10-QPeriod: Q1 FY2016

BECTON DICKINSON & CO Quarterly Report for Q1 Ended Dec 31, 2015

Filed February 5, 2016For Securities:BDX

Summary

Becton Dickinson & Co. (BDX) reported its first quarter fiscal year 2016 results on February 4, 2016, for the period ending December 31, 2015. The company experienced a significant revenue increase of 45.6% year-over-year, reaching $2.986 billion. This growth was primarily driven by the inclusion of CareFusion's results, acquired in March 2015, which contributed $1.016 billion in revenue and $137 million in operating income to the Medical segment. Excluding the impact of foreign currency fluctuations, revenue grew by a robust 53.5% on a constant currency basis. Despite the substantial revenue growth, net income decreased to $229 million from $236 million in the prior year, leading to a dip in diluted earnings per share to $1.06 from $1.20. This decline was impacted by higher operating costs, including acquisition-related expenses ($121 million), increased R&D spending, and a significant increase in intangible asset amortization related to the CareFusion acquisition. The company generated $463 million in cash from operating activities, demonstrating solid cash flow generation. BDX also continued to return value to shareholders through dividends, paying out $140 million in the quarter. Investors should closely monitor the integration of CareFusion and the ongoing impact of acquisition-related costs and amortization on profitability.

Financial Highlights

52 data points
Beta

Revenue

$2.99B

47.2% Gross Margin

Net Income

$229.00M

7.7% Net Margin

EPS (Diluted)

$1.06

Total Assets

$26.05B

Cash & Equivalents

$1.58B

Free Cash Flow

$329.00M

Financial Statements
Beta
Revenue$2.99B
Cost of Revenue$1.58B
Gross Profit$1.41B
R&D Expenses$187.00M
SG&A Expenses$748.00M
Operating Expenses$2.63B
Operating Income$352.00M
Interest Expense$97.00M
Net Income$229.00M
EPS (Basic)$1.08
EPS (Diluted)$1.06
Shares Outstanding (Basic)211.69M
Shares Outstanding (Diluted)216.29M

Key Highlights

  • 1Total revenues surged by 45.6% to $2.986 billion, largely due to the acquisition of CareFusion, which added $1.016 billion in revenue to the Medical segment.
  • 2Diluted earnings per share decreased to $1.06 from $1.20 in the prior year, impacted by higher acquisition-related costs and amortization expenses.
  • 3Operating income increased to $352 million from $349 million, despite increased costs associated with the CareFusion acquisition.
  • 4Cash flow from operations remained strong, increasing to $463 million from $286 million in the prior year's comparable period.
  • 5The company paid $140 million in dividends to shareholders, signaling a continued commitment to returning value.
  • 6Significant increase in intangible asset amortization ($152 million vs $20 million) primarily due to the CareFusion acquisition.
  • 7The Medical segment saw substantial growth, with revenues increasing by 91.6% to $2.054 billion, driven by CareFusion and legacy product sales.

Frequently Asked Questions

The primary driver of the significant revenue increase was the acquisition of CareFusion Corporation, which was completed in March 2015. CareFusion's results were included in BDX's consolidated statements for the first time in this quarter, contributing substantially to the Medical segment's revenue.

The decrease in net income and EPS was due to several factors, including a significant increase in acquisition-related costs ($121 million in the current quarter versus $23 million in the prior year), higher research and development expenses, and a substantial increase in amortization expense related to intangible assets acquired in the CareFusion transaction. These factors more than offset the revenue gains.

The company incurred significant debt to finance the CareFusion acquisition. While total debt was $12.8 billion at quarter-end, the company maintains a strong credit facility and is focused on managing its interest expense. The weighted average cost of total debt remained stable at 3.3%. The company also has a covenant requiring an interest expense coverage ratio of not less than 5-to-1, which it was in compliance with.

The company is actively working on integrating CareFusion. While the pro forma financial results presented do not include anticipated cost savings or integration effects, the company expects the integration to contribute to future growth and operating efficiencies. Investors should monitor the company's progress in realizing synergies and managing the associated costs.