01—Abstract
Summary
Summary of the 10-K filed November 21, 2018. Cited figures are marked; the original filing is the authoritative source.
Becton, Dickinson and Company (BDX) reported a significant increase in revenues for the fiscal year ended September 30, 2018, largely driven by the transformative acquisition of C.R.
Bard, Inc. (Bard) completed in December 2017. This strategic move has positioned BD as a more comprehensive medical technology provider across its three key segments: Medical, Life Sciences, and Interventional. While the integration of Bard presents opportunities for growth and synergies, it also introduces integration costs and increased debt levels, which management is actively working to manage.
Financially, the company experienced substantial revenue growth, fueled by the Bard acquisition and organic volume growth across its segments, particularly in Medication Delivery Solutions and Diagnostic Systems. However, diluted earnings per share were significantly impacted by "specified items," including substantial integration and acquisition-related costs, and a large one-time tax expense due to the U.S. Tax Cuts and Jobs Act. Investors should closely monitor the ongoing integration process, management's ability to realize cost savings, and the impact of regulatory matters, including FDA warning letters, on future performance.
02—Key points
Key Highlights
- BD completed the acquisition of C.R. Bard, Inc. for approximately $25 billion, significantly expanding its product portfolio and market reach, particularly in the Interventional segment.
- Worldwide revenues increased by 32.2% to $15.98 billion in fiscal year 2018, largely due to the inclusion of Bard's revenues and organic volume growth.
- The company recorded a significant one-time tax expense of $640 million related to the U.S. Tax Cuts and Jobs Act, which heavily impacted net income and diluted EPS for the year.
- Diluted earnings per share were significantly affected by "specified items," including integration costs, purchase accounting adjustments, and other restructuring expenses, resulting in a reported diluted EPS of $0.60.
- BD continued to invest in research and development, with R&D expenses totaling $1.006 billion, reflecting a commitment to innovation and new product development.
- The company's financial position remained strong, with $2.865 billion in cash flow from operating activities, and it returned value to shareholders through $927 million in dividends paid during fiscal year 2018.
- The company is managing regulatory matters, including two FDA warning letters for specific facilities and products, and an ongoing consent decree related to its infusion pump business, with plans to implement corrective actions.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Becton Dickinson & Co kept $0.02.
- Revenue$15.98B100.0%
- Cost of revenue−$8.71B54.5%
- Gross profit$7.27B45.5%
- Operating costs−$5.76B36.0%
- Operating income$1.51B9.4%
- Interest, other & tax−$1.20B7.5%
- Net income$311.0M1.9%
Where FY2018 revenue went
$15.98B- Cost of revenue: $8.71B, 55% of revenue
- SG&A: $4.02B, 25% of revenue
- Net income: $311.0M, 1.9% of revenue
- R&D: $1.00B, 6.3% of revenue
- Other operating costs: $740.0M, 4.6% of revenue
- Interest, other & tax: $1.20B, 7.5% of revenue
Kept 1.9% as net incomeNet income $311.0M · 1.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed November 21, 2018Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $15.98B$12.09B | +32.2% |
| Cost of Revenue | $8.71B$6.13B | +42.2% |
| Gross Profit | $7.27B$5.94B | +22.3% |
| R&D Expenses | $1.00B$770.00M | +30.4% |
| SG&A Expenses | $4.02B$2.91B | +38.1% |
| Operating Expenses | $14.47B$10.57B | +36.9% |
| Operating Income | $1.51B$1.52B | −0.9% |
| Interest Expense | $706.00M$521.00M | +35.5% |
| Net Income | $311.00M$1.10B | −71.7% |
| EPS (Basic) | $0.62$4.70 | −86.8% |
| EPS (Diluted) | $0.60$4.60 | −87.0% |
| Shares Outstanding (Basic) | 258.35M218.94M | +18.0% |
| Shares Outstanding (Diluted) | 264.62M223.59M | +18.4% |
05—Questions
Frequently Asked Questions
What was the main impact of the C.R. Bard acquisition on BD's financial performance in fiscal year 2018?
The acquisition of C.R. Bard, Inc. significantly boosted BD's revenue, contributing approximately 24.5% to the total revenue increase in fiscal year 2018, reaching $15.98 billion. It expanded BD's presence in the Interventional segment and overall market offerings. However, the acquisition also brought substantial integration costs and financing expenses, which negatively impacted reported net income and diluted earnings per share.
How did the U.S. Tax Cuts and Jobs Act affect BD's financial results?
The Tax Cuts and Jobs Act enacted in December 2017 led to a significant one-time tax expense of $640 million for BD in fiscal year 2018. This was primarily due to the reduction in the U.S. federal corporate tax rate and a transition tax on previously untaxed foreign earnings. This expense substantially reduced the company's net income and diluted earnings per share for the fiscal year.
What are the key risks and challenges BD faces moving forward, as highlighted in the filing?
Key risks highlighted include challenges related to the successful integration of the Bard acquisition, managing increased debt levels, potential volatility in raw material costs, cybersecurity threats, and ongoing regulatory scrutiny. BD is subject to FDA regulations and has received warning letters for certain facilities, which require corrective actions. Additionally, shifts in third-party reimbursement practices and intense competition within the medical technology industry pose ongoing challenges.
How is BD managing its debt following the Bard acquisition?
BD significantly increased its indebtedness to finance the Bard acquisition. The company is focused on managing this increased debt load by operating with an investment-grade credit profile, ensuring access to debt markets for strategic opportunities, and optimizing its cost of capital. The company has established various term loan and revolving credit facilities to manage its liquidity and debt obligations.
06—Continue