10-QPeriod: Q1 FY2018

BECTON DICKINSON & CO Quarterly Report for Q1 Ended Dec 31, 2017

Filed February 6, 2018For Securities:BDX

Summary

Becton Dickinson & Co. (BDX) reported its financial results for the fiscal quarter ending December 30, 2017. The period was significantly marked by the completion of the acquisition of C.R. Bard, Inc. on December 29, 2017, for approximately $25 billion. This acquisition is expected to be transformative for the company, creating a leading medical technology entity. Financially, the quarter showed a reported net loss of $136 million, or -$0.76 per diluted share, a stark contrast to the $562 million net income, or $2.58 per diluted share, reported in the prior year's comparable quarter. This net loss was heavily influenced by substantial acquisition-related costs, including transaction and integration expenses, as well as provisional tax expenses stemming from the new U.S. tax legislation. Despite the reported net loss, the company experienced revenue growth of 5.4% year-over-year, reaching $3.08 billion, driven by volume increases in both its Medical and Life Sciences segments, and a favorable foreign currency translation impact. The balance sheet reflects a significant increase in assets and liabilities due to the Bard acquisition, with total assets growing to $55.4 billion from $37.7 billion at the prior quarter's end. Long-term debt also increased substantially to fund the acquisition. While the immediate financial results were impacted by the large acquisition, investors should focus on the strategic benefits and future growth prospects presented by the combined entity.

Financial Highlights

53 data points
Beta

Revenue

$3.08B

50.4% Gross Margin

Net Income

-$136.00M

-4.4% Net Margin

EPS (Diluted)

$-0.76

Total Assets

$55.36B

Cash & Equivalents

$1.12B

Free Cash Flow

$142.00M

Financial Statements
Beta
Revenue$3.08B
Cost of Revenue$1.53B
Gross Profit$1.55B
R&D Expenses$191.00M
SG&A Expenses$773.00M
Operating Expenses$2.85B
Operating Income$235.00M
Interest Expense$158.00M
Net Income-$136.00M
EPS (Basic)$-0.76
EPS (Diluted)$-0.76
Shares Outstanding (Basic)230.04M
Shares Outstanding (Diluted)230.04M

Key Highlights

  • 1Completion of the C.R. Bard, Inc. acquisition for approximately $25 billion on December 29, 2017, creating a significantly larger medical technology company.
  • 2Reported a net loss of $136 million for the quarter, a significant decrease from a net income of $562 million in the prior year, largely due to acquisition-related costs and provisional tax expenses.
  • 3Revenues increased by 5.4% to $3.08 billion, driven by volume growth in both the Medical and Life Sciences segments and a favorable foreign currency translation.
  • 4Total assets significantly increased to $55.4 billion, primarily due to the Bard acquisition, with substantial growth in Goodwill and intangible assets.
  • 5Long-term debt rose to $22.1 billion from $18.7 billion, reflecting debt issuance to finance the Bard acquisition.
  • 6The company recognized a provisional expense of $270 million related to the new U.S. Tax Cuts and Jobs Act.
  • 7Operating cash flow remained stable at $320 million, indicating ongoing operational strength despite the large acquisition.

Frequently Asked Questions

The primary driver was the completion of the acquisition of C.R. Bard, Inc. on December 29, 2017. This transaction involved substantial costs, including acquisition-related expenses and financing costs, which led to a reported net loss for the quarter, contrasting with the profitability in the prior year's period. The acquisition also significantly altered the balance sheet with increased assets and liabilities.

The Bard acquisition significantly increased BDX's total assets to $55.4 billion from $37.7 billion at the end of the prior quarter. This increase is reflected in substantial growth in Goodwill ($22.7 billion from $7.6 billion) and intangible assets, such as Developed Technology and Customer Relationships, which were valued at $14.2 billion and $3.9 billion respectively as a result of the acquisition. Long-term debt also rose considerably to $22.1 billion to help finance the acquisition.

While the company reported a net loss this quarter, largely due to acquisition-related costs and provisional tax expenses, the outlook is focused on the strategic benefits of the combined entity. Management expects the acquisition to enhance BDX's position in the medical technology market, driving future revenue and profit growth through synergies and an expanded product portfolio. The revenue growth in the quarter, despite the loss, indicates continued operational strength.

The Tax Cuts and Jobs Act, enacted in December 2017, has led BDX to record a provisional expense of $270 million. This includes a tax benefit related to the remeasurement of deferred tax assets and liabilities based on the new lower corporate tax rate, and a provisional expense for the one-time transition tax on foreign earnings. The company is continuing to finalize its accounting for the Act.