

•	Changes in reimbursement practices of governments or third-party payers, or adverse decisions relating to our products by such payers, which could reduce demand for our products or the price we can charge for such products.

•	Cost containment efforts in the U.S. or in other countries in which we do business, such as alternative payment reform and increased use of competitive bidding and tenders, including, without limitation, any expansion of the volume-based procurement process in China.

•	Changes in the domestic and foreign healthcare industry or in medical practices that result in a reduction in procedures using our products or increased pricing pressures, including the continued consolidation among healthcare providers.

•	The impact of changes in U.S. federal laws and policy that could affect fiscal and tax policies, healthcare, and international trade, including import and export regulation and international trade agreements. In particular, tariffs or other trade barriers imposed by the U.S. or other countries could adversely impact our supply chain costs or otherwise adversely impact our results of operations.

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•	Increases in operating costs, including fluctuations in the cost and availability of oil-based resins and other raw materials, as well as certain components, used in our products, the ability to maintain favorable supplier arrangements and relationships (particularly with respect to sole-source suppliers), and the potential adverse effects of any disruption in the availability of such items.

•

Security breaches of our information technology systems or our products, which could impair our ability to conduct business, result in the loss of BD trade secrets or otherwise compromise sensitive information of BD or its customers, suppliers and other business partners, or of customers' patients, or result in product efficacy or safety concerns for certain of our products, and result in actions by regulatory bodies or civil litigation.

•

Difficulties inherent in product development, including the potential inability to successfully continue technological innovation, successfully complete clinical trials, obtain regulatory approvals in the United States and abroad, obtain intellectual property protection for our products, obtain coverage and adequate reimbursement for new products, or gain and maintain market approval of products, as well as the possibility of infringement claims by competitors with respect to patents or other intellectual property rights, all of which can preclude or delay commercialization of a product. Delays in obtaining necessary approvals or clearances from United States Food and Drug Administration (“FDA”) or other regulatory agencies or changes in the regulatory process may also delay product launches and increase development costs.

•	The impact of business combinations or divestitures, including any volatility in earnings relating to acquisition-related costs, and our ability to successfully integrate any business we may acquire.

•	Our ability to penetrate or expand our operations in emerging markets, which depends on local economic and political conditions, and how well we are able to make necessary infrastructure enhancements to production facilities and distribution networks.

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Conditions in international markets, including social and political conditions, civil unrest, terrorist activity, governmental changes, restrictions on the ability to transfer capital across borders, tariffs and other protectionist measures, difficulties in protecting and enforcing our intellectual property rights and governmental expropriation of assets. This includes the possible impact of the United Kingdom's exit from the European Union ("EU"), which has created uncertainties affecting our business operations in the United Kingdom and the EU, and possibly other countries. Our international operations also increase our compliance risks, including risks under the Foreign Corrupt Practices Act and other anti-corruption laws, as well as regulatory and privacy laws.

•	Deficit reduction efforts or other actions that reduce the availability of government funding for healthcare and research, which could weaken demand for our products and result in additional pricing pressures, as well as create potential collection risks associated with such sales.

•	Fluctuations in university or U.S. and international governmental funding and policies for life sciences research.

•	Fluctuations in the demand for products we sell to pharmaceutical companies that are used to manufacture, or are sold with, the products of such companies, as a result of funding constraints, consolidation or otherwise.

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The effects of weather, regulatory or other events that adversely impact our supply chain, including our ability to manufacture our products (particularly where production of a product line or sterilization operations are concentrated in one or more plants), source materials or components or services from suppliers (including sole-source suppliers) that are needed for such manufacturing (including sterilization), or provide products to our customers, including events that impact key distributors.

•	Natural disasters (including pandemics), war, terrorism, labor disruptions and international conflicts that could cause significant economic disruption and political and social instability, resulting in decreased demand for our products, adversely affect our manufacturing and distribution capabilities, or cause interruptions in our supply chain.

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Pending and potential future litigation or other proceedings asserting, and/or subpoenas seeking information with respect to, alleged violations of law (including in connection with federal and/or state healthcare programs (such as Medicare or Medicaid) and/or sales and marketing practices (such as investigative subpoenas and the civil investigative demands received by BD and Bard)), antitrust claims, product liability (which may involve lawsuits seeking class action status or seeking to establish multi-district litigation proceedings, including claims relating to our hernia repair implant products, surgical continence products for women and vena cava filter products), claims with respect to environmental matters, and patent infringement, and the availability or collectability of insurance relating to any such claims.

•	New or changing laws and regulations affecting our domestic and foreign operations, or changes in enforcement practices, including laws relating to trade, monetary and fiscal policies, taxation (including tax reforms that could adversely impact multinational corporations), sales practices, environmental protection, price controls, and licensing

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Product efficacy or safety concerns regarding our products resulting in product holds or recalls, regulatory action on the part of the FDA or foreign counterparts (including restrictions on future product clearances and civil penalties), declining sales and product liability claims, and damage to our reputation. As a result of the CareFusion acquisition, we are operating under a consent decree with the FDA relating to our U.S. infusion pump business. The consent decree authorizes the FDA, in the event of any violations in the future, to order us to cease manufacturing and distributing products, recall products or take other actions, and we may be required to pay significant monetary damages if we fail to comply with any provision of the consent decree. Also, in 2019, the FDA letter to healthcare professionals regarding the use of paclitaxel-coated devices in the treatment of peripheral artery disease resulted in decreased sales of BD’s drug-coated balloons. While we have changed the labeling on our products as required by the FDA and continue to work with the FDA on patient data, the extent and duration of the impact from the FDA letter, and the likelihood of FDA approval of new drug-coated devices, is difficult to predict.

•	The effect of adverse media exposure or other publicity regarding BD’s business or operations, including the effect on BD’s reputation or demand for its products.

•	The effect of market fluctuations on the value of assets in BD’s pension plans and on actuarial interest rate and asset return assumptions, which could require BD to make additional contributions to the plans or increase our pension plan expense.

•	Our ability to obtain the anticipated benefits of restructuring programs, if any, that we may undertake.

•	Issuance of new or revised accounting standards by the Financial Accounting Standards Board or the Securities and Exchange Commission.

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(1)	Consists of 1,605 shares purchased during the quarter in open market transactions by the trust relating to BD’s Deferred Compensation and Retirement Benefit Restoration Plan and 1996 Directors’ Deferral Plan.

(2)	Represents shares available under a repurchase program authorized by the Board of Directors on September 24, 2013 for 10 million shares, for which there is no expiration date.

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