August 6, 2020 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended June 30, 2020


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

For the transition period from to

Commission file number 001-4802

Becton, Dickinson and Company

(Exact name of registrant as specified in its charter)

New Jersey

22-0760120

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

1 Becton Drive,

Franklin Lakes,

New Jersey

07417-1880

(201)

847-6800

(Address of principal executive offices) (Zip Code)

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common stock, par value $1.00

BDX

New York Stock Exchange

Depositary Shares, each representing a 1/20th interest in a share of 6.00% Mandatory Convertible Preferred Stock, Series B

BDXB

New York Stock Exchange

1.000% Notes due December 15, 2022

BDX22A

New York Stock Exchange

1.900% Notes due December 15, 2026

BDX26

New York Stock Exchange

1.401% Notes due May 24, 2023

BDX23A

New York Stock Exchange

3.020% Notes due May 24, 2025

BDX25

New York Stock Exchange

0.174% Notes due June 4, 2021

BDX/21

New York Stock Exchange

0.632% Notes due June 4, 2023

BDX/23A

New York Stock Exchange

1.208% Notes due June 4, 2026

BDX/26A

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 289,868,551 shares of Common Stock, $1.00 par value, outstanding at June 30, 2020.

BECTON, DICKINSON AND COMPANY

FORM 10-Q

For the quarterly period ended June 30, 2020

TABLE OF CONTENTS


		Page Number
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Income	4
	Condensed Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	39

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	42

Signatures		43

ITEM 1. FINANCIAL STATEMENTS

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions of dollars


	June 30, 2020		September 30, 2019
Assets	(Unaudited)
Current Assets:
Cash and equivalents	$	2,882	$	536
Restricted cash	82		54
Short-term investments	22		30
Trade receivables, net	1,993		2,345
Inventories:
Materials	627		544
Work in process	336		318
Finished products	1,983		1,717
	2,945		2,579

Prepaid expenses and other	903		1,119
Total Current Assets	8,827		6,664
Property, Plant and Equipment	11,660		11,128
Less allowances for depreciation and amortization	5,819		5,469
Property, Plant and Equipment, Net	5,841		5,659
Goodwill	23,549		23,376
Developed Technology, Net	10,356		11,054
Customer Relationships, Net	3,186		3,424
Other Intangibles, Net	567		500

Other Assets	1,632		1,088
Total Assets	$	53,959	$	51,765
Liabilities and Shareholders’ Equity
Current Liabilities:
Short-term debt	$	1,630	$	1,309
Payables, accrued expenses and other current liabilities	4,437		4,345

Total Current Liabilities	6,067		5,655
Long-Term Debt	17,090		18,081
Long-Term Employee Benefit Obligations	1,297		1,272
Deferred Income Taxes and Other Liabilities	5,483		5,676
Commitments and Contingencies (See Note 5)
Shareholders’ Equity
Preferred stock	2		2
Common stock	365		347
Capital in excess of par value	19,228		16,270
Retained earnings	12,916		12,913
Deferred compensation	23		23
Common stock in treasury - at cost	(6,145)		(6,190)
Accumulated other comprehensive loss	(2,367)		(2,283)
Total Shareholders’ Equity	24,022		21,081
Total Liabilities and Shareholders’ Equity	$	53,959	$	51,765

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Millions of dollars, except per share data

(Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2020		2019		2020		2019
Revenues	$	3,855	$	4,350	$	12,333	$	12,706
Cost of products sold	2,195		2,276		6,962		6,684
Selling and administrative expense	980		1,076		3,126		3,238
Research and development expense	262		282		797		792
Acquisitions and other restructurings	74		90		235		281
Other operating (income) expense, net	(15)		—		(15)		61
Total Operating Costs and Expenses	3,497		3,725		11,104		11,056
Operating Income	358		626		1,229		1,649
Interest expense	(135)		(156)		(405)		(498)
Interest income	2		2		5		8
Other income (expense), net	23		(11)		12		19
Income Before Income Taxes	248		460		842		1,178
Income tax (benefit) provision	(38)		9		96		107
Net Income	286		451		746		1,071
Preferred stock dividends	(9)		(38)		(84)		(114)
Net income applicable to common shareholders	$	277	$	413	$	662	$	957


Basic Earnings per Share	$	0.98	$	1.53	$	2.41	$	3.55
Diluted Earnings per Share	$	0.97	$	1.51	$	2.38	$	3.49
Dividends per Common Share	$	0.79	$	0.77	$	2.37	$	2.31

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Millions of dollars

(Unaudited)


	Three Months Ended June 30,						Nine Months Ended June 30,
	2020		2019		2020		2019
Net Income	$	286	$	451	$	746	$	1,071
Other Comprehensive Income (Loss), Net of Tax
Foreign currency translation adjustments	34		(68)		(66)		(27)
Defined benefit pension and postretirement plans	17		12		50		40
Cash flow hedges	2		(3)		(68)		(2)
Other Comprehensive Income (Loss), Net of Tax	53		(58)		(83)		12
Comprehensive Income	$	338	$	393	$	663	$	1,082

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Millions of dollars

(Unaudited)


	Nine Months Ended June 30,
	2020		2019
Operating Activities
Net income	$	746	$	1,071
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization	1,601		1,700
Share-based compensation	193		208
Deferred income taxes	(203)		(172)
Change in operating assets and liabilities	(248)		(661)
Pension obligation	77		(150)

Gain on sale of business	—		(336)
Product liability-related charge	—		331
Other, net	(107)		(32)
Net Cash Provided by Operating Activities	2,058		1,959
Investing Activities
Capital expenditures	(597)		(599)


Acquisitions of businesses, net of cash acquired	(139)		—
Proceeds from divestitures, net	—		477
Other, net	(169)		(178)
Net Cash Used for Investing Activities	(905)		(300)
Financing Activities
Change in credit facility borrowings	(485)		300
Proceeds from long-term debt and term loans	3,389		2,224
Payments of debt and term loans	(3,711)		(3,882)
Proceeds from issuance of equity securities	2,917		—

Dividends paid	(773)		(737)
Other, net	(106)		(204)
Net Cash Provided by (Used for) Financing Activities	1,230		(2,300)
Effect of exchange rate changes on cash and equivalents and restricted cash	(9)		(1)
Net increase (decrease) in cash and equivalents and restricted cash	2,374		(642)
Opening Cash and Equivalents and Restricted Cash	590		1,236
Closing Cash and Equivalents and Restricted Cash	$	2,964	$	594

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2020

Note 1 – Basis of Presentation

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.

Note 2 – Accounting Changes

New Accounting Principles 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.

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 Company early adopted this standard as of April 1, 2020 on a prospective basis. The adoption of this standard did not materially impact the Company's condensed consolidated financial statements.

New Accounting Principle 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.

Note 3 – Shareholders' Equity

Changes in certain components of shareholders' equity for the first three 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)
Net income	—		—		286		—		—	—
Common dividends ($0.79 per share)	—		—		(229)		—		—	—
Preferred dividends	—		—		(9)		—		—	—
Common stock issued for:
Preferred shares converted to common shares	12		(9)		—		—		—	—
Public equity offerings	6		2,909		—		—		—	—
Share-based compensation and other plans, net	—		(12)		—		—		127	13
Share-based compensation	—		52		—		—		—	—
Common stock held in trusts, net (a)	—		—		—		—		13	—
Balance at June 30, 2020	$	365	$	19,228	$	12,916	$	23	(74,771)	$	(6,145)


	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)
Net income	—		—		451		—		—	—
Common dividends ($0.77 per share)	—		—		(208)		—		—	—
Preferred dividends	—		—		(38)		—		—	—
Common stock issued for share-based compensation and other plans, net	—		(6)		—		—		219	(8)
Share-based compensation	—		56		—		—		—	—
Common stock held in trusts, net (a)	—		—		—		—		4	—
Balance at June 30, 2019	$	347	$	16,227	$	12,997	$	23	(76,733)	$	(6,201)

(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.

Common and Preferred Stock Conversions and Offerings

In accordance with their terms, the Company's 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 on the mandatory conversion date of May 1, 2020.

Also, in May 2020, the Company completed registered public offerings of equity securities including:

•6.250 million shares of the Company's common stock for net proceeds of $1.459 billion (gross proceeds of $1.500 billion).

•1.500 million shares of the Company's mandatory convertible preferred stock (ownership is held in the form of depositary shares, each representing a 1/20th interest in a share of preferred stock) for net proceeds of $1.459 billion (gross proceeds of $1.500 billion). If and when declared, dividends on the mandatory convertible preferred stock will be payable on a cumulative basis at an annual rate of 6.00% on the liquidation preference of $1,000 per preferred share ($50 per depositary share). The shares of preferred stock are convertible to a minimum of 5.2 million and up to a maximum of 6.2 million shares of Company common stock at an exchange ratio, based on the market price of the Company’s common stock at the date of conversion, and no later than the mandatory conversion date of June 1, 2023.

The Company will use the net proceeds from these offerings for general corporate purposes, which may include funding for the Company's growth strategy through organic investments and acquisitions, working capital, capital expenditures and repayment of outstanding indebtedness.

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

(Millions of dollars)

Total

Foreign Currency
Translation

Benefit Plans

Form: 10-Q

Documents