May 5, 2022 - 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 March 31, 2022


☐			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

0.632% Notes due June 4, 2023

BDX/23A

New York Stock Exchange

1.208% Notes due June 4, 2026

BDX/26A

New York Stock Exchange

1.213% Notes due February 12, 2036

BDX/36

New York Stock Exchange

0.000% Notes due August 13, 2023

BDX23B

New York Stock Exchange

0.034% Notes due August 13, 2025

BDX25A

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 every Interactive Data File required to be submitted 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 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 285,064,629 shares of Common Stock, $1.00 par value, outstanding at March 31, 2022.

BECTON, DICKINSON AND COMPANY

FORM 10-Q

For the quarterly period ended March 31, 2022

TABLE OF CONTENTS


		Page Number
Part I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Income	3
	Condensed Consolidated Statements of Comprehensive Income	4
	Condensed Consolidated Balance Sheets	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	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	39

Signatures		40

ITEM 1. FINANCIAL STATEMENTS

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Millions of dollars, except per share data

(Unaudited)


	Three Months Ended March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Revenues	$	5,011	$	4,907	$	10,006	$	10,223
Cost of products sold	2,706		2,661		5,278		5,244
Selling and administrative expense	1,232		1,148		2,456		2,298
Research and development expense	343		317		673		608
Acquisition-related integration and restructuring expense	28		52		62		102
Other operating expense, net	49		296		70		296
Total Operating Costs and Expenses	4,359		4,473		8,539		8,547
Operating Income	652		434		1,467		1,676
Interest expense	(101)		(124)		(199)		(242)
Interest income	2		2		4		5
Other (expense) income, net	(27)		(8)		(24)		24
Income Before Income Taxes	525		305		1,248		1,462
Income tax provision	71		6		117		160
Net Income	454		299		1,131		1,302
Preferred stock dividends	(23)		(23)		(45)		(45)
Net income applicable to common shareholders	$	431	$	277	$	1,086	$	1,257


Basic Earnings per Share	$	1.51	$	0.95	$	3.81	$	4.32
Diluted Earnings per Share	$	1.50	$	0.94	$	3.78	$	4.28
Dividends per Common Share	$	0.87	$	0.83	$	1.74	$	1.66

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 March 31,				Six Months Ended March 31,
	2022		2021		2022		2021
Net Income	$	454	$	299	$	1,131	$	1,302
Other Comprehensive Income (Loss), Net of Tax
Foreign currency translation adjustments	78		(15)		119		50
Defined benefit pension and postretirement plans	11		16		21		58
Cash flow hedges	44		83		37		111
Other Comprehensive Income, Net of Tax	133		85		178		219
Comprehensive Income	$	586	$	384	$	1,309	$	1,521

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

Millions of dollars


	March 31, 2022		September 30, 2021
Assets	(Unaudited)
Current Assets:
Cash and equivalents	$	3,147	$	2,283
Restricted cash	173		109
Short-term investments	15		12
Trade receivables, net	2,303		2,497
Inventories:
Materials	708		641
Work in process	413		402
Finished products	2,137		1,823
	3,258		2,866

Prepaid expenses and other	1,256		1,072
Total Current Assets	10,152		8,838
Property, Plant and Equipment	13,193		12,942
Less allowances for depreciation and amortization	6,788		6,549
Property, Plant and Equipment, Net	6,406		6,393
Goodwill	24,096		23,901
Developed Technology, Net	9,044		9,417
Customer Relationships, Net	2,681		2,818
Other Intangibles, Net	542		548

Other Assets	1,866		1,952
Total Assets	$	54,786	$	53,866
Liabilities and Shareholders’ Equity
Current Liabilities:
Current debt obligations	$	1,051	$	500
Payables, accrued expenses and other current liabilities	5,605		6,126

Total Current Liabilities	6,657		6,626
Long-Term Debt	17,584		17,110
Long-Term Employee Benefit Obligations	1,048		1,228
Deferred Income Taxes and Other Liabilities	4,973		5,225
Commitments and Contingencies (See Note 4)
Shareholders’ Equity
Preferred stock	2		2
Common stock	365		365
Capital in excess of par value	19,495		19,272
Retained earnings	14,416		13,826
Deferred compensation	24		23
Treasury stock	(7,866)		(7,723)
Accumulated other comprehensive loss	(1,910)		(2,088)
Total Shareholders’ Equity	24,525		23,677
Total Liabilities and Shareholders’ Equity	$	54,786	$	53,866

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)


	Six Months Ended March 31,
	2022		2021
Operating Activities
Net income	$	1,131	$	1,302
Adjustments to net income to derive net cash provided by operating activities:
Depreciation and amortization	1,114		1,113
Share-based compensation	140		138
Deferred income taxes	(80)		(120)
Change in operating assets and liabilities	(950)		55
Pension obligation	(136)		45


Product liability-related charge	—		296
Other, net	(101)		(109)
Net Cash Provided by Operating Activities	1,118		2,721
Investing Activities
Capital expenditures	(415)		(499)


Acquisitions, net of cash acquired	(450)		(179)

Other, net	(124)		(186)
Net Cash Used for Investing Activities	(990)		(863)
Financing Activities

Proceeds from long-term debt	—		1,715
Proceeds from debt issued in connection with the spin-off (see Note 12)	1,424		—
Payments of debt	(2)		(1,998)


Dividends paid	(541)		(528)
Other, net	(76)		(82)
Net Cash Provided by (Used for) Financing Activities	804		(893)
Effect of exchange rate changes on cash and equivalents and restricted cash	(4)		17
Net increase in cash and equivalents and restricted cash	928		981
Opening Cash and Equivalents and Restricted Cash	2,392		2,917
Closing Cash and Equivalents and Restricted Cash	$	3,320	$	3,898

Amounts may not add due to rounding.

See notes to condensed consolidated financial statements

BECTON, DICKINSON AND COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

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 2021 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.

Spin-Off of Diabetes Care Business

On April 1, 2022, the Company completed the spin-off of its Diabetes Care business as a separate publicly traded company named Embecta Corp. (“Embecta”) through a distribution of Embecta’s publicly traded common stock to BD’s shareholders of record as of the close of business on March 22, 2022 (the “record date”). The Company distributed one share of Embecta common stock for every five common shares of BD outstanding as of the record date. Shareholders received cash in lieu of fractional shares of Embecta common stock. The spin-off is expected to qualify as a tax-free transaction for U.S. federal income tax purposes. Embecta is an independent, publicly traded company focused on diabetes management, and BD retains no ownership interest. Embecta’s common stock is listed on NASDAQ under the ticker symbol “EMBC”. The historical financial results of Embecta are included in these condensed consolidated financial statements. Subsequent to the spin-off, and in future filings, the historical results of the Diabetes Care business will be reflected as discontinued operations in the Company’s consolidated financial statements. Disclosures pertaining to Embecta’s issuance of debt in connection with the spin-off are provided in Note 12.

In connection with the spin-off, the Company and Embecta entered into various agreements to effect the spin-off and provide a framework for the relationship between the Company and Embecta after the spin-off. Such agreements include the separation and distribution agreement, as well as the following ongoing agreements: a cannula supply agreement, an intellectual property matters agreement, a transition services agreement, manufacturing and supply agreements, a lease agreement, a distribution agreement to support commercial operations, a logistics services agreement and other agreements including an employee matters agreement and a tax matters agreement. Under these agreements the Company will continue to provide certain products and services to Embecta following the spin-off.

Note 2 – Shareholders' Equity

Changes in certain components of shareholders' equity for the first two quarters of fiscal years 2022 and 2021 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, 2021	$	365	$	19,272	$	13,826	$	23	(80,164)	$	(7,723)
Net income	—		—		677		—		—	—
Common dividends ($0.87 per share)	—		—		(248)		—		—	—
Preferred dividends	—		—		(23)		—		—	—
Common stock issued for share-based compensation and other plans, net	—		(71)		—		—		762	19
Share-based compensation	—		83		—		—		—	—
Common stock held in trusts, net (a)	—		—		—		—		(5)	—
Repurchase of common stock (b)	—		150		—		—		(462)	(150)

Balance at December 31, 2021	$	365	$	19,435	$	14,233	$	24	(79,869)	$	(7,855)
Net income	—		—		454		—		—	—
Common dividends ($0.87 per share)	—		—		(248)		—		—	—
Preferred dividends	—		—		(23)		—		—	—
Common stock issued for share-based compensation and other plans, net	—		(21)		—		1		284	14
Share-based compensation	—		56		—		—		—	—
Common stock held in trusts, net (a)	—		24		—		—		9	(24)
Balance at March 31, 2022	$	365	$	19,495	$	14,416	$	24	(79,575)	$	(7,866)


	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, 2020	$	365	$	19,270	$	12,791	$	23	(74,623)	$	(6,138)
Net income	—		—		1,003		—		—	—
Common dividends ($0.83 per share)	—		—		(242)		—		—	—
Preferred dividends	—		—		(23)		—		—	—
Common stock issued for share-based compensation and other plans, net	—		(53)		—		—		549	2
Share-based compensation	—		83		—		—		—	—
Common stock held in trusts, net (a)	—		—		—		—		(7)	—
Effect of change in accounting principles	—		—		(9)		—		—	—
Balance at December 31, 2020	$	365	$	19,301	$	13,522	$	23	(74,080)	$	(6,136)
Net income	—		—		299		—		—	—
Common dividends ($0.83 per share)	—		—		(242)		—		—	—
Preferred dividends	—		—		(23)		—		—	—
Common stock issued for share-based compensation and other plans, net	—		(15)		—		—		234	4
Share-based compensation	—		55		—		—		—	—
Common stock held in trusts, net (a)	—		—		—		—		23	—

Balance at March 31, 2021	$	365	$	19,341	$	13,557	$	23	(73,821)	$	(6,132)

(a)Common stock held in trusts consists of the Company’s shares held in rabbi trusts in connection with deferred compensation under the Company’s employee salary and bonus deferral plan and directors’ deferral plan. During the second quarter of fiscal year 2022, the common stock held in trusts was temporarily replaced with the Company’s Series C preferred shares to adhere to trust requirements until the Company’s spin-off of its Diabetes Care business was completed on April 1, 2022.

(b)Represents shares received upon final settlement of an accelerated share repurchase agreement, and the related forward sale contract, entered into during the fourth quarter of fiscal year 2021. The share repurchases were made pursuant to the repurchase program authorized by the Board of Directors on September 24, 2013 for 10 million shares, for which there is no expiration date. In November 2021, the Board of Directors authorized the Company to repurchase up to an additional 10 million shares of BD common stock, for which there is also no expiration date.

The components and changes of Accumulated other comprehensive income (loss) for the first two quarters of fiscal years 2022 and 2021 were as follows:


(Millions of dollars)	Total		Foreign Currency Translation		Benefit Plans		Cash Flow Hedges
Balance at September 30, 2021	$	(2,088)	$	(1,292)	$	(784)	$	(10)
Other comprehensive income (loss) before reclassifications, net of taxes	34		41		—		(7)
Amounts reclassified into income, net of taxes	11		—		11		—
Balance at December 31, 2021	$	(2,043)	$	(1,251)	$	(774)	$	(17)
Other comprehensive income before reclassifications, net of taxes	122		78		—		44
Amounts reclassified into income, net of taxes	11		—		11		—
Balance at March 31, 2022	$	(1,910)	$	(1,173)	$	(763)	$	28


(Millions of dollars)	Total		Foreign Currency Translation		Benefit Plans		Cash Flow Hedges
Balance at September 30, 2020	$	(2,548)	$	(1,416)	$	(1,040)	$	(91)
Other comprehensive income before reclassifications, net of taxes	115		64		24		27
Amounts reclassified into income, net of taxes	19		—		18		2
Balance at December 31, 2020	$	(2,414)	$	(1,352)	$	(998)	$	(62)
Other comprehensive income (loss) before reclassifications, net of taxes	64		(15)		—		78
Amounts reclassified into income, net of taxes	21		—		16		5
Balance at March 31, 2021	$	(2,329)	$	(1,367)	$	(982)	$	21

The amounts of foreign currency translation recognized in other comprehensive income during the three and six months ended March 31, 2022 and 2021 included net gains (losses) relating to net investment hedges. Other comprehensive income relating to benefit plans during the three months ended December 31, 2020 represented a net gain recognized as a result of the Company’s remeasurement, as of October 31, 2020, of the legacy Bard U.S. defined pension benefit plan upon its merger with the BD defined benefit cash balance pension plan in the first quarter of fiscal year 2021. The amounts recognized in other comprehensive income relating to cash flow hedges during the three and six months ended March 31, 2022 and 2021 are primarily related to forward starting interest rate swaps. Additional disclosures regarding amounts the Company recognized in other comprehensive income relating to cash flow hedges during the three and six months ended March 31, 2022 and 2021 are provided in Note 10.

The tax impacts for amounts recognized in other comprehensive income (loss) before reclassifications and for reclassifications out of Accumulated other comprehensive income (loss) relating to benefit plans and cash flow hedges during the three and six months ended March 31, 2022 and 2021 were immaterial to the Company's consolidated financial results.

Note 3 – Earnings per Share

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,
	2022	2021	2022	2021
Average common shares outstanding	285,243	291,095	284,961	290,839
Dilutive share equivalents from share-based plans	2,003	2,452	2,215	2,660
Dilutive share equivalents from Series C preferred shares (a)	53	—	26	—
Average common and common equivalent shares outstanding – assuming dilution	287,299	293,547	287,202	293,499

Share equivalents excluded from the diluted shares outstanding calculation:
Mandatory convertible preferred stock (b)	5,639	6,169	5,639	6,169
Share-based plans (c)	—	773	676	773

(a)Represents dilutive share equivalents from Series C preferred shares that temporarily replaced shares of common stock held in trusts to adhere to trust requirements until the Company’s spin-off of its Diabetes Care business on April 1, 2022 was completed.

(b)Excluded from the diluted shares outstanding calculation because the result would have been antidilutive.

(c)Excluded from the diluted earnings per share calculation as the exercise prices of these awards were greater than the average market price of the Company’s common shares.

Note 4 – Contingencies

The Company is involved, both as a plaintiff and a defendant, in various legal proceedings that arise in the ordinary course of business, including, without limitation, product liability and environmental matters in certain U.S. and international locations. 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 litigation in which the Company is a party. In accordance with U.S. GAAP, the Company establishes accruals to the extent probable future losses are estimable (and 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, 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 any class. With respect to the civil investigative demands (“CIDs”) served by the Department of Justice which are 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.

Product Liability Matters

As of March 31, 2022, the Company is defending approximately 28,590 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 (“RI”) and in a federal multi-district litigation (“MDL”) established in the Southern District of Ohio, 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.

•The first bellwether trial in the hernia MDL resulted in a complete defense verdict in favor of the Company in September 2021 after over five weeks of trial.

•The second hernia MDL bellwether resulted in a $255 thousand verdict in April 2022 after four weeks of trial.

Trials are currently scheduled in various state and/or federal courts, including one currently scheduled for June 2022 in RI. The Company expects additional trials of Hernia Product Claims to take place over the next 12 months.

The Company also continues to be a defendant in certain other mass tort litigation. As of March 31, 2022, the Company is defending product liability claims involving the Company’s line of pelvic mesh products, the majority of which are pending in various federal court jurisdictions and in a coordinated proceeding in New Jersey Superior Court. Also, as of March 31, 2022, the Company is defending product liability claims involving the Company’s line of inferior vena cava (“IVC”) filter products. The majority of those claims are pending in various federal court jurisdictions after having been remanded from the MDL in the United States District Court for the District of Arizona.

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

Other Legal Matters

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), now captioned Industriens Pensionsforsikring v. Becton, Dickinson and Company, et al., 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 Securities and Exchange Commission (“SEC”) Rule 10b-5 promulgated thereunder, and seeks, among other things, damages and costs. The complaint alleges that defendants concealed certain material information regarding AlarisTM infusion pumps, allegedly rendering certain public statements about the Company’s business, operations and prospects false or misleading, thereby allegedly causing investors to purchase stock at an inflated price. The plaintiff filed a second amended complaint to add certain additional factual allegations on February 3, 2021. This complaint was dismissed on the Company’s motion on September 15, 2021. The court’s dismissal order, however, gave plaintiff an opportunity to replead, which it did on October 29, 2021. The Company moved to dismiss the newly amended pleading on December 16, 2021. That motion is fully briefed and pending. The Company believes that these allegations are without merit and it intends to defend itself vigorously.

On November 2, 2020, a civil action captioned Jankowski v. Forlenza, et al., Civ. No. 2:20-cv-15474, was filed in the U.S. District Court for the District of New Jersey by a shareholder, Ronald Jankowski, derivatively on behalf of the Company, against its individual directors and certain of its officers. The complaint seeks recovery for breach of fiduciary duties by directors and various officers; violations of the Securities Exchange Act of 1934, including sections 10(b), 14(a) and 21D; and insider trading. In general, the complaint also alleges, among other things, that various directors and/or officers caused the Company to issue purportedly misleading statements and SEC filings regarding AlarisTM infusion pumps, and issue a purportedly misleading proxy statement. The complaint seeks damages, including restitution and disgorgement of profits, and an injunction requiring the Company to undertake remedial measures with respect to certain corporate governance and internal procedures. A second derivative action, Schranz v. Polen, et al., Civ. No 2:21-cv-01081 (D. N.J.), was filed on January 24, 2021, and the two actions were consolidated. In March 2021, the Company received letters from two additional shareholders which, in general, mirrored the allegations in the Jankowski and Schranz consolidated actions, and demanded, among other things, that the Board of Directors pursue civil action against members of management for claimed breaches of fiduciary duties. Consistent with New Jersey law, the Board appointed a special committee to review the allegations and demands in the derivative actions and demand letters. Following an investigation, the special committee determined that no action was warranted, and rejected the shareholders’ demands. The special committee’s determination has been communicated to counsel for the shareholders. Should the shareholders continue to pursue their claims in court, the Company will take appropriate steps to seek dismissal of the complaints.

In May 2017, the Company was sued by a competitor in the Northern District of New York, alleging antitrust violations related to certain aspects of the Company’s medical delivery solutions business in a case captioned AngioDynamics, Inc. v. C. R. Bard, Inc. et al., Civ. No. 1:17-CV-0598. Motion practice in the case is ongoing. The Company believes it has meritorious defenses and is vigorously defending the case, which has been set for trial on July 5, 2022.

In February 2021, the Company received a subpoena from the Enforcement Division of the SEC requesting information from the Company relating to, among other things, AlarisTM infusion pumps. The Company is cooperating with the SEC and responding to these requests. The Company cannot anticipate the timing, scope, outcome or possible impact of the investigation, financial or otherwise.

In April 2019, the Department of Justice served the Company and CareFusion with CIDs seeking information regarding certain of CareFusion’s contracts with the Department of Veteran’s Affairs for certain products, including AlarisTM and PyxisTM

devices, in connection with a civil investigation of possible violations of the False Claims Act, and the government recently expanded the investigation to include several additional contracts. The government has made several requests for documents and interviews or depositions of Company personnel. The Company is cooperating with the government and responding to these requests.

In September 2021, the Company received a CID related to an inquiry initiated by the Northern District of Georgia in 2018. The requests concern sales and marketing practices with respect to certain aspects of the Company’s urology business. The government has made requests for documents and has interviewed employees. The inquiry is ongoing and the Company is cooperating with the government and responding to its requests.

In September 2021, the Company was served with a complaint from the New Mexico Attorney General, alleging violations of the state’s consumer protection laws in connection with the sales and marketing of its IVC filters. The Company filed its motion to dismiss on December 27, 2021, and intends to vigorously defend itself in the litigation. As the case is in its early stages, the Company cannot anticipate the timing, scope, outcome or possible impact at present.

In July 2021, the Company became aware of lawsuits that had been filed against it in state and federal court in Georgia. The suits were filed by plaintiffs who reside near Company facilities in Covington, GA, where ethylene oxide (“EtO”) sterilization activities take place. There are currently approximately 210 of such suits. The claims allege a variety of injuries, including but not limited to multiple types of cancer, allegedly attributable to exposure to EtO in the ambient air. The Company has meritorious defenses and intends to defend itself vigorously.

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.

The Company cannot predict the outcome of these other legal matters discussed above, nor can it predict whether any outcome will have a material adverse effect on the Company’s consolidated results of operations and/or consolidated cash flows. Accordingly, the Company has made no provisions for these other legal matters in its consolidated results of operations.

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. We also are subject to administrative proceedings under environmental laws in jurisdictions outside the U.S. 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 consolidated results of operations and/or consolidated cash flows.

Litigation Accruals

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.

Accruals for the Company's product liability claims which are discussed above, as well as the related legal defense costs, amounted to approximately $2.3 billion and $2.5 billion at March 31, 2022 and September 30, 2021, respectively. These accruals are largely recorded within Deferred Income Taxes and Other Liabilities on the Company's condensed consolidated balance sheets.

In view of the uncertainties discussed above, 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 /or consolidated cash flows.

Note 5 – Revenues

The Company’s policies for recognizing sales have not changed from those described in the Company’s 2021 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 allowance for doubtful accounts reflects the current estimate of credit losses expected to be incurred over the life of its trade receivables. Such estimated credit losses are determined based on historical loss experiences, customer-specific credit risk, and reasonable and supportable forward-looking information, such as country or regional risks that are not captured in the historical loss information. The allowance for doubtful accounts for trade receivables is 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 Company’s rebate liability at March 31, 2022 and September 30, 2021 was $585 million and $576 million, respectively. The impact of other forms 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 $2.2 billion at March 31, 2022. 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 $2.4 billion at March 31, 2022. This revenue will be recognized over the customer relationship periods.

Disaggregation of Revenues

A disaggregation of the Company's revenues by segment, organizational unit and geographic region is provided in Note 6.

Note 6 – Segment Data

The Company's organizational structure is based upon three worldwide 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.

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)	2022						2021
	United States		International		Total		United States		International		Total
Medical
Medication Delivery Solutions	$	588	$	450	$	1,038	$	531	$	468	$	999
Medication Management Solutions	461		143		604		440		126		566
Diabetes Care	140		133		273		148		135		284
Pharmaceutical Systems	125		376		501		100		361		462
Total segment revenues	$	1,314	$	1,102	$	2,416	$	1,220	$	1,091	$	2,311

Life Sciences
Integrated Diagnostic Solutions	$	618	$	532	$	1,150	$	454	$	807	$	1,261
Biosciences	129		206		335		121		204		325
Total segment revenues	$	747	$	738	$	1,485	$	576	$	1,010	$	1,586

Interventional
Surgery	$	268	$	72	$	340	$	227	$	65	$	292
Peripheral Intervention	240		210		450		222		198		420
Urology and Critical Care	239		82		320		217		82		298
Total segment revenues	$	746	$	364	$	1,111	$	666	$	345	$	1,011

Total Company revenues	$	2,807	$	2,204	$	5,011	$	2,462	$	2,446	$	4,907



	Six Months Ended March 31,
(Millions of dollars)	2022						2021
	United States		International		Total		United States		International		Total
Medical
Medication Delivery Solutions	$	1,207	$	915	$	2,122	$	1,099	$	908	$	2,006
Medication Management Solutions	945		286		1,231		917		278		1,196
Diabetes Care	291		271		561		298		271		569
Pharmaceutical Systems	228		670		898		180		621		801
Total segment revenues	$	2,671	$	2,142	$	4,813	$	2,494	$	2,078	$	4,572

Life Sciences
Integrated Diagnostic Solutions	$	1,232	$	1,062	$	2,295	$	1,469	$	1,459	$	2,928
Biosciences	258		416		674		241		396		637
Total segment revenues	$	1,490	$	1,478	$	2,968	$	1,710	$	1,855	$	3,565

Interventional
Surgery	$	549	$	152	$	701	$	489	$	135	$	624
Peripheral Intervention	457		407		863		454		392

Form: 10-Q

Documents